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Investment managers

panel

*Oliver Stones, Quilter

*Guy Ellison, Investec

*Craig Veysey, Sanlam Private Investments

AFM Presentation at The Belfry

Oliver Stones

18 October 2012

European Armageddon Postponed

4

FIXED INCOME – MARKET PERFORMANCE

Source: FTSE, Merrill Lynch and JPM Indices, 30 September 2012, figures are total return in GBP terms, unhedged, apart from Global HY and Global Corporates which are currency hedged

Q3 2012 Q2 2012 Q1 2012

UK Gilts 1.14% 3.76% -1.74%

UK Index-linked Gilts -2.64% 0.65% -1.51%

Global Sovereigns -0.03% 3.13% -3.35%

UK Inv Grade Corps 6.42% 2.08% 3.43%

Global Inv Grade 3.91% 1.67% 3.23%

Global High Yield 5.43% 1.09% 6.95%

EM Local Currency 1.79% 0.64% 5.34%

FTSE 100 4.19% -2.13% 4.78%

5

EUROPE’S WEB OF DEBT

Source: Bank for International Settlements, 2008, latest data available

6

EUROPEAN ANXIETY EASES… TEMPORARILY ?

Source: Bloomberg October 2012

7

FIXED INCOME – MAIN THEMES TODAY

Can Greece remain in the euro?

Will Spanish banks need recapitalisation?

Systemic risk implications on Italy and France

Will eurozone policymakers do what it takes to save the euro?

Will OMT (Outright Monetary Transactions) be ‘the’ solution?

European growth non-existent …

…whilst the rest of the world recovers?

Inflation is dead?

8

EUROZONE – POSSIBLE POLICY MEASURES

Further bank bailouts : use of European Stability Mechanism or European Financial Stability Fund?

ECB further action: rate cuts / Long Term Refinancing Option / Sovereign bond purchases / OMT

Fiscal Union: mutualisation of eurozone bonds or pooled debt redemption fund

Banking Union: Joint strict supervision of banks, eurozone deposit guarantee scheme

Pro-Growth measures: European Investment Bank infrastructure spending / QE

9

EUROZONE – ARMCHAIR POLITICS

ESM approved by Germany but 54% polled disagree, Merkel under pressure

EU elections now referendums on austerity programmes : France

Some surprise pro-Euro results however : Greece and Denmark

Will Spain take the ‘political poison’ of a bail out?

Opportunistic Catalonian independence bid sets uncomfortable precedent

Italian domestic politics will dominate in the New Year

Renegotiation of (Greek) bailout terms replaced by more time to satisfy the terms

10

GREEK EXIT MADE TANGIBLE

Greece fails to meet ‘Trioka’s austerity terms leading to…

Refusal of any further EU / ECB / IMF bail out money

Leading to complete bankruptcy

Social and economic breakdown

Loss of political control / Martial law

Imposition of capital controls

Immediate (but temporary) nationalisation of all banks

Redenomination of currency

Devaluation

Default leading to Debt-forgiveness

Stabilisation of new (old) currency at ‘comfortable’ level

Flow of ‘Hot money’ back into ‘cheap’ economy

Economic recovery / bonanza time?

11

FINANCIALS: CREDIT COVERAGE REMAINS WEAK

Source: Bloomberg (end of Q2 2012), July 2012

12

FINANCIALS: NPL / TOTAL LOANS

Italian Banks with highest NPLs

NPLs in Spain look questionable

Greek Banks

Lloyds stands out


*

*Non Performing Loans

13

FINANCIALS: LOAN LOSS RESERVES / NPAS


Italian & Spanish Banks appear under-reserved

Lloyds stands out

*

*Non Performing Assets

14

EURO RESILIENCE HAS BEEN REMARKABLE


15

THE TWO SPEED EUROPE – NOW ADD MORE AUSTERITY…


16

THE FUNDING COST ‘CORRECTION’ STILL HAS A LONG WAY TO GO


17

DISCLAIMER

This presentation has been prepared only for the recipient and date shown on the front page. It is not intended

for any other persons and should not be relied upon by other persons.

This presentation has been prepared for information purposes only and is not a solicitation or an offer to buy or

sell any security. It does not purport to be a complete description of our investment policy, markets or any

securities referred to in the material. The information on which the presentation is based is deemed to be

reliable, but we have not independently verified such information and we do not guarantee its accuracy or

completeness. All expressions of opinion are subject to change without notice. Any reference to the Quilter

model portfolio, which is used for internal purposes, is purely illustrative and should not be relied upon. The

figures quoted do not include charges.

