In last month's commentary, we discussed the reasons behind our decision to sell our investor's exposure to British American Tobacco. Our research suggests that a price of more than R300 per share leaves little margin of safety.

What did we do with the proceeds? In short, we went on an international spending spree! Three of our long term favourite companies namely Berkshire Hathaway, Tesco and ING Groep are trading significantly lower that our fair value estimates. We used this opportunity to increase your investment in these businesses. In addition to the above, we also managed to identify four new holdings for the fund: Microsoft, Dell, Alstom and Unilever.

We are convinced that all our investors are regular users of Microsoft products. The share price is still some 60% below its highs of the IT bubble in 2000, however, earnings have grown more than 10% p.a. since then. The business has a very strong moat due to the high switching costs and administrative headaches involved in moving to a competitor's product. At a price-earnings ratio (PE) of 10 this quality business is on sale.

Dell is another global technology-related stock. The company distributes computers globally and is busy growing its service offering. The business should benefit as corporates will inevitably have to replace their aging IT infrastructures. We bought this business at a PE of below 9.

Through Alstom, shareholders have exposure to a global leader in transport infrastructure, power generation and transmission industries. This French company powers one in four of the world's light bulbs. Alstom manufactured the Eurostar high speed trains and have also delivered equipment to 12 of Eskom's 13 power stations. Alstom trades at a 12 PE multiple and stands to benefit from the spending in power and transport globally, particular in emerging markets.

Unilever needs no introduction. 2 billion people use Unilever products daily. Investors will recognise brands like Knorr, Dove, Axe, Surf, Lux and Vaseline. The company offers a dividend yield of nearly 4%.

In our opinion, investing in these quality global businesses at unusually attractive levels will reward our investors over time.

Different to many other domestic unit trusts the PSG Flexible Fund invests directly in companies listed abroad rather than investing in global unit trust funds. One of our larger direct offshore investments is ING Group, the global financial services business domiciled in the Netherlands. Since the financial crisis ING's share price has recovered from €2.50 to €8.93 and our clients may well question why it remains the fund's 11th largest position.

There are two reasons why we tend to ignore past movements in the price of a company's shares. Firstly, the fundamentals which determine a company's fair price are dynamic and can change drastically over time. Secondly, a sharply recovered share price can simply be the movement from extremely undervalued to very undervalued. In the case of ING both these factors are relevant. Since 2009 ING's capital position has improved significantly and exposure to risky and volatile assets has been reduced substantially. In addition, the company has undergone a process of separating its banking and insurance operations, which we believe will unlock value for shareholders.

In the case of ING we believe that the tremendous run in the share price has been the movement from a panic-stricken low to what is still a much undervalued price.

We follow two approaches to detemine whether ING is currently undervalued, a relative and an absolute methodology.

In our relative methodology we compare the quality of ING's balance sheet and profits to that of a number of its competitors. We compared ING Bank to among others Deutsche, HSBC, JP Morgan and Standard Chartered while we compare ING Insurance to Aegon, Delta Lloyd, Allianz, Generali and Zurich FS. Generally ING has a superior funding structure, lower exposure to risky assets and higher quality income. ING, however, trades at a discount to its peers which we believe is not justified and therefore we regard it as attractively priced on a relative basis.

In our absolute valuation we calculate what we believe to be normal profits for the business and then also the normal dividend into which these profits could translate. 10 year Dutch government bonds currently yield 3.5% and we would certainly be satisfied with a 4.5% dividend yield from ING. Our calculated dividend would be a 4.5% yield at a share price of €16.49, way in excess of the current price of €8.93. In our view, ING remains very attractively priced despite the tremendous recovery in the share price from since March 2009.

The 15th annual Raging Bull Awards ceremony was held on 26 January 2011. The Raging Bull Awards is organised by Personal Finance, Plexus and ProfileData to commend the country's top unit trust fund managers. There are two different award categories, outright performance over the preceding three years and risk-adjusted performance over the preceding five years. We are proud to inform you that, in the Domestic Asset Allocation Flexible sector, the PSG Flexible Fund won both awards:

o Best Domestic Asset Allocation Flexible Fund (Top performance for the three year period ending 31 December 2010)

o Best Domestic Asset Allocation Flexible Fund (Top performance on a risk-adjusted basis for the five year period ending 31 December 2010).

A significant driver of relative performance over both these periods was the positioning of the fund before and the action taken during the credit crisis of 2008. As we have communicated before, prior to the credit crisis we found few exceptional companies trading at attractive prices and therefore held a large portion of the fund in cash. As share prices came down we found more and more quality companies, many of which we had been eyeing for a long time, available at bargain prices. The opportunities were compelling and we applied our cash, which happened to run out at the bottom of the crash. This turned out to be the correct strategy and clearly did not entail any black box magic. Our strategy is simple and not hard to repeat. It probably won't always win us a Raging Bull Award but we believe that it will reward our investors handsomely over the long term, which is the only relevant yardstick.

On a quite different note, with effect from 1 March 2011 management of the PSG-branded unit trusts will be consolidated under one house - PSG Asset Management. The merger will lead to less duplication and a healthy sharing of ideas. The way in which the PSG Flexible Fund is managed will remain at the discretion of the current manager, who will have freedom to follow his proven strategy. The merged PSG Asset Management will give us access to greater resources and thereby enable us to deliver even better returns for you, our client.