Nedbank Entrepreneur Fund tops Micropal performance rankings

The Nedbank Entrepreneur Fund was the top performing unit trust fund in South Africa for the three years ended 31 December 2006, with an annual compound return of 46.9%. (See footnote)

Nic Andrew, Head of Nedgroup Investments said, "the ongoing excellent performance of the Nedbank Entrepreneur Fund is further proof that our Best of BreedTM partnering strategy of selecting those managers with the most appropriate skills to manage our unit trust funds is continuing to benefit investors".

Commenting on how this performance was achieved, fund manager Anthony Sedgwick of Polaris Capital said, "a mandate that exposed the fund to the better performing small and mid-cap shares during a period of rand strength, as well as some large positions in companies that generated enormous growth in their earnings, and that also had an appropriate capital structure and astute management, such as Astral Foods, Reunert, Northam Platinum and Aplitec / Net 1 to name only a few paid off".

Sedgwick did, however, issue a word of caution to investors, stating that it is unlikely that this high rate of growth will be sustained in the immediate future, and consequently advises investors to revise their expectations accordingly.

Having said that, he remains confident that the team at Polaris Capital will continue to find exciting investment opportunities and he does not consider the companies that they are currently invested in to be overvalued. Sedgwick concluded that, "As we enter 2007, the primary themes that the Nedbank Entrepreneur Fund is exposed to are:

1. Platinum (about 15% of the fund): Although concerned by the recent weakening in some of the high flying commodity prices of 2006, most notably copper, we are much less concerned about the threat to platinum (and all platinum group metals) as a result of these metals' specific supply versus demand fundamentals, as well as the inevitable weakening in the rand that will result from falling commodity prices. We expect significant growth in earnings and dividends from the reasonably priced share selections that we have made and draw additional comfort from the attraction that these shares offer from a corporate action perspective, where quality opportunities are limited.

2. Fixed investment spending (about 23% of the fund): We remain convinced that that this is the area where one can most confidently expect growth to occur in the domestic South African economy over the next five years. We also remain circumspect about the valuations of most of the building contractor businesses and retain our preference for the material suppliers to the industry, where the valuations are more reasonable and the predictability of growth more accurate.

3. Domestic consumer (about 20% of the fund): Although we have been extremely concerned at the rate of credit extension growth in South Africa and the apparent limitless access to credit that is currently available to consumers, which must come to an end at some point, we do not believe that this is imminent. As a consequence, having reduced exposure to this sector significantly in mid-2006, we have recently built it up quite materially through selective purchases.

4. Rand hedge (about 36% of the fund, including platinum): We retain quite an aggressive exposure to stocks that will benefit from a weakening rand, and are pleased that the fund has performed so well in the short term in an environment of a strengthening rand, which had reached R7.90 to the US dollar in October 2006."

"On behalf of our investors, I would like to acknowledge and thank the enormous contribution of Anthony Sedgwick and the team at Polaris Capital", concluded Nic Andrew, Head of Nedgroup Investments.