It was a volatile quarter with declines of over 10% in most major stock market indices worldwide. I don't expect a global recession and world economic growth should pick up in 2012.

After falling 20% in the last quarter, the rand will probably trade in a weaker range of R7.20 to R8.20, placing upward pressure on inflation, and while the SARB probably won't raise interest rates due to weak economic growth, the risks are towards higher rates. There were some material changes to the portfolio , and I have been taking positions in defensive quality stocks due to slower anticipated economic growth and towards rand hedge shares in light of a weaker local currency.

I am also investing in selected European shares which according to my models are showing outstanding prospective returns Despite the turmoil over the quarter the fund was flat over the period with materially lower volatility than the All Share Index. The Centaur Flexible Fund outperformed its benchmark by 4.1% for the quarter and has risen 2.5% for the year to date, outperforming its benchmark by 5.7%.

The major investment theme over the quarter was uncertainty around the austerity measures for Greece and the potential slowdown in global growth. The JSE All Share Index was volatile and generally weak with strong rallies towards quarter end which has flattered performance.

Over the last quarter the portfolio outperformed the market. I increased cash holdings by trimming shares into price strength. The September quarter has historically been weak and I will use price weakness to purchase selected shares. In South Africa in light of lower oil, maize and wheat prices combined with weak economic growth I don't think an interest rate hike is now likely in 2011.

I foresee a period where prospective returns are not as good as the past (but materially better than cash) nevertheless Centaur will use its investment skills thus continuing its proud record of consistent out performance for the Centaur Flexible Fund.

The major investment theme over the quarter was the rising oil price. Rising petrol, food and electricity prices will contribute to inflation rising towards 6% by the end of the year and it is probable that the SA Reserve bank will raise interest rates. Many companies are battling with subdued demand and deflation, and economic growth will likely remain anaemic at 3% for an extended period. My approach is to reduce exposure to cyclical shares and increase exposure to defensive stocks. I purchased an 8% holding in the defensive Rand Merchant Insurance which owns OUTsurance amongst over investments. The current environment is creating greater value amongst smaller companies, an area where Centaur excels. I will look to use Centaur's investment skills and independent thought to invest in the best opportunities available thus continuing our proud record of significant outperformance.

The Centaur Flexible Fund was the second best performing SA unit trust in 2010.This fund has returned 20% per annum since inception 7 years ago, outperforming its benchmark by 3% per annum.

The economic recovery is gathering momentum driven by a recovery in consumer expenditure and mining production, offset by a recession in the construction sector. Our market is rated on a forward PE of around 11.5 times which indicates a full but not overvalued market. The rand should remain strong as emerging market flows support it, however, it appears overvalued on a purchasing power parity basis. Low interest rates (internationally and locally), reasonable economic growth and international demand should push the JSE higher resulting in a good investment year, however, a material slowdown in the Chinese economy or a fiscal crisis in the USA may result in things not turning out as well.