NEDGROUP HEDGE FUND REVIEW
                          SEPTEMBER 2006

   This  Review1   has   been     published       since    December       2003.    For    previous reviews,   please                                                                                                                        visit or, for further information 2 , contact Mohini Naidoo at

   A rapidly weakening rand caused a nervousness among local interest rate sensitive shares, rousing further volatility in the
   equity market. During early September the FTSE/JSE All Share Index lost nearly 8%, but promptly recovered again to
   deliver 2.3% for the month. The BESA All Bond Index gained 1.4% during September.
   The funds participating in the Nedgroup Hedge Fund Review gained, on average, 1.1% after fees during September, but the
   level of performance varied significantly across the different hedge fund categories. The best performing hedge fund
   category for the month was the trading category, delivering 2.0% on average. Within this category the Badger Quant
   Strategy Fund delivered the highest return for the month: 5.6%. The funds in the long/short equity, fixed interest and market
   neutral categories on average achieved returns of 1.3%, 0.6% and 0.0% respectively.
   End of September coincides with the publication of the quarterly Nedgroup SA Hedge Fund Index figures. The Index
   delivered 12.0% for the year-to-date, against the FTSE/JSE All Share Index’s 26.3%. The BESA All Bond Index lost 0.1%
   during the first nine months of 2006.
   Since inception (1 January 2001) the Nedgroup SA Hedge Fund Index delivered an annualised return of 22.5% p.a. at a
   volatility of 6.8%. Over the same period the FTSE/JSE All Share Index generated returns of 23.0% p.a. at a volatility of
   19.2%. The Nedgroup SA Hedge Fund Index displayed very little correlation with the FTSE/JSE All Share Index at +0.06.
   The BESA All Bond Index return and the STeFI Interbank Call Rate for this period are 13.4% p.a. and 9.1% p.a.
   respectively, at annualised volatility levels of 6.8% and 0.7%.
   At the end of the previous quarter we warned that the local hedge funds’ outperformance of equities defies the investment
   adage of higher risk delivering higher returns over the long run, as equities display much higher volatility than hedge funds.
   Well, for the first time since the publication of this Index equities have outperformed the South African hedge fund industry
   over the total period for which we hold monthly returns. However, the nominal performance of South African hedge funds
   over this period is still unusually high when you view it in light of the volatility associated with the equity and hedge fund
   indices respectively. We expect the volatility of the Nedgroup SA Hedge Fund Index to remain bond-like, but anticipate that
   the extent of the out-performance of the equity market over hedge funds will increase with time.
   What kind of returns and volatility can one expect from each of the four categories? Trading funds typically perform well
   when the market picks up momentum (either during a bull or a bear market). Within a sideways moving market or a market
   that whiplashes frequently, they can and often have negative returns over 12-month periods. The volatility of this group is
   normally as high as, if not higher than, that of the equity market. Some of these funds aim to outperform the FTSE/JSE Top
   40 Index. That is not possible while at the same time protecting capital over short periods of time, as risk and return are
   inseparable. The majority of long/short equity funds have target returns of between cash plus 3% and cash plus 8% p.a. and
   their volatility is typically between half and two-thirds of that of the equity market. Market neutral funds normally target
   returns of between cash plus 3% and cash plus 6% p.a. at low volatilities. The fixed interest funds are typically the most
   conservative hedge funds in South Africa, with very low volatility and accompanying cash plus 2-3% returns.

                                                                                                             Rolling 12-month returns





                                                                                                                                                                  Nedgroup SA Hedge Fund Index
                                                -10                                                                                                               FTSE/JSE All Share Index
                                                                                                                                                                  BESA All Bond Index
                                                                                                                                                                  STeFI Interbank Call Rate











   What should also remain unchanged is the superior capital protection of hedge funds over periods as short as one year.
   While the greatest 12-month loss experienced by investors in the FTSE/JSE All Share Index over the past six years is
   29.2%, the South African hedge funds participating in this Index, as a group, have never returned less than 14.5% over any
   12-month period during the past six years, while returning as much as 39.3% during their best performing year.

