Consumer price inflation halted its moderation and increased slightly from 4.9% y/y in July to 5.0% y/y in August. Although consumer inflation remains close to the upper end of the Reserve Bank’s inflation target band, South African consumer price increases have been surprisingly subdued when one considers the substantial depreciation of the exchange rate. South Africa imports more than 30% of what it consumes; however, a large decline in commodity prices has helped offset the inflationary impact of a weaker currency. In recent months, however, the decline in commodity prices has reversed and we have observed significant increases in the price of oil and agricultural commodities. These developments, coupled with a volatile currency have resulted in upside risks to the inflation outlook going forward.

Money in the bank is currently yielding approximately 4.5% - the lowest it has been for more than 38 years. The term to maturity of the fund is approximately 80 days to maximize the yield of the fund in this low interest rate environment. The fund is currently 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 from 6.1% year-on-year in April to 5.7% y-o-y in May. Although consumer inflation remains close to the upper end of the Reserve Bank's inflation target band, South African consumer price increases have been surprisingly subdued when one considers the substantial depreciation of the exchange rate. South Africa imports more than 30% of what it consumes; however a large decline in commodity prices has helped offset the inflationary impact of a weaker currency. Looking forward, with America slowly starting to emerge from the grips of recession and many emerging markets economies still producing high GDP growth the decline in commodity prices is unlikely to persist. We are therefore of the opinion that inflation will resume it's upwards trend in 2012 and remain elevated over the next 12 months as import costs rise.

There are indications that the Reserve Bank may keep interest rates at current levels despite our expectation of rising inflation. As a result, the average term to maturity of the fund has been maximised to 90 days.

The fund is currently 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 moderated to 6.1% year-on-year in February. This latest reading remains above the Reserve Bank's 6% upper target band and our expectation is for inflation to continue rising due to the following;

1. South Africa is yet to feel the full impact of a weaker Rand. Almost one third of SA GDE consists of imports, thus the Rand's depreciation against the US dollar over the last 12 months will exert significant upward pressure on inflation in the months ahead as import costs rise.

2. Rising energy prices. Continued tension in the Middle East has resulted in international oil prices remaining above the $120/barrel mark year to date.

3. Higher electricity and food prices.

There are indications that the Reserve Bank may keep interest rates at current levels despite the inflation rate increasing above the 3% - 6% target band. As a result, maturing deposits are being reinvested for longer terms to maximise the yield of the fund.

The term to maturity of the fund is approximately 79 days. The fund is currently 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 increased to 6.1% y-o-y in November from 6.0% y-o-y in October. Although we have seen inflation steadily increasing through 2011, we are yet to feel the full impact of a weakening Rand combined with rising food and fuel prices. Almost one third of our Gross Domestic Expenditure (GDE) consists of imports, thus the Rand's depreciation against the US dollar will exert significant upward pressure on inflation in the months ahead.

There are indications that the Reserve Bank may keep interest rates at current levels despite the inflation rate increasing above the 3% - 6% target band.

The term to maturity of the fund is approximately 70 days. The fund is currently 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.