What influenced the performance of the fund?
The fund delivered a positive return for October on the back of good returns from the market during the month. On a relative basis the fund had a below average month though. The overweight position in Liberty added value, but the funds exposure to Nedcor destroyed value.

Outlook
The interest rate cuts of 500 basis points so far and the prospect of even more interest rate cuts is negative for banking margins. The recovery in global markets and more attractive valuations underpin our preference for the life assurance sector relative to the banking sector.

The currency remains at low levels against the dollar, but in the fund manager's view it is likely to depreciate moderately going forward. With the fund having a significant exposure invested offshore and being underweight the banking sector, it is well positioned to benefit from a depreciating currency.

The recent global stock market recovery has been a catalyst to start unlocking the attractive valuations of South African financial shares and we expect this to continue over the next 12 months. The fund manager's remain positive that their stock picks will add value for the fund. The fund manager's will aim to improve the funds relative performance for the rest of 2003, by building on the excellent performance of the fund in 2001 and 2002. The fund has an excellent 3 year track record now.

Fund manager Adrian Cloete focuses on out-of-favour shares. He has done well accumulating shares such as Investec (up from R75 to R108) and Discovery (from 680c to 980c). But sometimes cheap shares get even cheaper, as Nedcor, in which he has a 9,8% holding, has shown. Alexander Forbes also detracted this quarter. After its September slide, Absa is back in the fund. Sanlam, at 11,3% of the fund, made a strong positive contribution.

(Financial Mail - 24 October 2003)

What influenced the performance of the fund?
The fund delivered a marginal negative return during the third quarter on the back of negative returns from the financial sector for the quarter. On a relative basis the fund had a slightly below average third quarter. The overweight position in Sanlam added value, but the funds exposure to Liberty and especially Nedcor destroyed value.

Outlook
The recent interest rate cuts and the prospect of even more interest rate cuts are negative for banking margins. The recovery in global markets and more attractive valuations underpin our preference for the life assurance sector relative to the banking sector.

The currency remains at low levels against the dollar, but in our view it is likely to depreciate moderately going forward. With the fund having a significant exposure invested offshore and being underweight the banking sector, it is well positioned to benefit from a depreciating currency. The recent global stock market recovery has been a catalyst to start unlocking the attractive valuations of South African financial shares and we expect this to continue over the next 12 months. We remain positive that our stock picks will add value for the fund. We will aim to improve the funds relative performance for the rest of 2003, by building on the excellent performance of the fund in 2001 and 2002. The fund has an excellent 3 year track record now.

Buys and Sells
We increased our holdings in Abil, Liberty, Nedcor, SBIC and Sanlam. In addition we increased our foreign share holdings and added Coronation Fund Managers to our portfolio. We reduced our holdings in Alexander Forbes, Investec PLC, PSG and Liberty International.

Performance and Reason
The JSE ALSI40 Index ended 8.8% up for the 2 nd quarter, but the FINI15 Index was up by 16.3% as the lacklustre performance of resources shares tempered the overall market increase. Our stock positions started to add value to the fund's relative performance in this quarter. The underweight positions in Liberty and Abil, as well as our overweight positions in Investec PLC, Discovery, PSG and life assurance stocks in general, added value to our performance. On the other hand, the underweight positions in Rembrandt, FirstRand and ABSA, as well as our overweight position in Nedcor, detracted from our relative performance. As a team we are confident that our stock picks will come through for us and we will continue to gain on our competitors for the rest of 2003. We feel that the attractive valuations will be unlocked in the medium term.

Outlook
Global stock markets remain volatile and difficult to predict. The South African equity markets are no exception and have also been adversely affected by the declining global markets and the strengthening rand. The recent global stock market recovery has been a catalyst to start unlocking the attractive valuations of South African financial shares, considering the underperformance of the last four years. We will aim to make 2003 a good year for the fund by building on the excellent performance of the fund in 2001 and 2002.

On 2 May 2003, The Sanlam Multi Services Fund merged with the Sanlam Financial Fund.

We increased our holdings in Alexander Forbes, Investec PLC, NAC, Nedcor and Old Mutual. Some of our holdings in Abil, ABSA, FirstRand, Liberty and Santam were sold. Our foreign holdings were increased by utilising some of our foreign cash.

Performance & Reason
None of our stock positions really added value to the fund's relative performance in the short term. The underweight position in ABSA as well as our overweight position in Investec and Sanlam detracted from our relative performance. The financial index has started to outperform recently and as a team we are confident that our stock picks will come through for us. We feel that the attractive valuations will be unlocked in the medium term.

Outlook
Global stock markets remain volatile and difficult to predict because of uncertainty created by the situation in Iraq. The South African equity markets are no exception and have also been adversely affected by the declining global markets and the strengthening Rand. The expectation of declining interest rates bodes well for financial shares, as does the prospect of a stable Rand. South African financial shares currently have very attractive valuations considering the under performance of the last four years. Investors with a medium term investment horizon could use the current attractive valuation levels to start increasing their exposure. We will aim to make 2003 a good year for the fund, by building on the excellent performance of the fund in 2001 and 2002.

The fund increased its exposure to Discovery, FirstRand, Investec, Liberty, PSG, Remgro, SBIC and Santam. These shares were offering value at the time. We sold some of our holdings in Alexander Forbes, NAC, Nedcor, Old Mutual and PGH.

The JSE ALSI index decreased by 2% for the 4th quarter in contrast to the financial index increase of 2.5%. We are very pleased to have repeated our performance of 2001 when we also ended the year in 1 st position. Our overweight positions in NAC and Aflife added value to the fund's relative performance. The fund's bias towards small and mid cap shares also helped the fund's relative performance. The underweight positions in FirstRand, ABSA and Capital Alliance as well as our foreign holdings detracted from our performance.

Global stock markets remain uncertain and difficult to predict. The South African equity markets are no exception and have also been adversely affected by rising interest rates and the strengthening Rand. The expectation of declining interest rates bodes well for financial shares, as does the prospect of a stable Rand. South African financial shares currently have very attractive valuations considering the under performance of the last four years. Investors with a medium term investment horizon could use the current attractive valuation levels to start increasing their exposure. The financial index has started to outperform recently and as a team we are confident that our stock picks will continue to come through for us. We will aim to make 2003 a good year for the fund, by building on the excellent performance of the fund in 2001 and 2002.

Buys & Sells:
The fund increased its exposure to Abil, ABSA, Liberty and Santam. We sold some of our holdings in FirstRand and Nedcor.

Performance & Reason
The ALSI40 index ended up by 2.0% for the month, but the FINI15 index was strongly up by 8.0%. Overall the fund had a good month. Our underweight positions in ABSA, FirstRand, Liberty and Venfin detracted value to the fund's relative performance. The overweight positions in Investec, Abil and some small cap counters didn't add value either.

Outlook
Global stock markets have become volatile and increasingly difficult to predict because of large sentiment swings. However, sentiment seems to be a bit more positive at present. It seems as if the South African interest rate cycle has peaked as well. South African financial shares currently have very attractive valuations considering the under performance of the last four years. Investors with a medium term investment horizon could use the current attractive valuation levels to start increasing their exposure. The financial index has started to outperform very recently and as a team we are confident that our stock picks will continue to come through for us. We will aim to make this year a good year for the fund as we did in 2001.