The fund delivered another sound performance in November. It added 3.8%, while the All Share (the benchmark) lost 0.2%. Star performers in November were local financials and industrials, and the fund benefited from being significantly overweight these sectors. Resource shares were down just over 5%, which is remarkably little considering that the rand strengthened from 6.90 to the US dollar to 6.39 during November. Clearly, foreign appetite for commodity shares continues unabated. We have a problem with the short-term valuation of these shares, and seeing that we expect further dollar weakness and commensurate rand strength, we are cautious on the sector. Exposure to resource shares in the fund remains very low. On the contrary, we believe local shares which will benefit from lower interest rates and robust consumer demand continue to offer value. We like banks, clothing and furniture retailers, telecoms, media, services and building suppliers.

During the month we added to Foschini and bought Venfin, Steinhoff and AVI. We sold our PPCs and cut exposure to Anglos and Billiton.

October was another scorcher on the JSE. Spurred on by a weaker rand initially, equities shrugged off a recovery by the currency to end the month almost 8% up. The fund beat its benchmark over this period, and has added nearly 35% in six months. It’s a pleasure to be reporting on a buoyant stock market after the gloomy picture of the previous year.

We’ve often indicated that we considered local equities to be undervalued relative to other asset classes. We are of the opinion that recent price action has marked the beginning of a re-rating of stocks on the JSE to levels that are commensurate with prevailing interest rate levels. Under the circumstances of continuing rand strength, resource share are less attractive than local financial and industrial shares on a risk-weighted return basis. We expect to wait for a pull-back in commodity shares before adding to our exposure. Accordingly, the fund remains underweight resources. On the other hand, we believe that the market is under-appreciating some companies with above market growth prospects over the next few years. Examples of such companies include Absa, Standard Bank, Barloworld, Bidvest, Remgro, Truworths and Avis.

During October we bought Truworths, Barloworld, Sappi, Avis and Reunert. Altech was sold and Cashbuild lightened.

The stock market, and the fund, took a breather in September, the first down month since April. This was to be expected after a fantastic run from the end of April to the end of August, during which time the fund added 28%. The pause in market momentum coincided with another stronger leg by the rand, with the currency nudging under R7 to the US dollar during September for the first time in three years.

For some time we have been drawing attention to the factors that we expect to continue to support the rand. These include stronger commodity prices, weaker developed country currencies and an attractive interest rate carry. Accordingly we have remained significantly underweight resources and overweight local financials and industrials for some time. While we are bullish on the outlook for commodity prices and believe a global recovery is in its early stages, we are wary of the valuations of resource shares. In the short to medium term, the strong rand will continue to have a severely negative effect on earnings, which will far outweigh the benefits of stronger commodities. On this basis, resource shares look expensive. On the other hand, a year-to-date decline in interest rates of 3.5%, with up to 2% still to come this year, has not been factored into the equity market. At current price-to-earnings ratios and dividend yields the locally-focussed stocks look cheap. We continue to favour banks, retailers, construction, media and services stocks.

August was another good month for the fund. It achieved 4.2% growth which compared favourably with the All Share Index which put on 4.8%. Since its lows of the year in late April 2003, the fund is up almost 28% to 31 August 2003. This is particularly pleasing considering that the fund outperformed its benchmark, the All Share Index, by some 20% over the 12 months to 30 April, a period over which the benchmark was down by 32%.

In August the rand traded in a tight range, managing to hold on to its recent gains against the US dollar. Nevertheless, resource shares surged in the month adding over 10% as institutional and foreign appetite increased. This is on account of an improving global economic outlook and a propensity for cyclical commodity shares to outperform at the early stages of an upswing. During the month, the fund’s exposure to mining stocks was raised which benefited performance. However, I am of the opinion that, at current prices, resource shares are discounting significant improvements in the commodity cycle as well as a weaker rand. Should neither transpire shares look pricey. Accordingly we don’t anticipate increasing our exposure in the short-term and profit taking is likely. During the month, positions in the retail sector were cut after a superb run.

For the third month running it gives great pleasure to report on a good month for the fund with it gaining over 7%. Over the quarter it is up over 21% and is up a similar amount for 12 months. This means that the fund managed to avoid the losses sustained by our equity markets last year and early this year and has also participated in the recent rally. We believe this indicates effective management in both bear and bull markets.

In July we saw strength across all sectors of the equity market. This was despite the rand nudging stronger and US markets drifting sideways. We believe this optimism in our market stems from attractive valuations and interest rates trending lower. Also commodity prices have on general being heading higher and shares like Anglos and Billiton have been surging overseas on the prospect of improving global economies and higher commodity prices. We suspect that our market bottomed in late April but expect weakness over the short-term with a stronger rand and weaker US markets putting a lid on our shares. We remain bullish on our equity market over the remainder of the year but at current rand levels prefer local stocks over rand hedges. Our favourite sectors are consumer and GDFI-orientated. The fund is significantly underweight resources and is overweight banks, retailers and building and construction.

