Ashburton Investments rmb

A part of the FirstRand Group

RMB Global Markets Fund Solutions Brought to you by Ashburton Investments

Ashburton Investments – giving investors access to more

2

Ashburton Investments is the FirstRand

Group’s investment management business

Brings together the investment capabilities of

RMB and Ashburton to create a new and

innovative investment proposition

Unique ability to leverage the skills, platforms

and product origination capabilities within the

FirstRand Group enables us to give investors

access to an investment universe not

previously available to them

Over R115 billion* in assets under

management

*As at June 2014

FirstRand Group

About Ashburton Investments

A new generation investment manager

Our view

Financial

markets

Portfolio

management

Solutions

Access

Listed instruments:

equities, cash, bonds Unlisted instruments:

Real economy origination

Single managers

Multi managers

Segregated portfolios

Alternatives Passives Guaranteed products Multiple investment styles

Risk profiles

Institutions

Individual investors Broad retail market

+

+

+

+

A view

Asset and

liability solutions

GLOBAL MARKETS February 2014

GLOBAL MARKETS Fund Solutions GLOBAL MARKETS Fund Solutions GLOBAL MARKETS Fund Solutions

Emile Linde [email protected] │ June 2014

Strictly Private and Confidential

Retail and commercial

banking Corporate and

investment banking

Instalment

finance

Investment

management

FirstRand Bank Limited FirstRand Investment

Management

Overview — organisational structure

4

• RMB provides guaranteed, alternative and passive solutions to private and professional investors

• RMB provides investment solutions to IFAs / private investors via Ashburton Investments


RMB non-traditional investment solutions include a combination of the following:

Overview — GMFS summary

Out-of-the-ordinary (alternative) assets

• Not equities, bonds or cash

• Low correlation to traditional asset classes

• Improved risk adjusted returns

• Relaxation of regulation 28 of the Pension Funds Act

Mirror of market performance (passive / rules-based /

Beta)

• Mainly derived from mathematical equations

• Include ETFs, ETNs, CISs, etc.

Downside risk protection

• Applied to many of our investment strategies

• Risk reduction compounds positively over time

• Can be overlaid within a solution

5 5

5

RMB boutique products

RMB customised solutions

RMB Fusion funds

RMB ETFs

5


Conservative range

RMB Cash Enhancer

RMB Structured Plus 100

RMB Inflation-X ETF

RMB Protected Equity

RMB Cautious Fusion Fund

Balanced range


RMB Protected Flexible 80


RMB Moderate Fusion Fund

Growth range

RMB Top40 ETF

RMB MidCap ETF

RMB Select


RMB Growth Fusion Fund

Aggressive range

Customised solutions (e.g. RMB Bespoke)

Overview — RMB investment range by client risk profile

C

on

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rva

tive

B

ala

nce

d

G

row

th

A

ggre

ssiv

e g

row

th

Po

ten

tia

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turn

Risk

6

6 6

RMB boutique products 7


RMB Cash Enhancer

RMB Dynamic Yield Series

RMB Cash Enhancer

Performance linked investment account

8


Indicator Details

Target market Private investors seeking above average returns

Product structure • Combine FSR cash deposits and investment grade corporate credit

• Invest alongside FSR’s own high quality corporate credit portfolio

• 60-75% FSR cash deposits, 25-40% corporate credit

• Client earns the rate pick-up from the corporate credit portfolio

• Returns accrue daily and are capitalised quarterly

Guarantee None

Liquidity • Weekly investment dates

• 45 calendar days’ notice

Investment horizon > One year

Benchmark The average large Money Market Collective Investment Scheme (MM CIS)

Minimum investment R1 000 000

Fees (excl. VAT) TER: 0.15%

Reporting Top ten credit holdings available monthly, full list available on request

RMB Cash Enhancer (cont.)

9 9


Credit portfolio exposure (top 10)

Growthpoint Properties Ltd.

Emira Property

BMW Financial Services RSA (Pty) Ltd.

Tongaat-Hulett Ltd.

Mercedes-Benz RSA (Pty) Ltd.

Transnet Ltd.

Engen Ltd.

Steinhoff International Holdings Ltd.

Pick ‘n Pay Retailers (Pty) Ltd.

