Market Review
The third quarter was reminiscent of the 2008 global financial crisis, with the selloff in US financial markets giving way to global contagion. This time around the rout was triggered by the uncertainty surrounding the raising of the US debt ceiling and was exacerbated by a downgrade in its credit rating. Policy makers in the developed world appear to be behind the curve, taking action only when market concerns reach elevated levels. Instead of agreeing to another round of quantitative easing, the Fed settled for "Operation Twist", funding the purchase of long-dated bonds with shorter-term instruments to influence the shape of the yield curve. The European sovereign domino effect also forced the EU to approve an enlarged bailout fund to address the problem. Unlike the global financial crisis, where the US housing market collapse led to a crisis of confidence in the banking system, this time round it is a crisis of confidence in Anglo-Saxon governments and their ability to deal with ballooning deficits. We are now clearly in the throes of a transatlantic crisis, with global economic growth likely to fall from 4% to 2% a year leading to a deterioration in the purchasing power of consumers and a worsening of the already burdensome budget deficits. In China, monetary tightening aimed at reducing inflation is starting to have a negative impact on fixed asset investment, an important driver of commodity demand.

What added to - and detracted from - performance
Given the growth concerns, most commodity prices declined during the quarter. Brent oil fell 6%, copper 24% and platinum 12%. The gold price was the notable exception, gaining 8%. The rand weakened against the dollar by 20%. Bulk commodity prices, coal and iron ore were flat over the quarter. With the positive move in the gold price and the weak rand, the fund's position in gold shares contributed significantly to performance during the quarter. Our Barloworld and PPC positions proved defensive. Detractors were the diversified miners, Anglo American and BHP Billiton; the oil and gas and steel counters.

What SIM did
uring volatile periods as experienced in the last quarter, we looked to increase the fund's exposure to shares offering substantial upside to our estimate of fair value, while selling more defensive shares that have outperformed and offer less upside. As such, we reduced our exposure to Mondi and Afrox and increased exposure to Anglo American. We switched some of our position in Anglo American Platinum into Royal Bafokeng Platinum. SIM Strategy The fund's principal objective is capital growth and preservation of capital by generating returns in excess of the market. The fund is guided by its value-based investment philosophy, preferring shares that are cheap relative to intrinsic value.

Market Review
The global macro risks from spiking oil prices and the Japanese earthquake materialised in the second quarter, with data confirming a widespread, synchronous, global slowdown. These factors, combined with growing sovereign risk, especially on the European periphery, have led to a widespread sell off in the resource sector in particular. It is quite interesting that markets have sold off in anticipation of lower commodity prices yet the correction in commodity prices has been pretty muted to date. This may reflect the unknown systemic risks that could result from a sovereign default, with memories of the 2008 financial crisis still fresh in the market psyche. If this slowdown proves to be just a mid-cycle slowdown, the market presents opportunities as shares are trading very cheaply on a spot basis. The oil price has been one of the exceptions, with a sharp selloff recently in the wake of the IEA's decision to release 60 million barrels of strategic reserves following a dysfunctional OPEC meeting. We believe this was a positive move because the oil price spike was threatening global growth and the release of reserves may also deter future spikes and reduce speculation. However, ultimately it is unsustainable given the finite nature of strategic reserves in OECD countries. So the fundamentals are likely to reassert themselves in 2012, especially if forecasts of a recovery in the Libyan oil sector prove to be too optimistic.

What added to - and detracted from - performance
The global turbulence mentioned above was positive for the fund's relative performance, given its defensive positioning. Our overweight positions in Mondi and Barloworld added to performance. Underweight positions in major precious metal miners, Anglo Platinum, Impala Platinum and AngloGold Ashanti, also added to performance. Underweight positions in the mining shares generally detracted from performance, especially Metorex given the generous take out offer for the company.

What SIM did
We used the sell off in the sector to reduce the defensiveness of the fund, especially internationally. Locally we built on our position in Afrox, taking advantage of the markets increasing pessimismon its near-term earnings. We also continued adding to Anglo American Plc, which we see as a relatively "cheap" entry point for mining exposure. Internationally we increased our exposure given the recent ruling allowing us increase exposure to 25% (20% previously). We added to our position in Zimplats given its relative value against parent Implats and the JSE Platinum sector generally. We continued favouring junior gold miners and used the political uncertainty in Egypt to add a position in Centamin. Centamin is ramping up the large Sukari mine, which offers competitive costs and reserve optionality, especially brownfields extensions at depth. We also took advantage of the recent governance issues at Kazakh miner ENRC to build a position. ENRC is a diversified miner, currently focussed on iron ore and ferroalloys, and has a competitive cost structure and no shortage of growth projects.

SIM Strategy
The Fund's principal objective is to generate capital growth and preserve it by achieving returns in excess of the market. The fund is guided by its value-based investment philosophy, preferring shares that are cheap relative to intrinsic value. We expect the forthcoming year to provide opportunities to rebalance the fund from its current defensive stance towards high beta (market sensitive) plays, while capitalising on unprecedented volatility.An improvement in macroeconomic data would signal potential opportunities, particularly in the US. However, we would need to see a bottoming in housing markets and a recovery in consumer confidence and spending before that becomes the case.

