This document provides a fixed income update and market outlook from the STANLIB Fixed Income team. It discusses various risks and uncertainties in the global and South African economic and market environment that could impact fixed income returns. These include the risks of recession, volatility, Brexit, trade wars, Eskom's financial constraints, and South Africa's rising government debt and weak growth outlook. The document also reviews the STANLIB Income Fund's positioning, maturity profile, and risk-adjusted returns compared to other asset classes.

1. Fixed Income Update

2. Henk Viljoen
Co-Head of Fixed Income
Nthabiseng Malebatja
Portfolio Manager
Depth and experience at our clients’ disposal
BCom (Hons) (Economics)
37 years of experience
Co-Heads Fixed
Income Team Bond and Income Fund Money Market Credit Analyst
BCom
30 years of experience
BCom (Hons) (Economics)
12 years of experience
BCom Acc (Hons), CA(SA),
CFA
11 years of experience
BCom (Hons), CFA
21 years of experience
Masters Finance and Investments
10 years of experience
BSc (Actuarial Science)
7 years of experience
MCom (Economics) (Cum Laude)
34 years of experience
BCom(Hons) (Econometrics)
22 years of experience
BCom (Hons), CA(SA)
16 years of experience
Njabulo Ngcobo
Portfolio Manager
Mary Hartigan
Portfolio Manager
Eulali Gouws
Portfolio Manager
Stephan Pienaar
Credit Investment Analyst
Sylvester Kobo
Portfolio Manager
Robin Mulder
Portfolio Manager
Victor Mphaphuli
Co-Head of Fixed Income
Ansie van Rensburg
Head of Money Market
Beverley Warnasuriya
Head of Credit
BCom (Hons), CFA
8 years of experience
2

3. Total AUM for Fixed Income Funds
31 December 2018
Total AUM – R206 billion
Preference
Shares
R0.06bn
TAA
R4.8bn
LDI Funds
R4.1bn
Money
Market
R108.3bn
Income
Funds
R50.0bn
Bond
Funds
R38.3bn
3

4. Market outlook

5. 5
The world of volatility
CORPORATE
MALFEASANCE
BREXIT TRADE WARS ESKOM SA ELECTIONS

6. 6
Majority of bear markets coincide with recession
Source: BofAML
• Out of 13 bear markets since 1928, 10 coincided with a recession
(and only 3 recessions with no bear market)
S&P500peaktotrough(%)
100%
80%
60%
40%
20%
0%
’28 ‘32 ‘36 ‘40 ‘44 ‘48 ‘52 ‘56 ‘60 ‘64 ‘68 ‘72 ‘76 ‘80 ‘84 ‘88 ‘92 ‘96 ’00 ‘04 ‘08 ‘12 ‘16
Bear Market Recession Non-Bear Markets

7. 7
Short to medium-term US recession probabilities rising
Source: JP Morgan (18 Jan 2019)
0%
20%
40%
60%
80%
100%
2011 2013 2015 2017 2019
Probability of recession within:
1 Year
2 Years
3 Years
4 Years
2011 2013 2015 2017 2019
100%
80%
60%
40%
20%
0%

8. 8
US yield curves – Is a recession cooking?
-1
0
1
2
3
1985
1987
1989
1991
1993
1995
1997
1999
2001
2003
2005
2007
2009
2011
2013
2015
2017
Percentage points
5-year less 2-years
5-year less 3-years

9. 9
US Feds pushing back on aggressive hikes

10. 10
Fund Manager survey
What is keeping fund managers awake at night right now
15%
19%
9%
5%
1%
6%
11%
11%
0%
8%
14%
0% 2% 4% 6% 8% 10% 12% 14% 16% 18% 20%
Liquidity
A major market crash
Brexit
The impact of climate change
Trade wars
Trump
Excessive government debt
The rise of nationalism and populism
Inflation
Cyberwarfare/crime
The burden of regulation

