The Fund returned 0.8% for the month.

The weak rand was able to offset some of the declines in commodity prices, with Anglos rising 3.9%, SasoI2.8% and Mittal 2.6%. The trend of the Diversified Miners to outperform precious metals has continued with Diversified Miners outperforming the Gold sector by some 30% year to date. With commodity prices entering a period of either stagnating or falling, it will be difficult for most commodity companies to generate meaningful earnings growth. However, for now the Resource shares in the portfolio provide valuable rand hedge characteristics.

Within Industrials, the defensive and noninterest rate-sensitive stocks had a reasonable month with Nampak returning 6.0% and Alltron 7.9%. Digicor, which is benefiting from the rollout of its technology returned 16.0% on the back of its very good results. We have increased our holding in Richemont to provide more rand hedge characteristics and it has returned 10.8% for the month.

Our holdings in the Financial sector disappointed on the back of the weak rand and fears that the interest rate increase may be higher and more prolonged. Abil returned -13.0% with the Banking subsector returning 2.0%. Until the market has some sense as to when interest rates will stop rising, we expect the valuations of interest-rate sensitive stocks to remain under pressure.

The weak rand was once again supportive for the dual-listed AngloAmerican and Billiton as it offset falls in commodity prices and weak international equity markets. In addition iron ore prices have been negotiated 19% upwards which underpins Kumba and Billiton's earnings.

Gold shares continue to be volatile as a combination of high valuations and a weak US dollar gold price has negatively affected their performance. Instead of holding Gold, the Fund has preferred to get its precious metals exposure via Impala and Northam. Within Industrials, Retailers continue to be weak and are now trading at very compelling dividend yields. The rise in interest rates clearly had a negative impact on the rating of this sector, but it is as of yet unclear how earnings and dividends are going to be affected. Only if interest rate increases give rise to increased unemployment, will it change the earnings outlook materially.

After the Banking sector's disappointing performance year-to-date, it held up very well in June, with Standard Bank returning -1.4%.

Going forward we still expect the interest rate sectors to be subdued until rand and commodity price volatility has abated. More stable commodity prices and a stable rand allows a better read on inflation forecasting which, in turn, allows us a more firm view of the short-term interest rate cycle. The market is clearly concerned about South Africa repeating its previous boom-bust interest rate cycles. Thus stability in forecast inflation will go a long way to addressing these fears.

This fund would have been the top fund in the general equity sector two years running, but it was denied this place by two others. First the Old Mutual High Yield Opportunity Fund, and then the PSG Alphen Growth, did a bit of opportunistic category shopping and moved to the general equity sector (and in spite of their changing categories, the Association of Collective Investments, rather spinelessly, let them keep their performance histories).

As a perpetual silver medallist, run by a business with no in-house distribution, Prudential Optimiser has never attracted significant inflows, which was bad news for investors who have piled into inferior funds.

It is not as if it is a fund that has depended more on luck than on skill, as it is backed by a robust process in one of SA's large managers - Prudential was top of the Large Manager Watch in the three years to March 31.

Optimiser started life as quite a timid relative value fund that took small bets against the index. But these bets have opened up in recent years. For example, the fund has no gold shares. Portfolio manager Gary Quinn says times are not going to get much better for gold producers, yet companies such as Harmony still struggle to make money. His preference for diversified miners such as BHP Billiton and Implats has certainly paid off, particularly in March, when the first returned 10% and the second 18%.

There has also been a chunky bet of 4,4% in the construction sector, well above its index weighting, with a focus on Group Five, Basil Read and Concor. But Quinn says there are usually much more pronounced differences in the valuations of the different sectors at this stage in the economic cycle (he says we are in the last lap of the commodity upswing). He is increasing his weighting in shares with a more stable earnings outlook, such as Nampak, Richemont and Remgro. But he is getting nervous about Telkom's refocus on expansion.

Quinn holds all four banks. He differs from most of his competitors by holding a full weighting in Nedbank, which he expects to benefit from a revival in corporate and merchant banking.

Financial Mail - 05May2006

The Fund returned 5.8% for the month.

Given the strength of commodities there is no surprise that Resources have had a strong month. Billiton, our largest counter, has returned 10%, due to its exposure to copper and oil. Impala Platinum has returned 18% this being our preferred stock in the precious metals complex. We still aim to buy commodity companies where expectations for the relevant commodity price are low.

The growing order books of construction companies and obvious infrastructure activity contributed to our holdings in the Construction sector with Group 5 returning 12% and Basil Reed 30%. Related GDFI (Gross Domestic Fixed Investment) stocks also did well with Altron
returning 13% and Reunert 7%. Large domestic industrial stocks have continued to benefit given investors' belief in the durability of the economic upswing with Bidvest returning 11 %, Imperial 12% and Tiger Brands and Edgars both returning 14%.

Globally, corporate activity has been a big boost for financial stocks and this has certainly benefited our Banking and Insurance sector. Unfortunately, global rates are rising and this has traditionally created headwinds for the performance of financial stocks.

In South Africa interest rates are still muted and we have yet to see any indication of rate rises, but we are vigilant of the global interest rate dynamics, as this is traditionally from where our interest rates take their cue.

The Fund returned 7.23% for the month with strong performance coming from all three sectors. In particular the Fund's Financial holdings performed strongly especially Banks and Real Estate. The JSE had a phenomenal year with a return of 47.3% for 2005.

Precious metals continue to attract a lot of attention, with Impala returning 10.0% in the month. This was despite Impala finalising their BEE deal. which although positive in terms of securing future production, has diluted existing shareholders by some 5-7%. Furthermore, compared to other BEE deals this was an expensive transaction. The Platinum Mining sector index return was 109.9% for the year.

With the news that interest rates were unlikely going to rise and with positive long-term comments on inflation and short-term interest rates, December was a very positive month for interest-rate sensitive stocks. So within Industrials, Retailers did very well with Edgars returning 18.3%, Foschini 16.7% and Truworths 19.9%. Macro news continues to be supportive of growth for SA Industrials and while an acceleration in growth is not envisaged, it is plausible that the country's GDP continues to grow at the same rate in 2006 as in 2005.

With the long end of the bond market performing strongly over December, the banking sector, whose rating is linked to the bond market, had one of its better months. FirstRand returned 16.7% and Nedcor 14.3%. Another sector closely tied to the bond market is Real Estate, which makes up some 4% of the Fund's holdings. Our holdings in Real Estate returned 8.4% with Redefine returning 13.5%.