Rezco Quarterly Report

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The following is an extract from The Rezco Unit Trust information brochure.

“Our intention is to preserve capital during times of market weakness and to outperform the overall index during periods that are positive for equities. We do not offer a capital guarantee but it is fundamental to our approach that capital needs to be protected.”

The graph below shows how we have attempted to fulfill this mandate.

The Red and Blue line are the JSE Overall Index and the Rezco Unit Trust respectively. These are both indexed to 1 at the start of this year. The scale is reflected on the left hand axis.

The right hand axis, represented by the black line, shows the percentage of the fund invested in shares. This gives a good representation of the degree of risk that the fund is prepared to accept. As can be seen the % of the fund committed to the market has ranged from 95% down to 50%. During times of instability we aggressively reduce risk.

REZCO VALUE TREND AVERAGE LEVEL OF INVESTMENT

REZCO VALUE TREND AVERAGE LEVEL OF INVESTMENT

The conservative nature of the fund is further enhanced by the 15% we have invested offshore on behalf of the members.

It is a difficult mandate to fulfill, indeed many managers will not attempt it at all. We however feel that the fund manager is better placed in this regard than non-investment persons. Having a significant amount of our own money in the fund enables us to think about risk as owners and not as part of a relative performance competition.

Current Market View

As can be seen from the graph above, we have moved to a more fully invested position. As we believe that selected companies are showing good long term value There are certainly risks out there but we believe that the positives are currently outweighing the negatives.

The world economy is, for the most part, growing strongly. International Share valuations are in relatively cheap territory and thus have scope to re-rate quite significantly. The local economy looks set to continue its current strength. However, since our current economic boom is dependent on strong foreign capital inflows, one of the big deciders is going to be the smoothness of the ANC leadership succession race.