11. 11
Volatility index
0
5
10
15
20
25
30
35
40
45
Jan-14
Mar-14
May-14
Jul-14
Sep-14
Nov-14
Jan-15
Mar-15
May-15
Jul-15
Sep-15
Nov-15
Jan-16
Mar-16
May-16
Jul-16
Sep-16
Nov-16
Jan-17
Mar-17
May-17
Jul-17
Sep-17
Nov-17
Jan-18
Mar-18
May-18
Jul-18
Sep-18
Nov-18

12. 12
Eskom’s financial constraints: 3 year view
FY20 FY21 FY22 Total
MYPD4 Revenue Applied (R’bn) 219 252 291 762
MYPD4 Revenue Granted (R’bn) 206 222 233 661
Shortfall (R’bn) 13 30 58 101
Regulatory Clearing Account –RCA (4
Year Recovery In Rbn)
8 8 8 25
Shortfall (Including RCA ) 5 22 50 76
Nominal Bond Maturities 14 9 26 49
Less Government Injection 23 23 23 69
Total Shortfall (R’bn) -4 8 53 56

13. 13
South Africa government contingent liabilities
Source: Bloomberg
Rbn Fiscal years
100
200
300
400
500
600
700
800
900
1000
06/07
07/08
08/09
09/10
10/11
11/12
12/13
13/14
14/15
15/16
16/17
17/18
Contingent liabilities average annual growth 15.8%

14. 14
South Africa business confidence (BER)
15
25
35
45
55
65
75
85
95
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
Index

15. 15
South Africa corporate profitability: bad for
government revenue
-60
-40
-20
0
20
40
60
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
Corporate net profit/loss before tax
Corporate income tax revenue
(2Q moving sum, % y/y)

16. South Africa real GDP growth (10-year average)
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
4.5
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
%y/y, ten-year average

17. SA government debt outlook
41.1
43.7
46.5
48.9
50.6
52.7
55.1 55.3
56 56.2
52.7
55.6
56.2
57.8 58.9
40
42
44
46
48
50
52
54
56
58
60
62
12/13
13/14
14/15
15/16
16/17
17/18
18/19
19/20
20/21
21/22
Rbn Fiscal years
2018/2019 Budget
February 2018
2019/2020 Budget
February 2019

18. 18
South Africa sovereign rating by Moody’s
0
1
2
3
4
5
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
Baa3
Baa2
Baa1
A3
A2
Ba1
Investment grade cut-off
Rating class history
Baa3
Baa2
Baa1
A3
A2
Ba1
Investment grade cut-off

19. 19
Bonds vs Rand correlation still high
7
7.5
8
8.5
9
9.5
10
10.5
11
10
11
12
13
14
15
16
17
18
Rand R186

20. 20
South Africa peers CDS spreads
A1 A2 A3 Baa1 Baa2 Baa3 Ba1 Ba2 Ba3
Moody’s Rating
Turkey
Senegal
OmanItaly
South Africa
Indonesia
Colombia
Romania
Kazakhstan
Cyprus
Brazil
Guatemala
Russia
Bulgaria
Slovenia
Thailand
Panama
Philippines Serbia
Mexico
Peru
Poland
Slovakia
China
Brazil
Chile
Average
Poly. (Average)
400
350
300
250
200
150
100
50
0
5-yearUSDCDS(bps)

21. 21
Foreign holding of South Africa bond market
0
5
10
15
20
25
30
35
40
45
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
Percentage of market

22. 22
Flows into dedicated Emerging Markets funds (bond
and equity total)
Source: EPFR Global, Barclays Research
10
8
6
4
2
0
-2
-4
-6
-8
May-2018 Jun-2018 Aug-2018 Sep-2018 Oct-2018 Dec-2018 Jan-2019 Feb-2019
Equity Bond EM Flows
$bn

23. 23
Inflation firmly inside target range
2019
2018
2017
2016
2015
2014
2013
2012
2011
2010
2009
10
9
8
7
6
5
4
3
2
% y/y