Discovery Holdings Ltd.

High quality credit assets strictly limited by a

mandate:

The credit assets must also comply with the

following:

• Investment grade only:

- Listed companies or metros

- Government guaranteed exposure / parastatals

- Subsidiaries/branches of multinational companies

• Maximum average duration of portfolio of 3 years

• Only local currency exposures

• No geared exposure

• Originated via the FirstRand Credit Process

• Originated by a division of FirstRand Bank

• Credit counterpart is a client of FirstRand Bank

• FirstRand Bank is similarly invested into the credit

counterparty


10 10



Monthly performance versus benchmark1

Source: RMB

Note 1. Returns are net of fees

11 11

4.50%

5.00%

5.50%

6.00%

6.50%

May-11 Nov-11 May-12 Nov-12 May-13 Nov-13 May-14

Cash Enhancer

Benchmark

11



RMB Multiple Asset Series



12 12


Indicator Details

Target market Private investors seeking low volatility real returns

Product structure

• Broadly diversified local asset mix

• Absolute return fund with explicit guarantee

• Only absolute return fund managed by a bank

Guarantee 100% explicit 12-month rolling FSR capital guarantee

Liquidity

• Annual liquidity

• 1 calendar month notice

• No monthly distribution


Benchmark CPI + 2%

Minimum investment R250 000

Fees (excl. VAT)

• Advice fee: 0.50%

• Management fee: 0.50%

• Performance fee: 25% of outperformance above benchmark

Reporting Monthly performance and holdings available


13 13


80

100

120

140

160

180

200

220

240

260

280

Dec-04 Nov-05 Oct-06 Aug-07 Jul-08 May-09 Apr-10 Feb-11 Jan-12 Nov-12 Oct-13

SP 100

CPI plus 2%

RMB Structured Plus 100 (cont.)

Strategic asset allocation

• 35% defensive hedge

• 20% growth hedge

• 30% secure growth 100

• 15% cash or equivalent

Source: RMB, Stats SA

Note 1. Simulated returns, net of management fees, gross of performance fee

Performance vs CPI + 2%1

14 14






15



Indicator Details

Target market Private investors seeking low volatility real returns

Product structure • Broadly diversified local asset mix

• Absolute return fund with explicit guarantee

• Only absolute return fund managed by a bank

Guarantee 90% explicit 12-month rolling FSR capital guarantee

Liquidity • Annual liquidity

• 1 calendar month notice



Benchmark CPI + 3.5%


Fees (excluding VAT) • Advice fee: 0.50%


• Performance fee: 25% of outperformance above the benchmark


16 16


75

100

125

150

175

200

225

250

275

300

325

Dec-04 Nov-05 Oct-06 Aug-07 Jul-08 May-09 Apr-10 Feb-11 Jan-12 Nov-12 Oct-13

SP 90

CPI plus 3.5%


Performance vs CPI + 3.5%

Source: RMB, Stats SA

Note 1. Simulated returns, net of management fees, gross of performance fee


• 30% defensive hedge


• 35% secure growth 95

• 5% cash or equivalent

17






18


Indicator Details

Target market Private investors seeking high exposure to equities and alternative assets with

a level of guarantee

Product structure • Formulaic allocation between asset classes according to market conditions

• Asset allocation managed daily to maximise returns (and for guarantee

purposes)

Guarantee Explicit FSR guarantee of 80% of the highest month-end value achieved

Liquidity and interest • 1 calendar month notice


• Total return paid out on redemption


Benchmark CPI + 5%


Fees (excluding VAT) • Advice fee: 0.50%



RMB Protected Flexible 80 (cont.)

19 19



• 60% top40 Index


• 0% Cash

RMB Protected Flexible 80 (cont.)

