The Fund continues to show strong absolute and relative performance numbers - the Fund
is up 9% for the first nine months of 2023 amidst a very challenging return environment.
We have been very vocal about our enthusiasm for South African small and mid-cap
companies where we have been able to buy above average companies at deeply
discounted prices. While our enthusiasm about this sector of the market remains intact, we
are becoming increasingly constructive about the growing opportunity set in smaller
international companies that have also been neglected as investors focus predominantly on
the widely held and revered US megacap companies.

We have used weakness in the energy sector to accumulate positions in some very cheap
Canadian oil and gas companies, as well as adding to existing positions in Aimia Inc and
IDT Corporation. Both are small holding companies trading at what we think are significant
discounts to the value of their portfolio of assets. Aimia is listed in Canada but owns two
very good global businesses and has smaller, minority stakes in a number of others,
including the largest outdoor advertising company in China. We used price weakness to
increase our position during the quarter as we think the return profile became even more
attractive with very strong downside protection given the net cash balance,
underappreciated asset value and reasonable management alignment. An activist investor
has subsequently made a proposal to buy out minorities at a 20% premium, an offer that
severely undervalues the business and which we assume will receive little traction.

Our conviction in IDT Corporation has grown during our ownership period as we have been
encouraged by the strong execution of this excellent and aligned management team. IDT
uses cash flows from some mature telecommunications businesses to develop and grow
some younger, more exciting companies that they should ultimately spin-off and take
public. We may have to wait a few years, but we are excited about the runway and
potential for some of these fast-growing businesses. The company also has net cash on
the balance sheet, and we were encouraged that management also used the recent price
weakness to repurchase more shares during the quarter.

We live in very uncertain times and there is no shortage of things to worry about. One of
the best hedges against future uncertainty is to invest alongside aligned, capable
management teams. We are finding plenty of opportunities to do so at very attractive
prices, giving us confidence in the long-term outlook for our underappreciated portfolio of
companies.

The objective of this portfolio is to provide capital growth over the medium to long term. The portfolio aims to achieve a return of at least 5% above CPI per annum measured over rolling 3 year periods. This portfolio aims to limit downside risk over the medium to long term, but investors must be able to withstand capital volatility in the short term.

The objective of this portfolio is to provide capital growth over the medium to long term. The portfolio aims to achieve a return of at least 5% above CPI per annum measured over rolling 3 year periods. This portfolio aims to limit downside risk over the medium to long term, but investors must be able to withstand capital volatility in the short term.

The Fund did well to produce a return of just under 7% in 2022, in what was a challenging year for global financial markets. The returns of the past few years are largely the result of active stock selection in unloved areas of the market. This is well illustrated by the key contributors during the year which include HCI, Grindrod, Santova and Grindrod Shipping, all of which produced outsized gains during 2022. Having trimmed our position in Grindrod Shipping during the course of 2022, we exited completely towards the end of the year as the company was subject to a corporate buyout. Having bought our last shares at R45 in July 2020 we made our final exit at R470, a very rewarding investment. Shipping may not be a good business, but it is a good example of the merits of investing in supply constrained industries at depressed prices.

The global portion of the portfolio has yet to contribute to returns, but our conviction in this area has only grown in recent months. Our offshore exposure is now higher than it was this time last year. This is not an asset allocation decision, but a reflection of the exceptional value we are finding overseas in numerous off the beaten path companies. We have been selectively taking profit in local shares that have done very well and reinvesting the proceeds into overseas shares that are just as cheap, but of slightly higher quality and with exceptional management teams.

The Fund has produced very good returns over the past few years, but we remain upbeat about the future prospects for the portfolio of companies we own. We expect market conditions to remain challenging, providing plenty of opportunities for flexible and unconstrained managers such as ourselves.