24. 24
Emerging Markets: inflation targeting mandates
Source: CITI
%
3.0
2.0
4.0 4.0 4.0
3.0
2.5
4.5
3.0 3.0 3.0
2.0 2.0
3.0
2.5 2.5
2
3
2
3
2 2 2
1 1
2
1.5 1.5
3 3
6
5 5
4
6
4 4 4
3 3
4
3.5 3.5
7
3
6
8.0
7.0
6.0
5.0
4.0
3.0
2.0
1.0
0.0
Lower tolerance / Target floor Upper tolerance/Target ceiling
1 1
China
Korea
Russia
India
Indonesia
Philippines
Thailand
Brazil
Chile
Colombia
Mexico
Peru
CzechRep.
Hungary
Poland
Romania
Turkey
Israel
S.Africa
Point target Point target with tolerance band
Target
range
3.0
2.0
4.0 4.0 4.0
3.0
2.5
4.5
3.0 3.0 3.0
2.0 2.0
3.0
2.5 2.5
5.0
Point target

25. 25
Market now expecting rates to be flat
-
-1
- - -
1
4
8
13
-10
-5
-
5
10
15
20
5.1
5.6
6.1
6.6
7.1
7.6
8.1
8.6
9.1
Apr
'19
May
'19
Jun
'19
Jul '19 Sep
'19
Dec
'19
Mar
'20
Jun
'20
Sep
'20
Market Change (rhs) Market View (lhs)
11 14
26 30
44
67
79
90
96
-
20
40
60
80
100
120
140
160
180
200
6.0
6.3
6.5
6.8
7.0
7.3
7.5
7.8
8.0
8.3
8.5
Oct
'18
Nov
'18
Dec
'18
Jan
'19
Mar
'19
Jun
'19
Sep
'19
Dec
'19
Feb
'20
Market Change (rhs) Market View (lhs)
2018 market expectationsCurrent market expectations

26. Fund positioning and performance

27. STANLIB Income Fund

28. 28
Income fund vs other asset classes
90.00
95.00
100.00
105.00
110.00
115.00
120.00
125.00
130.00
135.00
140.00
Feb-16
Mar-16
Apr-16
May-16
Jun-16
Jul-16
Aug-16
Sep-16
Oct-16
Nov-16
Dec-16
Jan-17
Feb-17
Mar-17
Apr-17
May-17
Jun-17
Jul-17
Aug-17
Sep-17
Oct-17
Nov-17
Dec-17
Jan-18
Feb-18
Mar-18
Apr-18
May-18
Jun-18
Jul-18
Aug-18
Sep-18
Oct-18
Nov-18
Dec-18
Jan-19
Feb-19
Asset Class Cumulative Graph - 3 Years - 28 Feb'19
All Share Index ALBI STeFI Composite Index SAPY ZARUSD STANLIB Income Fund

29. 29
Compelling risk adjusted return over time
ALSI
ALBI
STeFI
MSCI World Index - Net
JP Morgan Global Bond
SAPY
JSE Capped SWIX
SWIX
S & P 500
Barclays - SA Govt Inflation
Barclays Global Aggregate
MSCI Emerging Markets Index
MSCI All Countries IMI
MSCI AC World Net
HFRXGL (Global Hedge Fund)
Barclays Global Multiverse
ZARUSD
STANLIB Income Fund
Vol = 0.66%
-4.00%
-2.00%
0.00%
2.00%
4.00%
6.00%
8.00%
10.00%
12.00%
0.00% 2.00% 4.00% 6.00% 8.00% 10.00% 12.00% 14.00% 16.00% 18.00% 20.00%
Return
Risk

30. 30
Impressive stable returns with less capital volatility
95
100
105
110
115
120
125
130
135
140
145
150
155
160
Feb-14
Apr-14
Jun-14
Aug-14
Oct-14
Dec-14
Feb-15
Apr-15
Jun-15
Aug-15
Oct-15
Dec-15
Feb-16
Apr-16
Jun-16
Aug-16
Oct-16
Dec-16
Feb-17
Apr-17
Jun-17
Aug-17
Oct-17
Dec-17
Feb-18
Apr-18
Jun-18
Aug-18
Oct-18
Dec-18
Feb-19
Capital Income Total

31. 31
STANLIB Income Fund maturity profile
29%
32%
38%
1% 0%
0to1
years
1to3
years
3to7
years
7to12
years
Over12
years
Portfolio

