The fund returned 4.7% for the quarter outperforming the benchmark by 3.1%, and 3.3% for the 12 months to end March 2016.

Economic and market overview

The new year had a turbulent start, featuring one of the worst stock market sell-offs since the financial crisis of 2008. At first, markets focused on slowing growth in China and vulnerabilities in emerging market economies more broadly. Increased anxiety about global growth drove the price of oil and emerging market exchange rates sharply lower and catalysed a flight to safety into core bond markets. The turbulence spilled over to advanced economies, as flattening yield curves and widening credit spreads made global investors ponder recessionary scenarios.

Underlying some of the turbulence was market participants' growing concern over the dwindling options for policy support in the face of the weakening growth outlook. With fiscal space tight and structural policies largely dormant, central bank measures are seen to be approaching their limits.

Consistent with its statutory mandate, the US Federal Open Market Committee seeks to foster maximum employment and price stability, and against this backdrop, the Committee decided in March to maintain the target range for the federal funds rate at 0.25%-0.5%. The stance of US monetary policy therefore remains accommodative, and furthermore, the committee asserts that future policy will evolve cautiously as needed, taking cognisance of global economic and financial developments.

In late January 2016, the Bank of Japan surprised markets with the introduction of negative interest rates, after the European Central Bank had announced a possible review of its monetary policy stance and the Federal Reserve issued stress test guidance allowing for negative interest rates.

The balance of risks for emerging markets is still tilted to the downside. Lower oil and other commodity prices (notwithstanding the commodity-rally in Q1 2016) could provide some upside to demand by commodity importers, but they complicate the outlook for commodity exporters, some of which already face strained initial conditions. The Chinese authorities face difficult trade-offs in their objectives of achieving a transition to more consumption-driven growth without activity slowing too much, while also reducing financial vulnerabilities and implementing reforms to strengthen the role of market forces in the economy.

Locally, the SA economy still remains vulnerable to portfolio inflows slowing, and perhaps reversing, given the high current account and fiscal deficits. The rand appreciated by 4.7% vs the US dollar for the full quarter, and even strengthened to below R15/US$ for a brief while, driven by international risk-on sentiment, post the Fed chair's seemingly dovish rhetoric.

Rating agencies S&P and Moody's have placed SA currency on review due to continuing risks to South Africa's medium-term growth prospects and its fiscal stabilisation plans, against a backdrop of a weak investment climate and anaemic global demand. To curtail downgrade scenarios, the sovereign would need to show evidence of progress in planned structural reforms and fiscal consolidation envisioned in the 2016/17 Budget Review.

The best performing local equity sectors in the first quarter of 2016 were resources in general, but industrial metals (+93.1%), gold (+92.8%), platinum (+74.6%), general mining (+12.5%) stood out as particularly strong.

Unsurprisingly, rand-hedge sectors, including personal goods (-12.6%), forestry & paper (-6.6%), beverages (-4.5%) and tobacco (+1.1%) were among the weakest sectors.

Fund performance and positioning

Key contributors this quarter were Amplats, African Rainbow Minerals and Royal Bafokeng Platinum, while Metair, Capco, and Mustek were the main detractors.

Foreign stock selection was disappointing, with notable detractors being packaging solutions firm Westrock, and Westlake Chemical Corporation. Contributors to performance were our positions in healthcare group HCA holdings and energy pipeline firm, Kinder Morgan.

African Rainbow Minerals (ARM), one of our top ten holdings, is a leading South African diversified mining and minerals company with long-life, low unit cost operations. It has been one of the stellar performers for the year to date in our portfolios. ARM extracts and beneficiates iron ore, manganese ore, chrome ore, platinum group metals, copper, nickel and coal. ARM also produces manganese and chrome alloys and has an investment in gold through its shareholding in Harmony.

ARM's strategic imperative is that all its operations should be positioned below the 50th percentile of each commodity's respective global cost curve. Impressively, this has materialised in all but two of its operations. ARM strives to continuously improve productivity through technology, mining and processing efficiencies and continuous training.

