Please note that the commentary is for the US dollar fund. The feeder fund is 100% invested in the underlying US dollar fund. However, given small valuation, trading and translation differences for the two funds, investors should expect differences in returns in the short term. Over the long term, we aim to achieve the same outcome in US dollar terms for both funds.

The third quarter of 2015 created more pain and volatility for investors as concerns over China, along with growing uncertainty around interest rates, created havoc among share prices worldwide. During the normally quiet month of August (being in the northern hemisphere's summer vacation period), investors became increasingly concerned with the growth outlook for China, following the shift in the country's currency policy which saw a 3% depreciation of the yuan between 10 and 13 August. This shift affected all emerging market currencies, while Chinese stocks in particular sold off indiscriminately.

As global investors returned from their summer break during the month of September, the focus shifted to the outlook for interest rates in the US. Investors were on tenterhooks going into the Federal Open Market Committee (FOMC) meeting mid-September. Markets initially experienced a relief rally on the news of no hike, only to succumb to more investor uncertainty regarding the timing of the eventual liftoff. US economic data points have been weak, contributing to the delay of these rate hikes. At the time of writing our commentary, this heightened level of uncertainty continues to drive short-term investor behaviour, and we anticipate this will continue to dominate investor sentiment for the foreseeable future. While the inevitable normalisation of interest rates in the developed global economies has been well flagged and widely anticipated, the fact that rates have been artificially depressed for so long, contributes to this sense of uncertainty and unchartered waters that investors around the world currently need to navigate.

Global emerging markets continued to suffer from these heightened fears around global growth, while acceleration in internal political and economic issues led to another credit downgrade to junk status for Brazil. The Brazilian financial markets continued to sell off amidst this uncertainty, leading to significant losses in some of our equity holdings, both from share price declines and weaker local currencies. Global equity markets performed very poorly over the quarter, with the MSCI World Index down 8.3% for the three-month period, and down 4.6% over the year. The MSCI All Country World Index (with its higher weighting to emerging markets) performed even worse, returning -9.3% for the quarter and -6.2% for the year. Oil gave back much of its recent bounce, and ended the quarter 22.1% lower and by just more than 50% over the last 12 months. Other commodities experienced equally vicious sell-offs. Gold, which is often considered a safe haven during turbulent times, failed to live up to these expectations by registering a price decline of 4.7% over the quarter, and -8.1% over the last year.

Global bond markets displayed far less volatility than that experienced by equity markets. For the quarter, the World Global Bond index returned 1.7% in US dollars (and a similar number in local currency terms), while over the last twelve months, this index returned negative 3.8% in US dollars, primarily as a result of the stronger dollar. In local currency terms, returns were around 3-4% in the various markets over the last year. Credit spreads widened over most of the last few months as uncertainties relating to the interest rate and global growth outlook unsettled investors. As a result, most high yield indices reflect reasonably large negative returns.

Global property also had a turbulent third quarter, with some markets such as Japan and Singapore down between 5-10% on the back of interest rate fears in the US, while property markets in Europe and the UK were quite strong. Over the last twelve months, Europe/UK and Australia stand out as strong performers in local currency terms, but the overall global property index returned only 3.6% over this period as strong regional returns were diluted by the strength of the US dollar. The US market itself was quite strong over this period, returning 9.9%. Your fund performed very poorly against this backdrop. Over the quarter, the fund lost 12.8% of its value, underperforming its benchmark by 8.4% on an after fees basis. This disappointing outcome is the result of poor performances delivered by certain stocks held in the fund and a high allocation to emerging markets during the period. Our credit positions also marginally detracted. The fund has now marginally underperformed its benchmark since inception, mostly as a result of disappointing performance over the last three months. Stock performance within our developed market holdings was dominated by one of our bigger holdings, Porsche, which we discuss in more detail at the end of this report. This holding alone cost the fund more than 1.5% in capital losses. Unfortunately this incident also casts a shadow of doubt over other auto manufacturers, and Tata Motors (one of the fund's largest holdings) sold off significantly in sympathy. This is despite official denials by top management that the group does not have any exposure to this practice, and in fact, has very little diesel exposure overall. Tata cost the fund another 1.2%. In addition, our holdings in the alternative asset manager space in the US sold off as the industry's rate of taxation caught the attention of some high profile US Presidential candidates. Noises about an increase in the effective tax rate for the private equity industry have unsettled investors, and share prices responded in sympathy. Our holdings contributed just over 1.7% in negative performance. These stocks are continuing to raise record numbers in new capital, and we hold the view that market volatility is good for them, as it allows these managers to make investments at attractive prices. In the meantime however, investors are focusing on the anticipated poor third-quarter numbers that will be reported by these companies. We are confident that the long-term prospects for our holdings remain strong, and have added to our exposure into the weakness. Our large exposures to some of the internet stocks like Amazon and Google contributed positively, adding almost 1.4% in total.