1.There is no warranty of any kind, expressed or implied, regarding the information or                                                                    2.This publication provides factual historical information about the performance of
any aspect of this service. Nedgroup Investments shall not be responsible for and                                                                         the listed funds only, as received by the respective asset management houses and
disclaims liability for any loss, damage (whether direct or consequential) or expense of                                                                  relied upon by Nedgroup Investments. It is not an invitation to invest in any of these
any nature whatsoever, which may be suffered as a result of, or attributable to, the use                                                                  fund
or reliance upon the information provided in this Review.
                                         NEDGROUP HEDGE FUND REVIEW
                                                      September 2006

                                                                                                     Maximum       Open for    Fund       1 Month                                                                                 Standard
                                                                                        Inception   total gross      new      size in     Return to                   1 Year Return to                  2 Year Return          deviation over   Sharpe               Sortino
            Asset management house                              Fund name                  date      exposure      money?      R'm       30/09/2006     YTD Return       30/09/2006         Rank        to 30/09/2006   Rank   last 24 Months    Ratio    Rank        Ratio     Rank

Fixed Interest opportunities category:

Cadiz                                          Malachite Fund                            Dec-05       1200%          Yes        156.0            0.1           3.1

Coronation                                     Granite Fixed Income Fund                 Oct-02       1000%          Yes        259.0            0.8           8.6                  12.0                         12.4                     3.1       1.7                   4.2

PSG Absolute Investments                       South Easter Fixed Interest Fund          Nov-05       1200%          Yes         63.4            1.1           1.3

Average - Fixed interest opportunities                                                                                                           0.6           4.3                  12.0                         12.4                     3.1       1.7                   4.2

Long/short equity category:

36ONE Asset Management                         36ONE Hedge Fund                          Apr-06       200%           Yes        240.0            2.4
Armin Diem for Alpha Macro Fund Managers
Pty Ltd                                        Absolute Alpha Fund                       Nov-03       150%           Yes         40.4            2.2          23.9                  30.3            4            47.5      1             16.8       2.0          5        8.0      5

BlueBay Fund Managers                          Mayflower Fund                            Oct-03       350%           Yes        806.5            0.8          11.9                  20.9            7            28.5      5             10.4       1.9          6        4.1      6

Cadiz                                          Emerald Fund                              Jul-06       300%           Yes         26.0            -0.1

Cadiz                                          Sapphire Fund                             Nov-02       400%           No         463.0            0.5           7.3                   9.6           11            12.5      8              6.5       0.8          8        1.6      8

Clear Horizon Capital                          Multi-Strategy Fund                       Oct-05       500%           No         470.0            0.5          14.4                  18.2            8

Coronation                                     Presidio Fund                             Oct-05       300%           Yes         25.2            1.0           7.2                  13.9            9

Oryx                                           Oryx LLP Fund                             Nov-04       300%           Yes        495.0            2.8          25.5                  34.8           3

Oryx                                           Oryx Segregated Fund                      May-03       200%           No         379.0            2.9          25.7                  36.2            2            45.0      2             12.6       2.5          3       13.1      3

Peregrine Capital                              High Growth Fund                          Feb-00       500%           No         111.9            1.4          22.3                  38.3            1            39.6      3              8.7       3.1          2       14.8      2

Peregrine Capital                              Performance Fund                          Jul-98       500%           No         150.9            0.2          12.6                  22.3            6            26.9      6              7.1       2.5          4        8.2      4

Praesidium                                     Praesidium SA Hedge Fund                  Dec 03       200%           Yes        289.3            1.7          19.1                  27.1            5            28.7      4              5.5       3.5          1       18.0      1

Taquanta                                       Taquanta Hedge Fund Composite             Dec 02       300%           Yes           1.5           0.0          11.0                   9.7           10            16.1      7              9.5       0.9          7        3.2      7

Average - Long/short equity                                                                                                                      1.3          16.5                  23.8                         30.6                     9.6       2.2                   8.9

Market neutral category:

Allan Gray                                     Optimal Fund                              Oct-02       200%           Yes        860.9            0.7           5.3                   7.9            9             7.6      7              1.5       0.5          6        1.0          6

Coronation                                     Domestic Multi-Strategy Arbitrage Fund    Jul-03       300%           No         308.3            0.7          10.3                  14.2            7            14.9      4              3.2       2.4          3        7.9          3

Fairtree Capital                               Fairtree Market Neutral Fund              Oct-03       350%           No         387.6            -1.0         10.3                  17.5            4            25.0      1              5.3       3.0          1        9.3          2

GP Joubert & Company                           GPJ Segregated Hedge Fund                 Jun-03       150%           Yes           6.8           2.0          19.6                  21.5            2            17.0      3              8.8       1.1          4        2.5          4

Gryphon                                        Alpha Fund                                Jan-05       300%           Yes         34.4            -0.8          7.9                  15.5           6

