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[Tor]

Investment Commentary In November the gold price finished up an impressive 12.8% at $1,177 from its opening level of $1,045. RAB Gold Plus rose by 11.5% and the dollar class strategy was down 2.19%. Last month we had a reflective look at performance this year. This month we look forward to a new strategy which we partly executed this month. Late in the November we had confirmation that one of the gold industry leaders had aggressively bought almost 100 tonnes of gold in the past three months as opposed to their advertised time frame of twelve months. The de-hedging announcement has provided solid support and upward price action these past couple months. Not only have they been on the bid on any dips but the resultant positive price action has attracted a mix of other players to add to their gold exposure. Shareholders have forced gold company management teams across the globe to de-hedge their books as they demand gold price exposure via their equity commitments. In our opinion, the positive view expressed by gold company management teams has reached fever pitch recently, in complete contrast to ten years ago when most management teams thought gold prices would stay low and were irrelevant as long as they could lock in positive cashflows and then mine and explore successfully. If de-hedging has been the main gold market theme of the past five years, we think the next five years will be dominated by the search for resources. The bullish outlook of large capitalisation gold company management teams will mean they will probably not stop at de-hedging in order to increase their gold exposure, but will now begin to seek out resources in the ground as a way of expanding their depleting reserves. We believe that the biggest winners in this scenario will not be the acquirers but the takeover targets (junior gold companies) who currently own large, but as yet undeveloped resources. Many of these resources are uneconomic at current gold prices due to their depth or perhaps their isolation or geopolitical location but at multiplies of today’s gold price they very quickly become economic and their viability will be vastly re-appraised by the market. The inherent optionality within these companies is vastly cheaper than buying gold call options in the open market. In November we commenced a strategy to take advantage of the mispricing between the cheap optionality of these resource-rich listed gold companies and the relatively more expensive optionality as expressed by the premium investors are currently paying for vanilla gold price call options on the exchange and over the counter. We currently have a 15% allocation to this strategy (hedged in terms of gold price and equity risk) and will consider adding at opportune times going forward. The added attraction of this strategy is that it is income positive. That is, should gold prices remain range bound, as neither the hyperinflation scenario or the deflation scenario unfold in 2010, then the premium earned by selling calls on the exchange to hedge the long position in the gold juniors will be accretive toward performance. Sentiment Model The risk of a move lower in the near term depends to what extent the recent buying has come from long term investors such as central banks and large institutional investors looking to buy and hold or from short-term CTAs and hedge fund investors. According to our sentiment model those risks of a major sell-off are still not large enough to establish a large short position. Equally there is no denying this is a long market at present so any long positions must be carefully protected via stops. As a result we have kept a low exposure in this strategy and are waiting for an appropriate entry point. Volatility Strategy We are long precious metal and currency options looking to benefit from currency dislocation in the next six months. One of our gold break-out strategies was to buy silver call options; this paid off well in November and helped counter the losses in the contrarian gold downside and USD strength options. The net result was a gain of +0.7%. Relative Value/Macro This strategy delivered a 1.4% loss mainly due to further gains in risky assets and falls in the USD. This impacted the short positions which we hold via limited downside options which allow us to continue to express a negative view on risky assets. Going forward our biggest exposure in this strategy is the gold junior equity position held relative to gold call options discussed in the strategy and outlook section above. Lease Rate Strategy The market is pricing an average three month lease rate of only 0.31% p.a. over the next five years. In order to maintain exposure at prudent levels we reduced this position slightly towards month end. The price we received was encouraging although the strategy as a whole lost 0.9% in November.