The Nedgroup Investments Bond Fund is benchmarked against the All Bond Index (ALBI) and has exposure across the fixed income curve to both government and corporate bonds.

In the run-up to the ANC leadership congress, our markets remain vulnerable to political and industrial actions and statements, which might be negatively perceived abroad. Furthermore, longer-term inflation expectations in both global and SA bond pricing are starting to creep up. The global bond bull market is at an advanced stage,and experience tells us that when a turning point does come, it will be difficult to time. We would view it as imprudent to place fund capital at risk by making longer-duration bets in an advanced bull market.

The Fund thus remains conservatively underweight, mainly in the 12+ year sector. Yield enhancement continues to be mainly via bank and State Owned Enterprise credit exposure in both bond and cash markets.

The All Bond Index's performance for the month of September was 0.9% and for the quarter, 5.0%. For the month the 7-12 year area performed best, delivering 1.6% while the 12+ year area was the worst performer, up 0.4%. The R157 yield was down 9 basis points for the month from 5.5% to 5.4% and 63 basis points for the quarter. Year-to-date, the index has appreciated 13.0%, with the 7-12 year sector the best performer at 15.3%.

The Fund's return for the year-to-date is 10.6%, lower than the benchmark's gain of 13.0% due to the underweight duration position.

The Nedgroup Investments Bond Fund is benchmarked against the All Bond Index (ALBI) and has exposure across the fixed income curve both in government as well as corporate bonds.

Global leading indicators have weakened recently, as the Eurozone sovereign debt crisis and its implications for global financial markets remains a major risk. Political turmoil in Greece and concerns about the Spanish banking system halted the euro recovery. The safe havens of US and German 10-year yields remain low, having fallen 56 basis points and 21 basis points respectively for the quarter. The Japanese economy is now recovering from the negative shock of last year's earthquake, with reconstruction demand leading to a rebound in output.

In South Africa, the auction of new 11 and 36 year nominal bonds and 13 and 26 year inflation-linked bonds attracted interest from both foreign and local investors. This strong demand and a lower than expected inflation print resulted in curve flattening. Concerns of lower growth have continued to surface with the market increasing probabilities of an interest rate cut towards the end of 2012.

Bond yields were lower across the curve due to lower inflation of 5.7% versus the 6.1% in May and continued demand from foreigners following the official inclusion of South Africa in the Citigroup WGBI. This led to foreigners purchasing R19.3 billion in local bond market for June and R27.3 billion for the quarter. In June, the R157 and R209 were down 40 basis points to 6.0% and 8.5% respectively.

The All Bond Index performance for June was 3.3%. The 12+ year area performed best, delivering 4.6% while the 1-3 year area was the worst performer with 1.4%. The Fund remains underweight in the 7-12 year and 12+ year sector. The Fund's current duration is 4.4 versus the 5.8 of the ALBI.

The outlook for local bonds remains uncertain with continued risk to the upside. Global bonds remain expensive and the amount of issuance required to fund government deficits remains a concern. The Fund's short duration position will be maintained. We continue to hold credit to take advantage of the additional yield pick-up. Yield enhancement in the portfolio continues to be mainly via Bank and State-Owned Enterprise (SOE) exposure in both the bond and cash markets. June 2012

The Nedgroup Investments Bond Fund is benchmarked against the All Bond Index (ALBI) and has exposure across the fixed income curve both in government as well as corporate bonds.

Bond yields were weaker across the curve due to a weaker rand losing 2.4% against US dollar and S&P downgrading South Africa's outlook to "negative". This was despite continued foreign purchases in local bonds of R8.4 billion for the month, bringing their year-to-date purchases to R21.2 billion. South Africa's country risk premium, the yield spread of South Africa's dollar-denominated bond over US treasuries, was 8 bps wider at 2% at the end of March, but is 19 bps narrower for the year-to-date. The downgrade focussed attention on the vulnerability of the local bond and currency markets and encouraged a modest sell-off toward the end of the month.

