The fund's unit price over the quarter exceeded the gain made byte JSE All Share Index by a small margin. The fund also outperformed the average of the unit trust general equity sector.
We previously expressed our satisfaction at having outperformed the above benchmarks, so it is pleasing that we have managed to continue this pattern in an environment of a depreciating currency, which we have positioned the fund to benefit from for some time.
The depreciation of the rand has continued into early October 2006and at R7-90 to the US dollar, the rand is now 30% weaker than it was in May this year. Holdings in Remgro, Richemont, Bidvest, Anglo American and Altron Prefs all performed well in this environment. Disappointingly, several of our other large rand-hedge positions did not perform as expected, which include Sasol, Billiton, Trencor and AECI. We are, however, excited about their ability to contribute positively to our relative performance off the base of their recent underperformance, and consequently have added to all of these positions.
Our strategy going forward is to focus on the rand-hedges, which have not performed well, and to maintain a significant exposure to companies that are involved in the fixed investment arena where government spending is expected to accelerate.
The likes of Altech, Bytes, Altron and Reunert should benefit from both the weaker rand and Fixed Investment spending

The fund's relative performance for the quarter was strong against the benchmark. The JSE All Share Index gyrated wildly during the period - peaking at 22,094 on 11 May, declining to 18,380 (-17%) by 13 June and rallying to close at 21,400 (+16% from the low) by 30 June. The rand depreciated sharply from a mid-March low of R6-10 to the US Dollar to an end of June high of R7-40! This rapid deterioration in response to rising interest rates globally, weakness in commodity prices and a general weakness in emerging equity markets initially had no impact on the JSE. However, it did finally result in a lift in most of the Resource stocks as well as the Industrial rand hedges back to their highs. Compared with the Resource sector, which rose by 10% in June and 21% for the quarter, Financials were down 1% in June and 5% for the quarter.

The fund was well positioned for the currency slide, which we have been anticipating for some time; through the fund's increased exposure to Platinum stocks, Richemont and Remgro. We believe that commodity prices will continue to decline, and the predicted rise in the current account deficit will also contribute to further rand weakness. Another increase in domestic interest rates of at least 1% is widely expected which, combined with a very high oil price, should dampen consumer demand. We have accordingly reduced the fund's exposure to Banks and Retailers still further.

The fund has no life assurers and less than 2% in banks, which has helped investors during the recent sell off in financial shares. Fund manager Tim Allsop says he remains confident of the value of equities relative to cash, especially in selected rand hedges, telecommunication shares and fixed investment. Allsop has trimmed Anglo, Sasol and BHP Billiton, but says their prospects remain good.

Financial Mail - 30June2006

While the fund's performance in March did not match the strong performance of the All Share Index (up 7.1%), results for the first quarter as a whole were satisfactory.
Notwithstanding a significant income payment in early January, the fund's unit price outperformed both the All Share Index and the General Equity averages over the quarter.
The quarter was notable for ongoing strong inflows into the JSE by foreign investors, following a confirmation in the 2006/7 Budget of the healthy state of the South African economy. Fiscal revenues for 2005/6are expected to be R41bn over budget and expenditure going forward will continue to favour lower income groups - who will benefit from tax reductions amounting to some R14bn and increased welfare expenditure of a similar amount. (Total welfare expenditure is now running at aboutR90bn versus R10bn in 1994). Another notable feature of the budget was the reaffirmation of the commitment to spend R400bn over the next few years on infrastructure expansion.

Following the above, it was not surprising that the JSE's top performing sector for the quarter was Construction and Materials (up35%), but Platinum Mining (up 31%) was also strong.

The fund benefited from its recently expanded holdings in Shoprite, Richemont, Sun International and Barloworld, and used market strength to cut back positions in Ellerines and Foshini. We bought Amplats into relative weakness in February, which enhanced performance and leaves the fund well positioned for the current commodity price surge.
During the quarter many companies reported on their profit performances up to December 2005. Gold companies' results were particularly poor, but the fund's investments in Anglos, Billiton, Sasol, Trencor, Bidvest, Shoprite, Sun International, Santam, Prime Media andCity Lodge were positive and in line with expectations.

We continue to believe that rising interest rates abroad, some weakness in commodity prices and a rising current account deficit will lead to the rand trending weaker this year.
Accordingly, we have boosted our (up to now under performing)industrial rand hedges with a significant increase in our Richemont and Remgro holdings, but maintain some balance in the fund towards the local market with additions to MTN (a major laggard in the past two months).

We draw great comfort, and have confidence in the current portfolio structure (although we run the risk of under performing an equity market driven by momentum), where we have reduced investor's risk through our share selection, which is (as always) based on where we find the best relative value.

The Nedbank Rainmaker Fund, managed by renowned stockpicker Tim Allsop, has long been a fund to be reckoned with. But assets of R8,4bn make it one of the local giants and, perhaps, not as nimble as in the days when smaller-cap shares could be bought in quantities large enough to make an impact on returns. Though Nedbank Rainmaker Fund 's recent lacklustre performance suggests inertia, it would not be the first time it has lagged behind only to rebound later.

Financial Mail - 31 March 2006

The fund rose by approximately 6% during December 2005, bringing its total gain for the year to about 38% (excluding dividend and interest payments). For the quarter to December 2005, the fund's gain of about 7% was marginally below that of the All Share Index (+7.7%), as well as that of the Unit Trust General Equity Sector Average (+7.8%).
While we are happy with the absolute performance of the fund, it is disappointing to have under-performed the fund's benchmarks for the month and the quarter. The following factors have had a significant impact on performance.
1. After performing extremely well from 2002 to 2004, based on a top down bullish view of the rand, our decision to shift towards Industrial rand-hedges has not provided the tail wind in 2005 that we had hoped for given the rand's subsequent ongoing strength. For example, Remgro under-performed the Banks Index significantly during December.
2. Although a lot lower over 2005 in comparison with 2003 and 2004, our relatively high mid-cap exposure (so helpful over the prior two years) was a drag on performance, with the Mid-Cap Index consistently under-performing the ALSI-40 over the year. Shares like Trencor, Tiger Wheel, Consol and Oceana have been particularly weak relative to the All Share Index.
3. Our general preference is for high cash generating companies on relatively low PE ratios - especially where these companies have shown an appetite for buying back their own shares. This bodes well for the future, because if the SA economy maintains 2005 GDP levels, substantial earnings per share growth will be possible just from not having to service the shares that have been bought back. The momentum of the economy since September and through Christmas is particularly encouraging in this regard. However, while a strategy of buying good businesses at fair prices has certainly been a winner over time, sometimes one finds that certain sectors can get momentum in anticipation of a hoped for future event. The Gold Index appears to be discounting a substantially higher rand price of Gold. Our preference for Sasol, Anglos and Billiton has dampened performance in the short term, notwithstanding continuing price strength in underlying commodity prices.
The New Year has started on a strong note with reports of reducing inflation, and credit growth combined with significant sales volume growth and swelling fiscal coffers. Expectations for an interest rate cut and substantial Fixed Investment growth run high. Price Earnings ratios are high-ish, but not in relation to interest rates. We remain invested for onward momentum in equity prices.