Investors should remember that the value of investments, and the income from them, can go down as well as

up and that past performance is no guarantee of future return. You may not recover what you invest. Changes

in exchange rates may have an adverse effect on the value, price or income of foreign currency denominated

securities. Levels and bases of taxation can change. Investments or investment services referred to may not be

suitable for all recipients.

Quilter is the trading name of Quilter & Co. Limited, registered in England with number 01923571, registered

office at St Helen’s, 1 Undershaft, London EC3A 8 BB. Quilter is a member of the London Stock Exchange,

authorised and regulated by the UK Financial Services Authority and regulated under the Financial Services

(Jersey) Law 1998 by the Jersey Financial Services Commission for the conduct of investment business in Jersey

and by the Guernsey Financial Services Commission under the Protection of Investors (Bailiwick of Guernsey)

Law 1987 to carry on investment business in the Bailiwick of Guernsey. Accordingly, in some respects the

regulatory system that applies will be different from that of the United Kingdom.

Market Outlook For 2013

Guy Ellison – UK Equities

20 UK Gilts

Expensive Insurance

21 UK Gilts

Limited Upside From Here – Barring Armageddon

22 UK Credit

Still Some Value

23 UK Equities

2012 Looking Better Than May Have Been Expected

24 Equity vs. Credit Crossover Equity Yields Now Ahead Of ‘A’ Grade Debt

25 Reasons To Be Cheerful?

Equities (On Headline Measures) Still Look Cheap

26 Major Equity Markets

Despite The Uncertainty, Shaping Up To Be A Good Year

27 Gold

Where Could We Go From Here?

28 Oil

Geo-Political Insurance

29 Inflation

All Benign For Now

30 QE and Inflation

Where Is The Risk To Performance?

Equities Cash Property Gilts

Corporate

Bonds No of Years

Deflat ion 7.1 5.8 7.3 8.9 8.8 10

Inflat ion 0 – 2% 12.7 2.0 6.7 6.7 7.5 15

Inflat ion 2 – 4% 7.8 1.5 4.9 2.8 3.9 26

Inflat ion 4 – 6% 5.1 1.2 2.3 -0.3 1.7 16

Inflat ion over 6% -1.7 -2.5 -0.4 -4.3 -4.6 20

Total 6.0 1.1 3.8 1.8 2.5 86

Source: IWIN Research

Historic average annual performance for each asset class in different inflation scenarios

Group Offices

Bath

Belfast

Birmingham

Bournemouth

Cheltenham

Edinburgh

Exeter

Glasgow

Guildford

Leeds

Liverpool

London

Manchester

Reigate

Sheffield

www.investecwin.co.uk

Member Firm of the London Stock Exchange. Member of NYSE LIFFE.

Authorised and regulated by the Financial Services Authority.

Investec Wealth & Investment Limited is registered in England.

Registered No. 2122340. Registered office: 2 Gresham Street, London, EC2V 7QP.

Please note that the value of investments and the income derived from them may fluctuate and investors may not receive back the amount originally invested. Past performance is not necessarily a guide to the future. Current tax levels and reliefs may change and the investments and investment services referred to may not be suitable for all investors.

Stefan Ampenberger (1908 - 1983), detail from “The Red Sun”, oil on board, Sanlam Art Collection.

Fixed income presentation to the

Association of Financial Mutuals Craig Veysey, Head of Fixed Income

Sanlam Group

• Founded in 1918 in South Africa

• The Group has business interests elsewhere in Africa, Australia, India,

and Europe

• As at September 2012, Sanlam Investments had assets under

management of £40 billion.

• Sanlam Private Investments has £10bn AUM.

