It was a fascinating quarter for global equity markets. The panic and uncertainty that engulfed global market in mid July subsided in mid August on indications that key central banks would act to prevent a global financial meltdown. The US Fed reduced its key interest rates in August and again in September, raising expectations that global interest rates had peaked. Importantly, the Fed's statement suggested the risk of significantly lower growth was greater than the risk of higher inflation. This facilitated a sharp improvement in global risk appetite, which in turn boosted equities around the globe. The US dollar came under renewed pressure, falling to a record low against the Euro on expectations of lower, while commodity prices firmed (source: Investment Solutions). This was very positive for Emerging Markets, which rallied 14.9% in dollar terms during the quarter. Asia (+3.4%), Europe (+3.0%) and the US (+2%) produced healthy returns however Japan (-0.6%) lagged. The MSCI World Index produced a 2.5% return in dollars. The Fund was well ranked for the quarter amongst its peers but due to rand strength during the quarter, produced a small negative return.

The Fund remained overweight Europe and Asia and underweight the US relative to the MSCI during the period. This added to performance. The Global Equity and the North American Funds out performed their benchmarks for the quarter, whilst the Pan European and Asian Pacific marginally underperformed theirs. We were active in the Global Equity Fund during the quarter where we removed ACM (Growth) and Capital International (Core) and replaced them with T. Rowe Price and Gartmore respectively. Going forward it is likely that we will be making some other manager changes in the regional funds in order to affect our best investment view.

Despite one or two scares during the quarter, equity markets in general posted a reasonable first quarter. The Federal Reserve left the target repurchase rate unchanged for the quarter, and the decision to remove the tightening bias from the wording of their statement gave the equity markets considerable encouragement.While a slowdown in US growth is widely anticipated, the outlook for inflation remains uncertain, as does the extent and impact of the housing market slowdown currently being experienced.

The Euro-area continues to surprise on the upside, largely buoyed by the ongoing corporate activity. The much anticipated recovery in Japan remains elusive, as domestic spending continues to be restrained. Resources stocks have been resurgent, as commodity prices demonstrate extreme resilience. The STANLIB Multi-Manager International Fund of Funds was the target portfolio for the rationalization of a number of STANLIB's offshore portfolios during the fourth quarter of 2005, thus 2006 represented the first full year duringwhich the portfoliohas been structured in its current format. No changes were made to either the geographic allocations of the portfolio or to any of the underlyingmanagers during the quarter.

Performance from the underlying portfolios was largely pleasing over the quarter, as several of the underperforming managers appear to have turned the corner. No clear picture has yet emerged as to whether our bias toward large capitalisation growth managers is correct, nonetheless we remain convinced that this positioning, while made too early, is appropriate for the prevailingmarket conditions.

The outlook for global markets going forward appears mixed. The USA is likely to enter a period of slowing growth as it feels the impact of the 17 rate hikes imposed by the Federal Reserve, coupled with a slowing housing market. The Euroarea has experienced improving growth, and markets are likely to remain supported by ongoing corporate activity. Japanese economic data remains broadly encouraging, although a sustained economic recovery will require increased spending on the part of consumers. The STANLIB Multi-Manager International Fund of Funds was the target fund for the rationalization of a number of STANLIB's offshore funds during the fourth quarter of 2005, thus 2006 represents the first full year duringwhich the fund has been structured in its current format. No changes were made to either the geographic allocations of the Fund or to any of the underlyingmanagers during quarter.

Performance from the underlying funds has been mixed, with several of the underlying managers producing returns well adrift of their respective benchmarks. The worst of these were Loomis Sayles in the North American Equity Fund and Legg Mason in the Asia Pacific Equity Fund. The Fund's tilt to large capitalisation growth managers also detracted from performance. We remain convinced, however, that this positioning, while made too early, is appropriate for the prevailingmarket conditions.

The equity content of the Fund at 31 December 2006 was 98.1%, marginally down on the level of 99.0% at 30 September 2006.