The mid- and small-cap indices gave up some of the outperformance achieved relative to the all-share index since mid-March 2002. The mid-cap index rose by 0,7% and the small-cap index by 1,6% for the month of August, underperforming the all-share index which rose by 4,7%.

In the past couple of months an attempt has been made to increase the average market capitalisation of companies held by the fund, in order to achieve better liquidity. Accordingly, several of the smaller-capitalisation shares held by the fund such as Aquila, UCS Group and Chester, have been sold, resulting in a temporary large cash holding. The fund continues to focus on investing in domestic industrial counters, many of which still offer great value, with strong cash flows allowing the payment of above-average dividend yields.

Within the industrial sector August saw particularly strong performance by the GDFI sector, buoyed by strong earnings reported by a number of companies in the sector. The fund's 19% exposure to the GDFI sector through Group 5, Ozz, Wilson Bayley and Hudaco benefited from this positive sector move. Group 5 in particular reported strong results, with headline earnings per share growing by 60%, albeit off a low base.

The retail counters in the fund continued to perform well, with Foschini and Pepkor both up over 5%. Pepkor reported a strong set of results, with headline earnings per share more than doubling.

Going forward the fund managers anticipate the mid- and small-cap sectors to continue to show strong performance, underpinned by good earnings and undemanding valuations.

The Nedbank Entrepreneur Fund is preparing to move away from resources shares towards financials and industrials. Niall Brown, fund manager, says the portfolio exposure is not going to pay off until later this year, due to extremes in pessimism and optimism in the sectors.

The Nedbank Entrepreneur Fund has won the S&P 2002 award for the best fund within the Domestic Equity Smaller Companies sector over a three year period.