Unfortunately our global emerging market (GEM) holdings have performed very disappointingly, underperforming the GEM carve-out of the benchmark by a wide margin. When considering our holdings on an individual basis, each of them are performing well operationally; growing profits in tough economic conditions (all of our Brazilian holdings); or investing heavily in anticipation of future growth (our Chinese holdings). The only holdings where operational performance has been below par are our Macau gaming stocks, where our investment thesis focuses on an increase in capacity over the next few years. Unfortunately, in the short term, all emerging market stocks are being tarnished with the same macro-economic brush, and have been punished by nervous investors. We continue to hold these stocks as we believe in their longer-term prospects.

Given the volatile quarter, the equity carve-out of the portfolio has not changed materially over the past three months. We have added to our position in Porsche (given the severe market reaction), as well as to some of our emerging market holdings. We have added to Blackstone as the pre-eminent alternative manager, and have sold out of some of our smaller holdings. Most of the top 10 holdings have remained the same over the quarter. We have taken some profits in listed property, but are starting to see a bit of value appear in a few of the underperforming markets like Japan. We are also looking at some potentially interesting credit holdings after the recent sell-off in this segment. We will however continue to be cautious given the uncertain times that lie ahead. We have marginally increased the fund's equity allocation to around 61%, which still reflects a neutral stance relative to the benchmark. We remain convinced that our research process, which focuses on identifying longterm value in listed stocks, is robust and will deliver value to our clients over the long term. We also see significant value in most of our holdings, and as such remain confident that the fund will deliver good absolute and relative performance over the medium to longer term.

Porsche
Given the period of turmoil for Porsche/Volkswagen, we thought it appropriate to discuss the recent developments and the potential impact on the longer-term prospects for the groups. In September, VW admitted to deceiving the United States' Environmental Protection Agency's tests with respect to emissions of certain gases from their diesel engines sold in that country. The true emissions were significantly higher than what tests showed, because the company made their vehicles behave differently during the test phase compared to on the road. This is a serious infraction with a maximum fine initially thought to amount to $18bn. In the immediate aftermath, VW's market value fell by a similar amount even though this was subsequently shown to be overstated (the revised maximum fine was estimated to be $7.4bn). The company thereafter announced a provision of €6.5bn and the share fell further on concerns of contagion of the issue to Europe, bringing the loss in market capitalisation since the announcement to as much as €30bn at one point. We believe the likelihood of fines, recall costs and customer compensation of this magnitude are fairly low, given historical precedent of similar matters and our discussion with experts in the automotive and regulatory environment. However, it is not possible to know with certainty what the final cost to VW will be for this event, nor can we be certain that there are no other issues in the company that may subsequently come to light. We are, however, able to look at various scenarios of probable costs and assess how these impact the long-term investment case of VW (and hence Porsche). Prior to the revelations, VW was one of the most attractive stocks in our investment universe, based primarily on our belief of long-term margin expansion thanks to scale and the implementation of MQB (a platform for producing multiple vehicle types on a shared platform, reducing costs significantly for a multibrand operator). In our view, while these events are material (and not forecastable given VW's previous reputation for excellence), they have impacted the fair value of the business by far less than the reaction of the share price thus far. Fines paid and costs incurred will be paid over many years and in most cases will be tax deductible, reducing the impact on the valuation of the business even further. VW has adequate cash resources and generates reasonable cash every year from its manufacturing arm, and thus we believe it is unlikely that an equity raise will be required. We therefore continue to hold VW - via Porsche - in significant size in our funds and have bought additional shares in Porsche to offset most of the decline in position size as a result of the fall in its share price.

