The Absa Inflation Beater Fund has returned 9.3% p.a. for the 3 years to September 2012, comfortably ahead of inflation over this period of 4.6% p.a. The Fund has also returned 9.3% p.a. over the past 5 years, ahead of the 6.4% p.a. inflation rate for the 5 years. In aggregate the Monetary Policy Committee of the South African Reserve Bank (SARB) has cut interest rates by 700 basis points since their peak. Local inflation has been running at 5% over the past year, which means it is comfortably below the upper limit of the South African Reserve Bank's target range. However, the recent weakening in the Rand and the likelihood of above-inflation labour settlements, along with high administered price increases make it unlikely that there will be further cuts in short-term interest rates. Global food and oil prices have increased strongly from their lows of the past couple of years. Sustained cost-push pressures in South Africa, relating particularly to the higher energy price and wage-cost inflation, and as well as impacts from the weaker Rand, could still pose upside risks to inflation. Largely because of the recent violent labour unrest in the mining and transport sectors, the Rand has once again sold off rather sharply. Although the Rand was little changed against the dollar in the 3rd quarter, it weakened from 12.18 to 13.48 against the pound, and from 10.21 to 10.80 against the euro. As we have previously pointed out, history has shown that the Rand can both strengthen beyond consensus expectations, and also sell off strongly in a short space of time, particularly when sentiment of foreign investors towards South African financial assets turns negative. Over the last couple of years, there has been dramatic stimulus by central banks and governments worldwide, and there is increasing recognition in various circles that fiscal consolidation will be required for years to come. Ratings agencies have now downgraded sovereign debt of both the US and various European countries, which shows how serious the fiscal situation of many countries has become. Events in the Eurozone seem to be slightly more stable than they were a few months ago, but the situation remains precarious. At a "main street" level, the global economic recovery continues to be fairly soft, and the lack of job creation around the world is casting doubt on the extent to which a real business recovery will be able to "carry the baton" once governmental stimulus programmes start to wane. Despite all these negative factors, with interest rates in the developed world at ultra-low levels and fears around the fiscal sustainability of developed countries, there is some risk to being overly negative on equities. The possibility of a worsening of the crisis in the euro zone cannot be completely dismissed. In terms of equity exposures, we continue to focus on companies that are trading at parity (or at a discount) with the market at large, yet have higher earnings and dividend yields, strong business franchises and balance sheets, and better visibility of cash flow. The Absa Inflation Beater Fund continues to be positioned so as to minimize the risk of capital loss, whilst targeting a return in excess of inflation.

The Absa Inflation Beater Fund has returned 8.7% p.a. for the 3 years to 30 June 2012, comfortably ahead of Headline CPI over this period of 4.9% p.a. The Fund has returned 8.7% p.a. over the past 5 years. Over the past year, the Fund earned 10.0% and inflation has been running at 5.5%. Whilst the Monetary Policy Committee of the South African Reserve Bank (SARB) has, in aggregate, cut interest rates by 650 basis points since their peak, inflation has now again moved below 6.0%, which is the upper limit of the Reserve Bank's target range. Given the weakness is in the economy, there is a chance that the SARB may cut interest rates in the 2nd half of 2012.

The Rand weakened again during the quarter. The local currency weakened against the Dollar from 7.66 at the beginning of the quar-ter to 8.14 at the end of June, against the Euro from 10.22 to 10.33 and against the Pound from 12.18 to 12.80. As we have previously pointed out, history has shown that the Rand can both strengthen beyond consensus expectations, and also sell off strongly in a short space of time, particularly when sentiment of foreign investors towards South African financial assets turns negative.

Over the last couple of years, there has been dramatic stimulus by central banks and governments worldwide, and there is increasing recognition in various circles that fiscal consolidation will be required for years to come. Ratings agencies have now downgraded sov-ereign debt of both the US and various European countries, which shows how serious the fiscal situation of many countries has be-come. Events in the Eurozone are changing on an almost daily basis at the moment, so it is virtually impossible to predict the ultimate choices that European politicians will make. At a "main street" level, the global economic recovery continues to be fairly soft, and the lack of job creation around the world is casting doubt on the extent to which a real business recovery will be able to "carry the baton" once governmental stimulus programmes start to wane.

Despite all these negative factors, with interest rates in the developed world at ultra-low levels and fears around the fiscal sustainability of developed countries, equities look fairly attractive, provided that disaster scenarios do not unfold. The major downside risk at pre-sent is probably a severe worsening of the crisis in the euro zone.

In terms of equity exposures, we continue to focus on companies that are trading at parity (or at a discount) with the market at large, yet have higher earnings and dividend yields, strong business franchises and balance sheets, and better visibility of cash flow.

The Absa Inflation Beater Fund continues to be positioned so as to minimize the risk of capital loss, while targeting a return in excess of inflation.