Given their positioning on global cost curves, ARM maintains competitiveness and offers strong financial flexibility in a challenging global environment characterised by a strong USD and, concomitantly, weaker USD commodity prices. We regard the investment case as compelling in the current landscape, and the share could prove even more value accretive should commodity prices offer even a modest improvement from current levels.

We remain positioned with a contrarian orientation, aiming to exploit the extreme valuation differentials on offer as a result of global monetary authorities' unconventional interventions in capital markets, and the concomitant rise of price-agnostic market participants. Our view has for a long time been that extremely low bond-yields globally are causing global investors to over-price companies with stable cashflows (perceived as bond substitutes) and under-price companies with naturally variable or cyclical cashflows, when these cashflows are low.

The fund returned 1.4% for the quarter outperforming the benchmark by 0.9 %, and 4.7% for the 12 months to end June 2016.

Economic and market overview

The disappointing first quarter GDP growth rate (year on year contraction of 0.6%) deserves attention. The primary sectors - mining and agriculture, which make up 10% of GDP - were down 10% year on year. Secondary sectors - manufacturing and construction, which make up 20% of GDP - were down 1%. The tertiary sector - wholesale and retail trade, financial services, logistics and government services, which makes up 70% of the economy - is still serving as the powerhouse of our economy, but is coming under increasing cyclical pressures (rapidly slowing consumer spending growth and deteriorating credit cycle) and only managed to grow by 1%.

The first quarter result featured some seasonal effects (a lingering drought and safety stoppages in platinum mining), but past client discussions we've had on the worrying multi-year "de-industrialisation" of the local economy are now playing out. The reluctance of industrial growth to be meaningfully kick-started by a weakened currency is of particular concern.

On the global front, the "leave" outcome of the UK referendum on EU membership caused significant market turbulence towards the end of the quarter. The actual effects will only be known after a period of complex and prolonged exit negotiations. Of particular concern to us is the impact on the UK's financial services sector, and the extent to which the seamless sale of financial products to Europe ("passporting") will continue. Our current base case is that a partial migration of financial services infrastructure out of the UK (mostly back office functions relating to clearing activities) is likely. Negotiations that are politically motivated and short-term focussed will have negative growth implications for the UK and Europe, but will have a much smaller impact on the rest of the world.

In the aftermath of the UK referendum we saw a flight to safety. Gold prices increased moderately from elevated levels and, more importantly, many developed market bond yields plummeted to levels below 2012 lows. The US 10-year yield is now at record low levels of 1.38%. These moves, which are unsustainable in the long-term, invariably cause a "hunt for real yields" and distort asset prices. Looking through specific events, the reality is that markets are at high levels (on a historic P/E basis), apart from Europe. This makes markets vulnerable to stress events, and normal cyclical economic slowdowns.

Labour market data from the US disappointed this quarter. The average monthly change in non-farm payrolls has been about 200,000 since October 2010, but employment growth has now fallen short of that expansion average in four of the past five months. On the other hand retail sales remain robust, as have vehicle sales (which have recovered sharply post the GFC and are running at above 20-year average levels). Market expectations for rate hikes have been pushed out further this quarter (at most, one further hike expected at the end of the year).

Chinese data remains erratic and difficult to interpret during the country's adjustment to structurally lower tertiary led growth. However import data was stronger than expected this quarter, especially on the commodity front.

Exceptionally strong foreign inflows into SA equities (+R58bn) in June helped to more than offset the year to date outflow position of the previous quarter. A large portion of the flows have been deal related (the SAB/ABI merger as well as the Bidvest break up into Bidevest and Bidcorp), but we have nevertheless seen a return of foreign buying in industrials like Naspers and MTN (post the increased certainty around its Nigerian fine).

The local equity market gained 0.4% over the quarter. After a prolonged period of sharp falls, we have now had two successive quarters of resource outperformance (up 6.4% this quarter). Global macro developments (Brexit, US rate hike delays, increased political uncertainties) have created a perfect storm for the dollar gold price, which together with a weakened currency has led to a surging rand gold price, and rising gold sector (up 16.4%). The platinum sector held on to significant gains from the previous quarter and out-performed the market (5.1%), with a moderately stronger rand platinum price (up 2.8%). The premium between the gold price and platinum price is at record highs and will normalise over time. Kumba Iron Ore, a structurally high cost global producer following significant Australian mine expansions, was the strongest share this quarter (up 39.6%) on a higher iron ore price and a general reassertion of commodity grade price differentials (which were supressed during the commodity price lows of January).

