Market review
Equity markets continued their recovery through the third quarter after first rebounding in the second quarter as investors continued to look through disappointing short-term reported earnings. This resulted in a sharp rerating of the local market - a trend that was also apparent in international markets where there was a more severe sell-off than experienced in SA. On the economic front, although we expect a recovery off a low base in 2009, growth will probably remain muted going in to 2010. The SA Reserve Bank continued to lower interest rates in an attempt to stimulate subdued demand, with the surprise 50-basis point cut at beginning of the quarter further stimulating the market. A period of consolidation is likely until the 2010 inflationary outlook and economic prospects are more certain. The bond market remained fairly stable during the quarter - as did currencies and commodity prices after a recovery in the second quarter. Against this backdrop, industrial shares performed well, with the INDI 25 Index excluding dividends up 14,9% for the quarter and now a positive 17% for the year.

SIM action
The Fund was fairly active during the quarter and investments in the following new holdings were introduced: AECI, Afrox and Woolworths. All three were attractively priced. We added to the following counters: Barloworld, MTN, Richemont and Steinhoff. Meanwhile, we reduced the Fund's exposure to Basil Read, EOH, JD Group, Liberty International, Naspers and Value Group. We sold Aveng and Supergroup outright. Cash holdings were maintained at low levels throughout the quarter.

Performance attribution
Shares that were most geared to the economic recovery were the best performers during the quarter. Specific areas of outperformance were in the paper, transport, luxury goods and media sectors. However, the Fund's performance was broad based and a low cash holding also assisted. The Fund's underweight in the telecoms sector also added to performance. Overall the Fund performed well for the quarter.

SIM strategy
The Fund has a mixture of defensive and cyclical shares but value is the overriding consideration. The Fund remains fully invested and will benefit from any recovery in the market when this takes place. Given the rally in the market and still weak company results in the short term, more modest returns are likely for the rest of the year. Thus investors should diversify their investments.

Market review:
The second quarter of the year saw a steady recovery in the market as participants began to look through the very weak short-term economic environment and now expect some recovery towards the end of the year and into 2010. While we are likely to continue seeing disappointing earnings results, the stimulus provided by lower interest rates and the modestly priced valuation of the market during the quarter assisted the market. Short-term interest rates continued to decline, with a further 2% cut in the prime lending rate during the quarter. The outlook for further interest rates, however, is questionable - and indeed long-term bond rates continued to rise as inflation looks set to remain outside the SARB's range for longer than expected. Commodity prices also recovered during the period. But the most dramatic change was the strong rand, which strengthened by over 20% to the dollar during the quarter. For the quarter, the INDI25 index was up 13.4% and for the year-to-date a positive 1.8% excluding the impact of dividends.

What SIM did:
The fund was fairly active during the quarter. New holdings introduced to the fund were Sappi, Steinhoff, MTN and Vodacom. All these counters were trading at sizeable discounts to intrinsic value. Counters that were added to include Pick n Pay, Sun International, Liberty International, Zeder and Mondi. We reduced the portfolio's exposure to Aveng, Remgro, Richemont and Shoprite. We sold Spar outright. Cash holdings were also reduced to a minimum given the inherent value currently offered by the market.

Performance attribution:
With a general recovery in the market during the quarter, shares that were geared to a recovery inevitably performed best. Sectors that contributed to the fund's performance were paper, food, construction, furniture, media and IT. The more defensive sectors produced more modest returns. Most of the funds cash holding was invested early to take advantage of the broad value in the market. The fund's offshore weighting - although small - detracted from performance due to the very strong rand during the period.

SIM strategy:
The fund has a mixture of defensive shares and cyclical shares but value is our overriding consideration. The fund remains fully invested and will benefit from any recovery in the market when it takes place. Good broad value exists, although investors should look to diversify their investments.