34

Staff (Dec 2011)

12,586

Sanlam only

Market cap

(Sept 2012)

£6.1 billion

Shareholders (Dec 2011)

520,586

Sanlam Private Investments (UK) Ltd

• Portfolio management

• Offshore investments

• Fiduciary & tax

• Investment advisory

• Managed funds

• Custodian services

35

Investment management: a round the clock job

Regular

fund

manager

meetings

Market timing/

tactical asset

allocation

Performance

monitoring &

reporting

Active or

passive for

a given

asset class

Investment:

A ROUND

THE CLOCK

JOB

36

Investment team at SPI (UK) Ltd

37

Richard Champion, ASIP

Chief Investment Officer

Pieter Fourie, CFA, CA (SA)

Head of Global Equities

William Ball, ACSI, IMC

Equity Analyst

Nick Levens, Chartered MCSI

Central Dealer

Emma Joel

Investment Team Coordinator

Sarah Hughes

Investment Team Desk Assistant

Paul Surguy, Chartered FCSI

Head of Managed Funds

Craig Veysey CFA, ASIP

Head of Fixed Income

Francois Kotze, IMC

Fixed Income Analyst

John Thornber,

Chartered FCSI

Strategist

Duncan Burden, IMC

Equity Analyst

James Mercier, IMC

Managed Funds Analyst

Expertise in bond portfolio management at SPI

• Bond fund management

• We manage the SPI Strategic Investment Grade Bond Fund

• Investment grade focus - high quality corporate and government bonds

• Global investment - UK and overseas, including emerging markets

• Active fund management - the fund will actively seek to enhance total returns

• Visible and transparent performance track record

• Segregated fixed income portfolio management

e.g. Manage an £85m gilt and corporate bond portfolio for SIP(Sanlam Investment& Pensions)

• Strict credit risk policy criteria

• Asset Liability Matching: outsourced to Sanlam Investment Management

• Solvency regulations: European model formula designed by SIP

38

Tailored solutions for Financial Mutual portfolios

• Clients requirements may be very different

- we work closely with & understand our clients concerns

- appropriate investment solutions provided

- specific investment guidelines agreed

- can assist with applying Solvency II regulations

- can assist with implementing Asset Liability matching

• Fixed income only and multi asset portfolio solutions

- direct global equities, direct global fixed income, fund approaches

- aim to add incremental value to client’s investment portfolios

- rigorous application of investment process to all portfolios

39

40

• Direct access to investment manager

• Tailored, diversified portfolios within agreed restrictions

• Solvency II and ALM assistance

• Detailed reporting provision, as agreed with client

• Ongoing reviews and regular meetings

• Full nominee/custody service

• In specie transfers

• Online valuation service

• Updated investment news and commentary at: www.spi.sanlam.co.uk

Overview of our services

Investment strategy

41

Robust fixed income investment process

• Rigorous and disciplined global investment process

• Top-down, macroeconomic view formed from monthly strategy meeting

involving Head of Fixed Income, Chief Investment Officer and other key

members of the investment team

• Highly risk-conscious approach that seeks to add incremental value

from a broadly-diversified bond portfolio

• Credit screening process on individual bonds, derived from internal

analysis, combined with external credit analysis and active bond asset

and sector rotation

42

Decision making process in bond portfolios

Portfolio

Decision

Politics Technology

Demographic

Macroeconomic

Structural view

Bottom up

Credit screen Credit analysis

Cyclical

Tactical

• growth

• inflation

• monetary policy

• events

• regional analysis

• relative valuation

• market technical's

• risk on/risk off

Risk analysis

• credit risk

• duration risk

• yield curve

• currency risk

• value at risk

• regional/country

• portfolio analytics

• guideline monitors

43

Bond portfolio allocation decision - September

Preferred investment ranges

Bond investment Category Structural* Cyclical+ Tactical- Weightings Duration Comments

Global duration risk 1 1 0 7-15yr We maintain duration risk in 5-7 year range, though see opportunities to add

from structural and cyclical perspective with bonds seen well supported .

UK Gilt -1 -1 0 0-10% 7-15yr Gilts may benefit from perceived 'flight to quality' , but government

debt fundamentals a concern over long term. Near term risks elevated.

UK Index Linked Gilt 1 1 0 0-20% 10 to 30 Index linked gilts may be added to for inflation protection, particularly

over longer term with QE seen stoking inflation pressures.

GBP IG Corporates 1 1 0 50%-90% 5 to 30 GBP IG remains favoured for spread enhancement in low yield environment

amid highly supportive global monetary policy. BBB's provide value still.

GBP High Yield 0 1 0 0-10% 1 to 5 High yield may outperform in near term, with supportive monetary

policy and hunt for yield. Not looking to add further in near term though.

US Treasuries -1 1 0 0% None Fed balance sheet expansion not seen as positive for US Treasuries.

Concerns in near term due to credit rating/fiscal cliff.