Fund performance and positioning

Key contributors this quarter were Tongaat, Royal Bafokeng Platinum and Anglo American. Capco, AECI and Sasol were the largest detractors. Year to date our meaningful positions in defensive resource counters have added significantly to performance (as at 11 July 2016, Royal Bafokeng Platinum was up 90%, Anglo Platinum up 109% and ARI up 118%).

On the local side, specialist industrial property fund, Equites Property Fund, has been a strong performer over the quarter in our funds. Logistical excellence has become vital for industrial corporates in South Africa, particularly in the very competitive consumer facing sectors. This has caused a structural need for expanding, better located and optimised distribution centres. In many cases distribution centres, given scale benefits, have to be built in a modular fashion, with future expansion phases in mind. Equites Property Fund has built a competitive advantage in designing, financing, building and managing these specialist properties and is very well positioned to benefit from these structural trends.

The share provides our clients with a solid revenue stream from a well-diversified industrial portfolio with largely multinational clients and JSE listed corporates. In addition, we expect strong future cash flows from current development projects, brownfield expansions (the current Foschini Group distribution centre expansion) as well as partnering opportunities with other general property funds. An added advantage from a timing point of view is that the company is currently financially under-geared.

We continue to apply our process and valuation-driven philosophy with focus and discipline, currently positioning the fund very differently to the market and competing funds. Performance year to date has been very encouraging and we remain totally focused in clawing back recent under-performance. Market volatility and geopolitical events are creating exciting opportunities to position our funds in significantly undervalued shares with strong prospects for superior returns.

The fund returned 3.3% this quarter, strongly outperforming a flat market. It benefited from strong performances from some of our highest conviction holdings, especially amongst the mid-caps. Very strong stock foreign stock selection more than offset the effects of stronger currency, and resulted in a pleasing contribution to outperformance. The fund has returned 7.3% pa since inception in May 2011.

Economic backdrop

Developed economies continue to gradually improve, but growth remains subpar and inflation stubbornly low. In the US, rising employment, albeit with low wage growth, continues to benefit consumer expenditure and the energy sector is stabilising after a deep contraction. The US Federal Reserve is likely to increase interest rates again soon, with recent deferrals seemingly due to economic fragility outside of the US. European and Japanese growth is anaemic, with little credit growth, despite the backdrop of record monetary stimulus.

In China, significant fiscal stimulus has been propping up fixed asset investment and supporting GDP growth. Incrementally less profitable public projects are being undertaken and we are concerned that this inefficient growth path is not sustainable and is accompanied by rapidly increasing debt to GDP ratio. Additionally, the housing market in China, which has been in a strong upswing recently (benefiting heavy industries like cement and steel), is showing signs of a cyclical slowdown. This backdrop is negative for bulk commodity demand.

Within emerging markets, India and Indonesia are benefiting from pro-growth fiscal reforms, while Russia and Brazil are rebounding from deep recessions. The commodity price rebound, a key positive factor for many emerging markets this year, remains vulnerable to a potential Chinese investment slowdown. This quarter, the global search for yield resulted in very strong emerging market bond and equity inflows.

In South Africa, the economy remains very weak, with agriculture and mining sectors contracting of late and consumer expenditure weak. The rand is particularly important for financial markets at present, as it has strengthened this year from very weak levels, tempering inflation expectations and improving the interest rate outlook.

Ratings agencies have placed the SA sovereign ratings on a negative outlook, with a possibility of a foreign currency downgrade below investment grade due to tepid medium-term growth prospects, a lack of progress on growth-enabling reforms, a weakening fiscal position and heightened potential threats to (currently highly regarded) state institutions. The S&P rating decision in December will be particularly closely watched and a downgrade would be negative for the rand and interest rate expectations.

Market review

Extreme unconventional monetary stimulus in the form of asset purchases continues to distort asset prices across the globe. Bond yields are near record lows and in many cases negative. Equity prices are high, especially in sectors where stable cashflows are generated, such as consumer staples.

