The money market curve continued its rally during the month, led by the shorter end of the curve. The 12-month NCD rallied 0.9% during the quarter to yield 8.75% and the 3-month NCD rallied 1.35% to yield 9.05%. The rally was driven by the 1% interest rate cut in September. The South African Reserve Bank caught the market by surprise as an extra meeting in September was called, one month before the scheduled October MPC meeting, effectively cutting interest rates sooner than expected. The fund remained long the benchmark throughout the month, and as a result, benefited from the rally.

Going forward, we believe that inflation and interest rates will continue to fall, but will bottom towards the end of the year. Tactically, we expect the market to become over optimistic on interest rates and we will lighten duration into the strength. Strategically, we remain cautious on the money market yield curve and will move the fund back to benchmark duration.

The money market curve rallied sharply during the second quarter, led mainly by the long end of the curve. The 12-month NCD rallied 2.9% during the quarter to yield 9.9%, and the 3-month NCD rallied 1.85% to yield 11.4%. The rally was driven by the correction of the CPIX data, which enabled the SARB to cut interest rates by 1.5% at the June MPC meeting. The cut in official interest rates was larger than the market had anticipated, but in-line with our expectations. As a result, the fund was extremely well positioned at maximum duration ahead of the rally.

Going forward, although we believe that inflation and official interest rates will continue to fall sharply, we believe that the market has become overly optimistic on interest rates in the short term. We have used this optimism to shorten duration slightly, but will remain long the benchmark into year-end as interest rates and inflation continue their downward trend.

The money market curve remained remarkably stable during the first quarter with yields edging down 0.10% during the period. The year started optimistically, with the market largely discounting the first rate cut in March.

Despite the spate of positive inflation and monetary data over the past three months, the SA Reserve Bank adopted a cautious stance and kept rates on hold in March. The positive tone of the committee's statement, has reaffirmed our conviction that the first official interest rate cut will occur in June. The market has thus moved in line with our forecasts throughout the quarter. The fund was well positioned during the period, with the duration of the fund substantially extended during the quarter.

Going forward, we remain positive that inflation will fall sharply, enabling the SA Reserve Bank to cut interest rates aggressively in the latter half of this year, and for money market yields to rally. This view is underpinned by the performance of the rand, which has remained remarkably strong.

We are now long the benchmark and will continue to lengthen the duration of the fund ahead of the expected June rate cut.

In contrast to the first three quarters of the year, money market yields rallied strongly during the last quarter of 2002. The longer end of the money market yield curve led the rally with the 12-month NCD rallying over a full percentage point for the quarter. The fund was relatively well positioned for the rally with duration of the fund substantially extended during the quarter.

Currently, we believe that the market is fairly optimistic. Investors, forecasting that we have reached the peak in inflation and interest rate cycles, are starting to price in the SARB cutting the repo rate as soon as March 2003. The rand has played a large part in the positive sentiment. It has gained all that it lost in last December's currency crisis and was the best performing currency vs. the dollar in 2002. Although, the strong rand will give the SARB more room to cut interest rates, we believe that they will err on the side of caution, with the first cut probably only occurring in June 2003. Thus, in the shorter term, we believe that the market is pricing in too much of the good news. In the longer term we remain positive, and are expecting inflation to fall sharply and the SARB to start cutting interest rates aggressively during the latter half of 2003.

We will thus continue to look for opportunities to buy into any weakness.