US Treasury Index Linked 1 1 1 5-10% 10-20yr Inflation protection will be maintained near term in portfolio

USD Investment Grade 1 1 0 0-10% 5 to 15 Spread product can remain supported, with Fed balance sheet expansion

Not as much value as for GBP IG.

EUR Governments -2 -1 -1 0% None Avoid European government long term. Fundamentals remain poor,

though short dated bonds of peripherals should receive support.

EUR Investment Grade -2 -1 0 0-5% 1 to 5 Some isolated European corporate areas may be supported near term

by improving sentiment. Avoid Euro FX risk after recent rally.

Commodity FX Bonds 2 1 2 5-20% 3 to 15 Structurally we like commodity FX, and tactically we think QE perception

will support such an active position in portfolio. Will add on weakness.

Developing Market Bonds USD 1 1 0 0-10% 5 to 15 Attractive opportunities available. Searching for tactical entry

points for cyclical and structural view

Developing Markets LCL 2 1 2 5-20% 5 to 15 Some emerging economy bond markets look attractive and we are

seeking expsoure near term to higher real yield opportunities

non GBP FX investments 1 2 1 10-20% 1 to 10 GBP remains a concern from debt/GDP perspective, & more QE.

Tactically add non GBP risk in emerging markets and commodity markets.

Structural*1-5 years

Cyclical+ 3-12 months

Tactical- 1-3 months

44

Credit analysis screen

• Analyse 20,000+ bonds through proprietary filtering process to

determine potential bonds for portfolio inclusion/exclusion

• Filtering process includes-credit rating, liquidity, sector, currency, bond

structure, duration, geography

• Credit analysis, both internal and external, also conducted on suitable

bonds

• Suitable bonds that meet quality criteria are chosen to then fit allocation

decision within portfolio guidelines

45

Fixed income risk management tools

• Interest rate duration risk

monitoring

• Diversification - max 5% per

corporate bond issuer

• Credit quality - investment grade

focus

• Credit sector weight monitoring

• Currency weighting - max 5% per

non-sterling currency, except US

dollar

46

About the Fixed Income team at SPI

Craig Veysey CFA, MA, ASIP

• Craig Veysey is Head of Fixed Income & the lead Fund Manager of the SPI Strategic

Investment Grade Bond Fund. He has almost 14 years investment experience, and has been

responsible for directly held bond investments, at SPI’s since March 2009.

• Craig has previously managed global bond funds at both Scottish Widows Investment

Partnership and WestLB Mellon Asset Management, and earlier in his career was also a

senior member of the Global Fixed Income team at HSBC Investment Management. He

qualified as an Associate of the UK Society of Investment Professionals in 2001 and became

a Chartered Financial Analyst in 2003. Craig has a degree in Economics from Liverpool

University and a Masters Degree in Finance and Investment from Exeter University.

47

Francois Kotze, IMC

• Francois Kotze joined SPI (UK) as a Fixed Income Analyst in March 2012. Francois has a

degree in economics from the University of Bath which included a year on placement in the

fixed income team of UBS Global AM. Francois is currently a candidate for CFA level 1.

Think Personal - please contact us

48

• Craig Veysey

• [email protected]

• T: +44 (0)20 7280 8726 | M: +44 (0)7738 409 964

• Francois Kotze

• [email protected]

T: +44 (0)20 7280 8748

• Address: Sanlam Private Investments (UK) Ltd

10 King William Street | London | EC4N 7TW

mailto:[email protected]

mailto:[email protected]

Appendix

49

Sanlam

• 1918 - Sanlam founded

• 1922 - Introduce disability cover - 1st in SA

• 1953 - 800 staff members move to “Sanlamhof”, Bellville. Current

Sanlam Head Office

• 1967 - Launch of 1st Sanlam Unit Trust

• 1993 - SA‟s 1st BEE transaction. Sale of Metropolitan to black-

controlled, NAIL

• 1998 - Demutualisation on JSE & Namibian Exchange

• 2004 - Sale of 10% of Sanlam shares to Ubunto-Botho

50

What do Sanlam do?

• Leading financial services group in South Africa

• Provide financial solutions & products to retail clients (individuals) &

institutional clients. These include:

• life insurance

• savings & investments

• short-term insurance

• banking

• health

• advice

51

Extent of Sanlam business

52

Shareholders

(Dec 2011)

520 586

Market Cap

(Sep 2012)

£6.1 billion

# Staff

(Dec 2011)

12 586

Sanlam only

Sanlam Investments

53

• Apart from the UK, the Group has business interests elsewhere in

Africa, Australia, India, and Europe.

