International Market Commentary
A powerful rebound month during which forecasts of an imminent global recession were quietly buried. Reasons include oil recovering to near $40, the trade-weighted dollar falling by almost 4%, Draghi providing a 'bazooka' of stimulus measures in Europe, and Janet Yellen becoming gushingly dovish. World markets closed up a sparkling 6.5% helped by a massive 13% gain in emerging markets. However, investor sentiment remains fragile and negative developments continue to be treated harshly. With valuations above historical averages, risks to equity markets are still high - but the alternatives remain unappealing.

In South Africa, the rand recovered strongly rising 7% to R14.76:$1, mainly driven by dovish Fed rhetoric and the reassuring constitutional court ruling. Unfortunately, the latter does not imply a near-term leadership change, nor a stay in Moody's one-notch downgrade, which seems imminent.

The outlook remains clouded by the thick skin of our president - about as thick as that of a rhino but, unfortunately, with less risk of extinction. How the Zuma drama plays out will have a profound impact on the direction of our equity and bond markets, and that remains a conundrum that defies logical analysis.

The Fund
There was only one change to the fund's top 10 holdings during March; namely Trans Hex being replaced by Zeder. We were able to exit Trans Hex at a 36% premium to its end February share price as a strategic investor built a large stake in the group. After this disposal the fund's resources weighting has reduced from 23% at end December to its current 16%, predominantly in Anglogold and Impala Platinum.

Zeder moved into the top ten on the strength of a 12% share price advance during the month, as investors started to share our view that the company was trading at too wide a discount to the value of its portfolio of quality food investments. The Trans Hex proceeds were mainly invested into selected small cap industrial companies where we believe excellent opportunities exist. The two main purchases were Rolfes, a chemical business; and Dawn, a manufacturer and distributor of a huge range of hardware, plumbing and related products. Of course, times are tough for the building industry, but Dawn has a turnover in excess of R4bn, a rock solid balance sheet and a long established history. The shares are trading at 70% below their 2014 highs and a 50% discount to net asset value. As required by new legislation, we confirm that the fund has adhered to its policy objective and strategy.

Portfolio activity during December was muted, and the top 10 holdings saw just one change: namely, Sirius Real Estate, the German property company, replacing Impala Platinum, purely on relative price moves.

We have retained a 23% weighting in resources, largely comprising Transhex, AngloGold, Impala Platinum and Glencore. This reflects our belief that, notwithstanding, slowing growth in China and falling commodity prices, many resource shares are significantly undervalued after experiencing precipitous falls over the past few years, and particularly in 2015.

During 2015, the JSE AllShare Index was propped up somewhat artificially by just two stocks, Naspers and SAB. The fund’s lack of exposure to these two counters coupled with an overweight position in resources, led to its recent underperformance as indicated in the table below, right. Looking beyond the highly rated offshore heavyweights referred to above, there are now many good quality domestic businesses trading on the JSE at undemanding valuations, particularly after the recent market turmoil. Accordingly, we are retaining a fully invested position at present, in companies which meet our criteria.

As required by new legislation, we confirm that the fund has adhered to its policy objective and strategy.