Mario Draghi continues to inspire confidence. In September he followed up his bold speech by launching the Outright Monetary Transactions (OMT) facility, which addressed one of the shortcomings of his previous endeavours: that of credit risk remaining within the portfolios of the European banks. By allowing the latter to be able to sell toxic sovereign debt to the ECB and at the same announcing that there is no cap on sales, Draghi masterfully orchestrated a pullback in yields in those countries which were facing onerous borrowing costs. While there's still a long road ahead, tension levels have dropped in Europe. Not to be outdone, Ben Bernanke announced Open Ended Easing (OEE). The program targets the Mortgage-Backed Securities (MBS) market thereby adding another arrow to the quiver of Operation Twist. Interestingly, the Fed made specific mention of improvement in the labour market as being the specific target and that it would continue purchasing MBS's until employment conditions improved. The Bank of Japan then joined the cavalcade by unexpectedly expanding its asset purchase fund by 10 trillion yen ($126 billion) to 55 trillion yen. All-in-all, these global stimulus packages were positively digested by the market leading to strong global equity market performances.

The Fund was positively geared to this environment and returned 2.26% for the month. By comparison, the SWIX returned 1.2%. The biggest contributors to performance were Exxaro (+9.75%), MMI (+8.9%), Basil Read (+8.4%) and BHP Billiton (7.26%). These strong performances were only marginally offset by Cashbuild (-6.6%), BTI (-4.8%) and Supergroup (-3.6%).

The fund's trading activity remains low as we are largely comfortably with the current positioning. This is likely to remain so until the extreme valuation differentials between cyclicals and defensives compress somewhat. Although we have seen some mild rotation in the right direction, this is merely the tip of the iceberg.

We are comfortable with the current structure of the fund especially when considering its value metrics. The fund's 2yr forward PE, PBV and DY are 10.8x, 2.1x and 4.4%, respectively compare favourably with the SWIX which yields respective metrics of 12x, 1.9x and 4.1%.

'Risk on' was undoubtedly the order of the 1st 20 days of June. The month kicked off with the announcement of a €100bn bailout package for the Spanish banking system, which was positively received by the market. Global cyclical and high beta stocks rose rapidly in response to this proactive step taken by the European bureaucrats. Led by names such as Angloplatinum, Impala, Exxaro and Anglo American, the SWIX ALSI rose 4.9%. Unfortunately this was short-lived. As with so many of the false starts we've seen during the past 12 months, Angela Merkel again poured cold water on the proposals of her European counterparts at the EU Summit. Moreover, this coincided with the release of weak US economic data and the US Fed's downgrade of its economic growth expectations. Notwithstanding a top-up to Operation Twist, global markets took fright. Our market fell 2.8% in the following 10 days. Risk was decidedly off again. Global cyclical and high beta names were sold off aggressively, in favour of the more defensive names such as SAB, British American Tobacco, the retailers and food producers. This enabled the market to close up 2.2%.

Mastermind returned 1.47% for the month of June. The biggest contributors to performance were Investec (+9.9%), MMI (+7%), Old Mutual (+6.6%) and Anglo American (+5.5%). These strong performances were partially offset by our holdings in Basil Read (-14%), Anglogold (-10.5%), Sasol (-5.2%) and Naspers (-3.5%). Also, the fund holds low exposure to retailers, which performed exceptionally well during the month. For example, Mr. Price, Shoprite and Foschini Group were up 9.3%, 9% and 7.8%, respectively.

Continued strength in the Old Mutual share price prompted us to lock in some profits and reduce exposure. While the share still offers attractive upside potential it no longer warranted the exposure that we held. We took the opportunity to build a position in MMI - a life assurer which is the product of a merger between Momentum and Metropolitan. MMI brings cheap defensive attributes to the fund. Earnings have the ability to surprise on the upside as efficiencies are extracted from the merger. Together with excess group capital, this underpins the forward dividend yield of more than 6%.

The exposure to MTN was also increased materially during the month. MTN's valuation and 1yr forward dividend yield of 7% are far too attractive to ignore. We believe that the negative sentiment surrounding Iran and Nigeria is fully discounted at current levels and that the risks are to the upside.

Rising volatility since March 2012 combined with extremely depressed levels of risk appetite has been challenging to our ability to deliver equity performance in the short-term. We remain confident that the fund is well positioned to capitalise on risk normalisation over the medium term. In the event that this takes longer to play out than we expect, the fund has built up significant exposure to high yielding, cheap defensive counters which should help buffer the volatility. As evidence of this, the fund's forward PE, PBV and DY are 9.5x, 1.9x and 4.7% respectively, and compare favourably with the SWIX which yields respective metrics of 10.5x, 1.9x and 4.4%.

After a great start to 2012, things became slightly unhinged during March. This, despite the fact that private investors agreed to swap 86% of their Greek government bonds for new securities. At about €172bn, it's the biggest sovereign debt restructuring in history.

