Buys & Sells:
The old Domestic Asset Allocation Prudential sector has been subdivided into three sectors with effect from 1 Oct 2003. There will now be a low, medium and high equity sector for this category. This fund is competing in the medium equity sector and is allowed a maximum of 65% in equity type funds. Due to the reclassification, the fund manager's reduced equity exposure and increased exposure to fixed interest asset classes during the course of the month.

Performance & Reason:
Equity markets were particularly strong during the past month. The JSE All Share index increased by nearly 10% while SA bonds also returned a respectable 1.8%. The fund benefited from being invested in equities. However, due to the new classifications explained above, the fund manager's were forced to reduce equity exposure during the month and the fund did not benefit to the full extent.

Outlook:
The South African Reserve Bank gave bond owners another piece of good news during October when it announced that the Repo rate was being reduced by a further 1.5%. This brings the total interest rate cuts for 2003 to 5%.

With a lot of liquidity being generated in the SA economy through lower interest rates as well as the fact that equity market valuations are not currently extremely stretched, market commentators expect equities to be the best performing asset class in the next twelve months. Having said that, the SA equity market has already increased by nearly 30% since the end of the first quarter of 2003 and it is very likely that the market could take a breather in the near future.

Buys & Sells:
No major transactions were implemented during the month.

Performance & Reason:
Another solid performance during the month left the fund in the second quartile for the quarter, year to date and one year periods. Exposure to bonds as well as the position we had in the local industrial companies paid of handsomely. Thanks to the strong performance from equities during the past quarter, investors received a positive return from this product.

Outlook:
September saw a surprise Monetary Policy Committee meeting where the Reserve Bank cut the prime lending rate by another 1%. Despite conventional wisdom, the currency continued to strengthen, placing pressure on resources shares. Local industrial shares performed well but bonds were the star performer.

At present, the global economy seems to be delicately poised. There seems to be signs of a recovery, but no conclusive evidence is available yet. It seems as if investment markets around the world will continue to stay volatile until definite clarity regarding a global economic recovery emerges.

Buys & Sells
No major transactions were made during the course of the month. We did however include more absolute return type products in the portfolio through Coronation Aggressive Absolute.

Performance & Reason
The fund continues to hold a large proportion of Allan Gray Equity and RMB Equity. Both these funds have done exceptionally well in the past and continue to add value to the overall portfolio. The fund also has a good exposure to financial shares. This sector was the best equity sector over the past month.

Outlook
During June, SA equities declined by more than 2%. Bonds and financial shares, however, bucked the trend and returned 2.4% and 1.7% respectively during the month. This fund continues to maintain an overweight position in financial shares. It is believed that the impact of the stronger currency has not completely filtered through to the (rand hedge) resources shares and profit declines might occur.

During the month we increased our holdings in RMB Equity Fund as well as in Allan Gray Equity Fund. Funds sold were the Investec Value Fund and Sanlam General Trust. We now have a more focussed portfolio with 8 funds instead of 10.

Weak equity markets during March resulted in the fund declining in value. In addition, our overweight position in larger cap companies resulted in a marginal under performance against our peers. This month however, the flat foreign markets actually benefited our fund and our holdings in Sanlam Global acted as a hedge against the weak SA markets.

Equity markets are very cheap on historic valuation measures. However, they have been cheap for a while now and may stay cheaper for longer. Even though the war in Iraq seems to be nearing the end, global geo political risks still exist. This may impact adversely on markets for the foreseeable future. Investors with a longer term perspective could however use the current environment asinvestment opportunities as it may result in good long term returns.

The only transaction of significance was to switch some Coronation Top 20 into Investec Value. The Coronation Fund benefited from a high gold content, and we used the high gold price to take profits. Value is still very much in play.

A strong rand and very weak international stock markets detracted from the equity and foreign components of the portfolio. Rand strength and expected lower interest rates boosted the bond content of this balanced fund. Good fund selection included Allan Gray Equity Fund and Investec Value.

It is difficult to say when global stock markets will recover. Some technical graphs suggest that the recovery has in fact already resumed.

What we do know is that markets are now much cheaper than a year ago, and offer sound long-term value.

The very high volatilities shown by many markets argues in favour of a well-balanced portfolio such as this one.

Buys & Sells:
We exchanged Old Mutual Financial Services for Sanlam Financial because the latter fund is seen as the superior long-term performer. Investec Opportunity Fund, a conservative absolute return fund, was sold, and the proceeds invested in a spread of more aggressive unit trusts. This was done to position the portfolio for expected stronger stock markets. We sold the poorly performing Liberty Wealthbuilder in favour of RMB Equity, which is doing much better.

Performance & Reason:
The fund had a slightly better than average performance thanks to good returns from Allan Gray Equity Fund (5,9%), Sanlam General Trust (4,5%), Investec Value (5,8%), Sanlam Financial (6,2%), and Old Mutual Gilt (4,5%). International stock markets increased by about 5% - 6%. The SA rand, however, strengthened by 7,8%, and this detracted from returns of Sanlam Global (-1,2%) and Coronation Top 20 (-1,4%.)

Outlook:
Given the good rallies mentioned above, one could now expect some retracement of these gains. Looking more longer term, we see the investment scenario as being slightly more positive than was the case say three months ago. We do not, however, expect the prolonged bull stock markets of the nineties, simply because global economic growth is too slow. This argues the case for a well-balanced portfolio such as this one.