Developed market political and financial leaders have taken far too long in addressing the financial malaise that continues to dog markets. Their indecision, governed probably by both a lack of understanding and self-interest, has been the primary driver of investor sentiment since April 2011. In September, Greece took centre stage again. French banks (Soc Gen and BNP Paribas) came under increasing scrutiny regarding their exposure to Greek, Italian and Spanish debt instruments. Added to the mix were worries about the impact of failing property developers on the Chinese banking sector, and it's no wonder that risk aversion is high and rising. Investors are being bombarded daily with huge volumes of data, research and opinion on these matters, which is hindering the ability to make informed decisions and to take longer term views. One day is termed as 'risk on', while the next as 'risk off' depending on whether shares are rising or falling.

September was well and truly a 'risk off' month; most evident in the sell-off of resource shares, which were down 4.6% due to the global sell-off of physical commodities; down by between 8% (aluminium) and 28% (silver) during the month. Even gold, the traditional 'panic hedge', was off by 11%. Financial and industrial shares performed better but with a return of -3%, this was of little comfort. The SWIX fell -3.32% during September. Our fund performed in line with the market during the month. Notwithstanding good performances from our largest holdings (Sasol, Angloplat, Supergroup, Reunert), the fund held no exposure to gold nor SAB, which performed exceptionally well during the month. Furthermore, BHP Billiton which accounts for 12% of the portfolio underperformed the market by 5%. Only three trades of significance were implemented during September. We sold down our shareholding in Standard Bank and applied the proceeds to Spar and Aspen. Our work on Standard Bank indicates that it will struggle to generate attractive returns on its excess capital, which in turn will negatively impact the company's valuation over the foreseeable future. Spar's valuation is far more compelling and is supported by its ability to return excess capital to shareholders through a superior dividend yield. Aspen is also attractively valued and offers value uplift from its Australian acquisition, which was purchased at a large discount. We are likely to continue to build positions in these stocks as opportunities arise.

The fund's value attributes are attractive: a 2yr forward P/E and price/book of 9x and 1.76x, respectively. The SWIX measures in at 10.2x and 1.87x, respectively. The forward dividend yield of 4.9% is also higher than the market (4.5%). The fund holds 28 counters with the top 10 positions accounting for 65% of the portfolio. We are heavily exposed (43%) to rand hedge stocks. The majority of this exposure comes in the form of resources shares which are, in fact, leveraged to rand weakness. Furthermore, our exposure to local industrial shares (rand plays) is limited.

Notwithstanding the global macro noise, equity valuations are attractive and the long-term fundamental picture, in our view, is supportive of upside. Don't expect a smooth ride though. We expect these high levels of volatility to persist until the market gains clarity on the EU debt crisis and the US economic outlook.

The local equity market marked time during June waiting for direction from the many uncertainties currently prevailing; the Greek debt restructuring, the US budget deficit, the cessation of quantitative easing, recovery in Japan, economic growth in China, etc, etc. There was little in the way of performance to differentiate across the main tier 1 sectors. Resources fell the most, down 3.1%, with Financials off 2% and Industrials off 1.1%. The market return was dominated by the large caps, with the ALSI40 down 2.4% and both Mid-Caps and Small-Caps unchanged for the month. Overall the FTSE/JSE SWIX fell 1.53%.

The Resource sector fell on the back of generally weaker commodity prices and a slightly stronger Rand. The gold price fell 2% during the month, although the gold sector was much weaker, down 9%. Harmony, our preferred stock in the sector was reasonably defensive falling 5%. The platinum price was down 6% taking the platinum sector down 4% with it. Lonmin fell 12% after illegal labour disruptions at their Rustenburg operations resulted in management having to guide production downward for the company's financial year. Mining Houses Anglo American and Billiton were both down 2% on mixed base metal performances; the copper price rose 1%, Nickel held steady and Aluminium fell 5%. Bulk commodity prices were, however, firm in June. Exxaro, with its exposure to both Iron Ore and Coal, lead the way this month as the top performing stock in the portfolio, up 11%. This return was significantly better than its major underlying asset, Kumba Iron Ore, which was up 4%. Sasol fell 2% as the Brent Crude price fell 4%.