Portfolio manager
Louis Stassen and Niel Padoa

Please note that the commentary is for the US dollar fund. The feeder fund is 100% invested in the underlying US dollar fund. However, given small valuation, trading and translation differences for the two funds, investors should expect differences in returns in the short term. Over the long term, we aim to achieve the same outcome in US dollar terms for both funds.

During a relatively uneventful quarter, global equity markets returned a marginal positive return of 0.5% over the period. Global fixed interest markets continued their painful adjustment to normal interest rates and generated negative returns, with widening credit spreads contributing to investors' pain. Listed global property shared the negative impact of moves in interest rate expectations, and most developed market indices were severely impacted; in Europe's case the index return was negative 11.1%.

That said, the subdued nature of markets changed significantly during the last week of June due to the negotiations in Greece reaching a climax. Fears of a Grexit gripped European equity markets, and while at the time of writing it is virtually impossible to predict the outcome, markets have retraced most of their losses. The implications of any outcome will take time to be digested by markets given how fluid the situation currently is.

While US growth prospects have softened during the first half of this year, the likelihood that the Federal Reserve (Fed) will start to raise rates later this year has diminished only slightly. This is partly because the demand side of the economy (most importantly consumer spending) appears to be getting back on track following the winter season lull, as illustrated by retail sales and auto purchases which picked up again recently. Housing activity has rebounded as well. One clear consequence of low interest rates in developed economies, coupled with CEO confidence in the future of global markets, is that mergers and acquisitions (M&A) activity has skyrocketed. This is due to solid global growth and cheap, abundant money - both of which have acted as a catalyst for sustaining these activities. For the first five months of 2015, US M&A targeted (involving companies with a market capitalisation of $10 billion+) has more than doubled compared with the same period last year, thereby reaching the highest level ever. Interestingly, US acquisitions into Europe, Middle East and Africa year to date are also the highest on record. And while the US is the most active cross-border acquirer, it is not the only one. Global cross-border M&A volume is up 49% year-on-year to reach the second highest level ever. As always, stepping-back and gathering a longer-term perspective on international investment markets is helpful. As a starting point, investors should not lose sight of (amongst many others) the following facts:

-2015 marks the ninth year in which there has been no rate hike by the Fed;
-52% of all government bonds around the world yield less than 1%; but
-four countries (US, UK, Japan and Germany) are now operating close to estimates of full employment and in each case, wage inflation appears to have picked up.

Our concern is twofold. On the one hand, many investors around the world have grown accustomed to, and reliant on, the current status quo. That is, after 9 years of generational-low interest rates, they have come to regard this as embedded for the longer term. On the other hand, we believe that this benign period is in the process of changing. Overall, neither investment markets nor the Fed believes that inflation will be a problem. But the risks, in our view, are that we are underestimating the amount of inflation in the pipeline. If we are right, this will clearly have negative implications for emerging markets, as capital outflows could drive asset prices lower and currencies weaker against the dollar. These are the macro issues. One positive outcome for global equity investors is that an increasing number of high-quality emerging market equities are on offer at very attractive prices.

Your fund returned 0.74% for the quarter, a credible result given the poor returns generated by most asset classes over the period, and a comfortable outperformance over the fund's benchmark. Over the last twelve months, the fund return is negative, but still ahead of its benchmark. Since inception, the fund has generated credible annualised returns of 8.2%, with an annualised outperformance of 1.0% over its benchmark. This pleasing result is higher than we would expect over the longer term, and is the result of successful asset allocation (having been very negative about the outlook for global bonds, and having had a significant exposure to global property), as well as good stock picking within our equity holdings. During the quarter and past twelve months, the fund benefited significantly from our very low exposure to interest-bearing instruments, as bond prices corrected from their overbought levels. The fund also benefited from the stronger US dollar.

