The Standard Bank Extra Income Fund returned 12.2% over the past year and the fund remains invested in fixed interest securities with no capital value movements. The size of the fund stood at R474 million at quarter end.

The duration of the fund was shortened to a weighted average maturity of 103 days, mainly due to the liquidation of all the bond holdings. These proceeds were invested in shorter dated money market instruments. The Fund is in the process of being restructured and reclassified out of the Income Fund sector into the Other Cash Fund category. The duration of the fund will be increased when opportunities arise and the reclassification process is completed.

At the June MPC meeting, the Repo rate was lowered by 1.5% to 12.0%. The market anticipated a rate cut larger than 1% after Stats SA revised the CPI numbers downward by 2.3%. Money market rates declined sharply, with the 12 month NCD rate declining from 12.8% at the end of March to 9.9% at the end of June. The money market curve remains inverted, with another 3% of interest rate cuts expected in the cycle. The continued strength of the rand will help the likely attainment of the inflation target in 2004.

The Standard Bank Extra Income Fund returned 11.6% over the past year, while the size of the Fund stood at R469 million at quarter end.

The duration of the Fund was kept short at a weighted average maturity of 184 days, mainly due to mandate restrictions. The Fund is in the process of being restructured and reclassified out of the "Income Fund" sector into the "Other Cash" category.

The next expected move in interest rates is for the lowering in the repo rate from the current level of 13.5%. Inflation is expected to move towards the target range during the second half of 2003. The market expects two to three interest rate cuts this year, between June and November. However, there are a few factors which could influence the timeframe of interest rate movements; i.e. the strength of the Rand, level of international oil prices, the global growth outlook and the duration of the war in Iraq. With all these factors in mind the Reserve Bank will err on the side of caution and is likely to keep short rates sideways for longer.

The duration of the Fund will be increased when opportunities arise and the re-classification process is completed.

The Standard Bank Extra Income Fund delivered a return of 11.2%for the year 2002.The size of the fund remained constant throughout the year and ended at R562 million. The duration of the fund was kept short at 227 days in anticipation of further interest rate increases during the quarter.

The next expected move in interest rates is lower, with inflation to move lower towards the target range later in 2003.The market expects two to three interest rate cuts this year, however, there are a few factors which could influence the timeframe of the movements, ie. the strength of the Rand, global growth outlook and a protracted war in Iraq. With all these factors in mind, interest rates could move sideways for longer.

The duration of the fund will be increased when opportunities arise or when there is a clearer picture of the interest rate cycle starting to turn downwards.