The credit spread on the Absa bond (2020) narrowed 15 bps due to an auction early in the month and repriced by following the general trend of tighter spreads. Yield enhancement in the portfolio continues to be mainly via bank and State-Owned Enterprise (SOE) exposure in both the bond and cash markets.

The outlook for local bonds remains uncertain with continued risk to the upside. Global bonds remain expensive and the amount of issuance required to fund government deficits remains a concern. The Fund's short duration position will be maintained. We continue to hold credit to take advantage of the additional yield pick-up.

The helpful effects of official liquidity injections that sustained world markets in January and February were not evident during March, and economic growth anxieties surfaced once again, negatively affecting global stock markets. These anxieties are grounded in still-weak economic fundamentals for developed markets, renewed slowdown anxieties in China, and fears of a disruption to oil supplies. US data releases had better-than-expected employment and consumption figures but household debt and subdued house prices remain concerns. Europe remains the largest drag on global growth and has the most significant risk to destabilise markets. These anxieties have encouraged policy makers in all major markets to promise further monetary support.

The All Bond Index performance for March was 0.1%. The 1-3 year area performed best, delivering 0.5%, while the 12+ year area was the worst performer with -0.4%. Bond yields ended the month weaker. The benchmark R157 was up 9 bps from 6.6%, while the long-dated R209 was up 12 bps at 8.8%. Year-to-date, the index has done 2.4% with the 12+ sector the best performer at 2.8%.

The Fund returned 2% for the quarter, which was lower than the benchmark of 2.4%. This was due to the underweight in the 12+ sector, which performed the best for the year. The Fund remains underweight in the 7-12 year and 12+ year sector. The Fund's current duration is 4.2 versus the ALBI at 5.8

The Nedgroup Investments Bond Fund is benchmarked against the All Bond Index (ALBI) and has exposure across the fixed income curve both in government as well as corporate bonds.

Although bond yields ended marginally firmer in December 2012 yields did recover in line with the currency after selling off during the month. The benchmark R157 was down 5 basis points (bps) from 6.8% to 6.7%, while the long-dated R209 was 2 bps lower at 8.8%. The portfolio remains underweight in the 7-12 year and 12+ year sector. The portfolio's current duration is 4.7 versus the 5.8 of the ALBI.

Credit spreads were generally unchanged with the exception of The National Roads Highway bond that was 2 bps weaker after all the negative publicity regarding the Gauteng Toll road issues. Yield enhancement continues to be mainly via Bank and State-Owned Enterprise (SOE) exposure in both the bond and cash market.

The outlook for local bonds remains uncertain with risk still to the upside. Global bonds remain expensive and the amount of issuance to fund government deficits remains a concern. The portfolio's short duration position will be maintained given the global outlook for bonds and the supply pressures. We continue to hold credit to take advantage of the additional pick-up in yield.

The market continues to be dominated by the unsolved woes in the European Sovereign debt markets. This has resulted in the US dollar strengthening against the euro. Global bonds have rallied as the threat of a recession in Europe rises.

On the local front foreign investors were buyers of R2.5 billion in bonds after being sellers of R0.6 billion in November. The November CPI came out at 6.1%, up from 6% on the previous month, and was again driven mainly by food and transport factors.

During the quarter ending December 2011, the Rand was 0.3% firmer against the US dollar and also 0.7% firmer on a trade-weighted basis.

The ALBI performance for December was 0.7%. The 12+ year area was the best performing sector for the month delivering 0.9%, while the 1-3 year sector was the worst performer with 0.6%. South Africa's country risk premium, the yield spread of South Africa's dollar-denominated bond over US treasuries, was 17 bps firmer at 2.3% at the end of December, after being as high as 2.7% during the quarter.

Global bonds ended the quarter firmer. The euro bonds were 6 bps firmer at 1.8%, while the US and UK bonds were 5 bps and 44 bps firmer, at 1.9% and 2.0% respectively.

The SA 10-year implied inflation rate from US bonds is unchanged at about 6.0%.