Over the quarter, global equity markets were generally up, with particular strength from the Nasdaq index in the US, the German market and Hong Kong stocks. The local equity market gained 0.3% over the quarter, underperforming other emerging markets. After a prolonged period of weakness, we have now had three successive quarters of resource sector outperformance (up 8.1% this quarter and 36% year to date). The platinum sector was the star performer (up 22.6% this quarter and 125% year to date), outperforming gold (down 10%) and general mining (up 16.7%). Commodity prices in dollar terms were generally flat this quarter, consolidating gains in the year to date, but base metals (up over 10%) and sugar (up 13%) were particularly strong.

Industrials (down 2%) underperformed this quarter and cyclical retail shares were particularly weak: Truworths (down 15%) and Mr Price (down 26%), as these highly-rated shares have begun to disappoint on earnings growth. The healthcare sector was also weak (down 7%). Heavyweight industrials Steinhoff (down 6.8%) and British American Tobacco (down 5.1%) underperformed in line with the stronger rand, while MTN (down 16.2%) continued to be dragged lower by operational underperformance and a weaker Nigerian currency. On the positive side, Famous Brands (up 32.1%) and AECI (up 26.7%), were strong.

Fund performance and positioning

Strong contributors this quarter were AECI, Datatec, Royal Bafokeng Platinum as well as our global holdings (strong global stock selection more than outweighed the effects of the significantly stronger rand). Foreign stock selection was very positive this quarter led by Westlake, a chemical with similar operations to Sasol's proposed investment in the US.

On the local side, mining explosive and chemical manufacturer, AECI, has been a strong performer over the quarter in our funds. The company is one of the few remaining South African manufacturers with world-class intellectual property and globally competitive products. It is using this position to expand outside of South Africa, particularly in Africa, Indonesia and Australia. In addition to world class explosives technologies, the company has leading water purification solutions, agricultural chemicals and food additive products - all focused on attractive growth markets. AECI has a strong balance sheet, generates good cashflows and has many large growth opportunities.

Against a backdrop of weak economic growth, high asset prices, rising political uncertainty in many large countries and a potentially disruptive Chinese economic rebalancing, we are cautious on the outlook for financial markets.

We continue to position the fund in investment opportunities we identify from deep research and analysis, taking a long-term perspective to identify mispricings. We have a high exposure to mid-cap stocks where we see undervaluation, a large positions in the low cost PGM miners and certain PGM ETFs and very high exposure to global stock picks.

The fund returned -4.2% for the quarter and -5.8% for the 12 months to end September 2015.

Economic and market overview
The Federal Reserve (Fed) held interest rates flat at its September Federal Open Market Committee (FOMC) meeting, citing "recent global economic and financial developments" that could restrain economic activity and put further downward pressure on inflation. The clear message of the Fed's inaction is that both the initiation and pace of monetary tightening will take global growth and financial market stability into account, both of which the Fed has little power to influence and probably less confidence to forecast.

Emerging markets in general continue to suffer from three related headwinds: sluggish global growth, a rising US dollar and falling commodity prices. The cumulative effect of this triumvirate has prompted slow emerging market growth, a disappearance of earnings growth (in the aggregate), and complications arising from currency weakness.

Concerns about a slowing China have intensified fears of either an intra-Asian currency war, or a further breakdown in Chinese growth that exacerbates the three headwinds that the emerging markets have already been navigating.

The combination of relatively high debt levels, slowing growth (in both nominal and real terms), and an intentional rotation in the mix of domestic growth (away from investment and manufacturing, toward consumption and services) has intensified the risks of a hard landing in China. It has also undoubtedly contributed to the pressure on industrial commodity prices, thus extending concerns about the commodity-dependent economies within emerging markets.
The FTSE/JSE ALSI index declined by 2.1% over the quarter, led by SA Resources (-17.9%) as commodity prices remained under pressure, with Industrial Metals (-39.8%) and Platinum (-36.7%) among the worst performing sectors. SA sector winners included the rand hedges led by Beverages (+25.1%), Tobacco (+17.4%), Household Goods (+10.3%), Personal Goods (+9.9%) and Forestry and Paper (+8.3%) as the rand fell -12.1% over the quarter against the USD.