It was always going to be difficult to maintain the momentum after the announcement of the LTRO ('long-term refinancing operation') by the ECB January. The news was sufficient to lift world equity markets by 6% in January, with a spill over into February of another 5%. Most of the positive momentum in March took place in the US, whereas Emerging Markets hit the skids. Thus the more cyclically oriented stocks which had clawed back some of their massive underperformance of 2011 at the beginning of the year, slipped again in March. China came out with its revised growth forecast for the next 5 years at 7.5%, which ignited the cyclical woes. Notwithstanding the market's disappointment, we view this to be a respectable growth target bearing in mind that China's economic base is far larger than just a decade ago. With talk that the US is unlikely to see any QEIII because of improving economic fundamentals, and speculation that the Chinese won't apply aggressive monetary easing as that economy stabilizes, one of the great drivers of markets, namely the liquidity stimulus, is taken off the table. Making money will become a tad more difficult.

March's bearish global mood impacted negatively on our market, with the SWIX returning 0.02% for the month. The Fund's March return was -1.85%. The biggest contributors to performance were Wilson Bayley (+9.89%), Amaps (+23%), Aspen (+8.9%) and Naspers (+3.4%).

The performances of Aspen and Amaps were due largely to better than expected financial results, while Naspers is being driven by the performance of Tencent, its Chinese social media investment. Anglo American (-11%), Anglo Platinum (-9.43%), Sasol (-7.33%) and BHP (-6.16%) led the negative contributors. Large cap mining and energy stocks were particularly hard hit following the downgrade to Chinese growth expectations.

The fund was fairly active on the trading front during March. Small positions in Eqstra and Sun International were sold out, and Richemont and Aveng were added. Richemont comes with a strong economic moat, cash flush balance sheet and good growth prospects, yet its forward P/E is trading at a material discount to its long term rating. This presents the opportunity to gain exposure to a high quality rand hedge counter at a healthy discount. Aveng, on the other, is a turnaround stock. The construction cycle is at a low point and reflects in Aveng's share price, which has underperformed dramatically over the last 2 years. Its P/BV rating is at historic lows and in line with its cyclically low profitability. The balance sheet, however, is healthy. Aveng has excess cash of approximately R2bn but due to the current competition commission investigation, management is hesitant to distribute this to shareholders. We believe a positive resolution on this front will provide a significant catalyst for a rerating.

We continue to focus on the fund's attractive value attributes. To this extent the 2yr forward P/E, price/book and dividend yield are 9.6x, 1.86x and 4%, respectively. The fund remains concentrated with 23 counters and the top 10 positions accounts for 64.3% of the portfolio.

After the 30 November late afternoon rally, profit taking in December pushed the market into negative territory. The JSE SWIX ALSI returned -1.38% for the month. In contrast, Mastermind performed well, returning 2.2%. Our return was, however, partly boosted by a carryover of performance not captured in the November return because the fund is priced at 3pm. Price timing issues aside the fund still had a good month. Two of our largest holdings, Supergroup and Old Mutual performed exceptionally well after publishing news that positively surprised the market.

On 1 December, Supergroup published a trading update stating that interim earnings are likely to be 60-70% higher than the prior period. The announcement was a positive surprise to the market, which responded by pushing the share up 15% on the day and a further 3% for the rest of December. In our view, the result is a signal that Supergroup's troubles are in the past and that operations are beginning to perform normally. On our valuation metrics the share still offers significant value. We also anticipate that the company will resume dividend payments in the next 6-12 months, which should further enhance value to shareholders. Notwithstanding Supergroup's attractive fundamentals, we took some profits after the price jump and cut Mastermind's holding from 8% to 6%. The sale proceeds were applied to top up our holdings in City Lodge, Aspen, Wilson Bayley and JSE.

On 15 December, Old Mutual announced that it concluded a transaction to sell its Scandinavian operations for £2.1bn. The transaction was a positive surprise to the market, which pushed the share price up 11% on the day and a further 6% for the rest of December.
Our view is that the transaction enhances Old Mutual's value by about 10%, so the price reaction has not materially reduced the discount at which Old Mutual is trading. The sale proceeds mean that management will achieve their debt reduction target of £1.5bn, leaving change for a potential special dividend. The end result would be a more focused business with a stronger balance sheet, which provides a catalyst for further re-rating of the share price. Our valuation indicates that Old Mutual is still trading at a discount of more than 40% to its embedded value. We believe that this is far too high. Old Mutual currently accounts for 6.3% of the fund.

Several of the fund's smaller holdings also performed exceptionally well, most notably City Lodge (+12.1%), Amalgamated Appliances (+11.4%), Cashbuild (+5.6%) and Basil Read (+5.2%). In aggregate, these smaller holdings contributed nicely to the fund's return. These performances were only partially offset by the losers. Two of our biggest holdings, BHP Billiton and Anglo American delivered returns of -5%, -4.6% respectively.

2011 was a disappointing year for equities. The SWIX returned 4.3%, all of which came from dividends. Contrast this with the fact that year-on-year earnings and dividends increased more than 25% and 15% respectively. This implies that the market PE de-rated by approximately - 25%, which is the 4th worst number on record since 1961. This leaves the equity market looking extremely cheap. The 2yr forward P/E, price/book and dividend yield are 9.7x, 1.82x and 4.2%, respectively. Mastermind's respective metrics of 8.7x, 1.87x and 4.5% compare favourably. The fund remains fairly concentrated with 26 counters and the top 10 positions accounts for 65% of the portfolio.