In October, the Fund rose 5.2% (the FTSE Gold Mines Index was +3.8%, gold + 2.3% and silver +5.7% and palladium -5.8%. In 2004, the fund is -6.2% after +80% in 2003. As of now 11/11/04, this 6% shortfall has been closed once again. Our volatile sector is once again attracting attention, though institutional weightings in mining shares remain way below the averages of the 80's and 90's.

In October we made some minor changes. As we believe the bull market in gold is still in its infancy, it is sensible to maintain a high exposure to smaller companies with high operational gearing to the gold/metals prices. Baker Steel are experts in this area and this is why we have chosen them as advisers.

News flow continued favorable. LionOre bid for MPI Mines in Australia, which we hold. Harmony (in which we have a large position) announced its intention to make a USD 8bn offer for Goldfields to make the 2nd largest gold mine in the world. This is bitterly contested by Goldfield's board. We sold Harmony, but noted that Norilsk Nickel's involvement shows how major - in this case, Russian - companies recognise the strategic necessity to acquire elephant sized resources. Various Canadian producers, including Berna, Eldorado, Cambior, Rio Narcea and Yamana Gold, did equity raisings. Northern Orion - our third largest position - is reported to be in joint venture talks with a Korean smelting group in the Agua Rica project (Argentina). IMA released excellent drill hole results from the Navidad property in Argentina, leading to upwards revisions of resource size. A US exchange traded fund (StreetTRACKS) is about to trade on the NYSE, adding to demand for gold. Critically, the USD traded lower ahead of the US election (gold benefits from a lower USD).

We've positioned the fund not to sleep through a gold price recovery. It's got holdings in pre-IPO stock (eg African Minerals), a much reduced bullion position (only 4% and now only in palladium), the highest share weighting it's ever had (97%), an overwhelmingly small to mid-cap emphasis and just under 5% in options and warrants positions.

Portfolio Changes
Net Buys - Oct 04	Net Sales - Oct 04
1. Guinor Gold Corp	1. Harmony Gold
2. Yamana	2. Cambior
	3. GRD

Asset Allocation (as at 29/10/04)	Top 10 Holdings (38% of fund)
Gold and resource shares: 97%	1. Randgold 6.2%
	2. Placer Dome 4.7%
Palladium: 3.7%	3. Northern Orion 4.2%
	4. Resolute Mining 4.0%
Cash: -0.7%	5. Palladium Bullion 3.7%
	6. Oceana Gold 3.3%
	7. Freeport-McMoran 3.2%
	8. Apex Silver 3.0%
	9. European Gold Wts 3.0%
	10. MPI Mines 3.0%
Asset Allocation (per month)