Historical performance vs Top40 tracker

Source: RMB, Bloomberg

Note 1. Simulated returns, net of management fees

20

80

130

180

230

280

330

380

Dec-05 Aug-06 Apr-07 Dec-07 Aug-08 Apr-09 Dec-09 Aug-10 Apr-11 Nov-11 Jul-12 Mar-13 Nov-13


TOP40 Tracker

80% Guarantee

20


Product performance summary



21

80

100

120

140

160

180

200

220

240

260

280

300

320

340

360

Dec-05 Aug-06 Apr-07 Dec-07 Aug-08 Apr-09 Dec-09 Aug-10 Apr-11 Nov-11 Jul-12 Mar-13 Nov-13


TOP40 Tracker


Cash (Month NCD)


21


Product performance summary



22 22

-40%

-20%

0%

20%

40%

60%

80%

100%

Dec-06 Jun-07 Dec-07 Jun-08 Dec-08 Jun-09 Dec-09 Jun-10 Dec-10 Jun-11 Dec-11 Jun-12 Dec-12 Jun-13 Dec-13

RMB Structured Plus 100 TOP40 Tracker RMB Structured Plus 90

Cash (3 month NCD) RMB Protected Flexible 80

GLOBAL MARKETS February 2014

GLOBAL MARKETS Fund Solutions GLOBAL MARKETS Fund Solutions GLOBAL MARKETS Fund Solutions

RMB customised solutions 23


RMB Bespoke Series


24

RMB Bespoke

24 24

Strictly Private and Confidential 25

RMB Bespoke (continued)

All in one multi-purpose, multi-asset class portfolio

• ZAR financial assets only

Listed equity (Top 100)

Exchange Traded Funds (ETFs)

Hedge funds and fund of funds

Collective Investment Schemes (House View portfolios)

RMB Structured Products

• Cost

0.65% p.a.

27 25


The South African mystery

3

Question: Would you consider gearing into a growth investment?

Answer: Average South African will say that is too high risk.

The mystery: Growth assets have the highest probability of outperforming the cost of funding over time.

Low Volatility

Growth Assets

26


RMB Bespoke (continued)

27

Gearing offering

Limited to approved Growth assets with low volatility strategies

• Assets only available through the Balance Sheet

Responsible gearing

• Ranges from 0.1x to 1x

• Non recourse

• Risk management via Constant Proportion Portfolio Insurance (CPPI)

• Currently prime interest rate linked


RMB Bespoke (continued.)

Guarantees

Various reference assets can be guaranteed

• Independent Solutions

• Dependent on risk (liquidity, volatility, correlation etc.)

Cost effective

• 0.60% p.a. ‘pay-as-you-go’

Flexibility

• Lock-in returns by resetting guarantee

• Remove guarantee (no penalties)

Features

• 5 year term

• Typically 100% allocation to risky reference asset at inception

27 28


Liquidity Enhancer on guaranteed products

Issue Details

Term Same term as the guaranteed product (minimum of 1-year)

Loan value 85% of Present Value of guarantee

Loan size Minimum of R500 000

Interest rate Prime - 1%

Cash flows

• One cash flow per month (not a transactional account)

• Full application amount paid out

Turnaround time Approximately 5 working days

Benefit

Best of both worlds i.e. explicit guarantee plus liquidity

No redemption i.e. maintain exposure to growth assets

29 29


RMB Bespoke summary

FSR credit

Innovative

Flexible

Bespoke

Cost efficient

Tax

Transparent

Any SA

tradable

financial

asset can

be linked to

the RMB

Structured

Note!

Evolution

of

the

financial

advice

industry

33

30


RMB Global Markets Fund Solutions RMB Protected Equity

RMB Single Asset Series



31


RMB Protected Equity: terminology

Term Description

Term The time to the contractual maturity of the product

Cap A ceiling of the potential return

Participation A percentage of participation to the performance of the underlying asset

Guarantee A percentage (generally around 100%) of the initial investment that is guaranteed at

maturity

Strike The price from which the investor participates in the upside of the underlying asset

Average out At maturity the average value over a predefined period is used to protect against

sudden downturn

32 32


RMB Protected Equity: building blocks

Building blocks

Term, cap, participation and guarantee can be customised on certain products

Explicit FirstRand Bank Limited capital guarantee

All product payoffs are defined at maturity

1-, 3- or 5-year investment term

48-hour liquidity at market rates

All products are accessed directly via FirstRand Bank acting through it Rand Merchant Bank Division

33 33


Underlying asset choices

An Equity Linked Note (ELN) is an investment where the return is

linked to the performance of an underlying asset

Indices

Unit trusts

Single stocks

ETFs

Top40

Top40

stocks

(liquidity

dependent)

