Northstar BCI Income Fund aims to provide investors with regular and stable income that targets inflation beating returns over the long term, whilst actively managing the risk of capital loss in the short term

Regulation 28
Maximum foreign exposure as permitted by SARB
The portfolio is subject to a maximum equity exposure of 10% of the portfolio’s net asset value.
Maximum effective property exposure of 25%

The Northstar SCI Income Fund will change it's name to Northstar BCI Income Fund, effective from 25 August 2023

The fund switched Management Company from Sanlam Collective Investments to Boutique Collective Investments (RF) (Pty) Ltd. on 25 Aug 2023

Performance review
The Northstar Income fund outperformed the benchmark (STeFI x110%) over the quarter, with a return of 2.73% vs. 1.68%. An average weighting of 40% to fixed bonds contributed 1.87% with strong performances from R2030, R213, ABS7, and R2035. An average weighting of 36% to Inflation?linked bonds contributed 0.57%, with the SBSI14, FRBI25, I2033, and I2025 providing the bulk of returns. The 10% average weighting to Gold contributed 0.29%, and the 12% weighting to floating?rate notes contributed 0.21%. Conversely, the average weighting of 2% to USD detracted 0.3% on the back of a stronger Rand versus the Dollar over the last two months, despite continued commodity price weakness.

Market outlook and portfolio positioning
Inflation has begun to moderate over the last quarter, bringing into question the possibility of a peak in central bank rates early in 2023 and cuts in the year's second half. U.S. Treasuries are pricing in this outcome, despite the Fed's continued hawkish intent of raising the target rate to above 5% and maintaining that level for an extended period. Only 2 of the 19 FOMC members have rates peaking below 5%, with an overall average of 5.22%, and dot plots ranging between 4.88% and 5.63%. Over the next 12 months, the consensus is for U.S. inflation to moderate from 6.5% to 2.9% and in S .A. from 7.5% to 4.6%. In the absence of any crisis, this should bode well for bond and equity markets returns.

Factors that may challenge this outcome include; a rapidly slowing global economy, deepening oil
crisis in Europe, Covid restrictions in China, monetary policy change in Japan, increasing geopolitical
tensions and heightened liquidity risk. Locally, poor governance and service delivery continue to
exacerbate SAs weakening fiscal position, which will likely translate into continued bond market
volatility.

Despite these challenges, we have identified the following opportunities; 1) Good value in 7 to 12 year
fixed bonds on yields between 10% and 11.5%, 2) short dated inflation?linked bonds including R197,
I2025 and R210 on real yields between 3.3% and 4%. 3) scope for a firmer Rand, which is not fully
discounting the stronger commodity prices and relatively favourable inflation dynamics vs the likes of
the US. 4) higher gold prices on the back of a rapid increase in money supply and insurance status in
the event of heightened geopolitical risk and economic uncertainty.

As a result, the Northstar has the bulk of its exposure to fixed bonds and inflation?linked bonds with a
weighted years to maturity of 3.3 years and yield of 8.3%. In addition the por??olio has a 9.3% Gold
allocation and 2.9% USD exposure, in the event of any adverse market events.