32. 32
STANLIB Income Fund maturity profile of credit
Exposure to STANLIB Institutional Money Market
is included in the 0-1 year category
Maturity profile % Weighted duration
0 to 1 years 27.0% 0,048
1 to 3 years 32.6% 0,140
3 to 7 years 39.2% 0,219
7 to 12 years 1.3% 0,009
Over 12 years 0.0% 0,000
Total 0.416
0.000
0.050
0.100
0.150
0.200
0.250
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
0 to 1 years 1 to 3 years 3 to 7 years 7 to 12 years Over 12 years
WeightedDuration
%ofportfolio
Maturity

33. 33
STANLIB Income Fund – credit quality breakdown
4%
3%
12%
59%
22%
0% 10% 20% 30% 40% 50% 60% 70%
Other
BBB
A
AA
AAA
Average credit rating quality increased to AA

34. STANLIB Income Fund – Top 10 Holdings
Issuer % Holding
Standard Bank 17%
Investec 8%
Absa 7%
Eskom 7%
Firstrand 7%
Nedbank 5%
Amber House 4%
Thekwini 4%
Landbank 4%
KAP Industrial 2%
2%
4%
4%
4%
5%
7%
7%
7%
8%
17%
KAP Industrial
Landbank
Thekwini
Amber House
Nedbank
Firstrand
Eskom
Absa
Investec
Standard Bank

35. 35
Quality returns backed by ESG Framework
ENVIRONMENTAL
• Diversity
• Labour Unions/Wage contracts
• Technology
• Community/Social demographics
• Regulations
SOCIAL
• Pollution
• Recycling
• Regulation
• Renewable Energy
• Resources
• Board Composition/Independence
• Compliance/Regulators
• Politically exposed
• Financial policies/Remuneration
• Transparency
GOVERNANCE

36. 36
STANLIB exclusions include
Exclusions based on ESG:
• Exploitive forms of labour and any form of child labour;
• Manufacture of weapons and weapon systems;
• Production or distribution of narcotic drugs;
• Production or trade of any product or activity deemed illegal by laws, (animal poaching, illegal
harvested timber; environmental pollution, oil operations, pornography, etc.);
• History of serious health and safety breaches;

37. 37
5-year cumulative returns
100.00
110.00
120.00
130.00
140.00
150.00
160.00
Income Fund Benchmark CPI
R153
R126
R140

38. 38
STANLIB Income Fund performance
28 February 2019 1 Year 3 Years 5 Years
STANLIB Income Fund 9.5 10.3 8.9
Benchmark - Stefi 7.3 7.4 7.0
Out/Under Performance 2.2 2.9 1.9

39. 39
STANLIB Income Fund vs expected CPI
2
3
4
5
6
7
8
9
10
11
12
CPI Income Fund CPI Projections Fund Return Projections
2017 2018 2019

40. Thank you

41. Disclaimer
Collective Investment Schemes (CIS) in Securities are generally medium to long-term investments. An investment in the participations of a
collective investment scheme in securities is not the same as a deposit with a banking institution. The value of participatory interests may go
down as well as up and past performance is not necessarily a guide to the future. CIS are traded at ruling prices and can engage in borrowing
and scrip lending. A schedule of fees and charges and maximum commissions is available on request from STANLIB Collective Investments
(“the Manager”). Commission and incentives may be paid and if so, would be included in the overall costs. Forward pricing is used.
Fluctuations or movements in exchange rates may cause the value of underlying international investments to go up or down. Liberty is a full
member of the Association for Savings & Investment SA (ASISA). The Manager is a member of the Liberty group of companies.
The information and content of this document are intended to be for information purposes only and STANLIB does not guarantee the suitability
or potential value of any information contained herein. STANLIB Wealth Management Limited does not expressly or by implication propose that
the products or services offered in this document are appropriate to the particular investment objectives or needs of any existing or prospective
client. Potential investors are advised to seek independent advice from an authorised financial adviser in this regard. STANLIB Wealth
Management Limited is an authorised Financial Services Provider in terms of the Financial Advisory and Intermediary Services Act 37 of 2002
(Licence No. 26/10/590)
41