The fund has had an uncharacteristically weak past quarter which fund manager Tim Allsop attributes to holding no gold shares, being underweight in Anglo and Billiton (though the Anglo holding is being increased), too much cash, selling construction shares too early and the volatility of the old Aplitec holding. There is a good chance that this huge fund will soon be capped.

Financial Mail - 21 October 2005

Following a strong 10% gain in the fund's unit price during July, it rose by a further 2.0% in August. This gain was in line with that achieved by the All Share Index and the General Equity Unit Trust sector average.
Highlights of the JSE sector performances in August 2005 includes the winners: Platinum (+8.9%), Oil (+9.5%), Pharmaceuticals (+5.9%), Media (+7.7%) and Life Assurance (+7.7%), and the losers: Gold (-1.6%), Beverages (-2.1%), Health (-2.1%) and Banks (-1.7%).
The fund benefited from its significant exposure to the Oil and Media sectors through large holdings in Billiton, Sasol and Naspers. In addition, the very limited exposure to Gold, Banks and Beverages was an advantage.
We have continued to search for good relative value, hence our relative preference for Sasol above Gold shares, and Anglo American and Billiton above the Resource Sector in general. The earnings and dividend yields of the above-mentioned companies all demonstrate multi -year highs, relative to the alternatives mentioned.
In our July report, we intimated that we were happy to remain fully invested in the light of low and stable inflation and the JSE's attractive rating relative to the low prevailing interest rates. However, the market's continued strength in the face of a stronger rand, further appreciation in the oil price and Mr Greenspan's recent comments regarding the looming risks in the US economy, have caused us to raise the level of cash in the portfolio. His concerns that the US expansion has been led by soaring house prices and a growing trade deficit, while debt has risen and the savings rate has declined, are a sobering reminder that the 110% gain in the JSE All Share Index since March 2003 has been a bonanza that is unlikely to continue forever.

The fund enjoyed a phenomenal month with its unit price rising by approximately 10%, which was well in excess of the performance of the All Share Index +7.2% and significantly better the General Equity Sector unit trust average +8.3%.
Our relative performance was driven by the fact that we hold no Sappi or any direct gold shares (factors that hurt our relative performance in the previous month), as well as the phenomenal performance of some of our specific shares in the fund namely Net1 Technologies (previously Aplitec), which successfully moved their listing onto the main board of the Nasdaq exchange in the United States, and Sun International, Bidvest, Naspers and Altron.
At the beginning of July, with the market delicately poised, we were nervously positioned with a relatively high cash holding in the portfolio at over 8.3%. We reacted very quickly to the market's phenomenal strength and the fund was much more heavily invested from very early in July. Consequently, investors have enjoyed the benefit of the strong appreciation in the unit price.
As conservative South African fund managers, we consider the market on a PE of 15 times and a Dividend Yield of 2.5% to be fairly fully valued. However, we also subscribe to the view that in the light of low and stable inflation (regardless of the oil price) and low interest rates, that the equity market can justify a higher rating. This is particularly valid in the context of a robust economy and our high level of confidence of strong earnings growth from our domestic Financial and Industrial companies for the next12 months. For the time being we remain fully invested.

In a month which saw an 11% decline in the rand/US dollar exchange rate and a massive 10% rebound in the JSE All Share Index (after April's 5% decline), the fund did modestly well (relatively speaking) with a 7% rise in the unit price.
While under-performing the JSE All Share Index, performance was relatively strong compared to the General Equity unit trust average. We attribute this to our decision to down-weight Banks and Retailers in favour of Manufacturers and rand-hedges, a focus which has been in place since the end of 2004.
Stalwarts like Remgro, Trencor, Altron, Astral, Anglos and Naspers performed well and we added value by buying Billiton, Richemont and Tiger Brands into relative weakness. Nampak and Barloworld were major disappointments.
Looking forward we expect a short-term rally in the value of the rand, and some out-performance by Financials. However, we continue to look for stocks, which offer attractive earnings and dividend yields, backed by cash flows and solid growth prospects. We like companies that have demonstrated the ability to grow earnings during periods of rand strength, but whose earnings growth rates should accelerate with rand weakness.

Though Nedbank Rainmaker's assets have hit R6bn, manager Tim Allsop's flair for stock-picking shows no sign of constraint. The fund's three-year record of superior returns remains intact, bolstered by an astute shift into rand hedges in late 2004. Allsop's investment criteria include shares with strong cash flows, especially those that have done well despite a strong rand, but whose earnings growth will benefit from a weaker rand.