We have further reduced our equity exposure slightly over the three-month period and, at 58%, stands at the lowest level since the fund's inception. This position reflects our cautious stance towards valuation levels in many global financial markets. While the fund's significant cash position will dilute returns over the short term, we believe the time may come for us to deploy this cash actively. Given the uncertainties faced by investors around the world, we do not think that now is the appropriate time for aggressive portfolio positioning.

Within equities, we continue to find value in many of the technology names that your fund already owns. Amazon and Google have both featured in the fund's top 10 holdings since inception, and we have high conviction that these stocks offer superior risk-adjusted return prospects over the longer term. Two new technology holdings introduced during the month of June were Apple and Priceline.

Apple continues to strengthen its ecosystem with initiatives around ApplePay and its music streaming service. While it generates the bulk of its profits from the iPhone business, it is rated by the market on a very attractive 9% free cash flow yield. Its commitment to sound capital allocation steps is also commendable, making the company more attractive in the longer term.

Priceline owns Booking.com, the premier online hotel booking service. The growth prospects for this business remain attractive in our opinion, and yet we do not believe we are paying a premium for this growth. In addition, its cash-generating capabilities are underestimated and the board's commitment to sound capital allocation reduces the risk inherent in a technology-based business. We also own TripAdvisor in this space, a more highly-rated competitor with more potential growth opportunities than those of Booking.com.

Our emerging market exposure has disappointed so far, but given the low valuations of many of these stocks, we continue to believe that the fund will benefit over time from these holdings. Brazil, in particular, offers significant upside despite the poor macroeconomic outlook.

Despite their recent price correction, we continue to caution against valuation levels of global bonds. We hold some credit instruments, but hedge out the interest rate risk in these. We have lightened our exposure to property, but have recently supported capital raisings in some of our German residential names.

Portfolio manager Louis Stassen

Asset allocation mattered even more than usual during the first quarter of 2015. Global bonds lost 1.7%, commodities fell 4.9%, while the US dollar rallied 9.0%. Somewhat surprisingly, global equity markets rose by 2.5% during the quarter, thereby bringing the rolling 12-month gain in the MSCI World Index to 6.6%. This is startling given that recent events in financial markets do not intuitively suggest a period of low volatility. In fact, the benign numbers produced by equity markets misrepresent the true underlying volatility in other asset classes. To give this assertion context, it should be pointed out that over the past 12 months, the US dollar appreciated by 21% against the euro; crude oil and iron ore prices fell by around 50%; yields on developed market government bonds fell by between one and two percentage points; and the Japanese equity market rose by 34%. Put another way, during the past three quarters (expressed in US dollars), global bonds have suffered three consecutive quarters of losses (-2.9%, -0.7%, -1.7%), as have commodities (-13.7%, -21.3%, -4.9%), while the US dollar has appreciated sharply for three consecutive quarters (+7.7%, +5.0%, +9.0%).

The strength of the dollar and the weakness of the euro were key themes during the quarter. The dollar rose by 11% and 5% respectively against the euro and the pound, and by 19% against the Brazilian real. When looking at first-quarter returns in dollars, the performance of euro-denominated assets is materially diminished, with the result that European equities lose their top spots to the Chinese and Russian equity markets. In the US, the S&P 500 index produced a small positive return of 1%, as US equities struggled relative to their international peers due to a stronger dollar, weaker data and the termination of quantitative easing (QE). Within the U.S equity market, sector rotation continued into sectors which had also performed well in 2014, such as technology and pharmaceuticals, while profits were taken in the industrial, transport and utility sectors. Small cap shares also outperformed. Investors continue to remain wary of financial and the energy sectors.