Mobile Telecoms (-17.8%) struggled, given increasing investor concerns of a dividend cut, as oil prices slid further, jeopardising policy direction in Nigeria. The Specialty Chemicals sector was also down (-14.0%) over the quarter, given lower oil prices. Pharmaceuticals also struggled as Aspen's (-17.7%) primary currency exposures were negatively affected by a strengthening USD.

The domestic equity market remains very expensive with investors continuing to flee the resources sector and the concomitant waterbed effect continuing to benefit industrials and financials. Despite a weak base following the protracted 5 months strike in the platinum industry in 2014, mining production growth in 2015 has remained lacklustre. The benefit of the weaker currency has also been more than off-set by weaker commodity prices in $ terms, with most commodities showing negative year to date returns in Rand terms.

Government's visa bungle has already started to impact on the tourism sector and, with the manufacturing sector firmly in the doldrums, SA will have to rely on the mining sector to benefit from the weaker currency and pull the economy out of recessionary conditions. However, weak external demand (notably from China), coupled with labour issues, continues to impact mining production. In short, the outlook for the SA economy remains bleak with no obvious levers to engineer a turnaround.

Fund performance and positioning
Weak resources and mobile telecoms were the key detracting sectors this quarter. Lonmin, AECI and MTN were the worst absolute performers. Mondi was again a key absolute contributor, along with the palladium ETFs. In the wake of the VW emissions scandal, we saw stronger palladium pricing towards quarter end, reflective perhaps of consumers' (and regulators') short term preference for gasoline engines, at the expense of diesel ones.
We remain positioned with a contrarian orientation, aiming to exploit the extreme valuation differentials on offer as a result of global monetary authorities' unconventional interventions in capital markets.
Our view is that extremely low bond yields worldwide are causing global investors to over-price companies with stable cashflows (perceived as bond substitutes) and under-price companies with naturally variable or cyclical cashflows, when these cashflows are low.

We also hold a relatively high midcap exposure in undervalued industrial companies. These seem to have escaped the strong rerating that has occurred in many of the larger industrial SA companies with strong global investor shareholdings. This is possibly due to their size, causing them not to make the radar screens of large active global investors and the benchmarks of global passive investors. In general we are wary of SA economic exposure, given the very weak outlook, especially in the consumer-facing companies.
Platinum group metals (PGM) prices have significantly surprised us over the last quarter, falling substantially and placing the bulk of SA miners in a negative cashflow situation. This particularly threatens miners, such as Lonmin and Aquarius, which have no alternative sources of cash from low cost operations and which do not have ready access to financing at this time. Consolidation within the industry, project deferrals and capacity closures have begun as a result.
We continue to find significant value in the platinum miners as their share prices reflect a lower trajectory of spot metal prices than we believe is realistic, given the prospective fundamental market deficits that we expect. Our analysis suggests that PGM demand will continue to grow from autocatalyst fabrication, jewellery (especially in China and India) and other industrial applications. Recycling supply should peak in the next 3 years and mining supply, which is heavily concentrated in SA, remains extremely constrained by underinvestment by mining companies who need to preserve cash at a time when large parts of the industry are currently loss making.
The fund retains a high allocation to foreign equities and listed property stocks, where we find opportunity in certain large technology stocks, healthcare companies, property and specific listed property exposures.

ISLAMIC BALANCED - December 2015
The fund returned 2.9% for the quarter and -2.5% for the 12 months to end December 2015.

Economic and market overview
The interplay between policy normalisation in the United States, emerging market weaknesses, and accommodation in other major advanced economies drove market developments in the fourth quarter of 2015.
Rising dollar interest rates as the Fed finally started the hiking cycle in the U, lifted the value of the dollar relative to other countries, notably emerging market currencies. Rising US rates also resulted in increased volatility in equity markets, as investors re-assess their appetite for risky assets. This increases the appeal of perceived safe haven assets like US treasuries and results in a disproportionate strengthening of the dollar relative to other heavily traded currencies.

