The Fund marginally outperformed the Composite Benchmark. During the quarter we made one strategic asset allocation call, namely we increased our South African equity weighting by 3%. We maintained our exposure to South African bonds and income fund. Money market rates at around 5.5% are offering investors a negative real return. Investors need to invest in the longer end of the bond curve, where interest rates are in the region of 7.5%. We expect that South African interest rates will be flat well into 2014. We made no change to our global equities weighting in the Fund. Our total equity exposure is 30%. Fixed interest and cash yielding investments remain our preferred asset class.

We made no changes to our Industrial and Financial sector allocation of the portfolio. We have maintained our exposure in the Industrial portion of the portfolio to Retailers, Healthcare, Global consumer stocks and Mobile telecoms shares. Hence retailers like Woolworths and Mr Price continue to remain our top picks. Woolworths continues to trade well in the upper income client segments, while Mr Price has the ability to continue to expand operating margins by optimizing store foot print, supply chains and distribution networks. Mr Price is ideally placed for African continent growth given its price points. Global consumer stocks like Richemont, SAB Miller and British American Tobacco continue to provide the fund with exposure to the rising income levels of emerging market global consumer. These three shares also provide us with Rand hedge exposure which is of benefit to the fund during times of a depreciating Rand.

The portfolio continues to invest in high dividend yielding equities and this strategy was further enhanced by the purchase of MMI, Vodacom and Abil. We continue to seek ways to improve the overall portfolio yield.

Looking Ahead
The global economic recovery will continue, but the strength of underlying growth will remain weak. We retain our equity position as this asset class continues to render superior risk adjusted returns. Our portfolio has a mix of growth assets and stable money market investments to ensure a stable return profile over time.