European fixed income also saw a solid start to the year, led by the Italian and German government bond markets, which rose by 5.5% and 3.7% respectively. High-yield European credit indices also rose by around 3%. Broadly speaking though, US fixed income market returns overtook the European market as, in dollar terms, European returns have been completely overwhelmed by the currency move. Measured in dollars, German government bonds actually fell by almost 8% over the quarter. It has therefore been a perplexing year so far, with currencies having a significant impact on returns and ensuring a wide but near equal spread of winners and losers in dollar terms. The major commodity moves were a further 28% fall in the iron ore price (mainly as a consequence of weak steel production) and another 5% drop in the price of platinum. The price of crude oil fell by a further 10%, while the sugar price declined by 18%. The relative strength of the US economy and dollar, combined with the sharp drop in oil prices (and Russian aggression in Ukraine) have intensified the rotation away from currencies sensitive to commodities and manufactured exports. Over the past year, the Russian rouble has fallen by more than 50% to the US dollar, while the collapse has been even greater in the currencies of Ukraine and Venezuela. Commodity-sensitive currencies of developed markets, such as the Canadian and Australian dollars, have also fallen sharply. These 'competitive devaluations' will have a significant ripple effect on trade over the next 18 months. As a consequence, the emerging market discount has widened over the past year. Equities in these markets now trade at only 65% of the multiple of developed world equities - the widest discount seen for the past 12 years. As recently as 2011, emerging market equities were trading at a premium. That said, it is encouraging to note that emerging markets have been less vulnerable (so far) to the sudden rise in the US dollar than was the case in the 1990s. This is largely due to the fact that emerging markets as a group have far less borrowing in dollars.

Monetary policy remains supportive, with the wave of central bank rate cuts continuing across emerging markets and some developed markets. However, developments at the European Central Bank (ECB) and the US Fed continue to be the key areas of focus. The ECB has confirmed its strong commitment to its asset purchase programme and has started aggressively buying sovereign debt. Meanwhile, the Fed has been more supportive than expected, keeping rate increases in 2015 on the table but signalling that September, not June, is the likely start of its hiking cycle. Against this backdrop, your fund returned 0.94% after fees in US dollar terms (5.70% in ZAR) for the first quarter of 2015, outperforming the benchmark in US dollar terms. Over the last twelve months, the fund returned 2.58% (net in US dollars) (18.21 in ZAR), again about 1% ahead of the benchmark. Over the last three and five years, the annualised returns are a more respectable (in absolute terms) 8.36% and 7.93% (26.28% and 19.50% in ZAR) respectively. Our equity holdings performed in line with MSCI All Country World Index over the quarter, while lagging somewhat over the last 12 months. Our exposure to emerging markets has finally started to contribute positively to the overall performance, even though the Brazilian market still experienced a very tough first quarter. The Russian rouble recovered somewhat over the period, and a number of our Chinese holdings performed well over the quarter. We follow a long-term valuation-driven approach, and as such expect to face some of these headwinds from time to time. The challenge of such an investment approach is to maintain the long-term focus, and not to sell too early once the investment thesis starts playing out. However, we have reduced our exposure to Russia into the recent stock market strength. This decision was based on other investment opportunities becoming more attractive and as many Russian stocks rebounded by more than 50%. We remain strong believers in the attraction of emerging markets, and are holding nearly 30% of the fund in stocks domiciled in these regions.

Top contributors over the quarter included Porsche (until recently our biggest position, which benefited from QE and the weaker euro), JD.com (Chinese ecommerce player linked to Tencent), Amazon (a top 10 position producing good results), and Brilliance China (BMW JV in China). Detractors included Kroton (the leading private education company in Brazil, which we discuss in more detail below), Discovery Communications (the world's most widely distributed cable network, which was pressured by a weak US advertising market and weak international currencies), and Cia Hering (a clothing retailer in Brazil, implementing a turnaround strategy amidst a tough economic outlook). Our property holdings contributed positively to the fund's performance, even though they lagged the property index. Our small exposure to credit, however, detracted marginally over the quarter and the last year. We continue to hold roughly 60% of the portfolio in equities and another 6.5% in listed property. These percentages are significantly lower than our maximum holdings over the life of the fund. We continue to hold a cautious view on global equity markets given their strong performance over the last few years. We also bought some protection in the event of a material market correction, even though this is not our base case view.