Market Review
It has certainly been an interesting start to the year. Two events are worth noting, firstly the ongoing political upheaval in Middle East and North Africa.While political reform is overdue, the region is significant from an oil supply and transit perspective and the uncertainty has driven Brent oil prices up to $120/bbl. If current levels persist, the impact on global GDP could be between -0.5% and -1%. We calculate $150-160/bbl as a key stress level for the global economy from an affordability standpoint, which would jeopardise the current economic recovery. The second event is the tragic natural disaster afflicting Japan. The immediate economic impact is significant from a global perspective, around -0.5% of global GDP. Further it has revealed the intricacies of the global supply chain, affecting the manufacture of automotives and electronics globally. The lasting impact of this disaster could be witnessed in the energy sector. The nuclear disaster would no doubt be positive for hydrocarbon substitutes (oil, gas, coal), while utilisation of the current fleet remains low. Further, many other countries have ordered reviews of their nuclear industries and programmes, which will be negative for uranium but positive for other energy sources, especially coal and gas, if there is any slowdown in nuclear new-builds globally.

What added to and detracted from performance
The global turbulence mentioned above was positive for the fund's relative performance, given its defensive positioning. Our overweight positions in Sasol, Mondi and Barloworld added to performance. Underweight positions in Harmony gold detracted from performance, given the M&A speculation around its Wafi- Golpu asset in PNG. Underweight positions in the bulk mining shares also detracted from performance. Severe flooding in Australia over the New Year has hampered supply of both iron ore and coking coal, which has supported pricing

What SIM did
We have restructured the portfolio to bring it in line with its reclassification as a domestic fund. This involved selling our foreign shares down to 20% of the fund and reinvesting the proceeds locally. We have also increased our weighting in Anglo American, and added new positions in Afrox and Coal of Africa. Anglo American has been a weak performer, given its dependence on platinum. Afrox has been very disappointing on earnings thus far, when many other SA manufacturers have already turned the corner. The share now shows good relative value and we believe its earnings have bottomed. Coal of Africa has also underperformed, given the delays at its Vele project, and the associated balance sheet risk. However, we value its longer term Makhado asset highly and are comfortable with the margin of safety at current levels, given our positive view on global coal markets.

SIM Strategy
The fund's principal objective is capital growth and preservation by generating returns in excess of the market. The fund is guided by its value-based investment philosophy, preferring shares that are cheap relative to intrinsic value. We expect the forthcoming year to provide opportunitiesto rebalance the fund from its current defensive stance towards high beta (market-sensitive) plays, while capitalising on unprecedented volatility. An improvement in macroeconomic data would signal potential opportunities, particularly in the US. However, we would need to see a bottoming in housing markets and a recovery in consumer confidence and spending.

Market Review
A second round of quantitative easing in the US was confirmed during the fourth quarter. Given that the dollar's reserve currency status remains unchallenged, monetising their debts seems to be the preferred route, with the added benefit of weakening the dollar to rebalance the US economy. This has been positive for all "hard" assets including commodities; especially gold which broke through the $1 400/oz level, a record high. Not only has investment demand for commodities remained relatively "sticky", investment vehicles are still proliferating. Most notable has been the proposed introduction of base metal exchange traded funds (ETF's). Given the scarcity of physical stocks in certain metals, such as copper, and witnessing the precedent of these instruments being launched in the precious metal and oil markets, they are likely to have a real, initially positive impact, on their respective markets. The emerging Chinese economy is currently experiencing a policy -induced slowdown, reporting 9.6% growth in gross domestic product (GDP) in the third quarter. However we have also witnessed accelerating Indian and Brazilian economic growth, with the former starting to converge on the Chinese rate of growth, which is quite remarkable given the different political and economic structures. This is very positive for commodity demand as these economies still lag China's intensity of use patterns.

What added to - and detracted from - performance
The fund underperformed its benchmark over the past year but outperformed over two and three years. During the quarter overweight positions in the diversified miners, Anglo and BHP Billiton, added to performance. Our overweight in Mvelaphanda Resources also added value as the arbitration with Khumama was concluded in Mvelaphanda's favour, which freed the path to unbundling and unlocking the current discount. Underweight positions in the bulk commodity producers detracted from performance. Internationally, a strong German economy meant diversified chemical producer BASF added to performance. Specialty chemical names DSM and Syngenta lagged. Transocean continued to add to performance. Holdings in integrated oil companies, Total, ENI, Petrobras and Gazprom were detractors.

What SIM did
Locally we reduced our overweight position in Sappi to raise cash. The position, which was originally added at around R13 a share, has paid off handsomely in both relative and absolute terms. While the valuation is not yet full, the high level of both operational and financial gearing still presents risk in an uncertain macroeconomic environment. Internationally the Fund's exposure to Dow Chemical was switched to Total. Dow's ethylene business has benefitted from low US natural gas prices relative to oil-based feedstocks. Energy and related equities have lagged most other sectors, and Total's dividend yield is extremely attractive relative to its own history and the market. The Fund's position in Gold One has also been reduced following the value unlocked from the Goliath Gold transaction, which crystallised a value for its "megamine" project. The proceeds were used to fund a new position in Zimplats. Zimplats is a major asset within Impala Platinum, separately listed on the Australian Stock Exchange. It trades at an attractive 50% discount to the SA Platinum players.

SIM Strategy
The fund's principal objective is capital growth and preservation by generating returns in excess of the market. The fund is guided by its value-based investment philosophy, preferring shares that are cheap relative to intrinsic value. We expect the forthcoming year to provide opportunities to rebalance the fund from its current defensive stance towards high beta (market sensitive) plays, while capitalising on unprecedented volatility. An improvement in macroeconomic data would signal potential opportunities, particularly in the US. We would need to see a bottoming in housing markets and a recovery in consumer confidence and spending.

The fund changed sectors from Worldwide--Equity--Varied Specialist to Domestic--Equity--Resources & Basic Industries on 01 Feb 2011. The fund lost its history.