The unit price of the fund moved up materially during the quarter. However, the fund performance lost some momentum late in the quarter when our market pulled back in sympathy with declining international equity prices and a stronger currency.

During the quarter the fund manager's increased the exposure to resource counters on evidence that global economic activity is recovering. In order to increase the resource weighting the fund manager's trimmed some financials and selective consumer shares. The entire shareholding in Alexander Forbes and Aveng were sold.

The fund manager's have marginally increased the liquidity of the fund towards quarter end following a period of low liquidity levels.

Very few structural changes were made during the quarter and the focus was mainly on fine-tuning the portfolio. However, the fund manager's added somewhat to the overall equity exposure of the fund, consolidated the number of counters in the fund and increased the exposure to consumer shares and the media sector.

The higher equity exposure certainly added value to the fund as local equities have outperformed the other asset classes. The fund was marginally underweight in resources shares, which was the correct structural positioning over the quarter despite phenomenal performance of resources shares during May.

The pullback in equity prices late in the quarter was not unexpected, following the spectacular recovery in local share prices. The decline in local share prices hurt the nominal performance late in the quarter. However, the fund still did well enough in the quarter to reward investors for the risk being taken to invest in this asset class.

The decline in local share prices savaged the nominal performance of this general equity fund. Not only did the nominal performance suffer, but the underlying sectors within the market behaved in a very volatile fashion, which made sector rotation within the portfolio incredibly difficult. However, it was undoubtedly a stock picker 's market during the quarter and the relative performance of the fund reflected this volatility.

The very strong currency weighed heavily on resources shares. Against this background the fund manager's have sold the gold exposure down and trimmed platinum share holdings marginally. The fund manager's have maintained the overweight position in banks; the marginal overweight call on retail shares has been enhanced.

Despite the general weakness in equity prices the fund manager's maintain their view that the market is cheap and that patient investors will be rewarded over time. The volatility in the market allows astute fund managers to add value through careful stock picking. The relatively small size of this fund allows the fund manager's to do exactly that.

The unit price of the fund came under pressure as local share prices lost ground in sympathy with world equity markets. The market could not sustain the recovery of October and November as the rand continued its rally against the crosses. Despite the strength in the currency, banks were under pressure and pulled back. The fund took some profits in financial shares following their material recovery. The fund manager's did not alter their view on local industrial shares and maintained the funds full weighting in this sector.

The strong showing of the gold price offset the recovery in the currency as gold shares rallied on the back of a stronger dollar gold price. The fund manager's could not ignore the reasons for the stronger gold price and added to the sector. While one of the funds competitors has betted the farm on this sector and the fund has underperformed this competitor in recent months, it is not the fund manager's philosophy to take extreme risks. This is particularly true where the forecast risk of an economic variable, in this case the gold price, is extremely high.

This philosophy has certainly paid off as this fund now holds the number one position over a one-year and a three-year period.