The STANLIB Income Fund returned 12.2% for the one year period ending 30 June 2005. The Fund now holds the number one position from one to fifteen years, outperforming the 1-3 year sector of the All Bond Index over most measurement periods. The Fund continued to attract good inflows growing just short of R800m over the quarter. Trades for the first quarter ending 30 June 2005, included the purchase of government paper in the short end of the yield curve. The exposure to parastatals was increased through the purchase of Rand Water, INCA, Telkom and TCTA paper. The Fund replaced floating rate notes and securitisation issues that matured with new issues from the same issuers. Purchases in corporate paper included Standard Bank, Nedbank, ABSA, African Bank, Sasol, Super Group, Harmony and DaimlerChrysler. The exposure to securitisations was also increased, mainly through Edcon. During the quarter the SARB MPC surprised markets by cutting the Repo rate by 50 basis points to 7%, citing Rand strength as a factor in the decision to lower interest rates. The interest rate cut had the desired effect, by weakening the Rand. The currency was also weakened further by Dollar strength against most currencies over this period. International oil prices traded to new highs around $60 per barrel during the quarter, with no significant decrease in prices expected soon due to supply demand constraints. The money market curve has flattened out since the rate cut, the 12 Month NCD rate opened the quarter at 7.70% and ended at 7.10%. The money market sees interest rates sideways for the moment, but the combined effect of the weaker Rand and high oil prices will have to be monitored carefully, especially for the second round effects to inflation.

The STANLIB Income Fund returned 11.2% for the one year period ending 31 March 2005. The Fund now holds the number one position from one to fifteen years, outperforming the 1-3 year sector of the All Bond Index over most measurement periods. The Fund continued to attract good inflows of R260m over the quarter. Trades for the first quarter ending 31 March 2005, included the purchase of government paper in the short end of the yield curve. The exposure to parastatals were increased through the purchase of Rand Water, Telkom and TCTA paper. The Fund replaced corporate paper that matured with new issues from the same issuers. Purchases in corporate paper included Standard Bank, Nedbank, and SA Homeloans. In this quarter the SARB MPC decided to keep the Repo rate unchanged at 7.5%, stating that there are too many risks to inflation to lower rates further. The risks to inflation have increased dramatically over the quarter, as international oil prices traded well above $50 per barrel. The local currency also came under pressure with risk aversion traders selling emerging markets assets in a flight to quality. The money market curve steepened over the quarter, the 12 Month NCD rate opening the year at 7.35% and closing the quarter at 7.70%. The money market is not discounting any further rate cuts at the moment. The risks from higher oil prices and a weaker currency, translating into higher inflation in the next few months, will in all probability keep the SARB from cutting rates this year.

Modified Duration: 1.6%

The STANLIB Income Fund returned 11.3% for the one year period ending 30 September 2004. The Fund now holds the number one position over all measurement periods from one to fifteen years, outperforming the 1-3 year sector of the All Bond Index over most measurement periods.

The fund continued to attract good inflows of R180m over the quarter. Trades for the third quarter ending 30 September 2004 included the sale of government paper in the short and medium end of the yield curve. Exposure to parastatals was also decreased through sales of Transnet, Telkom and Rand Water short dated bonds. The Fund purchased longer dated money market assets, and switched into larger holdings of corporate paper. Purchases in corporate paper included African Bank, Standard Bank, ABSA, NBC, Sasol and Super Group. Exposure to Standard Bank was also increased through the purchase of newly listed preference shares. In this quarter the SARB MPC surprised the markets at the August meeting, by lowering the Repo rate from 8.00% to 7.50%. The SARB cited lower than expected inflation numbers and a strong Rand as reasons to cut rates, although the high oil price was seen as a risk to inflation targeting. The rate decision caused interest rate views to be revised lower and interest rate markets pricing in the probability of more cuts in the current cycle. The persistent high oil price is the cause for concern to the lowering of rates in the current cycle. The money market curve moved lower over the quarter, with the 12 month NCD starting at 8.90%, continuously trading lower, easing to 7.45% at quarter end. With the Rand trading in a stable range around the R6.50 level to the Dollar, but very high oil prices, it is likely that the SARB MPC will remain neutral on monetary policy.