The third quarter of 2002 was characterised by a crisis of confidence in Corporate America, declining economic and profit growth prospects, poor investment sentiment and war talk. This resulted in global equity markets having their worst quarterly performances in 15 years with the US and European markets crashing 18% and the MSCI World Index loosing $2.7trillion of its value.

The fund declined in line with global markets but managed to out perform its benchmark MSCI World Equity Index by approximately 1%. A higher than normal cash position, overweight in Asian Pacific markets and Consumer Staples and underweight positions in Medical stocks added to out performance. European Insurance companies declined by 50% during the quarter and investments in Swiss Re and Royal Sun Alliance had a negative impact on performance.

Researcsh suggests that industry-leading companies across many sectors are undervalued against their normalised earnings power and currently offer good opportunities for long term investing. The fund will continue to identify quality opportunities in global equity markets and aim to deliver above average returns over the long term. This is a good time to invest.

The falling US Dollar and weak international equity markets, in particular the US market, negatively affected fund performance. 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. 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.

The US Dollar fell 12% against the Euro and almost 11% versus the Yen the past quarter, driven by widening US trade deficit, falling stock prices and concerns that companies are using accounting practices to inflate earnings (e.g. Enron, Worldcom and Xerox). The US current account deficit is now $112.5bn or 4.3% of GDP. US stocks had their biggest first half loss since 1978 and led a global decline, reflecting growing mistrust of companies and their executives and concerns that a rebound in earnings may be slow. US and European companies lost $2.7trillion of market value this year, General Electric lost $100bn and Microsoft, IBM and Citigroup together lost $200bn. One of the most worrisome effects of the internet bubble frenzy was the rise of so many incentives for management to put their own interests ahead of those of shareholders. Few seemed to mind the huge option grants, and few questioned stratospheric earnings growth rates, as long as share prices kept rising. It's turning out in many cases that the profits of the past (to say nothing of current profits) were nothing more than smoke and mirrors.

Waning foreign demand for US assets is expected to further damp the need for Dollars and investors are moving assets into Europe, Japan etc. Japan's economy is very dependent on its exporters to pull its economy out of the third recession in a decade, as domestic demand remains weak. Slower growth in the US, Japan's biggest overseas market, and the Yen's rise has been negative for exporters, which accounted for half of the economy's growth in the first quarter. To weaken the Yen, Japan has sold $28bn worth of Yen since mid May 2002 in order to shield exporters like Toyota and Nissan. Japans auto industry highlights the disparity between domestic demand and exports. Exports by Japans 11 automakers rose 26% last month from a year ago while sales at home fell 1.4%.

For the first time in 25 months, Europe's inflation rate fell below the ECB's target 2% level. This was driven by lower energy prices and good inflation figures from Germany and Italy. Europe's two biggest central banks signaled they're in no rush to raise interest rates, as declining stock prices and a strengthening euro threatened to hold back the pace of the regions economic recovery. The ECB left its rates at 3.25% and the Bank of England left theirs at 4%. Policy makers will wait for more evidence that the world economy is picking up steam.

Currently, US economic data suggests a recovery is taking place but at an unexpectedly slow rate. The market still believes that interest rates will rise before the end of the year, and probably well before that.

This fund had a good quarter, which was driven by good stock and sector selection. Overweighting finance and underweighting the medical sector were strong contributors. The continued underweight of the telecom sector was again beneficial, as that sector lagged the market once more. Stocks such as Wolseley and Daiwa House in the value portfolio, and Capital One and Taiwan Semiconductor in the growth portfolio, performed strongly, adding to relative return. The MSCI World Index was up 4.4% in March, providing a strong finish to an otherwise mediocre quarter. Many of the forces driving the market were similar to the previous months in the quarter; specifically, classic cyclical stocks generally did quite well, with sectors such as construction and housing, energy, and financials posting strong gains.

The major exposures in the portfolio continue to be an aggressive overweight in financials and underweights in technology and tele-communications. The tech and telecom underweights have been reduced over the month, and in fact, telecoms and telecom equipment manufacturers are beginning to emerge as a value theme in the United States. The portfolio remains overweighted in industrial commodities, and in construction and housing. The portfolio is underweighted in consumer staples and medical stocks.

The Sanlam Global Trust (R class) has won the S&P 2002 award for the best fund within the Foreign Equity General sector over a five year period.