Top40 Index

Unit trusts

subject to

RMB

approval

MidCap

Equity Linked Note

34 34


RMB Protected Equity ― uncapped participation, 5 year example

Investor’s view that the market is going to increase

• 100% capital guarantee after 5 years

• 105% equity participation to Top40 index

• Monthly average out over last 12 months

Profit

Loss

Market return

Participation to Top40

Top40

35 35


RMB Protected Equity ― guarantee vs. participation


• Increase in guarantee = decrease in participation

Profit

Loss

Market return

36 36

Participation to Top40

Top40


RMB Protected Equity ― capped version, 3 year example


• 100% capital guarantee after 3 years

• 175% capped return for Top40 index

• Monthly average out over last 6 months

Profit

Loss

Market return

37 37

Capped Return

Top40


RMB Protected Equity ― guarantee vs. cap


• Increase in guarantee = decrease in cap

Profit

Loss

Market return

Capped return

Top 40

38 38


RMB Protected Equity: summary

Capital protection plus potential equity upside

100% capital guarantee after 1, 3 or 5 years depending on the term

1. Equity upside capped: 100% participation up to a max % (the Cap)

2. Equity upside participation: quoted as % participation, but uncapped

Term, participation and cap can be customised subject to RMB’s approval

Average-out applicable, minimum deal size R250 000

39 39


RMB Protected Equity: 100/110 Geared Equity

Capital protection plus potential geared equity return

100% capital guarantee after 5 years

Positive equity return capped at 110%

Payout at maturity: {Investment amount × positive equity return × participation % (subject to the cap)} +

100% capital guarantee at maturity

Average-out applicable, minimum deal size R250 000

40 40


• Cap of 110% is sensible —Top40 returned lower than10% less than 10 times in 14 years

• Very high probability that the investor will make a good return on this product

RMB Protected Equity: 100/110 Geared Equity

41

Note 1. Historic returns are not a guarantee of future performance

Top40 historic

5-year rolling returns

Number of

observations at

each return

Top40 historic rolling 5 year returns

Less than 10 historic observations based

on 5-year rolling historic returns from 2000

to 2014 were less than 10%

41


RMB Protected Equity: 100/110 Geared Equity example

Example

Investment term 5 years

Investment amount R1million (for illustrative purposes)

Capital guarantee 100% of Investment amount applicable at maturity

Underlying JSE Top40 Index (Bloomberg Code: Top40 Index)

Cap 110% of underlying equity price

Participation 550% of underlying equity price

Scenario 3 Market returns 20% after 5 years

Return R1,550,000 {R1m + R1m × 550% × 10%}

Per annum return 9.16%

Scenario 4 Market returns -10% after 5 years

Return R1,000,000 {R1m + R1m × 550% × 0%}

Per annum return 0%


Return R1,550,000 {R1m + R1m × 550% × 10%}



Return R1,275,000 {R1m + R1m × 550% × 5%}


42 42

RMB Fusion funds 43


Passive trends globally

Global ETP assets and number of ETPs by year • Accurate proxy for

passive investing globally

• Global AUM US$2.2

trillion = US$2.200 000

000 000!

5 000

4 000

3 000

2 000

1 000

0

# of

ETPs

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Sep-13

$2,200

$2,000

$1,800

$1,600

$1,200

$1,400

$1,000

$800

$600

$400

$200

$0

Assets($bn)

2.226 1.944

1.525 1.483 1.156

772 851

598

428 319 218 146 109 79

106 219 297 300

357

524

883

1541

2220

2694

2543

4311

4759

4937

Source: Blackrock report, September 2013

Number of funds

Assets under management

44


Passive vs active strategies

Percentage of actively managed general equity unit trusts that outperformed the FTSE/JSE All Share Index1

Source: Fundsdata.co.za

Note 1. Data based on Total Return after fees, fund performances versus the total return performance of FTSE/JSE All Share Index for period ending 31 Dec 2013

