The fund returned 6.8% (in US dollar terms) for the quarter, in line with the 6.8% from the benchmark MSCI World Index. For a rolling 12-month period, the fund's return of 18.6% lags the benchmark return of 22.3%. The performance of the MSCI World Index over the quarter masked a fairly volatile period, noted for further quantitative easing by the major central banks. The European credit crisis once again dominated global equity markets, but so did the looming 'fiscal cliff' in the US and the economic slowdown and regime change in China. The euphoria following the European rescue deal agreed on 29 June was short lived as the market, yet again, questioned the feasibility and practical implementation of the proposed solution. Stubbornly high unemployment and mixed signals on the state of the US economy added to the concerns, causing markets to seesaw during July. This was until Mario Draghi, president of the European Central Bank, announced the bank 'would do whatever it takes' to preserve the eurozone. His plan of unlimited bond purchases for countries undertaking agreed austerity budgets was welcomed by the markets. Shortly thereafter, Federal Reserve chairman Ben Bernanke announced the much speculated on third quantitative easing programme in the form of bond purchases totalling $40 billion per month for an indefinite period, and until there is substantial improvement in the US employment market. This announcement caused another substantial rally. In terms of regional equity performance, Asia ex-Japan, was the best performing region, rising 11.0% (in US dollar terms), while Japan performed the worst, gaining only 3.8% (in US dollar terms). Europe gained 8.8% (in US dollar terms) and the US gained 6.8%. The fund's regional positioning had a small positive impact over the quarter, with currency exposure making a significant negative contribution. The managers also made a small positive contribution to performance with a mixed set of numbers from the group. Strong results from Vulcan Value Partners Fund again demonstrated how well their bias towards high quality companies is paying off in these difficult times. Cantillon Global Fund also benefitted from such a strategy over previous quarters, but marginally detracted from performance this quarter. Adelphi Europe Fund continued their excellent recent performance with another solid contribution over the quarter. Morant Wright Japan, however, detracted from performance.

Outlook
The stimulus measures announced by the Fed and ECB should support market sentiment going forward, and although they strengthen future inflation concerns, this is not a real concern at present. However, as per recent history, the brinkmanship in Europe continues as Spain holds off on implementing economic measures which would allow the ECB to purchase bonds under Draghi's plan. With further aid to Greece still to be decided on and an American presidential election taking place in November, the fourth quarter could be volatile. As economies are being held back by austerity measures and unemployment, governments are becoming more pro-growth and we expect policies to reflect this. While downside risks remain and markets continue to be anxious, we believe equities offer reasonable upside compared to other asset classes.
Portfolio manager
Tony Gibson

The fund returned -6.6% (in US dollar terms) for the quarter, against -4.9% from the benchmark MSCI World Index. For a rolling 12-month period, the fund's return of -3.8% is ahead the benchmark's -4.4%. The European sovereign credit crisis was once again the theme of the past quarter. A second election in Greece, in theory a vote to remain in the euro, gripped the markets only until the focus shifted to Spain and Italy where bond yields rose. Investors didn't wait to see if they were indeed too 'big to bail out' and a flight to safety ensued, causing risk assets to decrease sharply. Weaker data points out of China and the US added to these fears. Significant geopolitical pressure on the euro countries, most notably Germany, during June led to yet another bailout, this time for Spanish banks, but more importantly a clear intention by the euro countries to move towards greater fiscal unity. The late night, last minute deal was welcomed by the markets and they rose significantly on the last day of the quarter. The rally was not enough to erase earlier declines and global equity markets declined by 4.9% over the quarter. In terms of regional equity performance, North America was the best performing region, falling only 3.4%, while Japan performed the worst, falling 7.3% (in US dollar terms). Asia ex-Japan declined 4.9% (in US dollar terms) and Europe declined 7.1% (in US dollar terms). The fund's regional positioning had a negative impact over the quarter. The fund's investments generally detracted from performance during this volatile quarter. Contrarius Global Equity and Nedgroup Investments Global Equity Fund (managed by Veritas Asset Management) both struggled and Cantillon Global Equity was the only fund to outperform amongst the global managers. In Europe, Adelphi Europe had a good quarter as did Morant Wright Japan. During the quarter we added to our investment in Vulcan Value Partners. The European crisis is having a negative impact on the global economy, and with the US and China also showing signs of weakness, central banks are on standby for more monetary easing should it be necessary. This should provide some support for equities in the short term. However, as with the many previous euro agreements and bailouts, while the new agreement is a welcome step forward, the crisis is not necessarily resolved. Implementation will take time and details will need to be negotiated. We therefore expect more volatility in the medium term.

