During the quarter under review, the US dollar was the weakest performing of the major currencies relative to the rand. The dollar depreciated by 9.2% during the quarter with the rand reaching a high near the end of September of 6.94/$ and traded at an average of 7.32/$ in the third quarter. The fund posted a return slightly below that of the benchmark net of the underlying manager's fees and this is attributable to the phenomenal rand strength and our remaining almost fully dollar invested the entire quarter.
The Fidelity fund continues to outperform the benchmark and currently the fund is yielding around 42 basis points (3D-day yield) where the benchmark is yielding 13 basis points. In terms of the maturity profile, almost 74% of the fund can be liquidated in less than 30 days and the weighted average maturity is 24 days. The fund continues to have its Aaa Moody's rating and has not experienced any defaults to date.

Looking Forward:
On a real trade-weighted basis, the US dollar is at the low end of its historical range and it was the worst performing of the major currencies in the quarter. The economic setting remains stimulative with interest rates remaining low and the Fed growing its balance sheet further. However, growth has been slow to react to these stimulative measures and forecasts show low growth in the region for some time to come.

Fund Review
The US Dollar strengthened in the second quarter against major currencies. Most significantly, the US Dollar's 9.4% gain on the Euro, which largely stemmed from Eurozone instability during the quarter. The only major currency that appreciated against the Dollar was the Japanese Yen. The Rand weakened in the second quarter relative to the US Dollar to 7.65/$ (5%), weakening by 3.6% year to date. The fund consequently has posted a positive return, outperforming the composite benchmark due to the average overweight offshore exposure. The 30 day yield of the underlying Fidelity money funds is 10 basis points ahead of the funds benchmark and is yielding around 31 basis points. The credit breakdown of the fund if of a high quality with more that 70% of the fund invested in assets with an AA rating or better and only invested in approved investment quality assets. The maturity profile of the fund also remains conservative and 60% of the fund's assets can be liquidated within 30 days.

Looking Ahead
Growth in the US during the first quarter was 2.7%, revised down from 3.2%, highlighting growth concerns that still exist in the US. This combined with subdued inflation has kept the Feds target lending rate low at between 0% and 0.25%. Elsewhere interest rates continue to remain low and are expected to remain so for the most part of 2010 and even into 2011. The Rand has seen many positive forces working in its favour and we maintain that the currency is overvalued and we look to see some weakness into the second half of the year.

Fund Review
The USD continued to weaken against most major currencies during the quarter before finding stability around $1.45 to the Euro exchange rate by quarter end. In line with other major economies, US rates remain at historically low levels resulting in the fund's 30 day yield being just below 30 basis points. The benchmark rate is currently at 9 basis points. The Fund remains invested in the conservative end of the credit spectrum with more than 95% of the fund's holdings rated A1 and above by Moody's Ratings Agency. The Fund has an average maturity of 37 days.

Looking Forward
The US Federal Reserve Bank has stated on record that it will not remove the current stimulatory regime until it is satisfied that economic recovery has firmly taken root. In light of this, we do not expect US rates to move higher before the second half of 2010. Inflation is also not much of a concern as core inflation remains at historically low levels. In our view, the Rand is marginally overvalued and should be expected to trend weaker during the year (2010) in line with US and South African inflation differentials.