September was a positive month for global equities, ending a good quarter overall. The announcement of a significant increase in powers for the European Central Bank (ECB) to intervene in sovereign debt markets considerably improved the outlook. Further economic stimulus measures from the US and Japan were somewhat of a surprise and this, along with the safe navigation of a couple of major banana skins in Europe (namely the German constitutional court and elections in the Netherlands), improved investor sentiment and hence risk appetite. Fears over euro issues and the global slowdown resurfaced towards the end of the month with global markets falling into month-end.

Investment performance was driven mainly by sustainable growth and analyst sentiment strategies. Good stock selection, particularly in materials and energy, also contributed.

The portfolio has been tilted slightly more towards recovery plays as, on the whole, market participants remain constructive towards global equities. Sector positioning, however, remains similar to the previous month. Unit

Global equities enjoyed positive gains across all regions in June, with European markets leading the rally. This breaks the negative trend seen in equity markets during the last two months, and takes most of the equity indices to positive territory for the year. Investors reacted positively to decisions by EU leaders to relax conditions on emergency loans and to allow recapitalisation of lenders directly with bailout funds. Macroeconomic news continued to be mixed, with increasing evidence of a slowdown in China, and significant uncertainty remaining from upcoming monetary policy decisions, as well as a lack of consensus among political leaders in Europe.

Performance of the fund year to date continues to be positive, relative to both its benchmark and its peer group, despite a difficult June. The fund underperformed this month due to its positioning towards high quality stocks, as sentiment in the market sharply turned positive and low quality stocks rallied, particularly towards the end of the month. These losses were partially mitigated by positive returns from our price-driven signals and company management strategy.

Positioning remained broadly unchanged both at the strategy level, with a balanced mix of valuation and quality, and at the sector level, with only industrials changing from neutral to overweight.

The team's approach is to rigorously assess companies against criteria including stock price valuation, balance-sheet quality, growth characteristics, efficient use of capital, analyst sentiment, and supportive market trends. We build a well-diversified portfolio of stocks that we expect will outperform in the current macroeconomic environment, while applying stringent risk-management techniques, carefully controlling turnover and trading costs, and maintaining strict limits on sector and stock positions.

The first quarter was broadly characterised by an improvement in confidence. The key event was the European Central Bank (ECB) seeing through a successful second round of the Long-Term Refinancing Operation, providing around €500 billion in additional liquidity. This removed the threat of any immediate credit crisis in the European banking system. More broadly, data and policy announcements in the US, Germany and China pointed to a more positive skew in the economic picture.

In the US, key employment statistics have been especially positive, backed by strength in business confidence and retail sales - automotive sales were particularly robust - while construction and even housing appeared to stabilise. Europe remains more difficult, with the economic strain of austerity in southern Europe continuing to put at risk any final resolution of the debt crisis. In Germany, despite muted domestic demand, business confidence is improving and the economy continues to benefit from the supply of manufactured and capital goods to emerging markets.

This improvement in sentiment was evident in equity market returns. The MSCI World Index returned 5.5% in the quarter in rands, and 11.7% in US dollars. The more defensive ends of the market, energy, utilities and telecoms, were negative - utilities fell 4% and telecoms 4.8%. But the rise was broad based. More economically sensitive areas tended to be the strongest. Consumer discretionary rose 11.6%, lifted by a very strong rise in automotives. Diversified financials, which includes investment banks, was also strong. From a regional perspective, European markets were especially strong. Germany rose 14.6%. Spain and Portugal were the exceptions, falling 9% and 3.4%, respectively. The US and Japan also saw good results, with the US rising 6.7% and Japan 4.7%.

World equity markets made positive overall progress in the last quarter of 2011, with the MSCI World Index (total return) rising 7.6% in rand terms over the period. The path, however, was not even. October saw a strong rally leading into European and G20 summit meetings, while the early weeks of November were characterised by a retreat as investors worried over the lack of a comprehensive solution to the Eurozone sovereign debt crisis. The prospect of significant, prolonged austerity in Europe raised the spectre of recession, putting the nascent US recovery at risk. Currency movements, relative to the rand, had little effect in the fourth quarter.

Although overall numbers for the quarter were positive, there remained significant underlying volatility in and among specific markets. Greece, at the centre of the Eurozone storm, fell 27.2% during the quarter, while Portugal fell 9.8%. Other Eurozone peripheral markets were more modest: Italy rose 0.6%, Spain fell 3.4% and Ireland rose 22.8%. The core global economies were positive in the period: the US rose 11.5%, the UK rose 8.7%, Germany was up 4.4% and France by 2.7%. Far Eastern markets were mixed: Hong Kong rose 6.2%, while Singapore and Japan fell 1.2% and 3.6%, respectively.

From a sector perspective, equities were positive across the board, with higher risk industries tending to bring the largest returns. Energy was strong, rising 16.4%. Capital goods, transport, consumer services and media were also among the sectors leading the market. Automotives, telecoms and utilities were all among the weakest sectors, though with positive absolute returns.