Gryphon                                        Market Neutral Equity Fund                Jan-03       200%           Yes         65.0            -1.0          6.8                  10.2            8             9.5      6              2.6       1.0          5        1.9          5

Huysamer Capital Investments                   HCi Conservative Hedge Fund               Jun-04       160%           Yes         19.6            0.2           2.7                   2.9           10             5.5      8              2.5      -0.5          8       -0.7          8

Peregrine Capital                              Pure Hedge Fund                           Jul-98       400%           No         104.3            0.1           9.6                  16.0            5            17.8      2              3.5       2.8          2       14.2          1

Stanlib                                        Quasar Fund                               Oct-02       300%           Yes        105.9            2.7          14.6                  18.2           3

T-Cap                                          Pardus Hedge Fund                         Jul-05       300%           No         248.0            -0.8          7.6                  21.8            1

Worldwide Capital                              Ploutos Capital Fund                      May-04       1000%          Yes        221.0            -2.3          -6.8                  -9.3          11            12.1      5             17.0       0.4          7        0.7          7

Average - Market neutral                                                                                                                         0.0           8.0                  12.4                         13.7                     5.5       1.3                   4.6

Trading category:

DWT Securities                                 Badger Quant Strategy Fund                Jan-04       500%           Yes         15.8            5.6          35.0                  65.5            1            44.4      1             26.4       1.3          2        2.8      3

Future Tactics                                 Garden Hedge Fund                         Jan-04       200%           Yes           1.4           3.8          11.1                  24.8            3            20.1      5              9.5       1.3          1        3.5      1

Gryphon                                        Doulos Fund                               Jan-06       400%           Yes           3.1           -0.5         11.7

Interneuron                                    Freestyle Fund                            Mar-02       100%           Yes        170.4            -0.2          5.7                  12.0            5            21.3      4             12.8       1.1          3        2.9      2

Rock Capital Management                        Honey Fund                                Jul-06       150%           Yes           6.4           2.0

Signal Futures                                 Signal Automated Fund                     Aug-04       200%           Yes           5.0           5.3          23.0                  38.7            2

T-Cap                                          Isivuno Hedge Fund                        Feb-05       300%           Yes         44.6            0.3           0.5                   3.9            7

Top-Flite                                      Top-Flite Eagle Fund                      Jan-06       500%           Yes         54.0            4.1          27.9

Trendline                                      Trendline Diversified Fund                Jun-00       350%           Yes         72.7            -0.2          9.5                   9.3            6            22.0      3             22.4       0.7          5        1.5      5

Trident Capital                                Trident Absolute Opportunities Fund       May-06       250%           Yes        100.9            0.5

Vega                                           Centauri Fund Composite                   Oct-04       300%           Yes         10.1            1.1          19.7                  17.4            4            23.6      2             21.5       0.8          4        1.6      4

Average - Trading                                                                                                                                2.0          16.0                  24.5                         26.3                    18.5       1.0                   2.5

Notes:                                                                                                              Total:    6823.1

                                                                                                                  Average:                       1.1          12.5                  19.4                         22.6                     9.9       1.6                   5.6

The performance figures quoted in this Review are subject to changes as and when the
managers submit annual audit certificates.                                                                                          (All returns are published net of fees. Both risk adjusted measures are calculated using the past 24 months' data)

Market Indicators:

FTSE/JSE All Share Index                                                                                                                         2.3          26.3                 36.1                         41.8                    15.3

All Bond Index                                                                                                                                   1.4          -0.1                  5.0                          9.2                     5.9

STeFI Interbank Call Rate                                                                                                                        0.6           5.1                  6.8                          6.8                     0.1
                 MEET THE MANAGERS
                 Kyle Hulett, Nick Middelman and Arno van Wyngaarden
                                                   Cadiz Emerald Fund

Asset management house: Cadiz Specialised Asset Management (CSAM) focuses on the management of
absolute return funds. CSAM currently has one of the largest absolute return teams in South Africa, managing a
range of offerings that include protected investments, hedge funds and inflation plus funds. CSAM also manages
long-only equity funds, bond funds and money market funds. The Emerald Fund came into existence in July 2006
and the fund’s objective is to seek absolute returns that are not correlated to the market.

Fund managers:

           Kyle Hulett                            Nick Middelman                     Arno van Wyngaarden

All three managers hold B.Bus.Sci degrees from UCT and are CFA charter holders, with Kyle also holding an FFA
(Fellow of the Faculty of Actuaries) designation. Nick and Arno both have 10 years experience in managing
long/short equity hedge funds in South Africa. They joined Cadiz in 2002 and have co-managed the Cadiz Sapphire
Fund for 4 years. Kyle was previously at SyMMetry where he started and managed their Fund of Hedge Funds. He
then moved on to manage a hedge fund at Prescient for a year before joining Cadiz in 2006 to co-manage the
Emerald Fund.