Markets stabilised in October, following the August rout. Fears of a crisis centring on emerging markets faded as Chinese equity and currency markets - the rout's epicentre - entered calmer waters. Sentiment improved after policy interventions in emerging markets (The Reserve Bank of India cut its policy rate to a four-year low of 6.75% in late September. At the end of October, the People's Bank of China lowered the one year benchmark lending and deposit rates by 25 basis points).

Most commodities are leveraged to the China investment and construction cycle; negative growth here in 2015 has contributed to weak demand and the resultant softer spot commodity prices see the bulk of producers in loss-making territory. This is clearly not a sustainable situation for the long term, but large scale industry losses look likely to remain a market feature until production shuts are initiated to rebalance markets, or we see an unexpected lift in global demand. Surplus capacity exists in most mined commodities and remains utilised as production halts have been below what is needed to rebalance the trade. In general, market participants attempt to anticipate future outcomes and price them in ahead of time. Pricing therefore suggests a continuation of anaemic global demand and over-supplied markets.

Fund performance and positioning
The performance of South African equity markets in 2015 was characterized by lower commodity prices; higher costs of equity amidst fears of interest rate hikes given the likely ratings downgrade, and a protracted drought due to a severe El-Nino weather phenomenon. The rand depreciated by 25.2% vs. the USD in 2015, against a generally stronger dollar. The rand weakness was exacerbated further by domestic policy concerns, such as power shortages and drought, and in addition current account and budget deficits weighing on SA's credit ratings.The fund's negative return in 2015 was mainly due to the exposure to resources, with the resources sector declining by over 30% in 2015.

Unsurprisingly, SA sector winners in 2015 included rand hedge sectors, with Paper (+64.2%), Beverages (+57.4%), Tobacco (+43.8%), Media (+40.2%) and Household Goods (+34.8%) among the top performers, as the rand depreciated against the USD over the year.
Resources including Industrial Metals (-76.9%), Platinum (-61.8%), Construction (-41.3%), General Mining (-36.7%), Mobile Telecoms (-29.4%) were among the key sector laggards, on the back of generally lower commodity prices in 2015.

The biggest relative contributors to fund performance have been an underweight position in MTN, and then overweight positions in Aquarius platinum, NEPI and Mondi.
One of the fund's biggest holdings, Tongaat Hulett has had a challenging operating environment of late. The above-mentioned El-Nino caused the most severe drought in several years in South Africa and forced Tongaat to pursue cost cutting initiatives in the next six months amidst a 10% decline in profits. The company has also been hurt by lower world sugar prices that are linked to oil prices earlier in the year, although world sugar prices have recovered strongly towards the end of 2015.

We now see less risk of lower earnings post a big land deal and in addition, we expect recovery in the sugar margin in 2017 to offset any decline in property profits post 2016.
Barring adverse weather conditions, we remain positive on longer term sugar prices given the steady increase in consumption from developing nations in Africa, Asia and the Middle East, and given that sugar prices are below the Brazilian cost of production and cash costs. This implies that Brazilian producers have an incentive to switch to producing ethanol, potentially leading to price reaction on the back of reduced global supply.

We remain positioned with a contrarian orientation, aiming to exploit the extreme valuation differentials on offer as a result of global monetary authorities' unconventional interventions in capital markets.

Our view is that extremely low bond yields globally are causing global investors to overprice companies with stable cashflows (perceived as bond substitutes) and under-price companies with naturally variable or cyclical cashflows, when these cashflows are low.
We also hold a relatively high midcap exposure in undervalued industrial companies. These seem to have escaped the strong rerating that has occurred in many of the larger industrial SA companies with strong global investor shareholdings. This is possibly due their size causing them not to make the radar screens of large active global investors and the benchmarks of global passive investors. In general we are wary of SA economic exposure, given the very weak outlook, especially in the consumer-facing companies.

The fund retains a high allocation to foreign equities and listed property stocks, where we find opportunity in certain large technology stocks, property and specific listed property exposures.

