The P&C Global Gold and Natural Resources Fund, based on the 30/6/03 valuation, rose by 2% to USD 1105.50 in June. The FTSE Gold Mines index (USD) was up by 8% in June and the Merrill Lynch International Gold and General Fund (USD) up by 2%. We are ahead of this, a leading fund in the sector, by 7% and the FTSE Gold index by nearly 3% since inception, though our benchmark is the USD cash return, not a share index. In June, Gold fell by 5% and Silver by 2%.

As at 30/6/03, the Fund was fully invested. We continue to hold a diversified portfolio of major, medium-sized and junior gold and mining company shares active in North America, Australasia, Africa, Russia and many other countries, as well as an increasingly large position in the metals themselves (20% at month end).

In June, we increased physical gold and silver positions; metals have lagged share markets. We increased exposure to Coeur d'Alene (now 7% of the Fund), Aber Diamond, Cambior and Oxus Gold. We sold down in Gabriel Resources, Freeport McMoran, Goldfields, Thistle Mining, Peter Hambro Mining and Aquarius Platinum.

The long-term gold bull market is on track. The abundant liquidity created by central banks is feeding into share markets everywhere. Whilst this may create some competition for gold right now, it is more positive longer term for gold than for shares. Bond market yields are rising to reflect this. Other positive factors for gold shares include WGC exchange traded funds, Chinese gold market liberalisation, and renewed corporate activity as the majors scramble to buy scaleable productive assets. Some form of (unofficial) inflation targeting in Japan and elsewhere will only help our cause.