Which fund strategies do you employ? The wider the mandate of a fund, the more freedom the fund’s managers
have to add value. The Emerald Fund has a wide long-short equity mandate allowing the fund to profit from any
value opportunity within the market. This includes, amongst others, NAV arbitrage, statistical arbitrage, event
strategies and pairs trades. The fund can take directional exposure through outright long and short positions to
exploit market-timing opportunities. The overall directional exposure is actively managed according to the team’s
market view. This market view is based on global valuations and economic factors impacting the South African

What investments do you typically use in your portfolio? The fund takes long and short positions in JSE
shares and futures. The portfolio is constructed from individual equity stocks researched fundamentally on a bottom
up basis. This involves detailed financial analysis of the company and the sector in which it operates, as well as an
understanding of the economic environment in which the company operates. This is combined with management
meetings that are designed to establish the drive and competency of the company leaders. Stocks are then
compared against others in their sector/operating environment using proprietary models. Once the investment
decision is made technical trading disciplines are used to time the entries and exits of the various positions. The
fund is completely independent from the Cadiz house view; however, the team has access to Cadiz in-house
research as well as numerous sell side brokers to supplement the independent research.

What differentiates the Cadiz Sapphire and Cadiz Emerald Fund? The Sapphire Fund is one of the longest
standing funds in the industry and has successfully traded through bear markets. The Emerald Fund leverages off
the expertise of the Sapphire Fund with a slightly more aggressive mandate and smaller fund size. The fund has a
very strong fundamental bias with the fund managers continually visiting a substantial number of companies. This
provides great insight into what is happening in the companies and aids in the formation of the macro view.

What type of returns can an investor in this fund expect and at what volatility? The Emerald Fund targets
cash + 12% after fees with a volatility of roughly 10% while the Sapphire Fund competes in the market neutral
space. Both funds are expected to perform well in a market driven by fundamentals but with sufficient volatility to
give attractive entry and exit points.

Absolute returns Returns unrelated to, and independent              Standard           The average fluctuation of a
                 of, any index measure of performance.              deviation          series of returns around its
Asset allocation   Taking a view on whether domestic                Short position     The seller sells shares he does
                   equity, bonds or cash, or perhaps                                   not own on the calculated basis
                   offshore asset classes will be more likely                          that before he must deliver the
                   to experience growth during the                                     stock, he will get the chance to
                   proposed investment term and allocating                             purchase the shares at a lower
                   the fund's capital accordingly.                                     price.

Fixed interest     These strategies attempt to capture mis-         Systematic trend These      strategies   take    a
opportunities      pricing within, and across, global fixed         following        directional view in markets based
                   income      markets    and     associated                         on computer models. The
                   derivatives. Leverage is used to enhance                          strategies reflect an emphasis on
                   returns.                                                          market trends and behavioral

Global macro       These strategies employ a top-down               Sharpe ratio       This ratio measures the return of
geared equity      macro-economic             approach         to                      a fund, adjusted per unit of
                   opportunistic         investing      globally.                      volatility. It is calculated by
                   Managers will attempt to exploit changes                            deducting the risk free return on
                   in interest rates, exchange rates and                               cash from the fund return. The
                   liquidity for different instruments.                                result is then divided by the
                                                                                       fund's standard deviation.

Long/short equity This is a broad category of strategies            Sortino ratio      This ratio measures the return of
fund              characterised by long positions in                                   a fund, adjusted per unit of
                  securities expected to appreciate in                                 downside risk. It is calculated by
                  value, together with short positions in                              deducting the risk free return
                  securities expected to depreciate in                                 from the fund return. The result
                  value.                                                               is then divided by the fund's
                                                                                       downside deviation from the risk
                                                                                       free rate of return.

Market neutral     This      usually     involves        being      Value investment Value funds invest in shares with
equity             simultaneously long and short in                                  low relative price:earnings ratios,
                   matched equity portfolios of the same                             shares trading at a discount to
                   size within a country. These portfolios                           their net asset values or shares
                   are designed to have no directional bias                          with dividend yields significantly
                   towards a potential bull run, or a potential                      higher than the market average.
                   bear market.

Maximum total      The sum of the absolute value of the
gross exposure     long and short position exposure to the

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