Market review
The first quarter of 2009 followed the trend established in 2008, with generally worsening local and international economic conditions dragging the market down. At one point during the quarter, conditions were very dire but they went on to improve towards the end of the quarter. The Indi 25 index ended down 10.2% (excluding the impact from dividends) for the quarter. During the period, the currency was relatively stable and we saw a bottoming in commodity prices, particularly towards the end of the quarter. From an interest rate perspective, there was a big dislocation between short-dated and long-dated bonds as interest rate cuts continued to occur. The shortdated bonds ended the quarter down, while medium- and long-dated bonds were materially higher. This is symptomatic of rate cuts being front loaded but largely discounted by the market - while the mediumterm outlook for inflation deteriorated somewhat. Interest rates have a significant impact on equities and we saw a further two successive percentage point interest rate cuts by the SA Reserve Bank during the quarter. Further cuts are expected over the next six months, which should provide a stimulus for the market.

SIM action
The fund was fairly active during the quarter. New holdings that were introduced to the fund were Mondi, Cipla, Sun International and Liberty International. All these shares had retraced significantly and represented good long-term value. Counters in which we increased our exposure to included Barloworld, Richemont, Spar, Naspers and Didata. On the selling side, we reduced the fund's weighting in Basil Read, Imperial, Zeder and JD Group. Holdings that were sold outright were Group 5, Steinhoff, SAB, Oceana and Telkom. Cash holdings were also reduced to a minimum given the inherent value currently offered by the market.

Performance attribution
Generally there was a broad sell-off across most of the counters although some of the cyclical counters declined more than the index. Some of the smaller shares in the portfolio performed fairly well, notwithstanding the weak market. The fund's cash holding of around 7% also stood the fund in good stead as the market fell, although this has largely been invested now. Some value was obtained by buying shares at their trading lows and selling some counters that had gone up a reasonable amount in the short-term.
SIM strategy
The fund has a mixture of defensive shares and cyclical shares but value is the overriding consideration. The fund remains fully invested and will benefit from any recovery in the market when this takes place. Good broad value exists although investors should look to diversify their investments.

Market review
Once again a weak and deteriorating economic environment dragged down the equity market in the fourth quarter, following on the third quarter's dismal performance. This was particularly evident internationally, with the MSCI World Index down more than 22% in dollars for the quarter.
Our market did not escape this trend and locally there was confirmation of a slowing economic environment. We did see the rand continue to weaken by a further 13% during the quarter, which assisted some of the dual-listed industrial shares. Mining shares were particularly weak during the quarter. With confirmation of a weak local market and the oil price dropping some $60 during the quarter, the bond market moved significantly downwards - over 150 basis points on the government medium-dated bond index as the market started to price in at least 2% to 3% cuts in interest rates during 2009. The downward trend in interest rates was, in fact, confirmed when the SARB governor cut rates in December by 50 basis points. So, against a difficult market backdrop, the INDI 25 Index was only down 4.9% for the quarter but off 17.7% for the year, excluding dividends.

SIM action The fund was fairly active during the quarter, both buying and selling Telkom and Rembrandt. New holdings that were introduced included food retailers Pick 'n Pay and Spar - both quality companies with great long-term track records. The fund's construction exposure was reshuffled away from Murray and Roberts and WBHO and into Aveng, while Group 5 was introduced as a new holding. We sold the fund's holding in Altron and significantly cut back on its Richemont exposure in the face of a deteriorating environment for luxury goods internationally. A large holding in Imperial was also trimmed back slightly. We maintained a reasonable cash holding in the fund, which will be deployed when it makes sense. The environment is likely to remain difficult in the short term, while also presenting some good buying opportunities.

Performance attribution The more defensive shares performed well, while the local and global cyclical shares performed poorly. The fund's construction shares in particular retraced earlier gains. On the other hand, the fund's high exposure to food retailers stood it in good stead - particularly its exposure to Shoprite. Other retail shares also performed well, notably Mr Price and JD Group.

SIM strategy The environment is likely to remain difficult in the short term but the fund is defensively positioned and good broad value exists, which should benefit performance in the medium term. Investors should look to diversify their investments.