Fund Review
The equity market returned 2.8%, -3.6% and 1.8% for April, May and June respectively. The fund returned 1.6%, -1.1% and 1.1% for the same months. This illustrates our philosophy of gaining exposure in rising markets and limiting losses in falling markets.

Looking Ahead
Despite the recent market performance we continue to believe, based on how asset classes are currently priced, that structurally we may remain in a low return environment and that investors are unlikely to be compensated for excessive risk taking. We therefore believe that investors will increasingly consider both return and risk (prospect of losses) in their investment choices, which speaks squarely to the mindset of Absolute Return funds. Our current fund positions take consideration for the investment environment that we have articulated above and our target during these times remains to preserve client capital during the difficult market environments, there will surely be some, whilst also ensuring that we deliver healthy CPI + returns during the good times. This combination of defence and offense outcomes we believe will allow for the continued compounding of fund returns and over time, the delivery of equity type returns but only with bond type risk/ losses.

Fund Review
2012 has started off on a positive note for financial markets especially for growth assets as poor economic growth concerns recede. Though economic growth concerns in the Euro region remain, the US seems to be gaining positive momentum while China's slowdown appears consistent with market expectations. Financial markets had initially priced in a disappointing global economic growth scenario and as expectations have been revised upwards, growth assets have rallied.

Into 2012, the fund positioning was well balanced between "offense" (i.e. growth assets) and "defence" (i.e. defensive assets - fixed income). Our equity holdings have also had a good run as we were well positioned in financial and industrial stocks, which have outperformed resources.

Looking Ahead
At this stage we do not see any reason to change our asset class positions, which as mentioned are well balanced between growth and defensive assets. Though global economic growth prospects may look better than they appeared a year ago, there are still challenges out there and asset class valuations are not cheap - a level of caution is therefore warranted in our opinion as markets grind higher. As opportunities present themselves here we will use weakness to build positions into Q2. We are always consciously aware of the dual nature of the fund mandate - on the one hand we aim not to lose money over the short term while looking to deliver healthy returns ahead of CPI over the medium term - this also influences the tradeoff between "offense" and "defence".

Fund Review
2011 was a year that we witnessed muted real returns across different asset classes, inflation rising to the upper end of the SA Reserve Bank inflation-band and extreme volatility as financial markets swung from optimism to pessimism largely driven by macroeconomic factors.

During the last quarter of 2011 the SA equity market delivered 8.38% and for 2011 a total return of 2.47%. The fund delivered 5.08% for the last quarter and a return of 9.30% for 2011.

Looking Ahead
2012 has started off no different to the preceding year with the same macro economic factors at play - Questions such as what will be the impact of the European crisis on global growth, is the Chinese property market a bubble about to burst and will the US manage to continue on its path of recovery are common. We believe that news flow around these events will keep financial markets volatile and again we look to continue to preserve capital during the likely market downturns. However, the other side of financial market volatility is that it creates valuation anomalies across and within asset classes especially for those willing to look through the noise and take a medium-long term view. As a result, although our current fund positioning is well balanced between growth and defensive assets our bias is toward upping our exposure to growth assets as valuations present themselves, which will also increase the probability of continuing to deliver returns ahead of CPI over the medium term target.