The Standard Bank Money Market Fund grew by R1.1bn during the quarter, ending the quarter at R12.3bn. The fund maintained the position as the second largest fund in the category.

The duration of the fund was lengthened to its maximum before the June MPC meeting to lock in higher rates for as long as possible. At the June MPC meeting the repo rate was cut by 150 basis points and as a result rates declined from 13.35% to 11.50% in the three month area. The money market curve inverted as the market started to anticipate further interest rate cuts at the next MPC meetings.

Short-term interest rates are expected to decline further over the next nine to twelve months. A cut of 100 basis points in the repo rate is expected at the August and October MPC meetings.

The fund continues to be invested closer to maximum duration in order to lock in current high rates for as long as possible.

The Fund continued to grow by R800m during the quarter, and ended the quarter at R11.2bn, to maintain the position as second largest fund in the category.

The duration of the Fund was run short of the index during the quarter to benefit from the high rates at the short end of the money market curve, offered by the local branches of the international banks. No change in the repo rate was expected at the March MPC meeting.

Short- term interest rates are expected to move sideways for longer due to the highly volatile global environment. The SARB is expected to wait for confirmation that CPIX is nearing the target range, before taking action on the interest rate front. A 100basis point cut in the repo rate is expected at the next MPC meeting in June, provided no pressure is seen on inflation from a higher oil price. Money market rates remained high, with 3 months rates trading 10 basis points below the repo rate.

We will continue to invest the Fund to benefit from the high rates at the short end of the curve, looking to take the duration to maximum towards June.

The Standard Bank Money Market fund kept its top half performance in 2002, returning 11.3%for the year. The size of the Fund has grown to R10.6bn at year-end, to remain second largest in the category. The duration of the Fund was kept low until November in anticipation of further interest rate hikes, but was later increased to the 90 day maximum after the November MPC meeting left rates unchanged. For the fi rst three quarters of the year, the SARB propagated a hawkish monetary policy stance, however, this was changed to neutral in the last quarter. At the last SARB MPC meeting for the year in November the repo rate was kept on hold at 13.5% with prime at 17.0%. This was a signal to investors that the SARB was expecting inflation to peak in the third quarter and no further hike in rates was needed. The performance of the Rand also helped the SARB with their inflation targeting policy, ending at R8.60 to the US Dollar. With all this bullish sentiment in the market, we saw the money market curve invert. The one year NCD rate traded a high of 14.4% in October, but aggressively came down to 12.9% at the end of December.

The next expected move in interest rates is lower, with inflation expected to move lower towards the target range later in 2003.The market expects two to three interest rate cuts this year, hence the duration of the Fund will be kept at maximum to take advantage of higher yields in the longer end of the