The Stanlib Income Fund returned 8.6%, compared to the benchmark All Bond 1-3 year Index return of 8.1%, an outperformance of 0.5% for the 12 months ending 30 September 2007. Trades for the third quarter ending 30 September 2007 included the purchase of longer dated money market assets at attractive levels.

Duration was lengthened through the purchase of RSA 2015 bonds. Purchases of corporate bonds consisted of the corporate issues of MTN, Super Group, Sappi and SAB Miller. Sales of corporate bonds included Standard bank, Absa and Calyon. The exposure to floating rate notes was reduced through the sale of securitisation assets. During the quarter the SARB MPC decided to increase the Repo rate by 50 basis points to 10.00%, after the May CPIX number remained above the upper band of the inflation target. The risk for inflation remain on the high side as inflation expectations are rising and pricing pressures become more broad based in the economy. The bond and money market diverted in views on the outlook for interest rates. The money market pricing for higher rates, with the 12 month NCD trading from 10.60% at the beginning of the third quarter, to end the quarter at 10.85%. The bond yield curve remained inverted, the RSA 2010 bond starting the quarter at 8.92% trading to a high of 9.41%, before closing the quarter at 8.95%. The bond market having a more benign outlook on interest rates. Due to the changes in worldwide fundamentals, the probability of more rate hikes from the SARB MPC seems balanced.

The STANLIB Income Fund returned 7.80%, compared to the benchmark All Bond 1-3 year Index return of 6.98 %, an outperformance of 0.82% for the 12 months ending 30 June 2007. The Portfolio remains the top performer over the three to fifteen year measurement periods.

Trades for the second quarter ending 30 June 2007 included the sale of short dated money market assets. Exposures to parastatals were reduced through the sale of Trans Caledon Tunnel Authority (TCTA) paper. Purchases of corporate bonds consisted of the corporate issue of African Bank. Sales of bonds included Imperial Group and African Bank. The exposure to floating rate notes was increased in the various securitisation assets.

During the quarter the SARB MPC decided to increase the Repo rate by 50 basis points to 9.50%, after the May CPIX number breached the top end of the inflation target for the first time in 43 months. The risk for sustained high inflation is becoming embedded in the economy as cost pressures are rising. Increasing food and oil prices are the main drivers of inflation at present. The bond and money market reacted negatively during the quarter, due to this change in fundamentals. The 12 month NCD traded from 9.65% at the beginning of the second quarter, to end the quarter at 10.60%. The bond yield curve remained inverted, the RSA 2010 bond starting the quarter at 8.16% trading to a high of 9.16%, before closing the quarter at 9.08%. The interest rate markets are pricing for higher inflation as well as the possibility of the SARB MPC having to increase rates further. Modified Duration: 1.09 years

The STANLIB Income Fund returned 7.1%, compared to the benchmark All Bond 1-3 year Index return of 6.0%, an outperformance of 1.1% for the 12 months ending 31 March 2007. The Portfolio remains the top performer over the three to fifteen year measurement periods. Trades for the first quarter ending 31March 2007 included the purchase of money market assets in the long end of the yield curve, as yields looked attractive against long bond yields.
Exposures to parastatalswere reduced through the sale of Transnet and Trans Caledon Tunnel Authority (TCTA) paper. Purchases of corporate bonds included issues from Standard Bank, Absa, Super Group, MTN, Barloworld and Group Five. Sales of bonds included the RSA 2008 R194, as well as the corporate issues from Nedbank and Investec. The exposure to floating rate notes was maintained in the various securitisation assets. During the quarter the SARB MPC decided to leave the repo rate unchanged, citing the improved fundamentals, as well as the 200 basis points of rate increases in 2006 to be sufficient to reduce inflation, as well as slow the strong credit demand. The interest rate markets reacted positively, the 12monthNCDrate trading from a high of 9.90% down to a low of 9.40% and the RSA 2010 bond trading to a low of 7.80%. During the latter part of the quarter the inflation outlook deteriorated, as the Rand traded to a high of 7.54 against the US Dollar and oil and maize prices rising sharply.

The interest rate market revised their outlook, the 12 month NCD rate moving back to 9.70% and the RSA 2010 bond to above 8.00%. The yield curve remained inverted, as demand for the long end continued, while the short end was kept high by money market rates above 9%. The SARB is expected to increase the repo rate at one of the next twomeetings, which could be the last of the cycle.

Modified Duration: 1.0 years

The STANLIB Income Fund returned 6.8%, compared to the benchmark All Bond 1-3 year Index return of 5.6%, an outperformance of 1.2% for the 12 months ending 31 December 2006. The fund remains the top performer over the three to fifteen year measurement periods. Trades for the fourth quarter ending 31 December 2006 included the purchase of money market assets in the long end of the yield curve, as yields looked attractive against long bond yields. Exposures to parastatals were switched through the sale of Telkom paper and the purchase of Transnet and Trans Caledon Tunnel Authority (TCTA) paper. Purchases of bonds included the RSA 2008, as well as the corporate issues from Standard Bank, Absa, Imperial Capital, Steinhoff, Super Group, Unilever, MTN, Momentum Group, Calyon and Anglogold. Sales of bonds consisted of Nedbank paper. The exposure to floating rate notes was increased through the purchase of various asset securitisations issued by the major financial institutions. During the quarter the SARB MPC increased theRepo rate by 100 basis points to 9.00%,with a negative stance towards futuremonetary policy.

The SARB maintained their negative outlook on inflation and consumer spending. The SARB still maintains the cautious outlook on the current account deficit and inflation. The money market reacted negatively to the news, with the 12month NCD rate rising from 9.35% to 9.60% during the quarter. The bond market reacted positively with the RSA 2015 moving lower from 8.63% at the end of September to 7.85% at the end of December. The divergence between short and longterm rates widened, due to the money market discounting for a higher Repo rate and bond yields being driven lower by positive supply dynamics from government. Oil prices trended lower during the quarter, coupled with a resurgent Rand, should have a positive influence on the SARB's inflation outlook.

Modified Duration: 0.9 years