In May, the fund was up 1.4% but behind this modest but pleasing advance was a highly volatile and nervous month's trading as the mining share sector sought to build a base after a blood-letting in April. So far this year, the fund is down 15% after +80% in 2003.

The fund's handsome returns last year came from exposure to the more specialist area of intermediate and small cap mining stocks and for the time being these are lagging large caps. Consequently, the fund lagged the FTSE Gold Mines Index - a large cap index - last month. Metals, notably silver, where the fund has a large position, were steadier.

The fund's managers, Baker Steel, think most of the recent sector selling may have taken place near the volatile medium term lows. Time will tell. Baker Steel's two principals have been calmly going about their business of visiting interesting companies over the last few weeks. They tell us they can see 'outstanding value re-emerge in the market'. The MBH Commodity Survey shows a 17 year record low in the level of bulls (10%). The speculative COMEX long position is at its lowest level since July 2003, when gold was $50 lower.

As at 31/5/04 the fund remained invested in a diversified portfolio of major, medium-sized and junior gold and mining company shares active in North America, Australasia, Africa, Russia and other countries, as well as a large physical position in the metals themselves (13% silver + 4% palladium = 17% of the fund).

We repeat our message of last month: "investors who buy at these levels will see excellent multi year returns and April 2004 will be seen as insignificant a blip on a chart as the double-digit corrections in each of the last 3 years now appear. Even if metals correct further from here on continuing liquidation, we doubt that shares will feel the same downdraft. Short-term panic has created longer-term opportunity."

Asset Allocation (as at 31/5/04)	Top 10 Holdings (49% of fund)
Gold and resource shares: 82%	1. Silver Bullion 13%
	2. Mvelaphandra Res 5%
Silver, gold, palladium: 17%	3. Harmony Gold 4%
	4. Palladium Bullion 4%
Cash 1%	5. Ivanhoe 4%
	6. Randgold 4%
	7. Northern Orion 4%
	8. Placer Dome 4%
	9. Goldfields 4%
	10. European Gold 3%
Asset Allocation (per month)