The fund gained 2% during June. The benchmark, the All Share Index lost over 2%, as a stronger rand outweighed the influence of the continued rally on overseas markets. Outperformance by the fund was due to effective profit taking in rand hedge shares resulting in a very low resource exposure as at month end. The fund managers are of the belief that resource shares are pricing in rand depreciation and that local industrial and financials offer better value at present. Exposure is heavily tilted towards sectors expected to benefit from a stronger rand and lower interest rates: retailers, banks and construction. Resource exposure is limited to gold shares as we anticipate that the macro-economic environment will provide further support to the gold price.

At last, a buoyant stock market! The JSE rallied 14% in May, driven by a correction in the rand and strong global markets. The fund added almost 11% and the switch into oversold large caps in late April and early May paid off.

The way forward will be determined by three factors: the rand, interest rate cuts and US markets. After bouncing back sharply from levels around 7 to the US dollar, the currency has been range-bound between 7.80 and 8.10. The rand's short-term future will be influenced by the size of the interest rate cut at the June MPC meeting. The size and path of the rate cuts will likely have a large effect on the stock market as investors discount the effect of lower rates on the consumer. The upward path of US markets since March has been relentless as market participants, buoyed by liquidity, look forward to better times in the US economy. The jury is out as to whether these times will materialise.

We expect the rand to remain relatively stable before resuming a weaker trend later in the year. We believe that resource shares prices are still pricing in a weaker currency and the fund is underweight. We expect banks, retailers and construction stocks to benefit from a series of rate cuts of up to 4%. We will wait for US economic data to convince us that the rally on US markets is sustainable.

The fund was about 1% up for the month of April. Its benchmark, the All Share Index, lost close on 2% during the month. The fund beat its benchmark primarily due to a strong performance by banks, which it is overweight, and relative outperformance by local industrials. The month saw the rand continue its strong surge, touching on 7 to the US dollar at month end. As might be expected rand hedge shares suffered during the month. The fund has beaten its benchmark by as much as 20% over a one year period.

The fund’s medium-term positioning has remained largely unchanged, being heavily underweight resources and overweight South African industrials and banks. The fund managers were of the opinion that the rand was due for a correction and that the oversold Top 40 shares were due for a bounce in the short-term. This scenario materialised in early May.

The major additions for the month were Anglos, Sasol, Iscor, Barloworld, Imperial and Bidvest. Naspers and Aplitec were sold.

After a solid start to 2003, the fund took a knock in March. Of the 9% lost during the quarter, almost 8% was lost in March. Over the quarter, the benchmark was down close on 18%, capping a miserable quarter for equities. The fund gave away some of its recent outperformance due mainly to a sell-off in one of its holdings, Impala Platinum. It suffered further as a result of the poor performance by its mid cap components. Some of these losses were recouped in early April.

We take pleasure in drawing investors' attention to the fact that the fund was the top performing fund in its category for the year ending March 31, 2003. Over the year, it beat its benchmark by as much as 26.5%.

The fund manager expects relative earnings growth to be the main driver of equity returns over the medium to longer term. Accordingly, current stock selection is focussed on industrial and financial sectors which are relatively immune to the woes of global economies and a strengthening rand. We believe South African equities offer tremendous value and prefer stocks with attractive dividend yields. We are underweight resources, overweight local industrials and overweight banks. Preferred resource sectors are gold and platinum.

December was another disappointing month for equities and the fund lost 4%, underperforming its benchmark, the JSE/FTSE All Share Index, by 1%. The fund suffered from its overweight position in banks which gave up some of their strong gains from November. Despite continued rand strength, which saw the currency ending the year at 8.59 to the US dollar, reflecting a 28% improvement for the year, resource shares outperformed financials and industrials during December, largely due to a strong showing by gold shares.

We are pleased with the fund' s performance for 2002. In an environment of extreme uncertainty and volatility, with markets worldwide coming under pressure, the fund managed to end the year flat and in the process outperformed its benchmark by almost 11% over the 12 months. At the same time, it returned over 7% more than the Domestic Equity Growth Unit Trust Index (source I-Net), resulting in it being one of the top two performers in its category (source I-Net) over the year.

The fund remains overweight banks. During December, profit was taken on the gold shares and Sasol and Sappi were bought. Retailers were lightened, though Edgars was added at the expense of Metcash. Remaining exposure to life assurers was eliminated. With the valuations of rand hedge stocks improving, we have begun adding them to the portfolio.