The Stanlib Flexible Income Fund returned 11.6% for the year ending 30 September 2007. The Fund is classified in the Fixed Interest Varied Specialist category.

Trades for the third quarter ending 30 September 2007 included the purchase of longer dated money market assets at attractive levels. Purchases of bonds included issues from Standard Bank, Absa and SAB Miller. Sales in corporate bonds included MTN, Calyon and Absa. The exposure to floating rate notes wasmaintained. Exposure to property was maintained at a low level due to the changing interest rate environment. No further exposure to preference shares was taken.

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 Flexible Income Fund returned 10.38% for the year ending 30 June 2007. The Portfolio is classified in the Fixed Interest Varied Specialist category.

Trades for the second quarter ending 30 June 2007 included the sale of short dated money market assets. Purchases of bonds included issues from Standard Bank, Imperial Group, MTN, Supergroup, DaimlerChrysler and African Bank. Sales in corporate bonds included Absa. The exposure to floating rate notes was increased through the purchase of mortgage securitisation assets. Exposure to property was reduced, as valuations became expensive due to the changing interest rate environment. The exposure to preference shares was reduced during the quarter, through the sale of FirstRand preference shares.

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 43months. 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 SARBMPChaving to increase rates further. Modified Duration: 2.01 years.

The STANLIB Flexible Income Fund returned 7.1% for the year ending 31 March 2007. The Portfolio is classified in the Fixed Interest Varied Specialist category. Trades for the first quarter ending 31 March 2007, included the sale of short dated money market assets. Purchases of bonds included issues from Standard Bank, Absa, Nedbank, Anglogold, MTN, Calyon, Barlowoworld and Group Five. Sales in corporate bonds included Absa, Investec,and Supergroup.

The exposure to floating rate notes was increased through the purchase of mortgage securitisation assets. Exposure to property was maintained, as valuations remained attractive compared to long bond yields. The exposure to preference shares was reduced during the quarter, through the sale of Absa preference shares. 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: 1.7 years

The STANLIB Flexible Income Fund returned 6.4% for the year ending 31 December 2006. The Fund is classified in the Fixed Interest Varied Specialist category. Trades for the third quarter ending 31 December 2006, included the sale of short dated money market assets. Exposures to parastatalswere deceased through the sale of Eskom and TCTA paper. Purchases of bonds included the RSA 2015 as well as in corporate bonds of Standard Bank and Super Group. Sales in corporate paper included Absa, Investec, MTN and Calyon. The exposure to floating rate notes were maintained in the various securitisation assets. Exposure to property was increased, as valuations remained attractive compared to long bond yields.

The exposure to preference shares was slightly reduced during the quarter, through the sales of Standard Bank and Firstrand preference shares. During the quarter the SARBMPCincreased the Repo 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 12 month 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: 1.2 years