GDFI related stocks were amongst both the best and the worst performers in the month. Eqstra was up 6% and Basil Read was up 4% but Bell fell 7% retracing some of the out-performance that resulted from the cautionary notice published in May. Other contributors included AVUSA, up 5%, Imperial, up 4% and Adcorp, up 4%. Detractors included both Steinhoff and Grinrod, down 5% and 2% respectively, further underperforming following their recently announced interrelated corporate action. Lastly, City Lodge Holdings fell 10% after releasing disappointing trading figures.

Resource counters were the culprits that prevented the market from surging ahead in March. Two of our largest sector exposures (General Mining (-3.2%) and Platinum (-2.3%)) performed particularly poorly. The Industrials (+2.6%) and Banks (+5.7%) sectors had a good run to lead the SWIX up 1.8% for the month. Brait announced material changes to its proposed future structure. It is expected to transform from being a manager of third party private equity funds and investing a portion of its balance sheet alongside these investments to being a pure private equity holding company. In future, it will only manage its own investments. To give it scale and the ability to acquire two core holdings, Pepkor and Premier Foods, it is proposing a huge R5.9bn rights issue at R16.50. Titan Nominees (Christo Wiese), Brait Management and RMB are underwriting the rights issue. The current very attractive dividend policy will fall away. Our revised investment valuation will depend on the underlying valuations of Pepkor and Premier Foods, together with the typical "investment holding company discounts."

We executed a number of changes to our holdings during the month. We allowed Pallinghurst's strong run in performance to up-weight in our model portfolio. We sold some Steinhoff, MTN, Avusa and Imperial and invested these proceeds in Aspen. Aspen's share price has fallen dramatically as it embarks on the significant Sigma acquisition in Australia. It also potentially faces pricing headwinds in South Africa should the Rand weaken, its South American strategy has been altered and overall segmental disclosure has been reduced. Despite these challenges we consider its share price to offer considerable compensation for us. On Avusa, we think there is still material upside to fair value above the offer price, but envisage a drawn out approval and implementation of this take-out. We have taken some profits and sold a portion, but are keeping just one foot in the door with our remaining holding.

Mastermind is currently trading at a 17% PE relative discount, a 19% price-to-book discount and a marginally lower dividend yield than the SWIX index. We reiterate that the lower dividend yield is as a result of a number of turnaround opportunity holdings in the portfolio, which are currently paying below par dividends or none at all.

It is always pleasing to end off the year on a positive note and the South African market did just that, being the best performing emerging market for the month. The All Share Index was up 6.2% in Rand terms over December and factoring in the Rand appreciation was up 13.8%.

The local market was helped along by buoyant resource prices and strong global markets, with the MSCI World Index gaining 7.4%. The most notable moves amongst resources were Copper which was up an incredible 16.3%, Brent Crude which increased 9.9% and the Dollar platinum price which gained 6.6%. These moves are particularly relevant for Mastermind as we now have a material position in Sasol and our long held Platinum exposure is one of the standout features of the fund at the moment. During the month we switched some of the Impala Platinum exposure to Anglo Platinum.

December is usually a slow month on the economic data side however one of the more interesting areas to watch is the performance of the retailers over this peak trading period as this is a good indication of the health of the consumer. Although no official figures have been released yet, feedback from the listed retail brands is the majority of them had a decent Christmas, showing robust growth. One has to bear in mind that last December was a particularly bad trading period so any growth this year will be off quite a low base.

Consumer spending on semi durables such as furniture traditionally recovers quite late in the cycle. We are now seeing some recovery in this sector which has been reflected in JD Group being the best performing retail share in the last three months, up 30%. We took this opportunity to sell our remaining holding in the stock this month. We do however still have exposure in this area to Lewis. Our faith in Super Group continued to be rewarded as it was the largest contributor to the fund's outperformance over December. Steinhoff was the second biggest contributor. Steinhoff came out with a long anticipated announcement that they have made a bid to acquire the French furniture retailer Conforama. Steinhoff has a vertically integrated global furniture sourcing and retailing business. The group already supplies Conforama with 60% of its furniture, and this acquisition will enable them to extract more margin through its vertically integrated model and expand their retail presence in Europe.

We have entered the New Year motivated and encouraged by the performance of the second half of the year. Let's hope 2011 is a good year for everyone!