The Stanlib Bond Fund returned 8.6% for the 12 months ending September 2007, compared to a 9%return for the All Bond Index benchmark. The Fund remains a top performer over all major measurement periods In terms of market movement, although the RSA 2015 R157 bond was little unchanged for the quarter, after opening at 8.33% and closing the quarter at 8.26%, there was actually some volatility in the market as trading levels touched a high of 8.72% and a low of 8.21%. During the quarter, the Fund maintained the bullet strategy of overweight in the middle sector of the yield curve (i.e. the 3-7 years and 7-12 years sectors); however, the modified duration was kept slightly shorter than that of the All Bond Index at 4.8 years versus 5.1 years. The main trades for the quarter included purchases of Bidvest paper maturing in 2014 and securitised paper from Investec maturing in 2012. These purchases were funded by a sale of RSA 2015 R157 paper and some RSA 2036 R209 paper.

The direction of the bond market was affected by a host of factors this quarter, which explains most of the volatility seen. During the quarter, international markets were shocked by developments in the US sub-prime market crises which affected emerging markets negatively. Local corporate bond spreads widened as a result, with local primary issuances occurring at higher levels than in the past. The Rand responded, in line with other emerging market currencies, by weakening to a quarter's worst level of R7.585 before recovering to R6.81 after the Federal Reserve Bank cut the Fed Funds rate by 50 basis points. Locally, the South African Reserve Bank MPC increased the repo rate by 50 basis points in an effort to quell persistent inflation fears. This move pushed yields to the highest point for the month. During the last week of the quarter, the market squeezed lower after the release of slower than expected producer inflation numbers.

The STANLIB Bond Fund retained its top quartile performance for the 12 months measurement period ending 30 June 2007. It is also the best long term performer over all major measurement periods. For the 12 months the Portfolio returned 8.4%, outperforming the benchmark All Bond Index by 0.8%.

The RSA 2015 R157 bond opened the quarter at 7.80%, but subsequently traded a wide range of 7.53% low and 8.55% high before ending the quarter at 8.09%. During the quarter, the modified duration of the All Bond Index increased by 0.16 years after it was reconstituted and reweighed. The Portfolio's duration increased from 5.0 years to 5.1 years but was mainly kept slightly shorter than that of the benchmark. The structure of the Portfolio was kept relatively unchanged with an overweight position in the middle sector of the yield curve. Trades during the quarter included a purchase of RSA 2015 and Imperial Capital 2012, which were funded utilising cash inflows.

Volatility in the bond market continued during the second quarter ending June 2007 as yields ascended near the highest levels in four years on speculation that the SARB will increase the repo rate by another 50 basis points at the August 2007 MPC meeting. The upsurge in yields came as a result of quicker than expected consumer and producer inflation which appeared to be more generalized than in the past. International oil spot prices strengthened by at least $9 per barrel from the quarter's low, closing the quarter at $72.5 per barrel. During the quarter, the yield curve underwent some inversion as the short end weakened by more than the long end in a bid to stay in line with higher money market rates. Market based expectations are for another repo rate hike at the next meeting, however, this view could be negated by a significant slowdown on credit due to the introduction of the National Credit Act (NCA). Modified Duration: 5.1 Years

The Stanlib Bond Fund returned 6.7% compared to the benchmark All Bond Index return of 5.6%, an out-performance of 1.1% during the 12 months ending March 2007. The Portfolio remained the top performer over the three and five year measurement periods. The bond market opened the year at 7.85% on the RSA 2015 R157. Rates then traded to a low of 7.48%, on a very positive demand and supply outlook for bonds, as well as the substantial lengthening of the All Bond Index.

The modified duration was increased during the early part of the quarter from 4.8 years to 5.2 years, to track the Index. The modified duration position was subsequently reduced, as economic fundamentals in the bond market turned bearish. The bullet strategy curve bet was maintained, with the weighting in the 1-3 year and 3-7 year area reduced for an increased weighting in the 7-12 year area. The Portfolio also benefited from the inclusion of corporate paper, issued at wider spread levels over government bonds. The volatility in the market continued in the first quarter, as demand for duration continued in line with the lengthening of the Index, as well as Government's positive fiscal position, creating a supply shortage over the next year or two.

The decision by the SARB not to increase the Repo rate at the Februarymeeting, was another bullish factor for bonds during the quarter. The fundamental outlook for inflation deteriorated in the latter part of the quarter, with the Rand trading to a high of 7.54 against the US Dollar and oil and maize prices rising sharply. The yield curve remained inverted, as demand for duration 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: 5.0 Years

The STANLIB Bond Fund returned 6.6% compared to the benchmark All Bond Index return of 5.5%, an out performance of 1.1% during the 12 months ending December 2006.The Fund remained the top performer over the three and five years measurement period. The bond market opened the quarter at 8.63% on the RSA 2015 R157. It then traded up to 8.70% before embarking on an 80 basis points bull market, ending the year at 7.85%. The modified duration of the Fund was lengthened from 4.1 years at the beginning of the quarter to 4.8 years to take advantage of the strength in the market. Although the Fund still maintained a bullet strategy in the middle sector of the yield curve, the fund manager switched from the 3-7 years sector of the yield curve to the longer dated 7-12 years sector to benefit from the inverted yield curve. The purchases were funded by cash inflows as the Fund size increased from 850 million to R1.3 billion during the fourth quarter.

The volatility in the market continued in the fourth quarter as demand for duration increased due to an expected supply squeeze following the government's higher than expected revenue collections. The subsequent strength was also underpinned by a resurgent Rand, which strengthened from R7.915 to R6.92 to the dollar on the back of a weaker dollar against major crosses. The yield curve experienced further inversion as the long end was well bid and the short end stayed at higher levels in line with money market rates. The market will await the next SARB MPC meeting on the 14th and 15th February, with most analysts calling for another 50 basis points increase in the repo rate.

Modified Duration: 4.8 Years

STANLIB Bond Fund (A) won the Best Domestic Fixed Interest Fund Straight Performance Raging Bull Award 2006. The fund had the highest ProfileData total investment return ranking over three years to December 2006 in the ACI Domestic Fixed Interest Bond and Income sectors.
Funds were ranked as at 31 December 2006 on a three-year lump-sum NAV-to-NAV basis (ie, entry costs were not taken into account) with income distributions reinvested at the ex-div date. Calculations by ProfileData.