• Majority of SA active

managers do not

outperform the market

• Becomes harder to

outperform the longer

the term

1-year 2-years 3-years 5-years 7-years 10-years 20-years

39.5%

26.4%

30.1%

15.3%

22.9% 24.1%

20.0%

0.0%

25.0%

35.0%

45.0%

5.0%

10.0%

15.0%

20.0%

30.0%

40.0%

45


Passive — what the experts are saying

• New legislation in the South African savings industry is coming into effect

• Local National Treasury is prompting structural changes by prescribing that

“Low cost passive based product will form the basis of compulsory savings going

forward”

46


Delivery mechanisms

e.g. Top40 index

ETFs Unit trusts

• Caters for real-time dealing

• For DIY clients trading via the JSE

• Caters for daily dealing

• Aimed at the traditional savings market

• Ideal for being sold via LISPs and

advice

channels

Passive vs active investing — ETFs vs unit trusts

• ETFs were traditionally the only entry to passive products in

SA

• ETFs can only be purchased via a stockbroker who charges

fees

• ETFs typically offer single asset class investing

But…

Segregated portfolios

• Caters for institutional clients

• Can be created for bespoke

needs

• Large minimum investment

47


Index tracking analysis — TER and tracking error comparison vs competitors • Well established

reputation

• Proven track record in

many asset classes

• RMB Inflation-X voted

best Bond Fund in SA in

2013 by Morningstar —

across all funds

• RMB offers the only

Midcap ETF in SA

(tracking error of 0.12%)

Why RMB passive?

23.00%

22.50%

22.00%

21.50%

21.00%

20.50%

20.00%

RMB Top

40 Portfolio

Competitor 1 Competitor 2 Competitor 3 Competitor 4 Competitor 5 Competitor 6 Competitor 7

Tracking Efficiency 0.15% 0.23% 0.10% 0.25% 0.43% 0.38% 0.45% 0.40%

TER 0.20% 0.45% 0.60% 0.48% 0.59% 0.72% 0.70% 1.14%

Performance 22.42% 22.09% 22.07% 22.04% 21.75% 21.67% 21.62% 21.23%

Source: Fundsdata.co.za

48


RMB Fusion Series Portfolios Return expectation (p.a.) Term

RMB Cautious Fusion Fund Low equity CPI + 2% Rolling 3-years

RMB Moderate Fusion Fund Medium equity CPI + 3.5% Rolling 5-years

RMB Growth Fusion Fund High equity CPI + 5% Rolling 7-years

RMB Fusion Series — portfolios, return expectations and terms

49 49


Asset

class Description

RMB Cautious Fusion

Fund

RMB Moderate Fusion

Fund

RMB Growth Fusion

Fund

SA equity RMB Top 60 Capped

Index 25% (within 5%) 40% (within 5%) 55% (within 5%)

SA bonds Government Nominal

Bond issuance weighted 33% (within 5%) 22% (within 5%) 11% (within 3%)

SA

property

The FTSE/JSE SA

Property Listed Index 10% (within 2.5%) 10% (within 2.5%) 10% (within 2.5%)

SA cash Overnight cash 10% (within 2.5%) 7.5% (within 2%) 5% (within 1.5%)

SA ILB

Government Inflation-

linked Bonds issuance

weighted

12% (within 3%) 8% (within 2%) 4% (within 1%)

Global

equity MSCI World Index 0% (within 3%) 5% (within 1.5%) 10% (within 2.5%)

Global

bonds

The Citigroup World

Government Bond Index 10% (within 2.5%) 7.5% (within 2%) 5% (within 1.5%)

Total 100% 100% 100%

RMB Fusion Series — range of unit trusts

50 50


RMB Fusion Series — summary

Inflation-linked

performance benchmarks

Three risk profiled funds with different

investment horizons

These funds in the true definition of fusion,

combine the best of passive,

with an active overlay

51

RMB Exchange Traded Funds (ETFs) 52


InflationX vs CPI

90

110

130

150

170

190

210

230

250

270

290

310

Feb

-04

Aug

-04

Feb

-05

Aug

-05

Feb

-06

Aug

-06

Feb

-07

Aug

-07

Feb

-08

Aug

-08

Feb

-09

Aug

-09

Feb

-10

Aug

-10

Feb

-11

Aug

-11

Feb

-12

Aug

-12

Feb

-13

Aug

-13

CPI InflationX

53

• Tracks index of SA’s nine largest Government Issued inflation-linked

bonds

• Fund was voted Best Bond Fund in SA 2013 by Morningstar

• Funds pay distribution four times per year. The CPI portion of the

fund is rolled up into the asset price

• 0.36% management fee (equates to a fund TER of 43bps)