Two notable stock purchases over the quarter include Kroton and American Express. The Brazilian private education sector sold off significantly since the end of last year, after the newly elected government announced major changes to its student loan programme. This was to contain the costs of the scheme in the face of severe budgetary constraints as the weakening commodity cycle continues to put pressure on Brazil's fiscus. The programme (called the FIES scheme) affected around 35-50% of on-campus undergraduate students, hence the market's very severe reaction. In the process, stock prices of companies like Kroton (leading player with 13% market share) and Estacio (5% market share) declined by over 40% to their recent troughs. Our analysis showed that firstly the proposed changes could be short-term measures that may be lifted once government finances were in better shape, and secondly, but more importantly, that the longer-term growth prospects for private education in Brazil remained intact. The crisis allowed us to buy these stocks with great growth prospects on forward PEs of below 12 times the reduced earnings expected by the market. As such, Kroton is now a top 10 fund holding, and we have added Estacio to the portfolio as well.
Along with Visa and MasterCard, Amex is a beneficiary of the secular shift in payments from cash to electronic format. The business model is a hybrid between a payment network and credit card business. Amex has a strong brand (often associated with wealthy, higher-end consumers) and a loyal customer base, whose cardholders spend c.4 times that of the average credit cardholder. The opportunity to buy Amex arose due to recent lower-than-expected quarterly card-swipe revenue growth followed by the loss of a major private label client, CostCo. Taking a longer-term view, the secular shift from cash to electronic payment format should drive high single-digit volume growth, with some offset from a discount rate decline, yielding mid-single digit revenue growth over the forecast period. Improved cost control and very high excess capital generation (as a result of Amex's high 28% return on equity) should sustain low-teens EPS growth over the forecast period. After funding growth and dividends, Amex generates additional cash flow, which we expect to be deployed into share buybacks that will reduce shares outstanding by 3-4% annually. Amex's 1-year forward PE is 14.3x and it has a 1.4% dividend yield. It now represents a material position in the fund (just outside top 10).

Portfolio manager
Louis Stassen

Global equity markets moved sideways during the quarter, following their correction in early October. The MSCI World Index produced a positive total return in US dollar terms of 1.1% for the quarter. This brought the year-to-date gain to a moderate 5.5%, well below the US equity market's 13.7% gain for the year. The relatively disappointing performance of non- US equity markets in 2014 has largely been due to the strength of the US dollar, which has risen by 11% against the currencies of other developed market nations and by 10% against emerging market currencies. The result is that, despite both the MSCI Europe Index and the MSCI Emerging Markets (EM) Index gaining in local currency terms by about 5.2% and 5.6% respectively during 2014, in US dollar terms, the MSCI Europe lost 5.7% for the year, while the MSCI EM fell by 1.8%. Lower oil prices, geopolitics and the opaque outlook for the Fed Funds rate were some of the headwinds facing the broader emerging markets as 2014 closed. In dollar terms, the MSCI EM Index posted its first back-to-back annual decline in 12 years, whilst the rouble had its worst year since the Russian default in 1998.

The most notable currency and commodity moves during the fourth quarter were the dramatic collapse in the oil price, falling by 41.6%, and the slump (-34.1%) in the Russian rouble. The oil price and rouble both ended 2014 down by a massive 45%. The iron ore price also fell sharply; being down by 16% for the quarter and 49% for the full year, mainly as a consequence of increased production and weak steel demand. Other notable commodity movements during the quarter were a 7%-fall in the platinum price (down 12% for 2014) and a 5%- decline in copper (down 14% for 2014).

As mentioned above, currency movements in 2014 were a oneway bet, with the US dollar outperforming all global currencies. In developed markets, both the euro and yen fell by 12% over the full 2014, while amongst the smaller currencies the biggest fallers were the Norwegian krone and Swedish krona, down 18% and 19% respectively. Bond markets performed surprisingly well (particularly when measured in local currencies) in 2014; this was mainly due to ongoing deflationary pressures across most of the globe. The developed bond markets that produced the best returns in 2014 (in dollar) were the UK (up 7.4%) and the US (up 6.1%), while the poorest performers were Japanese bonds (down 8.1% mainly due to yen weakness). Looking at equity markets, there was the usual wide dispersion in returns during 2014. In the developed market universe, the strongest performer (in local currencies) was Japan (up 6.7%), while the weakest was Portugal (down 19.6%) following more disruptions within its banking sector. In emerging markets, the worst performers were Greece, down 25.5% due to further election uncertainty, and Russia, down by 5.9%. It should be noted that, when converted into US dollar, Russian equities fell by a staggering 32.8% and 45.9% over the past quarter and year respectively.

