The performance of the fund for the third quarter of 2006 was a total return of 6.51%[8.05%] of which 2.05% was income and 4.46% was capital. The negative effect of rising interest rates was offset by strong earnings growth reported by the underlying property companies during August. This quarter the Fund paid out the highest distribution since inception as a result of the continued strong fundamentals in the physical property market. The panic selling by investors, who wrongly have a short-term investment horizon and which was characteristic of the 2nd quarter, is out of the market. Fundamentals in the underlying property market remain strong with the results from listed property companies continuing to be ahead of market expectations. Over the next 3 years strong fundamentals in the underlying physical property market are expected to support both earnings growth and capital appreciation. However there will be short-term capital volatility during the rising interest rate cycle.

The property exposure of the fund is as follows:
Retail 47% --Gauteng 62%
Offices 34% --Western Cape 19%
Industrial 18% --KwaZulu Natal 9%
Specialized 1% --Other Provinces 10%
Offshore 0% --Offshore 0%
Total Properties 100% --Total Properties 100%

Because of continuing concerns regarding inflationary pressures in the economy, SA interest rates are expected to move up by a further 100 basis points by the end of 2006, with a probability of a further 50 basis points increase early in 2007. The fund has declared the distribution for the second[third] quarter of 2006 of 4.36 cents per unit, which was as expected. Over the next 12 months the fund is expected to generate a Total Return of 8.5% (before fees), being income only as the above interest rate scenario is likely to offset capital appreciation.

The performance of the fund for the second quarter of 2006 was a total return of -17.6%. Listed property was negatively affected by rising interest rates and concerns regarding a weaker currency during the quarter. This was excessive relative to bond yields because of panic selling by investors who wrongly have a short term investment horizon. Fundamentals in the underlying property market remain strong with the results from listed property companies continuing to be ahead of market expectations.

Over the next 3 years strong fundamentals in the underlying physical property market are expected to support both earnings growth and capital appreciation. However there will be short term capital volatility during the rising interest rate cycle. Because of concerns regarding inflationary pressures in the economy and rising interest rates globally, SA interest rates are expected to move up by a further 100 basis points by the end of 2006, with a small probability of a further 50 basis points increase early in 2007. The fund has declared the distribution for the second quarter of 2006 of 2.97 cents per unit, which was as expected. This is lower than the second quarter of 2005 because one of the fund's largest holdings paid out during the second quarter last year when they have previously always paid during the third quarter. The early payment last year was because of an attempted takeover of another company and resulted in an abnormally high distribution during the second quarter of 2005. During the third quarter this year the situation will normalise. Over the next 12 months the fund is expected to generate a Total Return of 16%(before fees), given the above interest rate scenario.

The performance of the fund for the first quarter of 2006 was a total return of 21.46% of which 1.64% was income and 19.61% was capital return. Listed property again performed ahead of expectations during the quarter with the results from listed property companies continuing to be ahead of market expectations. This better than expected actual growth combined with upgraded earnings forecasts has generated good capital growth without lowering the expected forward yield. The strong fundamentals in the underlying physical property market are expected to support earnings growth over the next 3 years.

Because of benign inflationary pressures in the economy, interest rates are unlikely to move up during 2006. This, coupled with continued growth in listed property earnings, should result in further growth in capital values in listed property, although at a slower pace.

The fund has declared the distribution for the first quarter of 2006 of 2.98 cents per unit, which was as expected. The rolling 12month distribution growth is 10.8%.Over the next 12 months the fund is expected to generate a Total Return of 13%(before fees), given a stable interest rate environment.

Stanlib Property Income manager Mariette Warner is optimistic that property will continue to deliver solid growth. A similar view in 2005 saw her maintain a fully invested stance when many managers upped liquidity. She believes that with strong earnings growth set to continue, even a modest interest rate hike over the next 12 months would not detract from property's appeal. But she feels stock selection is vital, a task for which her 20 years' experience has equipped her well.

Financial Mail - 24 March 2006

The performance of the fund for 2005 was a total return of 47.62% of which 8.27% was income and 39.35% was capital return. Listed property again performed very well during the year with continued strong fundamentals in the underlying physical property market generating good earnings growth from the listed property companies. This has also caused significant increases in net asset values as a result of rising rentals and falling vacancies.

Because of benign inflationary pressure in the economy, interest rates are unlikely to move up during the first half of 2006. This, coupled with continued growth in listed property earnings, should result in stable capital values in listed property.

The fund has declared the distribution for the third quarter of 2005 of 1.96 cents per unit, which was as expected. For 2006 we expect the fund to generate a Total Return of 16% (before fees), given a stable interest rate environment.

The annual service fee of the STANLIB Property Income Fund is currently a performance based fee ranging between 1% and 2% (excluding VAT) based on the performance of the portfolio relative to the current benchmark of the combined FTSE/JSE Property Unit Trust Index and FTSE/JSE Property Loan Stock Index.

From 25 February 2006 the annual service fee will change to 1.3% per annum (excluding VAT).

There are two key reasons for amending the annual service fee:

1. This fee is in line with the fees charged by similar collective investment scheme portfolios and will result in the service fee being 0.30% p.a. higher when the portfolio would not have outperformed the benchmark and 0.70% p.a. lower when it would have outperformed the benchmark.

2. This basic annual service fee (constant fee) is easier to understand and calculate than a performance based fee. There is no longer any reliance on an externally calculated benchmark to determine the fee payable.

Amendment to portfolio benchmark

When the portfolio was launched in September 2002, there was no comprehensive property benchmark against which to measure the portfolio. A makeshift benchmark was created by combining the FTSE/JSE Property Unit Trust Index and FTSE/JSE Property Loan Stock Index. These are the legal structures within which direct property assets are collected and listed on the relevant exchange (in this case the JSE Securities Exchange). The JSE Securities Exchange has recently launched the FTSE/JSE SA Listed Property Index (SAPY). The SAPY is designed to accurately track the domestic property sector, represent an investable index and has already been adopted by many property collective investment scheme portfolios as a benchmark. As the listed property sector has evolved into a significant part of our market, its size has increased considerably, allowing for the construction of a more efficient index (benchmark) that was not practically possible at the time of the launch. In conjunction with the amendment of the annual service charge, STANLIB will be amending the portfolio benchmark of the STANLIB Property Income Fund to the FTSE/JSE SA Listed Property Index from 25 February 2006.