For the 3rd month running, Resources (-22%) drastically underperformed Industrials (- 8%) and Financials (-2%). The Resources basket has fallen a massive 38% in the last quarter. Investors around the world have started to price in substantial reductions in world growth and possibly even a global recession, as underlying commodity prices have plummeted. Mastermind again outperformed the SWIX index by almost 1%.

In the August commentary we wrote that our interest in some Resources shares was pricked and that we would not ignore attractive valuations despite the market's swift de-rating of these stocks. Our fund made some substantial trades in the month. We sold our entire holding in Sasol and invested the proceeds into the commodity diversified BHP Billiton and Anglo shares. Given the astounding movement in the platinum price we sold our entire holding in Angloplats and used some of the proceeds to buy Implats, which still manages to make a small profit at the 920 US$/oz platinum price (unlike Angloplats), thereby effectively reducing our platinum exposure. We sold Goldfields and bought Anglogold on a relative valuation swap. The remainder of these proceeds and the sale of some of our industrial shares were invested in a meaningful position in Kumba Iron Ore. Its relative valuation is very attractive on a PE of 7x and a dividend yield of 12%. Kumbo negotiates its iron ore prices on an annual basis and has recently announced a very favourable US$ price increase for the next year. These trades resulted in us decreasing our resource underweight to 11.5%.

Given the market's volatility, there has been the opportunity to make numerous valuation based trades. Within Financials we continued to build a position in Brait and financed this by reducing our Firstrand and Investec holdings slightly. We took some profits from Foschini, Reunert, Bidvest, Lewis, JD Group, Imperial and Discovery. We sold our entire holding in Nampak after Bidvest announced that they are re-evaluating their options post the surprise Nampak trading update. We made an initial investment in Old Mutual, which has been sharply de-rated along with other global financial stocks. We increased our holding in Steinhoff and Richemont. Both these stocks have performed poorly and we believe their offshore earnings are very attractively rated.

Overall, despite us being underweight, our basket of Resources holdings detracted significantly from the fund's performance for the month. Richemont (-18%) and Telkom (-25%) also performed poorly. The biggest contributors to performance were Rockwell (+80%), Imperial (+12%), Coronation (+11%), Brait (+5%), Lewis (+4%) and Firstrand (+2%).

Early in October, as we write this commentary, we have seen investors' disbelief in the effectiveness of the approved United States Congress bailout and the European injection of funds into financial systems. Even with the news of potential coordinated interest rate cuts from central banks, equities around the world have been dumped indiscriminately. We believe these investment opportunities seldom present themselves. Mastermind's discount on a historic price:earnings relative basis has increased slightly to 14% (was 12%) and the price:book widened to 25% (was 21%). In absolute terms the fund is still cheap on a price:earnings of 8.3x, a price:book of 1.5x and a dividend yield of 4.9%.

The SWIX All Share Index fell 6.6% in June, with Resources once again delivering the best performance at +1.3%. Industrials and Financials were down 11% and 10% respectively; their second worst monthly performance over the past 5 years. Year to date, this discrepancy in performance is even more exaggerated with Resources +33%, Industrials -9% and Financials -10%.

Mastermind has enjoyed a comparatively good month, with Telkom contributing the most to our relative performance for June. It has re-rated strongly on the back of corporate action. There are a few scenarios that could unlock the value trapped within the group. All involve the separation of the fixed line business from Vodacom. The potential downside is that the group has previously been poised to announce deals and has disappointed the market at the final hurdle. Given this month's share price performance and consequent re-rating of the implied fixed line business and the risk that the deal could frustrate investors, we have trimmed our Telkom holding back to the original weight in the fund.

There were no major trades in the month for Mastermind. We are always attempting to seek out additional performance for the fund and did take advantage of the large dividend yield that JD Group offered. We used 2% of the fund to buy up our holding in JD Group before the dividend LDR (last date to register for dividends) date. We have subsequently sold the additional stock after receiving the dividend.

Including the trading costs and share price movements of the liquid stocks that were used to fund this trade, we managed to add close to 5 bps to the fund. We intend taking advantage of further "dividend stripping" opportunities as they arise.

We mentioned last month that the Reserve Bank's decision to hike the repo rate in April surprised the market. The subsequent economic data released more than vindicated their decision to hike. Consequently the consensus expectation for the June MPC meeting deteriorated to at least a 100 bps increase. Our belief that the task of forecasting interest rate movements is near impossible was realised when the Governor only increased the repo rate by 50 bps. The interest rate sensitive stocks did rally on this news, but this was short lived as the Rand weakened significantly. The outlook for the interest rate sensitive stocks does look poor, but we want to reiterate that the valuations are convincing. We have not changed our allocation to this sector and continue to hold a reasonably overweight position across a basket of seven stocks.

The fund's PE is now 8.6x historic earnings - a 25% discount to the market average. The dividend yield of 4.6% is considerably higher than the market average of 3.6% and the price to book is 32% cheaper than the market.

Following February's very strong performance (+11%), the SWIX Index fell 3% in March. The Financial board lost 7%, led down by the banking sector (-9%). Our banks continued to be de-rated because of global banking risk aversion and news flow relating to the very poor inflation outlook for our economy. The Healthcare index (- 10%) was severely dealt with on the renewed publicity of regulation for the hospital industry. The Industrial Metals basket rallied 7% with the announcement of further steel price increases by ArcelorMittal.

