The defensive stock picks included in the portfolio have provided good relative performance for the fund. At the time of writing, five of the fund's stocks are involved in corporate events, which is providing some floor to the share prices. In difficult times, this is an encouraging position to be in.

Investors will observe that there are notable absentees from the traditional unit trust portfolio, namely Old Mutual and Richemont. This strategy has worked well for the fund, and the fund managers strategy going forward will be to take a focused approach to stock picking by assertively implementing Coronations house views.

The third quarter of the year is typically a volatile period, and the fund managers anticipate that the fourth quarter will be just as difficult. Uncertainty is prevalent, and until the strong liquidity policies of the reserve bank governors around the world encourage capital spending, the markets will remain depressed. Furthermore, talk of war with Iraq does not help sentiment.

Promising "above average long-term capital appreciation", Coronation High Growth did no better than track sector returns in the two years to September 2001 and underperform over the past 12 months. With largely par-for-the-sector top share holdings, it's difficult to imagine the fund achieving exceptional sector-beating returns. An "active" management style may make the difference but, based on the fund's recent showing, there's no guarantee.

The second quarter was satisfactory in terms of relative performance and stockpicking. The fund benefited from the fund manager's timeous reduction in financials, and was protected by the 2nd and 3rd tier stocks, which were not as volatile as the rest of the market. The fund manager's have always maintained that this portion of the portfolio would provide some upside relative to competitors who have favoured the blue chips. It is pleasing to note that minorities of HLH are being offered a premium to its current price, which means that the fund manager's patience in holding this stock has been rewarded.
The fund manager's have continued to reduce exposure to the overseas fund in favour of local markets and cash (offshore). This fund has been quite defensive and has served its purpose within the portfolio. It is the fund manager's intention to take it to 5% of the fund.
Investors would have noticed that there has been much talk about benchmarks and the introduction of new indices. With effect from 1 July, the fund manager's will be using the 50% free float benchmark.
Looking forward, the fund manager's expect the second half of the year to deliver better returns than the first half, with 2003 providing interesting challenges.

At first glance, relative performance versus the peer group and the index looks poor. However, it is important to bear in mind that the fund was 15% invested offshore. During the quarter, the Rand strengthened by 5% and the All Share index was up by approximately 5%. Had the Coronation High Growth Fund been exposed solely to the local market, the fund's return would have increased by approximately 1.5%.
A further factor contributing to the underperformance was the eclectic approach we took in the fund, ie its exposure to a mix of shares not commonly held by other fund managers. Currently, this portion of the fund constitutes approximately 30% of the allocation, with shares such as HLH, ABI, Uniserv, Foschini, Delta, Kersaf/Sisa and Discovery.
Looking forward, the most important call will be when to lower exposure to commodities. The fund manager will not attempt to time the exit should he find value in the financial and industrial sector.

The Coronation High Growth Fund was ranked 15 out of 46 in the general equity category for the year ending 30 Sep 01. Excellent stock picking will be the strategy going forward and this may result in some short-term volatility. A large proportion of small and midcap shares will be included in the portfolio.