The Liberty Stable Growth Fund is a smoothed, absolute return portfolio which has as its aim:

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1 PERFORMANCE CONCERNING THE LIBERTY STABLE GROWTH FUND Dear sir/madam, 09 November 2016 This letter aims to clarify the positioning of the Liberty Stable Growth Fund, which underlies the Liberty Life Stage as well as various investment strategies offered by Liberty Corporate. PHILOSOPHY OF THE PORTFOLIO The Liberty Stable Growth Fund is a smoothed, absolute return portfolio which has as its aim: - A benchmark of CPI + 5% per annum over rolling three-year periods - Using risk management via protection strategies to limit large losses in relation to major market losses - Smoothing the return over time to limit short term volatility in returns The portfolio does not make use of guarantee structures nor does it guarantee any level of return as such guarantees are perceived in the case of this portfolio s strategy to be costly and unnecessary in achieving the overall long term portfolio objectives. This is also in line with National Treasury guidelines which aim to ensure high-quality, low-cost returns for investors. More information about the portfolio philosophy is provided in Appendix A. RECENT PERFORMANCE OF THE PORTFOLIO Historically the portfolio has been able to deliver positive returns over all rolling one-year periods, with its lowest one-year return being 3.9% over any one year. This is illustrated graphically in Appendix B. More recently, market performance has struggled in line with market conditions being poorer over the last three years and particularly over the past year as compared to previous years from 2009 to Performance compared to benchmark is shown below:

2 September 2016 bonus declaration In keeping with the portfolio philosophy, the portfolio will declare an immediate return if a deficit lower than -5% occurs. As a result of poorer market returns over the previous months during 2016 and in line with the PPFM, the portfolio did breach its -5% deficit level on 28 September Accordingly a -3.06% return was passed on 29 September 2016 to return the portfolio to a -2.5% deficit at that point. This was to prevent any new investors to the portfolio (contributions or switches in) from effectively funding a deficit. The same logic would apply if the fund was in surplus and we would not want to prejudice existing investors from sharing their surplus with new investors. Performance relative to market portfolios We undertook a review of performances over one and three years of all South African Multi-Asset unit trusts (excluding income funds) for the period ending 08 November The Liberty Stable Growth was in the top quartile (highest 25% of funds) compared to that group of portfolios over the one year period and over the three year period. The table below shows net performance in annualized terms. For the period ending 08 November year 3 years p.a. First Quartile Median Third Quartile Liberty Stable Growth Fund It can therefore be seen that performance of the portfolio is not significantly out of line with those of other portfolios available in the market over the various time periods considered. Index performance over time The long term strategic asset allocation of the portfolio, which is amended in line with expected long-term future market conditions from time to time is: - 55% Local Equities - 10% Local Bonds - 10% Local Cash - 15% Global Equity - 10% Global Bonds

3 The table below shows the performance of various indices used within the portfolio, over the year-to-date, one-year and three-year period to end October The three year period is annualized. 1 year 3 years p.a. 5 years p.a. Local Cash 7.24% 6.46% 6.03% Local Bonds 6.93% 6.91% 7.58% Local Equity -3.42% 6.66% 12.68% Foreign Equity -3.29% 12.20% 18.66% Foreign Bonds 3.42% 10.51% 11.03% The actual returns on local equity over the long term are expected to be around 7% higher than inflation, or around 12% in nominal terms. This has not been achieved over the one-year or three-year period. As local equities make up 55% of the long-term allocation of the portfolio, the underperformance of this asset class should cause a general underperformance of the long-term inflation objective. Risk statistics Since inception of the portfolio (01 October 2012), the following risk statistics related to the fund exist. These are compared to a typical moderately-balanced fund in the market over the same periods: Stable Growth Typical Balanced Volatility 1 year 4.28% 8.37% Volatility 3 year 3.01% 5.92% Sharpe Ratio 3 year Maximum Draw Down -3.12% -5.05% The portfolio has managed to satisfy its intention of reducing volatility compared to market-linked portfolios. The maximum drawdown on the portfolio is just over -3% in the time period (lower than that of other market-linked portfolios). The Sharpe ratio, which measures the portfolio return ahead of a hurdle rate (in this case money market returns) as a proportion of the volatility of the portfolio is positive and over 0.5 over a three year period, and furthermore is in line with other funds in the market.

4 Conclusion The Liberty Stable Growth Fund is a smoothed absolute return portfolio which aims to deliver market-linked performance over time while avoiding large losses in the market. The portfolio has a simple formula for declaring monthly returns in advance based on the increase in CPI and the funding level of the portfolio. The portfolio is also designed to deliver long-term returns and should not be assessed on its short term returns. The asset allocation of the portfolio is designed with the long term performance of the underlying asset classes in mind. The current market conditions with significant market volatility and an increase in sociopolitical uncertainty both in South Africa and globally must also be taken into account. The portfolio does not contain expensive capital guarantees or performance fees and charges a simple fee deducted daily from the performance. Should you require anything further, please do let me know. Kind regards, John Taylor Marketing Actuary Liberty Corporate john.taylor@liberty.co.za

5 APPENDIX A: PORTFOLIO PHILOSOPHY AND MECHANICS The Liberty Stable Growth Fund is a smoothed, absolute return portfolio which has as its aim: - A benchmark of CPI + 5% per annum over rolling three-year periods - Using risk management via protection strategies to limit large losses in relation to major market losses - Smoothing the return over time to limit short term volatility in returns The portfolio does not make use of guarantee structures nor does it guarantee any level of return as such guarantees are perceived in the case of this portfolio s strategy to be costly and unnecessary in achieving the overall long term portfolio objectives. This is also in line with National Treasury guidelines which aim to ensure high-quality, low-cost returns for investors. The long term strategic asset allocation of the portfolio, which is amended in line with expected long-term future market conditions from time to time is: - 55% Local Equities - 10% Local Bonds - 10% Local Cash - 15% Global Equity - 10% Global Bonds The bonus declaration formula The portfolio declares bonuses formulaically in line with the published Principles and Practices of Financial Management (PPFM) for the Liberty Stable Growth Fund. A summary of the formula is shown below. Each month s bonus is set with reference to the increase in the prevailing Consumer Price Index over 12 months lagged by 3 months. It also takes into account any surplus of assets over liabilities, or else deficit in the case of liabilities exceeding assets. ( ) In order to prevent the surplus or deficit from becoming too concentrated and hence prejudicing members entering/exiting or remaining in the portfolio under certain circumstances, the portfolio will declare an immediate return if the deficit decreases below -5% or the surplus increases above +5%. The extent of this immediate return is to return the portfolio s reserve to a -2.5% or +2.5% level depending on if the portfolio is in deficit or surplus respectively.

6 APPENDIX B: ONE-YEAR ROLLING RETURNS Historically the Liberty Stable Growth Fund has been able to deliver positive returns over all rolling one-year periods, with its lowest one-year return being 3.9% over any one year. The graphic below shows the movement in this one-year return over time as compared to the annual increase in inflation as measured by the Consumer Price Index, along with a comparison to a typical multi-asset (balanced) fund in the market. It can be seen that the performance of the Liberty Stable Growth Fund does follow in line with the multi-asset portfolio s performance over time, but can be ahead and beneath that portfolio for some time. Importantly, the market performance has resulted in portfolio performances decreasing more recently.