The Absa Inflation Beater Fund has returned 9.3% p.a. for the 3 years to 31 March 2012, comfortably ahead of Headline CPI over this period of 5.2% p.a. The Fund has returned 8.8% p.a. over the past 5 years. Over the past year, the Fund earned 10.1% and inflation has been running at 6.0%. Whilst the Monetary Policy Committee of the South African Reserve Bank (SARB) has, in aggregate, cut interest rates by 650 basis points since their peak, inflation has now breached the upper limit of the Reserve Bank's target range. Consequently, short term interest rates have, in all likelihood, now bottomed. Both global food and global oil prices have increased sharply from their lows of the past couple of years. Sustained cost-push pressures, relating particularly to higher administered prices and wage-cost inflation, along with the sell-off in the Rand in September (as well as potential future weakness in the currency) could still pose upside risks to inflation. After plummeting against other major currencies in September 2011, the Rand has stabilized somewhat. In March, the local currency weakened against the Dollar from 7.44 at the beginning of the month to 7.64 at the end of the month, against the Euro from 9.91 to 10.18 and against the Pound from 11.86 to 12.24. As we have previously pointed out, history has shown that the Rand can both strengthen beyond consensus expectations, and also sell off strongly in a short space of time, particularly when sentiment of foreign investors towards South African financial assets turns negative. Over the last couple of years, there has been dramatic stimulus by central banks and governments worldwide, and there is increasing recognition in various circles that fiscal consolidation will be required for years to come. Ratings agencies have now downgraded sovereign debt of both the US and various European countries, which shows how serious the fiscal situation of many countries has be-come. Events in the Eurozone are changing on an almost daily basis at the moment, so it is virtually impossible to predict the ultimate choices that European politicians will make. At a "main street" level, the global economic recovery continues to be fairly soft, and the lack of job creation around the world is casting doubt on the extent to which a real business recovery will be able to "carry the baton" once governmental stimulus programmes start to wane. Despite all these negative factors, with interest rates in the developed world at ultra-low levels and fears around the fiscal sustainability of developed countries, equities look fairly attractive, provided that disaster scenarios do not unfold. The major downside risk at pre-sent is probably a severe worsening of the crisis in the euro zone. In terms of equity exposures, we continue to focus on companies that are trading at parity (or at a discount) with the market at large, yet have higher earnings and dividend yields, strong business franchises and balance sheets, and better visibility of cash flow. The Absa Inflation Beater Fund continues to be positioned so as to minimize the risk of capital loss, while targeting a return in excess of inflation.

The Absa Inflation Beater Fund has returned 8.4% p.a. for the 3 years to 31 December 2011, comfortably ahead of Headline CPI over this period of 4.8% p.a. The Fund has also returned 8.3% p.a. over the past 5 years. Over the past year, inflation has been running at 6.1%. Whilst the Monetary Policy Committee of the South African Reserve Bank (SARB) has, in aggregate, cut interest rates by 650 basis points since their peak, inflation has now breached the upper limit of the Reserve Bank's target range. Consequently, short-term interest rates have, in all likelihood, now bottomed. Sustained cost-push pressures, relating particularly to higher electricity prices and wage-cost inflation, along with the dramatic sell-off in the Rand in September (as well as potential future weakness in the currency) could still pose upside risks to inflation.

After plummeting against other major currencies in September, the Rand has stabilized somewhat. Although the local currency weakened slightly against the Dollar in December (from 8.08 at the beginning of the month to 8.15 at the end of the month), it strengthened against the Euro (from 10.88 to 10.58) and against the Pound (from 12.75 to 12.58). As we have previously pointed out, history has shown that the Rand can both strengthen beyond consensus expectations, and also sell off strongly in a short space of time, particularly when sentiment of foreign investors towards South African financial assets turns negative. We have been cautioning that the significant capital inflows experienced by South Africa over the past 18 months could easily experience sudden reversals.

Over the last couple of years, there has been dramatic stimulus by central banks and governments worldwide, and there is increasing recognition in various circles that fiscal consolidation will be required for years to come. On 5 August, S&P made the historic decision to downgrade US sovereign debt to a rating of AA+; furthermore the Japanese fiscal position continues to look dire. The rolling debt crisis amongst peripheral European nations is increasing feelings of nervousness amongst various market participants. Events in the Euro zone are changing on an almost daily basis at the moment, so it is virtually impossible to predict the ultimate choices that European politicians will ultimately make. At a "main street" level, the global economic recovery continues to be somewhat anemic, and the lack of job creation around the world is casting doubt on the extent to which a real business recovery will be able to "carry the baton" once governmental stimulus programmes start to wane.

The outlook for company earnings is quite uncertain; hence whilst there are still pockets of value amongst some local stocks, they are fairly difficult to find. Some stocks are trading at parity (or at a discount) with the market at large, yet have higher earnings and dividend yields, strong business franchises and balance sheets, and better visibility of cash flow. We seek to invest in such companies.

The Absa Inflation Beater Fund continues to be positioned so as to minimize the risk of capital loss, while targeting a return in excess of inflation.