The Fund had a very good month, returning 7.1 % for the month, with the Fund's Financial holdings in particular outperforming the Financial index quite strongly.

Equity markets had another strong month with all sectors performing well. By far the best performance came from the Fund's Resource holdings, which returned 14.6% for the month, once again on the back of renewed commodity strength. The best performance was Kumba with 27.4%, followed by AngloAmerican with 17.9%.

The JSE Resource Index has returned 60.0% for the year to date and although valuations are moderate, commodity prices are very high and it should therefore be no great surprise if a setback occurs.

All domestic economic releases such as retail sales, credit growth, and car sales tell us the South African economy has not slowed. Although there is a lot of fear regarding rises in interest rates to curb this growth, we feel that this is overstated. Stocks that did well this month were Woolworths with 16.1 %, Digicor with 19.1 % and Concor with 13.6%.

Financials have been the weakest sector, as the prospect for growth has been more muted. There are however selected individual counters, which we think will demonstrate decent growth in this sector, namely FirstRand which returned 11.5% and PSG, which returned 32.8% for the month.

Prudential is perceived to be a conservative benchmark-aware house, but there are some strong bets in this fund. Portfolio manager Gary Quinn has no Richemont or MTN, and had no life companies until September when he took a small position in Liberty. The fund considers the competition, rather than the all share index to be its benchmark. A bet against construction was an isolated mistake.

Financial Mail - 7 September 2005

The Fund had an excellent month, returning 10.1 %. All three sectors delivered strong returns with Financials delivering 11.2%, Industrials returning 10.6% and Resources returning 8.0%.
Within Resources, our two largest holdings, Billiton and Sasol, enjoyed good gains as a result of the strong oil price, with returns of 8.4% and 8.5% respectively. The resumption of growth in China has also helped the two Steel stocks in the portfolio, Highveld and Mittal, which returned 10.6% and 16.1 % respectively.
The Fund's domestic Industrials holdings, achieved good returns all round. Sun International returned 19.6%, Digicor, a new stock in the portfolio, returned 17.3 % and the Retail component of the Fund returned 11.3%. We have maintained our preference for Telkom over MTN and over the month Telkom returned 15.2%. Although large gains have occurred this year, no rerating in terms of valuation has actually occurred as the bulk of the performance is just following the earnings growth of the companies. We would be more concerned if stock performance had been driven by rerating. Domestic equities still enjoy good yields when compared to cash and other fixed income assets.
The completion of the buy-out of Absa and speculation of further international interest in our banking sector, has delivered very strong returns for Firstrand and Nedbank of around 14.1 % each. Other Financials that also performed well, as they are benefiting from the buoyant conditions, are Brait with 17.3% and Alexander Forbes with 10.1%.