Financial Mail - 24 June 2005

The fund's unit price declined in April 2005, outperforming the All Share Index, which declined by 5.2% but marginally under-performing the unit trust General Equity sector average, which declined by 2.9%.
Our under-performance can be largely explained by the 17% decline suffered by one of our largest holdings - NUEP. These shares are held via a trust, which only allows us to sell the shares we hold. Consequently, we continued to hold them, even though they had reached a relatively expensive level after a superb run in February and March 2005. Our longterm opinion of the company's growth prospects and valuation remains very positive, and we are happy to live with a period of short-term underperformance.
In the face of a strengthening rand and some doubts about the sustainability of commodity prices, the Resource Index declined heavily by 8.7% in April. While also producing negative returns, the Financial (-1.9%) and Industrial (-4.5%) sectors did a little better.
The event of the month was undoubtedly the Reserve Bank Governor's surprise decision to cut interest rates by a further 0.5%. The subsequent strengthening experienced in the rand must have him, and all the economists in South Africa, wondering what they have to do to get the rand weaker.
In an uncertain and volatile equity market we have found ourselves gravitating towards investments where we have high comfort in their valuation - supported by strong cash flow, a high and growing dividend yield, and where we are confident of earnings growth.
Consequently, the most significant decisions implemented during the month were to add to our holdings in Remgro, Firstrand, Standard Bank, Reunert, Altron and MTN.

The fund marginally out-performed the unit trust General Equity sector average in the first quarter 2005. Taking into account the high base set in 2004 as well as the annual income distribution, which happened in January 2005, we hope unit-holders will not be dissatisfied with the result.
Although our efforts to down-weight the General Retail component of the fund (in favour of rand-hedges in December 2004) helped performance in the face of a rand that moved from R5-70 to R6-30 to the US Dollar, our underweight position in the likes of Billiton, Kumba, Sasol and Old Mutual were a drag on performance. On the other hand, Trencor and NUEP (Aplitec) were both strong gainers and we remain optimistic about the future for these stocks.
We used the mid-March market surge to increase liquidity in the fund from 5% to 9%, while at the same time increasing exposure to Sasol from 2% to 3.5%. While we continue to believe that the market offers value when one compares current earnings yields with the Prime interest rate, we are concerned that rising interest rates and high oil prices may cause the market to stagnate in the short term.

The fund's unit price increased by 49.06% for 2004 and by 4.33% for December. This represents a substantial out-performance of the fund's benchmarks, the All Share Index (+25.4%) and the General Equity unit trust category average (+ 37.95%). Inflows have been consistent and the value of the fund exceeded R5 billion at the end of the year.
Although the fund's strong performance partly reflects a rebound after a relatively poor third quarter, it is pleasing to note that for the year as a whole, the portfolio growth in unit price exceed the All Share Index's appreciation by more than 20%. Since the fund's inception in July 2000, it has doubled relative to the All Share Index, and risen by over 300% in US dollar terms.
The fourth quarter of 2004's strong showing reflects the fund's underweight position in mining companies, and the negative impact of the strong rand on the mining sector. In contrast -consumer, media, telecomm, and fixed investment stocks have done well, which is also the area where most of the fund's investment focus lay. The fund also benefited from certain rand hedge investments, namely Trencor and Uniserv, which performed strongly notwithstanding the strength of the rand. The latter has now been de-listed and the proceeds re-invested into Anglo American in anticipation of the rand trending weaker during 2005.
While we do not expect the spectacular 2004 returns to be repeated in 2005, we are reasonably confident that equity investors can look forward to a real return.

The fund had a strong month and its unit price rose by almost 10%, outperforming an All Share Indexes gain of 7.3%. Inflows were consistent and at the time of writing, the value of the fund has topped R5bn for the first time!
As usual, a value based stock selection process drove performance. In plain terms, we continued to avoid companies trading on high price to earnings multiples with low growth prospects, and favoured shares with high earnings and cash flows relative to their share prices. For example, we avoided Gold, Platinum and Oil stocks (which declined by 3.5% during November) and enjoyed the strong gains made by Diversified Industrials, Telecomms, General Retailers and Media companies.
Looking forward, we continue to believe the JSE offers reasonable value relative to current interest rates (which are high in relation to inflation). However, we maintain our preference for Industrials.