• As at September 2012, Sanlam Investments had assets under

management of £40 billion.

Capital

Management

SCM

SPE

Property

Equities

Debt

Asset

Management

SIM

Gen-X

SSS D

Satrix

Wealth

Management

SPI

SPI (UK)

Merchant

Summit

Employee

Benefits

GR

SUS

SSS-EB

RFA

Simeka

International

SIIP

SIM-Global

Sami

Sanlam UK

SGS

Investment

Services

SMMI

SCI

Blue Ink

Graviton FP

Graviton WM

A brief history of Sanlam Private Investments

• SPI was formed in 1999 under the brand Gensec Private Clients, a Sanlam

subsidiary.

• Following the acquisitions of leading private client businesses ABN Amro SA and

Merrill Lynch Private Clients SA, Gensec rebranded to Sanlam Private

Investments in 2001.

• In March 2008, Principal Investment Management Ltd become part of the

Sanlam Group and rebranded to SPI on the 24 September 2012.

• In the past 12 years Sanlam Private Investments has grown to become South

Africa’s 2nd largest private wealth manager, with operations in South Africa, UK,

Switzerland and Australia and some £10 billion assets under management.

• Established in 1999 and headquartered in Cape Town, the SPI team comprises

400 people across 23 international offices, managing £10bn in assets under

management and administration for 30,000 clients.

54

Solvency II stress testing (1)

55

Credit quality step

duration i

up to 5 0.9 %. duration i 1.1 %. duration i 1.4 %. duration i 2.5 %. duration i 4.5 %. duration i 7.5 %. duration i 3%. duration i

More than 5 and up

to 10

4.50% + 0.53 %.(

duration i -5)

5.50% + 0.58%.(

duration i -5)

7% + 0.70%.(

duration i -5)

12.50% + 1.50%.(

duration i -5)

22.50% + 2.51%.(

duration i -5)

37.50% + 4.20%.(

duration i -5)

15% + 1.68%.(

duration i -5)

More than 10 and up

to 15

7.15% + 0.50 %.(

duration i -10)

8.40% + 0.50 %.(

duration i -10)

10.50% + 0.50 %.(

duration i -10)

20% + 1 %.(

duration i -10)

35.05% + 1.80 %.(

duration i -10)

58.50% + 0.50 %.(

duration i -10)

23.40% +

1.16%.(

duration i -10)

More than 15 and up

to 20

9.65% + 0.50 %.(

duration i -15)

10.90% + 0.50 %.(

duration i -15)

13% + 0.50 %.(

duration i -15)

25% + 1 %.(

duration i -15)

44.05% + 0.50 %.(

duration i -15)

61% + 0.50 %.(

duration i -15)

29.20% +

1.16%.(

duration i -15)

More than 20 12.15% + 0.50 %.(

duration i -20)

13.40% + 0.50 %.(

duration i -20)

15.50% + 0.50 %.(

duration i -20)

30% + 0.50 %.(

duration i -20)

46.55% + 0.50 %.(

duration i -20)

63.50% + 0.50 %.(

duration i -20)

35% + 0.50%.(

duration i -20)

Maximum modified

duration (in years)

176 173 169 140 107 73 130

NRAAA AA A BBB BB B and below

Spread shock on bonds

The latest level 2 text stresses the value of the assets held by the factor shown in the table

below depending on their credit rating and modified duration (where duration is never lower

than 1):

Source: Draft Implementing measures Solvency II (issued on 31

October 2011)

Solvency II stress testing (2)

56

The value of the annuity liabilities will also decrease to allow for the increase in the

matching premium subject to the limitations. The table below shows the factor to be

applied to the change in the fundamental spread the matching premium will only

increase for bonds with credit ratings above BB. Although the level 2 text wording is

confusing we have interpreted the table below as saying that for more risky assets

there will be no compensating increase in the discount rate and thus decrease in the

technical provisions. For lower risk assets the contribution to the matching

adjustment can be increased to compensate partially for the fall in the assets.

