At the outset, when the product was launched in 2000, the fund was one of a range of sectoral funds. At the time "basic" was understood in the stricter sense of basic materials and so the fund had a strong bias towards mining securities. The objectives of the fund have evolved to include the wider meaning of simplicity. This means that the investment universe excludes the finance, health, technology, media and communication sectors. We invest in companies that are elementary in nature and thus easier to understand. This includes mining companies of course but also companies in the distribution, manufacturing, agriculture, services and transport sectors.

We have of course benefited from the cycle of increasing raw materials demand and prices. This is however part of a wider "rarity" concept we are actively seeking to exploit. Our investment strategy involves seeking out excess demand over supply which is something we can find on any market. We then ask ourselves which operator is in the best position to take advantage of this disequilibrium in terms of positioning, strategy and management quality. Finally, we don't wish to pay too high a premium for our ideas so price is an essential element of our procedure. This leads us to invest in companies that are often insufficiently valued or actually ignored by a market that has a tendency to operate with a "short term outlook". We like to put ourselves in the shoes of the owners and involve ourselves in the recovery of a company which can see its prospects improving over a period of several years. For instance, we noticed that to date only 4% of the Chinese population have already travelled abroad. Furthermore, the Chinese government is intending to invest 6.6 billion Dollars in building airports in order to open up the West of the country between 2006 and 2010. We think that EADS, via Airbus, is in the best position to meet the growing demand for planes that will result from this initiative. Boeing is unable to fulfil any new orders before 2013, and if the maintenance hangars are built to the Airbus model, it is virtually guaranteed that the Asians will continue to order planes from Toulouse in the future. In actual fact, a partnership between an airline and a manufacturer can last for decades. We have therefore seized the opportunity to buy shares at a price which does not reflect the company's long-term potential.
A year-on-year performance of 24% over 5 years is indeed impressive.

All the M&G teams have a very powerful valuation tool called "Holt". Brokers often lay too much emphasis on a company's profits. We generally look for the efficient use of capital, as would the owner of a company. Holt allows us to assess the balance sheet's capacity to generate cash-flows. We select shares which we predict will have higher future cash-flows than those that are implicit in the market prices and we wait for the market price to "catch up" with the real intrinsic value of the share. This may seem bizarre, but often the moment the company returns to good health and is once again coveted by the market, we choose to close our position and seek out other opportunities.