Performance1 RMB Inflation-X ETF

3-month -2.72%

6-month -2.17%

12-month -3.21%

3-year 8.91%

1. RMB Inflation-X ETF

RMB Inflation-X ETF vs CPI1

Financial ratios1

Real yield going forward (over CPI) 2.2%pa

12-month historical distribution yield 2.4%pa

Note 1. Data for end January 2014

CPI

Inflation-X

53


2. RMB Top40 ETF

• Tracks index of SA’s 40 largest and most liquid shares


Performance1 RMB Top40 ETF

3-month -0.06%

6-month 11.73%

12-month 15.46%

3-year (annualised) 16.06%

RMB top 10 sectors1


Financial ratios1

PE ratio 19.79


Mining 24.93%

Personal goods 10.38%

Beverages 9.8%

Media 8.88%

Mobile Telecomms 7.84%

Banks 6.81%

Oil & Gas Producers 5.84%

Life Insurance 5.2%

Tobacco 3.25%

General Industrials 1.79%

54


3. RMB MidCap ETF

• Tracks index of 60 of SA’s midcap stocks which are the next

biggest outside of the Top 40


RMB top 10 holdings1


Financial ratios

PE ratio 16.39


Performance RMB MidCap ETF

3-month 5.67%

6-month 10.77%

12-month 12.99%



Netcare Limited 4.29%

Mr Price Group Ltd. 4.12%

Gold Fields Ltd. 3.96%

Reinet Inv Soc Anon 3.33%

Redefine Properties Ltd 3.33%

Lonmin plc 3.18%

MMI Holdings Ltd. 3.15%

Barloworld Ltd 2.86%

Coronation Fund Mgrs 2.77%

The Spar Group 2.7%

55


FNB Share Saver

• Share Saver gives you access to the Top 100 shares listed on the JSE by investing in the RMB Top40 and RMB MidCap

Exchange Traded Funds (ETFs)

• Most cost effective exposure to the equity market in SA

• Invest from R300 per month via FNB Online Banking www.fnb.co.za/share-investing

7 56

70

80

90

100

110

120

130

140

Apr13 May13 Jun13 Jul13 Aug13 Sep13 Oct13 Nov13 Dec13 Jan14 Feb14

A return of 25.9% since inception

Source: RMB Global Markets

56

http://www.fnb.co.za/share-investing




57

57


Strictly Private & Confidential

This presentation has been prepared by FirstRand Bank Limited, acting through Rand Merchant Bank (“RMB”).

The information contained in this presentation is confidential and intended solely for the use of the intended recipient. This presentation may contain information proprietary to RMB

and accordingly may not be reproduced, acted upon or disseminated in whole or in part without RMB’s prior written consent. By attending this presentation, the intended recipient

undertakes to keep the information contained in the presentation confidential and not to do any act or allow same to be done on his behalf which is in breach of the above mentioned

prohibition.

This presentation contains information which has not been independently verified by RMB. RMB and its directors, officers, employees and agents make no representation and give no

warranty with respect to, and assume no responsibility for:

the correctness, accuracy and completeness or otherwise of the information contained in this presentation; or

the correctness or otherwise of the Advisers’ conclusions based on such information.

Any liability of whatsoever nature and howsoever arising on the part of RMB, their directors, officers, employees and agents relating to the contents of this presentation is hereby

expressly disclaimed.

This presentation is intended for discussion purposes only and does not represent a commitment, proposal, recommendation, offer open for acceptance or agreement to enter into a

transaction. Any transaction is subject to the agreement of final terms to be set out in a separate written agreement. The decision to enter into any transaction and to assume the risks

associated with the transaction rests solely with the intended recipient.

July 2012

Disclaimer

58 58

A part of the FirstRand Group

2014/07/07

Client Name (change in footer)

59

THANK YOU

For more information please visit

www.ashburtoninvestments.com

Ashburton Investments rmb

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