The fund has produced a stunning performance over both the quarter (20%) and year (54%) in rand terms. Even the dollar performance was excellent (10% for the quarter and 26% for the year). Global property shares have continued to outperform offshore equities in the past year. By July global property shares had passed their previous record high and rose a further8%by the end of September. There is no question that the performance has way exceeded expectations.

When the manager of the fund, Steve Buller from Fidelity in Boston, spoke at the STANLIB International Conference in July 2005, he forecast 7-9% annual returns compared to the 26% seen in the past year. On the whole the strength in the world economy has played a big role because increasing employment worldwide implies more demand for space. Also pension funds and private clients are increasingly including listed property shares as a new asset class in their balanced portfolios for the first time. Steve Buller says that the fundamentals remain encouraging and that generally speaking rents are not yet high enough to justify erecting new buildings. The average building in the portfolio is yielding 5.75%, although those in London are lower at 4%, Dallas Texas, for example, is at 8% and Australia is 6.3%. But gearing or leveraging the 5.75% yield allows Steve to arrive at his 7-9% expected return for the shares. Interestingly, in the US the so-called "multi-family" apartment complexes (i.e. good old blocks of flats, all rented out, not individually owned) are yielding 5%, which is the same as the institutional money market in the US. In Japan, the average yield on properties is 3.7% (much higher than both money market yields of 0.1% and 10 year bond yields of 1.8%), but the yield on blocks of flats is 5%. Property shares have become more volatile than other ordinary shares because they are attracting "hot" money, e.g. hedge funds. Investors need to be aware of this risk factor. In the US the total value of all property shares is $400 billion, which is less than the value of one big share, Exxon. So although they do trade well, liquidity is not anywhere near as good in the big non-property shares. About5%of the portfolio in the US has been bought out, ie gone private via acquisitions and the number of property shares in the US has shrunk as a result of this.

The average global yield is about 3.3%, with dividends growing at 7-8%. In the first 9 months of 2006 European property shares did best (especially France, Spain and the Netherlands), up 27.6% in dollars, followed by the US with 23.9%, which is the highest return in 5 years. The lowest return was in Asia (14.6%). The fund's four biggest country holdings are 44% invested in the US, 13% in the UK, 12% in Japan and 10% in Australia. As long as global growth continues and interest rates stay muted, property shares should do fine, but investors need to be aware of higher volatility

The fund experienced the most volatile quarter in its history, somewhat smoothed by the weakening rand. The weaker rand enabled the fund to achieve a record rand price towards the end of the quarter, while in US Dollar terms the fund also saw a new high during the quarter, but this was in early May, prior to a sharp correction. This correction, from which the fund has been recovering well, followed the global equity sell off after negative comments by US Fed Chairman, Ben Bernanke concerning his aggressive stance on monetary policy. Asian listed property succumbed the most to the sell off, while the upward trend enjoyed in Europe and the Americas leveled off. Europe has gained 13% so far this year in Euros, with pockets of powerful performances from the likes of Poland (+53%) and Spain (+38%). Germany has fared the worst in the region (-2%). The fund has overweight positions in Germany, Italy and the UK of a combined 5%. In the Americas listed property has risen 13% in Dollars, despite a 6% pull back early in the second quarter. The sectoral drivers in the Americas have been listed residential and office stocks, comfortably beating retail and industrial. Vacancies are low, and landlords are achieving higher rentals, while the overbuilding of prior years has largely been worked into the system. Here the fund held an underweight position - 45% versus benchmark of 51%. Asia has been the laggard, and thanks only to a strong June (+3%), this region has onlymanaged to chalk up 5%year to date. The regional giant, Japan, has only generated 1% this year, unlike Singapore (+17%), Hong Kong (+11%) and Philippines (+10%). The fund is3%overweight Japan, and4%underweight Hong Kong. Oceana's listed property was flat for the year until a powerful June (+7%) in Australia and New Zealand brought back some element of respectability. Here the fund held an underweight position - 6%versus benchmark of 12%. Global property has held up well considering its big run over the last few years and the volatility of the markets. Property as an asset class has proven more defensive than both equities and bonds over the recent past. Global growth remains robust, a positive for property, but unanticipated interest rate hikes could dampen prospects looking forward.

During the quarter listed international property continued to prove its worth as a generator of good returns, a portfolio diversifier and a sound yield earning asset class. Listed property handsomely outperformed both equities and bonds over the period, and the correlation with the other major asset classes is very low. All three of the broader regions reported positive returns. Europe generated 18% with Germany, Spain and France all producing in excess of 30% over the quarter. The Americas returned 15% (US is 45% of portfolio vs 48% for benchmark), dragged down by Canada with 6%. Asian listed property was the "laggard" with 13% returns, buoyed by 28% in Singapore (2% of fund vs 1% in benchmark) but weighed down by a poor 1% from Australia (the fund is underweight Australia at 8.5% of portfolio vs 11%for the benchmark). Asia was also the most volatile region.

Residential still features as the best performing category in both Europe and the Americas. Over the longer term, the correlation between these regions is very low resulting in a well balanced portfolio. There are no significant regional bets against the EPRA/NAREIT benchmark, and on a sectoral basis, office (26%) and retail (25%) have the highest exposure. The sector is expected to continue to grow fast, reaching $1trillion in five years, from $600billion today. Japan, Germany and the UK are expected to grow the fastest, with relaxed REIT legislation being the main driver. The fund is expected to generate between7%and9%annual return over the medium term and has a dividend yield of around 3.6% (pre frees). A potential negative may be any effect the recent increase in global bond yields may have on listed property.

The fund saw an admirable performance for 2005, the first year of operation, slightly ahead of equities and well ahead of cash and bonds. This warranted inclusion of property in an offshore investment portfolio. The best performing region was Asia with a rand return of 48%, followed by Europe on 26%, the US with 15%, and Oceana (Australia, South Africa and New Zealand) at 14%. Countries that stood out were Japan (+74%) and Spain (+75%) on the upside, and Australia (+14%) and Hong Kong (+13%) combined with the US to drag the overall index down. The US, which comprises 55% of the benchmark EPRA/NAREIT Index, returned substantially less than the 5 year average USD return of 19%. This was due to a high base and the fact that abnormally high levels of capital raising created a surplus of supply. The main news out of Europe is the move towards REIT structures which should have a positive effect on listed property values. Asia saw many new listings and a slow move towards REIT structures.