Credit quality step AAA AA A BBB BB B NRReduction factor 45% 50% 60% 75% 100% 100% 100%

Source: Draft Implementing measures Solvency II (issued on 31 October 2011)

Credit Risk Tolerances example

57

Risk limitAssurance

provider

Gilts 25% to 100%

Supranationals, and AAA w ith gov't guarantee 0% to 50%

AAA corporates 0% to 50%

AA corporates 0% to 33%

A corporates 0% to 33%

BBB corporates 0% to 15%

Below BBB corporates 0%

33%

>A: 1,000

=<A: 500

300

10%

500

20%

Large, AAA rated

OECD members *

30%

20%

>1

A

0.5

A

1

10

10

0Head of

Investments

Highest available

15

AAA

AAA

BBB

90

* Australia, Austria, Canada, France, Germany, Netherlands, Norw ay, Sw eden, Sw itzerland, UK and USA

Maximum % corporate bonds in any one country (other than UK)

Approved list for acceptable countries for £ denominated bonds

Maximum % corporate bonds in f inancial sector

Maximum % corporate bonds in any other (i.e. non-financial) sector

Maximum nominal holding w ith any one counterparty (£k)

Minimum nominal issue size (£m)

Maximum % corporate bonds that are subordinated

Maximum nominal holding w here an added layer of risk exists e.g. subordination, liquidity or

recoverability (£k)

AFH

Minimum # of reinsurers

Minimum reinsurer credit rating

Maximum unsettled balance (£m)

Minimum credit rating

Maximum # of payments in arrears

Maximum net exposure to any one counterparty (£k)

Minimum short term counterparty credit rating

Head of

Investments

Maximum exposure to any one counterparty (£m)

Maximum outstanding term to maturity (days)

Minimum sovereign rating of foreign domiciled holdings

Minimum rating of liquidity funds

Minimum rating for commercial paper, certif icates of deposit, f loating rate notes

Category

AFH

Limits on

investment

type (as %

total fund)

Maximum % corporate bonds below AA

Maximum loan to any one individual policyholder (£k)Head of

FinanceMaximum loan to any one individual trading partner (£k)

AFH

Source: Sanlam Investment and Pensions

58

2012/06/29 2012/07/31 2012/08/31

MINTAN and MINCON

Scenario

-50 bps on the Short End : 100 bps on the Long End 1 681 973 3 114 644 643 568.59

0 bps on the Short End : 0 bps on the Long End 1 654 202 2 978 955 739 674.27

50 bps on the Short End : -100 bps on the Long End 1 590 116 2 819 712 729 697.74

MINFLA

Scenario

-50 bps on the Short End : 100 bps on the Long End -40 879 177 446 220 604.30

0 bps on the Short End : 0 bps on the Long End 33 106 218 637 206 226.14

50 bps on the Short End : -100 bps on the Long End 80 844 232 453 190 710.26

Assets less Liabilities

Non Parallel Stresses

The table below shows the non parallel stress using the 2 year point

as the pivot. Non-parallel stresses are within mandate limits.

Asset Liability Matching (1)

-£500 000.00

-£400 000.00

-£300 000.00

-£200 000.00

-£100 000.00

£0.00

£100 000.00

£200 000.00

£300 000.00

£400 000.00

£500 000.00

-200 bps -150 bps -100 bps -50 bps 0 bps 50 bps 100 bps 150 bps 200 bps

MINTAN and MINCON combined - Parallel Stress

31-Aug-12 29-Jun-12 31-Jul-12

Source: Sanlam Investment Management

59

Non Parallel Stresses

The table below shows the non parallel stress using the 2 year point

as the pivot. Non-parallel stresses are within mandate limits.

Asset Liability Matching (2)

