Consumer inflation continued its decline slowing from 3.7% y-o-y in July, to 3.5% y-o-y in August. Broad-based disinflationary pressure from rand appreciation is assisting with the continued deceleration of inflation. However, due to the vulnerability of the exchange rate and other structural inefficiencies within the South African economy (currently reflected in elevated administered prices), we remain concerned with the longer term outlook for inflation in South Africa.

The term to maturity of the fund is approximately 87.28 days to maximize the yield of the fund in a stable interest rate environment. The fund is not exposed to any credit linked instruments and is only invested in the five major banking institutions, ensuring the lowest possible risk for our investors.

Consumer inflation declined for the sixth successive month, to 4.2% y-o-y in June, from 4.6% y-o-y in April. Unfortunately optimism surrounding a subdued and stable outlook for inflation was short lived due to a coinciding 2.6% rise in the y-o-y PPI inflation rate, the biggest such increase in producer inflation in two years. PPI inflation for June measured 9.4% y-o-y. With electricity prices set to increase at an average rate of 25% over the next 3 years coupled with the vulnerability of the exchange rate, sticky services inflation and escalating producer price inflation we remain concerned with the longer term outlook for inflation in South Africa.
The term to maturity of the fund is approximately 89 days to maximize the yield of the fund in a stable interest rate environment. The fund is not exposed to any credit linked instruments and is only invested in the five major banking institutions, ensuring the lowest possible risk for our investors.

Consumer inflation slowed from 6.2% yoy in January to 5.7% yoy in February. The moderation in CPI was primarily driven by declining food inflation. With electricity prices set to increase at an average rate of 25% over the next 3 years, a rigid labour market and other structural inefficiencies, we remain concerned about the longer term outlook for inflation in South Africa. The fund remains only invested in the four major banking institutions, ensuring the lowest possible risk for our investors.

The last month of 2009 saw South African inflation breaching the upper end of the Reserve Bank's target band once again. CPI increased from 5.8% yoy in November, to 6.3% yoy in December. Although disappointing this increase in inflation was not unexpected. With the impact of favorable base effects coming to an end and services inflation remaining stubbornly above 7% yoy containing CPI within the target band will continue to prove challenging. The fund remains only invested in the four major banking institutions, ensuring the lowest possible risk for our investors.