Purchases:
Northam Platinum: Switch from Gencor into Northam due to concerns about delays in the Gencor unbundling which may negatively effect the share price in the short term Murray and Roberts: Switch from Aveng. The full benefits of the restructuring have not come through yet. Underlying growth in core areas will result in out performance over the next 12 months. Foschini Limited: The clothing retail sector continues to perform well with volume growth in excess of 20%. We expect the results will surprise on the upside.

Sales:
Adcorp: the environment is expected to remain tough for sometime. The counter is not expensive, but we believe there is further potential for negative news and therefore the risk is on the downside. MGX: We have concerns about the flight of management resignations and the strength of the balance sheet going forward, subsequent to the failure to sell the Software Futures Business

Manager's outlook:
At the end of September 2002, the number of counters in the trust was 46. It is our intention to reduce the number of counters to around 40; the top 10 stocks intended to comprise approximately 45% of the equity component (this may change according to the outlook for small caps). As at end September 2002, the top 10 stocks comprise 41% of the equity component.

Our theme/style analysis suggests that the larger cap sectors are in expensive territory. Whilst the indicators do not provide insight into the exact timing of sustained small cap relative out performance, it does illustrate that small caps are currently very cheap on a relative basis, while mid caps are expensive on the same basis. Early indications are that small caps have established a support base at current levels and are attracting much more investment interest. We see this as very positive. Small caps have out performed their large cap counter parts by 13,5% year to date.

At its worst in late 2000, Sanlam Select Fund's price was down 70%, against its small-cap index benchmark's 47% fall. The fund has subsequently regained some credibility. Returns since last year are again more in line with its benchmark. But with the strategy of holding a high number of shares (50 at present), outperforming more focused funds will be difficult and benchmark-equalling returns are probably the best investors can expect.

The trust outperform the average of its peer group this quarter. The main reasons for this was due to the performance of specific counters like:

Wetherly's (up 28%). A Very good results were released and the prospects for the company are positive in the light of improving consumer confidence, new store openings and expansion into Spain.

LA Retail (up 26%). The company has successfully closed its under performing retail operations. The business is trading on a fwd PE of less than 2 with limited downside risk and still offers huge upside potential.

RAH (up 15%). A cautionary was released regarding the future group structure, resulting in the discount narrowing. The share still trades at a 20% discount to NAV.

Reason for major purchases and sales over the past quarter:

Purchases:

NAC: offering excellent value. The counter came under pressure due to its exclusion from the Alsi40.
Glotec: trading at a significant discount to Temenos (listed in Switzerland). There is a potential for the sale of it's stake in Temenos once the markets have strengthened. and sales being:
Corpcapital: profit taking. The fund still have a holding of 5% of the fund.
Wiphold: received cash and Alexander Forbes shares. The investment offers little attraction post the unbundling.
LA Group: profit taking following a strong performance

At the end of June 2002, the number of counters in the trust was 49. Due to the high volatility in the universe and the poor levels of liquidity it is the intention to maintain the structure of the portfolio such that the total counters number around 40 to 45; the top 10 stocks intended to comprise approximately 50% of the equity component (this may change according to the outlook for small caps). As at end June 2002, the top 10 stocks comprise 43% of the equity component. It is the intention to maintain this relative performance in the top quartile of the small cap unit trusts and to consistently beat the JSE Small Cap Index over time.

The SIM theme/style analysis suggests that the large cap sector is in expensive territory. Whilst the indicators do not provide insight into the exact timing of sustained small cap relative out performance, it does illustrate that small caps are currently very cheap on a relative basis, while mid caps are expensive on the same basis. Early indications are that small caps have established a support base at current levels and are attracting much more investment interest. The fundmanagers see this as very positive.

This year so far, small caps have under performed large caps marginally by approximately 13,5%. Early indications are that small caps have established a support base at current levels.

The fund is positioned as follows: 40% in Industrials ex-TMT, 33% in financials, 14% in TMT, 13% in resources. The strategy is to concentrate our process on the selection of undervalued stocks in a disciplined manner; relative to predicting the timing of market hanges. Furthermore, the fund manager is seeking those stocks which are both undervalued on a fundamental basis, while being supported by potential corporate activity.

At the end of March 2002, the number of counters in the fund was 43. Due to the high volatility in the universe and the poor levels of liquidity we intend maintaining the total counters around 40. The top 10 stocks currently comprise 52% of the equity component.

It is the intention to maintain this relative performance in the top quartile of the small cap unit trusts and to consistently beat the JSE Small Cap Index over time. The sustained performance of the fund on an absolute basis is however dependent on the recovery of the small cap universe as a whole.

In this regard, the theme/style analysis suggests that the large cap sector is in expensive territory. Whilst the indicators do not provide insight into the exact timing of sustained small cap relative out performance, it does illustrate that small caps are currently very cheap on a relative basis, while mid caps are expensive on the same basis.