Portfolio manager
Tony Gibson Client

The fund returned 13.2% (in US dollar terms) for the quarter, against 11.7% from the benchmark MSCI World Index. For a rolling 12-month period, the fund's return of 2.9% is ahead the benchmark's 1.1%.

Markets performed strongly despite the belief that a further bailout may be required in the medium term. Positive sentiment was driven by the latest efforts to resolve the Greek debt crisis by means of a €1 trillion liquidity injection by the ECB in the form of low cost, long term funding to the region's banking system. However while these steps are undoubtedly positive, the severe "austerity" budget cuts being implemented by the indebted European countries raise the risk of a further European recession, and it will be some time before we can call the end of the crisis. The markets were also buoyed by the ongoing recovery in the US economy which appear to becoming more entrenched each month. Fears of a hard landing in China did not have a significant impact this quarter. In terms of regional equity performance, North America was the best performing region, rising a strong 12.3%, while Europe was the worst performer, rising 10.8%. Japan and Asia ex-Japan both rose 11.3%. The fund's regional positioning had a slightly negative impact over the quarter. Following a difficult 2011, the managers contributed significantly to the quarter's performance, especially in Europe where the ongoing turmoil continues to provide attractive investment opportunities. Adelphi European Select Fund generated around 9% alpha for the quarter. In the US, Vulcan Value Partners returned 14.9%, comfortably ahead of the S&P 500 Index return of 11.2% over the period. Overall, the global managers made a positive contribution to performance but individual performance was mixed. The Coronation Global Emerging Markets Fund had an excellent quarter returning 16.9%, as did Contrarius Global which finished the period well ahead of the market. Negative contributions came from Cantillon Global and Nedgroup Global as they underperformed the index over the quarter. Morant Wright Japan also slightly underperformed in Japan.

Outlook
Despite the recent market rally, one should be careful in assuming that the crisis is now behind us. Indeed, at the time of writing, markets are down on a weak bond auction by Spain which has renewed focus on the European debt crisis. In recent days, even the US Fed has expressed caution on the US recovery. Although the risks have reduced somewhat we expect that markets will continue the risk-on, risk-off volatility of recent months as the daily news flow is reported. However, the market noise should not detract from the underlying value of the fund's holdings. Many companies are still growing despite the economic hardship and currently trade at steep discounts to their intrinsic values - a gap which will be closed over the long term. Our managers continue to find attractive investment opportunities and we expect to be rewarded over time.

Portfolio manager
Tony Gibson Client

The fund returned 5% (in US dollar terms) for the quarter, against 7.7% from the benchmark MSCI World Index. For a rolling 12-month period, the fund's return of -7.6% is lagging the benchmark return of -5.0%.

The quarter was again dominated by the ongoing European sovereign debt crisis. The new governments in Greece, Spain and Italy provided impetus to fiscal austerity in those countries, but an attempt to create greater fiscal unity within Europe was struck down by a British veto, and an agreement between the other 26 nations appears increasingly uncertain. Globally the crisis weighed heavily on sentiment and markets, however economic data from the US is moving in the right direction and is expected to improve in 2012, an election year.

In terms of regional equity performance, North America was the best performing region over the quarter, rising a strong 11.1%. Japan performed the worst, falling 3.9% (in US dollar terms), while Asia ex-Japan and Europe rose by 6.0% and 5.5% respectively (in US dollar terms). The fund's regional positioning had a significant negative impact on overall performance over this period.

The managers were also a significant detraction from overall performance. After a poor final quarter of 2011, Cantillon Global sacrificed some of their exceptional performance delivered in the third quarter of the year. Despite strong relative performance to its benchmark, the Coronation Global Emerging Markets Fund also had a negative impact on our fund's performance. Morant Wright Japan had a weak three-month period, finishing well behind their benchmark.

Vulcan Value Partners, however, comfortably beat the MSCI World Index with a return of 12% for the quarter.

During the 3-month period, we redeemed the Edinburgh Partners Europe Fund.

Outlook
2011 was a tough year for active, valuation-driven managers such as those with whom we place capital. With market volatility at extreme levels and short-term momentum dominating stock prices, our managers were unable to generate their historical levels of return. However, equity markets remain attractively priced and we are confident that our managers will provide good returns once some semblance of normality returns. This may not happen in the short to medium term as Europe continues to resolve its crisis, but there are some signs that conditions are improving, particularly in the US.

Portfolio manager
Tony Gibson Client