After a strong run, the market took a breather in September and the fund showed a marginally positive performance for the month. The stronger than expected rand is having a negative impact on forecasts of companies that have an export component, or where raw material prices are declining. Manufacturers across the board are feeling the slower volumes and lack of pricing power. The SA consumer remains in good shape, and should be aided by further interest rate cuts. The portfolio remains positioned to take advantage of this, and the low position in resources has been maintained.

During the month, new positions were established in Altron (which is trading at a big discount to quality underlying business's), Delta (which we believe is undervalued despite being negatively affected by the rand) and Illiad (which is well positioned to take advantage of the current boom in retail building supply spending).

Investec launched a new B class (retail) on this fund on 1 October 2003.

The fund continued to perform well over the month, as small and mid-cap shares extended their out performance of the large-caps. Despite the ongoing performance of this area, the relative valuations are still extremely attractive and earnings expectations, while having been trimmed somewhat, are still for real growth.

We have an overweight in consumer shares, which is supported by our top down bullish view on the local consumer and attractive valuations. Real wage increases, falling petrol prices, tax cuts, rising house prices and a strong rand will all serve to make the consumer more confident about the future. Already this is showing in consumer confidence surveys. The overweight in healthcare continued to pay off handsomely this month. This was driven by strong earnings growth and some re-rating as more certainty emerged on the regulatory front.

During the month we lightened Wilson Bailey, AECI and Metorex; increased holdings in Illovo and Netcare and established a new position in Glenrand MIB, which has an extremely attractive yield. Holmes-Ovcon Massmart Holdings Aspen Pharmacare Massmart Holdings Aspen Pharmacare Massmart Holdings Seardel

Returns across the board were negative for March, but in relative terms the mid/small cap indices continued to outperform the overall market. Results reported continued to be buoyant, but forecasts are being reduced due to the anticipated impact of the strong rand. In the area of retail in particular, we feel that expectations are overly pessimistic and have used the opportunity to add exposure to the sector as mentioned below.

During the month the fund sold out of Armgold, Busby and Brimstone. The Armgold sale was to reduce commodity exposure in the face of a stronger rand, while Busby and Brimstone were selling out of positions in micro caps that had outperformed. Purchases were made in Truworths, Massmart and Reunert - all companies with good management that have delivered superior returns over time.

The fund had a very strong performance of 2.8% for the month.

Holdings that contributed to this performance were Armgold, Busby, Group 5, Wilson Bailey and Capital Alliance, with the biggest boost coming from Southern Mining which appreciated by 58% in the month.

Southern Mining's principal asset is the right to develop the Corridor Sands Project in Mozambique. An announcement was made early in December that these rights had been sold to WMC Limited of Australia. This transaction has put a clear value on the company, and has vindicated our view that the SMC management could realize the underlying value in the project for shareholders. The company will receive a combination of cash and WMC Ltd shares which will be sold, and the cash will be returned to shareholders in the form of special dividends over the next 15 months.

During the month, further reductions were made in AST and MCubed, and new holdings were established in AVI and Supergroup. Both these counters add exposure to the local economy at very attractive valuations.