The Portfolio's main objective is long-term growth of capital and income. Investments to be included will, apart from assets in liquid form consist solely of participatory interests of collective investment schemes. The participatory interests to be included would include
a selection of participatory interests in collective investment schemes which invest principally in US Dollar denominated fixed interest portfolios. Initially, the foreign collective investment schemes to be included in the Portfolio will include the following schemes: Fidelity Funds SICAV, Fidelity Funds SICAV II, Fidelity Investments Funds OEIC and Fidelity’s UK Authorised Unit Trusts.

Fund Review

The rand depreciated by just 10c, from 10.53 to 10.63 to the dollar during the second quarter of 2014 (-0.9%) and was down 2.6% in the first six months of the year. Over the twelve months to end June, the rand depreciated by 7.2%. Your fund, managed by Fidelity Worldwide Investment, is a triple A rated stable net asset value liquidity fund, with a focus on security and diversification of risk, whilst delivering a return in line with money market rates. The rating is the highest possible money market rating of Moodys and Standard & Poors.

The fund, $6.6bn in size, does not use derivatives and has not experienced any negative returns to date, including during the mighty 2008/9 stock market crash and great recession. The fund has a weighted average maturity of 48 days of the money market instruments in its portfolio, which typically range between thirty to forty different issuers.

Looking Ahead Most forecasters have been betting on a stronger dollar, because of the stronger US economy than most others and therefore the likelihood that the US would be the first to eventually raise interest rates. So far the dollar has gained 1.1% against the euro during 2014, but has lost 3.5% against the powerful pound. In fact, the dollar is at a new six year low versus the pound. Admittedly the UK economy is strong too, having grown at 3% year-on-year in the first quarter. Usually the US dollar tends to weaken when investors are in a risk-taking mood because they then tend to invest funds in other parts of the world. At this stage it is probably fair to expect the dollar to gain further against the euro but not the pound.

Fund Review The rand depreciated quite sharply early in 2014, touching 11.40 at end January, before rallying back to be down just 1.7% at the end of March at 10.53. Over the year to end March, the rand lost 14.1% to the dollar.

At time of writing on 10th April, the dollar is testing its low for the year versus the euro at $1.387 as investors now think that the US Federal Reserve may delay the start of interest hikes beyond the first quarter of 2015. The dollar has also declined to a three year low against a basket of its trading partners and has lately given up much of its gains against emerging market currencies.

Looking Ahead

The big developed market currencies have traded in a fairly narrow band for the past three to six months, probably because there is not yet any sign of interest rate hikes in sight, with inflation remaining so subdued and unemployment still at record highs in Europe.

At this stage, there is no reason to expect anything different in the next three months. Usually when investors are in the mood to take on more risk, the dollar gets weaker as funds leave the US in search of higher returns elsewhere. That is going on now in early
April.

The STANLIB US Dollar Cash Fund of Funds will change it's name to STANLIB USD Currency Fund of Funds, effective from 18 February 2014