Mastermind enjoyed a relatively good month's performance. We took the opportunity to increase our exposure to the very weak banking sector. Within this sector we sold our entire investment in Standard Bank and increased our holding significantly in Firstrand, after it fell by close to 15% for the month. We also bought an additional 1% in Investec to increase our exposure to 6%. It is early days, but we have been exceptionally pleased with this transition and continue to see deep value in this sector.

Our interest is always perked when a sector falls as hard at the healthcare sector has over the past 3 months (-22%). When we construct a fair value for Netcare, by summing the building blocks of their United Kingdom operations and South African operations, we find that the share remains at best fair value. Consensus earnings forecasts have been marked down and given the severity of the regulatory risk, we would like the comfort of a reasonable discount to fair value. We will monitor these counters closely for any change in valuation. ArcelorMittal had an exceptional performance in the month and we took the opportunity to sell the last of our holding in this stock. We continue to prefer Sappi as a value counter amongst the expensive industrial smokestack resource basket of shares.

We tweaked the holding in some of our industrial shares and have started to nibble at Nampak, Amaps and Super Group, three counters demonstrating good value characteristics. Given the large tail of small cap stocks we have increased the number of counters in the fund to 32.

With an ex-ante tracking error of 7.2%, we have managed to construct a fund with exceptional value characteristics. The fund's PE is extremely cheap at 9.2x historic earnings (27% discount to the market average). The dividend yield of 4.5% is significantly above the market average of 3.4% and the price to book is 28% cheaper than the market.

The All Share Index has again delivered incredible performance variance within the tier one sectors - Resources dominated with 12.7%, while Industrials and Financials struggled with -0.4% and -3.3% respectively. Over the last six months this effect has been even more pronounced, with Resources delivering 21.3%, Industrials 9.0% and Financials -4.6%. Our fund has been underweight Resources and Financials and overweight Industrials over this period. Within Resources our large holding in BHP delivered 16% for the month and Anglogold was up 17%. Banks were poor and our switch into Investec also detracted from the fund's performance. However, we continue to believe that Investec offers considerable value.

Within Industrials, Construction was the clear winner and our holding in Raubex delivered well. Unfortunately one of our GDFI proxies, AG Industrials, issued a profit warning and lost 11% during the month. Operational issues within the company are being addressed and for the time being we have decided to continue to hold our investment. Bell, on the other hand, was up 19% in the month and was a strong contributor to our fund.

Our retail exposure, through JD Group and Foschini, impaired the fund's performance. We believe JD Group offers exceptional value and continue to hold the stock despite the plethora of bad news surrounding the company. The share price is currently discounting an enormous slowdown in trading, disastrous bad debt costs and potentially large tax liabilities. It requires significant analysis and fortitude to hold a stock that "everybody hates". However, we believe this emotion can create opportunities that deep value managers can exploit over time.

We haven't done too much trading in the fund recently and remain satisfied with the position of our fund. The value characteristics are good and we are holding cheap shares with above average dividend yields.

The overall market performed poorly for the month (-4.4%). The biggest loss was seen in the Resources sector (-6.2%), followed by Financials (-5.4%) and then Industrials (- 2.3%). Mastermind staged a fairly decent recovery following the disappointing month we had in November and gained approximately 150bps against the SWIX All Share Index.

Once again, interest rate sensitive stocks performed poorly, with the prime rate increasing by 50 bps to 14.5%. Our market has now experienced 8 rate increases since June 2006, when the rate was at its cyclical low of 10.5%. Mastermind has been slightly overweight the market's basket of interest rate sensitive stocks. Our focus remains on stock picking, with a top down fundamental macro overlay. These fundamentals are impossible to forecast, but we do view the prospect of further interest rate tightening to be low. During December we could no longer ignore the relative cheapness of these stocks and took the opportunity to increase our exposure by adding Standard Bank and increasing our Foschini holding.

We funded most of this by reducing the holdings we had built up in some of the small cap construction listings we participated in during the second half of the financial year. These stocks have performed exceptionally well for the fund and have re-rated significantly.

Within Resources, we took the opportunity to reduce our holding in Sasol and Arcelormittal subsequent to their strong performance and increased our exposure to BHP Billiton. We are also slowly building a position in the underperforming Sappi. Richemont was increased to 5% of the fund. This provides some protection for the fund against the significant underweight Rand Hedge resource sector and the cheapness of the luxury business in absolute and relative terms to its international peers.

Investec was the largest detractor from the fund's performance for the month and continues to be beleaguered by concerns around sub-prime, even though its exposure to this area of the market is relatively small. Naspers also took a knock when it announced its acquisition of UK listed Tradus. Even if we discount the value of this fairly large acquisition in our Naspers model by 30%, we still get an attractive discount to the sum of the group of around 23% currently.

The fund's PE is cheap at 10.6x (18% discount to the market average), the dividend yield of 3.9% is significantly above the market average and the price to book is 12% cheaper than the market - a comprehensive value offering.