In July the Fund was down 2%. In 2004, the Fund is down 22% after +80% in 2003. June's NAV was revised down to USD 1419 from USD 1452. This was due to a custodian error in double-counting a new issue by Eurozinc Mining. Despite attempts at independent valuation by the Fund's managers, the mistake was only confirmed after the report was issued. We apologise for this.

For students of markets, July's activity was from a behavioral standpoint a classic for a multi-month correction in a bull market. Extreme volatility: a mid July gain of over 5% was subsequently retraced. Low speculative participation: the net long gold position is now about 6mn oz (compare this with an average of 12mn oz over the life of this gold recovery). Risk aversion: large cap stocks (in which the Fund is largely underweight) have outperformed small caps (in which we are well invested and which did us so well last year). Squeezed supply: mine financing has crawled to a halt in every country. Attractive valuations: mining share indices trading way below where they ought to be for this level of gold. Nowhere is this more so than in South Africa where (according to Baker Steel, the Fund's adviser) many mines are trading on option-type valuations. Overall, this sets the scene for a strong second half given sector volatility.

We hope not to miss this rise. The Fund is heavily geared to recovery. We have large holdings in pre-IPO stock (eg African Minerals). We've reduced the bullion position (at the time of writing) to under 5% (down from 17% in April and 37% in January); shares have better gearing than the metals to recovery. We're invested in many smaller names to whom a whiff of recovery should act like Viagra on their share prices. We hold just under 5% of the Fund in options and warrants where we'll get 'more bang for our buck" than by holding the common shares. Baker Steel have of course done due diligence on all companies held.

Finally, at this time of high oil prices (by the way, gold is cheap relative to oil) we remind readers that from 1973 to 1980 - another high oil price period - gold rose 8 times.

Asset Allocation (as at 30/7/04)	Top 10 Holdings (50% of fund)
Gold and resource shares: 89%	1. Silver Bullion 7%
	2. Placer Dome 5%
Silver, palladium: 11%	3. Randgold 5%
	4. Harmony 4%
Cash 0%	5. Palladium bullion 4%
	6. Mvelaphandra 4%
	7. Northern Orion 4%
	8. African Minerals 4%
	9. Lihir Gold 4%
	10. Goldfields 3%
Asset Allocation (per month)