The fund returned 0.5% (3.0% in ZAR terms) in the fourth quarter, bringing the 2014 calendar year re
turn to 1.1% (11.6% in ZAR terms). Over longer and more meaningful periods, returns are more pleasing both in absolute terms and relative to the benchmark: the annualised three-year return is 11.7% (26.0% in ZAR terms) and since inception in March 2010 (now approaching five years) the annualised return is 9.1% (17.7% in ZAR terms). These performance numbers are all net of fees. Our equity selections performed in line with the overall market over the quarter, but underperformed by 2.7% for the whole of 2014. While a number of developed market stocks such as Dollar General, Fortress and Schibsted made significant positive contributions over the quarter, our exposure to emerging markets - Russia in particular - detracted materially from returns over both the quarter and the year. Equity exposure has remained steady at 60% of fund. Looking at the property portfolio, since inception the fund's exposure to property has been a material positive contributor to the fund's performance. But despite posting a double digit return in 2014, our property holdings lagged very strong benchmark returns. In general, we see fewer attractive opportunities so it is not surprising that property exposure has drifted lower throughout the year, now standing just above 7%. Our holdings in Brazil, Indonesia and Japan (where Yen depreciation swamped progress at the operating property level) were the main negative contributors over both the past quarter and twelve months.

At present, 6% of the fund is invested in Brazil which constitutes about 10% of our equity exposure. Brazil has been one of the worstperforming emerging markets over the past several months and as such has been a detractor for the fund. Brazil has a poor macroeconomic outlook with ongoing negative newsflow. Very few investors like investing in stocks against this backdrop and Brazil is undoubtedly one of the most disliked emerging markets. By way of contrast, India (representing only 3% of the fund invested in Tata Motors, which is in reality a global business) is almost universally loved. Its economic outlook is promising and the newsflow has been almost continually positive since Prime Minister Narendra Modi won the elections. Accordingly, in our view, expectations (and resultant valuations) in India are generally high and unattractive, while expectations (and resultant valuations) in Brazil are generally low, and very attractive. We make investment decisions based on the longterm prospects and earnings streams of individual companies as opposed to the shorter-term macroeconomic outlook or individual company prospects. In this regard, we are finding compelling value in Brazil. A research trip to Brazil in December, during which we met the management teams of all portfolio holdings, confirmed this view. The fund's largest Brazilian holdings include the country's leading private education business, Kroton, which now trades on 13x forward earnings; the biggest local life insurer, BB Seguridade, which trades on 15x forward earnings and with a very attractive dividend yield of just under 5%; and the holding company of the leading private bank in Brazil, Itausa, which trades on 7.5x forward earnings and has a dividend yield of 5%. With these valuation metrics for what are all very good businesses, we believe the fund's Brazilian holdings will be meaningful contributors to performance in the years ahead. Looking into 2015, we believe that volatility could increase further. Although the US economic outlook still points to a rise in US interest rates in mid-2015, the global picture is one of most central banks continuing to pursue highly accommodative monetary policy. The QE baton is being handed from the US and the UK to Japan and the euro area. Also, China and a number of other emerging market nations have joined the deflation-fighting brigade, which suggests a concerted effort to stimulate the global economy over coming quarters. With the MSCI World Index and the MSCI Emerging Market Index trading at reasonable forward PE multiples of 15.5 and 10.7 times respectively, the stage seems set for further equity market gains over the next year. That said, we would not be surprised to see equity and credit market volatility rise somewhat as the US moves toward modestly tighter policy after a long period of pushing investors toward risky investments. Overall, the fund's asset allocation reflects a fairly defensive stance at present.

Portfolio manager team
Gavin Joubert, Neville Chester, Karl Leinberger, Louis Stassen and Mark le Roux