Buys & Sells
We reduced our global bond exposure to raise cash which we intend investing in attractively priced equities in the course of the next few months.

Performance & Reason
The rather mediocre performances should be judged against the following environment of extremes:
(a) A leading global stock market, such as the German Dax, collapsed by 25% in just one month (September). Year to date the US Dow Jones Industrial Index fell by 24%.
(b) Gold and bonds offered safe haven status, with the Gold Index rocketing by 190% during the past year, and Global Bond funds increasing by 30%.

Outlook
We are optimistic on the outlook for this fund. Shares are very oversold, and should stage a healthy rally simply on this score. Unfortunately the risk of this rally ever eventuating is also very high, because volatilities are at record levels as well.

The fund delivered acceptable performance over the month and quarter. Performance is not purely comparable to peer funds due to the portfolio structure of the fund. Investors in this fund gets the benefit of being invested in a widely diversified balanced portfolio in terms of local and international currencies, asset classes (bonds, equities and cash), expert managers, regions and sectors.

As the fund remains to be fully invested in Global Equity markets, SA rand movement against global currencies, will continue to have an effect on rand performance numbers. Since the end of March 2002, the rand appreciated by more than 10% against the US Dollar, 4% against Sterling and but lost 1% against the Euro. The falling US Dollar and weak international equity markets, in particular in the US, negatively affected the international investments in the fund.

The fund managers sold the fund's holding in the Mercury Global Fund due to the fund's large exposure to growth stocks and the US equity market. The investment in the Lombard European Mid Cap Fund was increased and this holding benefited from the appreciating Euro. The fund has a relatively low exposure to international equities and this position was beneficial over the quarter. The 24% exposure to local and international bonds was positive but the holding in Coronation Top 20 and the Sanlam Financial Fund detracted from performance. On balance the fund managers feel comfortable that the fund is well positioned to offer the investor consistent long term performance at less than average equity market

At the start of this year, we reduced this fund’s foreign exposure from 64% of total assets to 52%. Given the fairly strong rand in recent months, this was the correct strategy. The long-term strategy, however, remains to be overweight in foreign assets. As far as local assets are concerned, the fund switched Allan Gray into Investec Equity, reduced Old Mutual Gilt in favour of Old Mutual Financial, and sold Prudential Optimiser for more units in Liberty Industrial. The basic idea behind these deals was to reposition the fund for a stronger stock market.

The fund consists of a well-diversified balanced portfolio of equities, bonds and cash. It is further diversified in terms of rand and hard currency exposure and the international investments cover most global regions. The fund manager expects the global economy to improve. This should benefit emerging stock markets even more than those of developed economies. SA is a cheap emerging market - hence the stronger exposure to SA Incorporated.