Your portfolio has earned a return of 13,8% over the past 3 calendar months. This is already significantly more than our target return of inflation plus 6% for a whole year!

This state of affairs allows us to take less risk over the next 9 months.

The JSE has de-rated over the past 11 years, from a Forward Price-Earnings ratio of 12 - 14 times in 1993 to 8 - 10 times recently.

We believe the watershed change we referred to at the beginning of August confirms that this derating has now run its course - and share prices will in future rise more in line with company earnings.

In certain market conditions, "stock pricing"(selecting the right shares) is the most important contributor to outperformance. At other times, "asset allocation" (deciding how much to invest in shares) prevails.

We believe we have now entered an asset allocation environment. We are thus focusing our energy on ensuring your portfolio is relatively fully invested in a bouquet of shares from all JSE sectors.

The last week of July saw a simultaneous change in the short term trends of the Dollar/Euro, Rand/Dollar, Top40 Index and a number of other indicators.

We believe these changes may herald new market conditions which will make it easier for us to achieve positive returns than has been the case in the past six months. Our focus will thus shift from preserving your capital to pursuing of at least inflation + 6% p.a.

From a foreign investor's point of view, the JSE Securities Exchange has doubled relative to the S & P 500 index since its low on December 31, 1998. However, our market can still rise by 84% to just get back to its average level since 1960 relative to the US Market. We can thus expect foreign investors to continue to increase their exposure to the "cheap" JSE. When the Rand stops strengthening, this will become good news for Rand-based investors on the JSE.

Investors sometimes get pre-occupied with "whether Greenspan will raise rates in June or in August". In reality, if rates are definitely to rise, it is of little consequence when the process actually starts. We pledge to do our best to concentrate on the big picture on your behalf.

During the past month, the risk of a setback in the level of the JSE Securities Exchange has increased. We have therefore positioned your portfolio more cautiously, in order to avoid or reduce losses. We nevertheless find many shares that are still interactive - for example, banking shares.

We do not measure our success by being "number 1 in the survey", but rather by the extent to which we can remain above our long-term target return of inflation plus 6% p.a., whilst at the same time avoiding large periodic losses.

These are also the factors you should take into account when deciding whether this portfolio is suitable for you.

The name of the Flexible Managed Portfolio will change to Interneuron Freestyle Portfolio on 1 February 2004.

The name of the Flexible Managed Portfolio have change to Interneuron Freestyle Portfolio on 1 February 2004.