Opportunity knocks

In May we highlighted the NFJ International Value Fund (AFJAX) as being a suitable investment for US investors seeking an internationally diversified mutual fund. With a value philosophy and global financial markets perspective similar to Fat Prophets, we believe investor's could potentially benefit from the mutual fund's long term investment approach.

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"We believe the worst of the correction is now behind commodities and stability is returning to the markets. "

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The NFJ International Value fund is part of the NFJ Investment Group, a $25 billion money manager based in Dallas. Portfolio managers Ben Fischer and Cliff Hoover see the global investment landscape through a similar lens to us. They are bullish on commodities and gold and bearish on the dollar.

And if our view on a sharply lower dollar materializes in the not too distant future, AFJAX is well positioned, with the bulk of investments located offshore. We have repeatedly warned that sharp falls in the dollar are probable later this year and in 2007.

Despite hawkish statements a few weeks ago, the Fed now appears to be losing its nerve to continue tightening interest rates. Record levels of debt at the consumer level have rendered the US economy vulnerable to any further rate hikes. Another rise in interest rates would, in our opinion, have an impact on consumption (in fact we could argue that higher rates are slowing the economy already).

The US dollar has weakened in recent weeks and we believe this is due to the market looking ahead to the end of the Fed's tightening. Since January 2005, the dollar has in our view, advanced within the confines of a bear market rally. Fuelling this rally has been seventeen successive rate hikes. We now believe the dollar has resumed a downward trend and that lower levels are on the horizon over the next 6 months.

Through investing in stocks denominated in foreign currencies, US investors are effectively diversifying out of US dollars. Should the dollar fall by 25 percent or more over the next two years, investors would benefit from a currency perspective.

NFJ provides comfort by adhering to a value investment philosophy. At the end of April, the international value portfolio was selling at an attractive 12.5 times trailing earnings with a 3 percent dividend yield.

The portfolio's ten largest country allocations are as follow:-

Country	%
United Kingdom	12%
Brazil	12%
South Korea	11%
Canada	11%
China	9%
United States	9%
Netherlands	8%
Mexico	6%
Taiwan	4%
Bermuda	2%
Bahamas	1%

The fund can invest up to 50 percent in emerging markets, allowing it to take advantage of the ongoing global mining boom. The fund's current emerging markets weighting is around 45 percent.

In our opinion, the world is experiencing a long term shift of wealth away from developed nations to developing nations. While these emerging markets will undoubtedly experience sharp corrections during their ascent, we believe long term exposure is essential.

The markets are currently experiencing a correction and emerging markets such as Russia, Turkey and Hungary have all retreated.

Many commodities and commodity related stocks have also corrected sharply after a strong rally earlier this year. We believe the worst of the correction is now behind commodities and stability is returning to the markets.

Since the funds inception in January 2003 the fund has returned around 33 percent, and 27.5 percent over the last 12 months.

We believe NFJ will continue to benefit from both the industrialization of China and India and the depreciation of the dollar. Over the next decade, commodity prices are likely to receive support from both emerging market demand and dollar weakness. Commodities are priced and traded in US dollars - therefore, a weaker dollar translates automatically into commodity price strength (given constant demand and supply).

Given our macro outlook, we are encouraged the fund's top weightings, as at 30 April, were in materials and energy.

Top Five Industries

Materials	23%
Energy	15%
Financials	13%
Utilities	9%
Consumer Staples	8%

While emerging market, materials and energy exposure increases the risk profile and volatility of the fund, risk is mitigated by investment in companies with a minimum market capitalization of $1 billion and below market average price to earnings ratios. The Top Ten holdings are in the table below.

Top Ten Holdings at 31 March 2006

ING Groep N.V. (ING)	3.75%
ABN AMRO Bank N.V. (ABN)	3.72%
Posco (PKX)	3.72%
Korea Electric Power Corp (KEP)	3.66%
VOLVO AKTIEBOLAGET (VOLV)	2.89%
Votorantim Celulose e Papel SA (VCP)	2.89%
Aluminum Corporation of China Ltd. (ACH)	2.88%
Companhia de San B_sico (SBS)	2.86%
Petroleo Brasileiro Sa Petro (PBR)	2.86%
United Utilities PLC (UU)	2.86%

In terms of the fee structure, Allianz Global Investors promotes the NFJ International Value Fund and investors can purchase either A Class or C Class shares. The difference between the two relates to fees, with A Class shares having a maximum load of 5.5 percent and annual operating expense fees of 1.45 percent, while the C Class shares have no load but a higher annual fee of 2.2 percent.

Longer term, the A class shares are the better option given the lower ongoing fees. We recommend obtaining a rebate on the load from your financial advisor. If this is not possible the C Class would be the better option

We stress this investment be considered long term as there are penalties for early withdrawal. On both A and C Class shares the penalty is 2 percent if funds are withdrawn within the first 30 days. C Class shares are also subject to a 1 percent CDSC (contingent deferred sales charge) for funds withdrawn within the first 18 months.

From a charting perspective, NFJ has weathered the correction of May and June relatively well. During the past three weeks there has been a firm revival of positive investor sentiment toward the fund.

From a June low of $17.46 the stock has rebounded strongly, challenging initial resistance between $19.55 and $19.60. We believe that consolidation below this barrier will be short lived with further gains expected in coming weeks.

A clear break above $19.60 would be positive and signal an attempt to resume the longer term upward trend. In time, we believe that NFJ has the ability to trade above the May high of $21.31. Accordingly, we recommend NFJ International Value Fund as a buy around $19.41.