Major sales included BOC Group, Air Products, Bayer, Air Liquide Praxair and Solvay, all of which performed exceptionally well over the past year.

Major purchases included Anglo American, Angloplatinum, BHP Billiton, Sasol, Sappi and Mittal Steel.

Physical commodities continue to trade at or near historical highs but share prices are displaying increased level of volatility following the period of very strong returns. This suggests rising uncertainty with regard to the direction of the next phase of the commodity cycle. We believe that the market has just cause to be nervous. The effect of rate hikes around the world is evident in the OECD lead indicator, which turned down sharply. This signals slowing demand that is likely to coincide with escalated supply growth from new projects, resulting in downward price pressure in several key commodities.

The oil price has fallen significantly during the past quarter, mostly reflecting the subsiding fears of supply shocks from Iran and hurricane activity in the Mexican Gulf. Oil prices should continue to normalise downward as current high stock levels weigh heavily on the market. We believe the next major move in the commodity cycle will be down which, in turn, will present significant downside risk to share prices. We are therefore maintaining a defensive investment strategy and are positioning the fund accordingly.

The fund has low exposure to single-commodity metal producers, opting instead for the relative defensiveness of the large diversified counters (Rio Tinto, Anglo American and BHP Billiton). A significant portion of the fund is invested in cement and aggregates, which have undemanding ratings and attractive earnings growth prospects. We expect the margins of these companies to remain stable as the commodity cycle unwinds.

The large underweight position in pulp and paper has been reduced somewhat. Industry fundamentals are showing signs of improvement. Surplus capacity, which eroded pricing power over the past two years, is slowly being addressed. Soaring energy, chemical and transport costs that have squeezed profitability should begin to reverse with the fall in the oil price. We are, however, concerned that the industry turnaround may be hampered by slowing global growth.

The fund increased its exposure to platinum significantly during the quarter. Platinum offers a long-term strategic play on the trends towards more stringent emissions controls and increased market share of diesel vehicles. These companies should prove more defensive than their base-metal counterparts and will derive material benefit from the rand weakness recently experienced.

The entire holding in Inco Ltd was sold following an offer by Falconbridge to buy out the minorities. We regarded the offer price to be fair and therefore took the opportunity to liquidate the holding. Small stakes were sold in Anglo and BHP Billiton following the exceptional performances of these shares.

Approximately 13% of the fund is now held in cash in various markets offshore. We will take a conservative approach to investing the cash as asset prices have risen materially and significant value opportunities are limited.

Physical commodities continue to trade at or near historical highs and have manifested in very strong share price returns. Albeit with enormous volatility, the oil price has sustained itself at the higher levels of its trading range thereby reinforcing its threat to the global growth environment. Additional factors of concern are strong supply growth across the commodity complex and the continued high level of speculation in physical commodity markets.

Simultaneously, central banks around the world have begun to raise interest rates, which should have a slowing effect on global growth. The combination of these factors presents significant downside risk to commodity prices and therefore share prices. We are therefore maintaining a defensive investment strategy and are positioning the fund accordingly.
The fund has low exposure to single-commodity metal producers, opting instead for the relative defensiveness of the large diversified counters (Rio Tinto, Anglo American and BHP Billiton). The fund has no direct exposure to either steel or aluminum, which we believe to have the weakest fundamentals.

A significant portion of the fund is invested in consumer-related chemical companies, which have undemanding ratings and attractive earnings growth prospects. We expect the margins of these companies to widen as feedstock costs fall along with the oil price over the next few years.

The large underweight position in pulp and paper has been maintained but industry fundamentals are showing signs of improvement. Surplus capacity, which eroded pricing power over the past 2 years, is slowly being addressed. Soaring energy, chemical and transport costs continue to squeeze profitability though. We are, however, concerned that the industry turnaround may be hampered by slowing global growth.

Positions have also been taken in geographically diversified cement and container packaging companies. These companies offer relatively stable earnings growth prospectsand should perform well in the event of a cyclical downturn.

The fund held its exposure to precious metals (gold & platinum) during the quarter. We believe that the dollar gold price is supported by the prospect of rising global inflation. The long-term outlook for Platinum is positive on the trends towards more stringent emission controls and increased market share of diesel vehicles. These companies should prove more defensive than their base-metal counterparts.

No major trades took place during the quarter. Approximately 8% of the fund is held in cash in various markets offshore. We have taken a conservative approach to investing the cash, as asset prices have risen materially and significant value opportunities are limited.

We remain of the view that commodities are trading at or near historical highs, and this has manifested in very strong share price returns. The oil price resumed its uptrend over the past month and continues to pose a threat to the global growth environment. Additional causes for concern are strong supply growth across the commodity complex and the rising level of speculation in physical commodity markets. The combination of these factors presents significant downside risk to commodity prices and thus share prices. We have therefore maintained a defensive investment strategy and are positioning the fund accordingly.

The fund has low exposure to single-commodity metal producers, opting instead for the relative defensiveness of the large diversified counters (Rio Tinto, Anglo American and BHP Billiton). The fund has no direct exposure to either steel or aluminum, which we believe to have the weakest fundamentals.

A significant portion of the fund is invested in consumer-related chemical companies, which have undemanding ratings and attractive earnings growth prospects. We expect the margins of these companies to widen as feedstock costs fall along with the oil price over the next few years.

Weak industry fundamentals support the large underweight position in pulp and paper. Surplus capacity has eroded pricing power, while soaring energy, chemical and transport costs have squeezed profitability. The near-term outlook has shown some signs of improvement but not sufficient to warrant a material increase in exposure.

Positions have also been taken in geographically diversified cement and container packaging companies. These companies offer relatively stable earnings growth prospects and should perform well in the event of a cyclical downturn.

The fund maintained its exposure to precious metals (gold & platinum) during the quarter. We believe that the dollar gold price is supported by the prospect of rising global inflation. Platinum offers a long-term strategic play on the trends towards more stringent emissions controls and increased market share of diesel vehicles. These companies should prove more defensive than their base-metal counterparts.

No major trades took place during the quarter. Approximately 8% of the fund is held in cash in various markets offshore. We will look to invest this cash as opportunities present themselves.

We remain of the view that commodities are trading at or near historical highs and have manifested in very strong share price returns. Despite recent easing, we are concerned about the impact of high oil prices on the global growth environment coinciding with strong supply growth across the commodity complex. While this is most evident in the steel and coking-coal markets, we expect that this theme will extend to the broader base-metals complex as well. We therefore retain a defensive investment strategy and are positioning the fund accordingly.

The fund has low exposure to single-commodity metal producers, opting instead for the relative defensiveness of the large diversified counters (Rio Tinto, Anglo American and BHP Billiton). The fund has no direct exposure to either steel or aluminium, which we believe to have the weakest fundamentals.

A significant portion of the fund is invested in consumer-related chemical companies, which have undemanding ratings and attractive earnings growth prospects. We expect the margins of these companies to widen as feedstock costs fall along with the oil price over the next few years.

Weak industry fundamentals support the large underweight position in pulp and paper. Surplus capacity has eroded pricing power, while soaring energy, chemical and transport costs have squeezed profitability. The near-term outlook has shown some signs of improvement but not sufficient to warrant a material increase in exposure.

Positions have also been taken in geographically diversified cement and container packaging companies. These companies offer relatively stable earnings growth prospects and should perform well in the event of a cyclical downturn.

The fund increased its exposure to gold during the quarter. We believe that the dollar gold price is supported by the prospect of rising global inflation. In this environment, gold companies should prove more defensive than their base-metal counterparts.