The fund returned -0.04% for the quarter and -1.4% for the 12 months to end June 2015.
Economic and market overview
While global growth dipped in the first half of 2015, it is set to make a modest comeback over the remainder of the year, partly due to the reversal of several temporary factors that depressed economic activity in the US. The Chinese government's efforts to stimulate their economy and reasonably strong economic momentum in Europe and Japan should also lift growth. Still, a persistent shortfall in aggregate demand remains the defining feature of the global economic landscape.

Market sentiment remains closely linked to US monetary policy and the timing of the first rate hike for many years. Far more important is the pace and extent of the hiking cycle and we expect this to be relatively slow and shallow. The debt crisis in Greece continues to weigh on sentiment in Europe, but appears to be relatively limited in its effect on fundamental economic activity.

The Chinese economy continued to slow in the first half of the year, as reflected in various 'real-time' measures such as railcar freight volumes, electricity output, bank lending and slowing demand for commodities. Large debt burdens in various areas of the economy are a pressing concern. The shift in economic activity from capital investment to consumption continues as per the current five-year plan.

The FTSE/JSE All Share Index touched a record peak in April before entering a more volatile period for the remainder of the quarter as negotiations between Greece and their European creditors broke down. The equity market ultimately ended the quarter largely unchanged.

SA sector winners included Support Services (+11.7%), Mobile Telecoms (+11.0%), Forestry and Paper (+10.3%), and Specialty Chemicals (+10.0%). Unsurprisingly, sector laggards included resources stocks, with the Gold (-16.8%), Industrial Metals (-13.7%) and Platinum (-8.1%) sectors hurt by falling commodity prices. Construction (-8.3%) and Fixed Telecoms (-19.0%) were also out of favour.
Fund performance and positioning
A generally weak resources sector and a weak spot platinum pricing environment once again led to share price attrition in the platinum sector. Selected platinum names were key absolute detractors for us. Mondi, and several of our mid-cap ideas such as Metair and KAP, were the fund's top performing holdings over the quarter.

The fund's exposure to certain real estate counters, particularly those with foreign operations such as Capital & Counties Properties, contributed to performance once more. The fund's offshore assets generally performed well.

Adcorp is one of the fund's compelling mid-cap holdings. It was founded in 1975 as the country's first recruitment advertising agency and has transformed into the largest workforce management player on the African continent. The Group offers workforce management, training and business process outsourcing services and solutions across a vast spectrum of industry sectors and job types with a specific focus on emerging markets and, in particular, Africa and the Asia-Pacific region. Spanning three continents and a strategic alliance with global player Randstad, the Group has an increasing global presence. Adcorp has an impressive record of creating value for its shareholders, converting a high proportion of its profits into cash and paying dividends, and adhering to high standards of corporate governance. We are confident that this business offers excellent long-term prospects at very reasonable market valuation.

We remain positioned with a contrarian orientation, aiming to exploit the extreme valuation differentials on offer as a result of global monetary authorities' unconventional interventions in capital markets. Our view is that extremely low bond yields globally are causing global investors to overprice companies with stable cash flows (perceived as bond substitutes) and underprice companies with naturally variable or cyclical cash flows, when these cash flows are low.

We also hold a relatively high mid-cap exposure in undervalued industrial companies that seem to have escaped the strong rerating that has occurred in many of the larger industrial SA companies with strong global investor shareholdings - possibly due to their size causing them not to make the radar screens of large active global investors and the benchmarks of global passive investors.

Platinum group metal (PGM) prices have continued to be very weak and platinum mining share prices have plumbed new depths, currently discounting weak prospective metal prices. We continue to find significant value in the platinum miners as their share prices reflect a lower trajectory of metal prices than we believe is realistic, given prospective fundamental market deficits that we expect. Our analysis suggests that PGM demand will continue to grow from autocatalyst fabrication, jewellery (especially in China and India) and other industrial applications. Recycling supply should peak in the next three years and mining supply, which is heavily concentrated in SA, remains extremely constrained by underinvestment by mining companies who need to preserve cash at a time when large parts of the industry are loss making.

The fund retains a high allocation to foreign equities, where we find opportunity in certain large technology stocks, healthcare companies, property and casualty insurers and specific listed property exposures. We are favouring companies with strong intellectual property and consequent high margins.