With the Rand strengthening by over 6%during April, it was inevitable that Resource counters would give up some of their recent gains. Gold &Platinum counters were however able to buck the trend as a result of the continued firming in metal prices. Despite oil prices rising to seven month highs, on the back of the continued conflict in the Middle East, the Chemicals, Oils &Plastics Sector was unable to follow suite and gave up 9.22%. Financial counters, in particular Banks were among the major winners - the Banks Index rose by 20.41%, clearly benefiting from the firmer rand and offshore demand. Within the broader Industrial sector performance was mixed. The Consumer sectors performed particularly well, as did the Transport, Service &Information Technology sectors. The equity portfolio was well positioned during the period. The overweight positions in Gold, Platinum, Banks and the consumer sectors and an underweight position in Diversified Industrials coupled with good stock selection by the managers boosted performance well above the benchmark.

The bond market shrugged off the worst quarter it had experienced since September 1998 by posting its best single month return since February 1999.Offshore demand for local bonds pushed medium and long dated bond yields down over 1%. This movement has resulted in the yield curve taking on an inverted profile, something that is usually associated with the country being in or about to enter a period of recession. This is though not the case. As the relatively illiquid foreign currency markets have benefited the rand during the current month, so has the lack of supply in the bond market helped drive bond yields down. While the rand 's improvement has had a positive impact on the country 's inflation outlook, a 1% increase in the repo rate when the SARB next meets in June is still expected. CPI &PPI were above expectations for March. The portfolio 's slightly shorter duration as well as the portfolio 's greater exposure to Non-Government bonds, which clearly assisted performance in the March quarter, detracted from the portfolio 's performance during April.

Money market rates were relatively flat during April with shorter-term rates moving up between 0.25%and 0.5%. The Income Fund is well positioned to benefit from any rate increase given that the maturity profile of the fund is never longer than 90 days. The fund is not locked into long term fixed rates but rather is able to reinvest capital at a higher rate relatively quickly.

The equity portion was positioned broadly in line with the Low Resource Index, but was slightly under weight in Mining Holdings and Houses,which lead the way in equity markets for the month of February and slightly over weight in banks,which continued to disappoint.

This fund would have been affected by movements in the bond market. As the market is now pricing in a potential increase in interest rates (since the release of the PPI and CPI figures), the bond market ended the month softer,specifically the longer dated bonds. The bond fund has a slightly longer maturity profile than the benchmark. The fund is exposed to fixed interest securities and is positioned well to benefit from any rate increases, given that the maturity profile of the fund is never longer than 90 days.