The Fund has been in existence for approximately four months. Consistent with our investment philosophy we are building a portfolio of investments in companies with a durable competitive advantage that are underappreciated by stock markets. By the end of the quarter we had invested 44% of the Fund in shares, up from 15% at the end of June. This steady progress can be expected to continue in the months ahead because shares remain a better option than cash and bonds, although we are finding that stock markets, particularly in the US, are closer to fair value now compared with the bargain levels of recent years. This means that we have to look a little harder to find attractive new investments.

The Fund has invested in 10 companies including General Electric, Google, JP Morgan, Wal-Mart and US Bancorp. The bias happens to be towards US and European markets although we are open to investing anywhere in the world where private property is secure and financial reporting is reliable. No investments have been made directly in emerging markets, thereby largely avoiding the recent currency woes of countries like India, Indonesia and Turkey. Indirectly, the Fund has some exposure to these markets via a 3.8% stake in Unilever, the global consumer goods company, which is going through a renewal process under the excellent leadership of Paul Polman, the CEO. What about the exposure to the Rand? With Rand in-flows from our clients, this exposure had grown during the quarter but we managed to trim this to 15% of the Fund by quarter end by buying more US dollars at R9.75/$ in late September.

We will provide specific performance numbers once the Fund has a 6 month track record. More broadly, the Fund has had a solid performance since inception, driven primarily by the weaker Rand. The underlying equity investments are, thus far, largely unchanged in dollar terms.

With the Fund having started in mid-May 2013, this is our first opportunity to update you on investment decisions taken to date.

The biggest decision came on Day One, when we decided to immediately convert 95% of the rand inflows into the Fund to US dollars at an exchange rate of R9.30/US$. Although the port-folio manager believed that the rand was slightly undervalued at that level, the decision to convert was driven by the on-going problems with South Africa's current account deficit and no visible progress in labour relations in the country's key export industry - mining. Time will tell, but so far the decision has been beneficial to the Fund with the rand weakening further to R9.90/US$ at quarter-end.

How have we invested the US dollars? By 30 June 2013, we had invested 15% of the Fund in US equities, with stakes in Wal-Mart, Yum! Brands and Wells Fargo. These are all wonderful businesses with durable qualities, and were acquired at what we calculate to be reasonable prices.

Our target is to increase the investment in equities closer to 80% of the Fund and you can expect a great deal more progress over the next three months. Like starting a wardrobe, it is always challenging to assemble a select collection of equity investments over a short space of time that doesn't require wholesale changes at the hint of a change in circumstance. Fortunately major stock markets have declined since the recent highs of 21 May 2013 (e.g. S&P 500 Index) and as a result, over the short period from the date of inception to 30 June 2013, the Fund has performed well by being largely invested in cash offshore.

At the outset we said that our bias was towards equities and that government bonds in developed markets were too expensive. We have not changed this thinking. Note that bond investors in the US suffered their worst first half period since the bear market of 1994, with the rout happening in May and June 2013.