The fund continued its steady performance during the quarter as the equity market pushed ahead. The fund recorded a new high when the unit price broke through R8 a unit for the first time. However, the relative performance lagged somewhat, as some of the sector positions did not pay off during the last quarter.

We reduced the equity exposure during the quarter because we had a significant overweight position to this asset class. The equity market has arguably run ahead of itself and we simply wanted to lock in some of the positive performance generated by equities since the beginning of the year. From a sectoral perspective, we trimmed in the areas where we believe the fund had significant overweight positions: banks and retail counters. The small cap exposure was increased marginally.

We remain overweight in local equities, as this remains our preferred asset class despite the recent strong performance. Within equities, the fund's positioning is fundamentally unchanged despite the trimming that took place during the quarter. The fund is well placed to perform in different market conditions because it has exposure to the local financial and industrial companies, as well as diversified miners and Sasol, which should benefit from resilient commodity prices.

The fund continued its steady performance, with the unit price once again reaching a new high as local equity prices recovered significantly from a hesitant start to the quarter. On a relative basis, the fund held its own against competitors.

Following the strong run in the diversified miners, we trimmed our exposure to them marginally. The proceeds were used to add to direct commodity counters. The rand hedge component of the portfolio was increased during the quarter, as the rand depreciated against a rampant dollar. This action provided more balance to the portfolio, which was skewed towards shares that are geared to a strong local economy.

These actions are not as a result of believing that a major slide in the rand is likely but are a portfolio realignment because we acknowledge that the rand was too strong at levels below R6/$.

The unit price advanced as the local equity market continued to reach new highs, but came under pressure as local equity prices pulled back. The relative performance of the fund was disappointing as some of the sector calls did not work for us in the period under review. The historic success of the fund started to attract new inflows as more than N$3 million in new flows was invested in the fund during the quarter.
It was an active quarter for the fund as we continued to adjust some of the positions. We have added to mining stocks as very firm commodity prices continue to surprise analysts. On the other hand, we have reduced the fund's holdings in some industrial counters where we had a significant overweight position. These trades do not represent a change in view, but simply reduce the relative risk associated with the portfolio. After careful review, we still maintain that our macro view remains intact.

The unit price of the fund hit an all-time high when it broke through the N$6,79 level for the first time. The market value of the fund also broke the N$70m mark for the first time. The unit price was driven by the strong market reaction following the surprise rate cut earlier in August and the continuation of the rally in the fourth quarter. The fund certainly rewarded its investors with stellar nominal performance in 2004. Not only did the fund perform well in nominal terms, it also outperformed its competitors convincingly during the quarter. In fact, preliminary figures would suggest that this fund has outperformed its closest competitor by in excess of 400 basis points during the year.
The fund had strong cash inflows during the quarter. We have invested the contributions as we received them in order to maintain low liquidity levels as equity prices continue to go up. We have partly added to existing holdings to maintain the relative positions in the counters, but have also added new counters to the portfolio. The new entrants were largely small caps. The intention is to maintain our overweight position in banks and industrials and to create more focus with the resources exposure.