2012/06/29 2012/07/31 2012/08/31

MINFLA

Scenario

-50 bps on the Short End : 100 bps on the Long End -40 879 177 446 220 604.30

0 bps on the Short End : 0 bps on the Long End 33 106 218 637 206 226.14

50 bps on the Short End : -100 bps on the Long End 80 844 232 453 190 710.26

Assets less Liabilities

-£300 000.00

-£250 000.00

-£200 000.00

-£150 000.00

-£100 000.00

-£50 000.00

£0.00

£50 000.00

£100 000.00

£150 000.00

-200 bps -150 bps -100 bps -50 bps 0 bps 50 bps 100 bps 150 bps 200 bps

MINFLA - Parallel Stress

31-Aug-12 29-Jun-12 31-Jul-12

Source: Sanlam Investment Management

Sources: Bloomberg, SPI

Portfolio Statistics

Yield to maturity 3.97

Distribution Yield 5.25

Average Duration 6.85

Average Rating A

90%

6% 4%

Currencies

GBP USD MXN

6% 6%

43%

40%

5%

Credit Ratings

AAA AA A BBB <BBB

23%

4%

19%

14%

15%

6%

6% 2%

2% 4% 4% 1%

Sectors

Banks & Insurers*

Other Financials*

Consumer

Telecoms

Utilities

Industrial

Basic materials

Energy

Diversified

Supranational

Index Linked Govts

Other Government

Cash

48%

16%

12%

6%

2% 3%

3% 2% 5%

2% 1%

0%

Country Exposure

Great Britain

United States

Germany

Mexico

Spain

France

Bond Fund portfolio structure, 1st Oct 2012

-SPI Strategic Investment Grade Bond Fund

Rating Price Yield Income

Yield Weight

MCDONALD'S CORP 5.875% 2032 A 134.11 3.45 4.38 2.82

CENTRICA PLC 4.25% 2044 A 97.75 4.38 4.35 2.67

BHP BILLITON FINANCE LTD 3.25% 2024 A 99.83 3.27 3.26 2.56

US TREASURY INF/ LINK 3.625% 2028 AAA 159.19 2.86 2.28 2.53

PETROBRAS GLOBAL 5.375% 2029 BBB 100.96 5.29 5.32 2.43

TESCO PLC 5.5% 2019 A 116.52 2.92 4.72 2.35

MEX ICAN GOVERNMENT 6.5% 2022 A 108.94 5.32 5.97 2.31

RWE AG 7% able BBB 105.13 6.08 6.66 2.27

AMGEN INC 4% 2029 A 99.47 4.04 4.02 2.24

ELECTRICITE DE FRANCE 5.5% 2041 AA 110.77 4.80 4.97 2.23 *Callable

60

Active bond portfolio management (1)

0

1

2

3

4

5

6

7

Jan 10 Apr 10 Jul 10 Oct 10 Jan 11 Apr 11 Jul 11 Oct 11 Jan 12 Apr 12

Yiel

d -

%

Buy Point BP 4% 2014

Bond holding period return: 22.2% Fund performance impact: 1.4% (Average position size: 6.4% portfolio) As at 26/06/2012

61


4

5

6

7

8

9

10

11

12

Apr 10 Jul 10 Oct 10 Jan 11 Apr 11 Jul 11 Oct 11 Jan 12 Apr 12

Yiel

d -

%

Buy Point Soc Gen 5.4% 2018


62



6.0

6.5

7.0

7.5

8.0

8.5

9.0

28

May

12

04

Jun

12

11

Jun

12

18

Jun

12

25

Jun

12

02

Jul 1

2

09

Jul 1

2

16

Jul 1

2

23

Jul 1

2

30

Jul 1

2

06

Au

g 1

2

13

Au

g 1

2

20

Au

g 1

2

27

Au

g 1

2

03

Se

p 1

2

Yie

ld %

Buy Point Telefonica 5.445% 2029

63


0.6

0.61

0.62

0.63

0.64

0.65

0.662.4

2.6

2.8

3

3.2

3.4

3.6

09

Fe

b

16

Fe

b

23

Fe

b

01

Mar

08

Mar

15

Mar

22

Mar

29

Mar

05

Ap

r

12

Ap

r

19

Ap

r

26

Ap

r

03

May

10

May

17

May

24

May

31

May

07

Jun

14

Jun

21

Jun

28

Jun

05

Jul

%

Buy Point Bond Sell Point

Currency Trade Date US Treasury 3.125% 15/02/2042

GBPUSD

Bond holding period return: 8.28% Pure bond return: 5.23% Currency Return: 3.05% Fund performance impact: 0.11% (Average position size: 1.54% portfolio) As at 09/07/2012

64

Bond Fund performance since inception

65

98

99

100

101

102

103

104

105

106

107

108

02

Mar

09

Mar

16

Mar

23

Mar

30

Mar

06

Ap

r

13

Ap

r

20

Ap

r

27

Ap

r

04

May

11

May

18

May

25

May

01

Jun

08

Jun

15

Jun

22

Jun

29

Jun

06

Jul

13

Jul

20

Jul

27

Jul

03

Au

g

10

Au

g

17

Au

g

24

Au

g

31

Au

g

07

Se

p

14

Se

p

21

Se

p

28

Se

p

Bond Fund NAV* IMA £ Strategic Bond Sector Gilts

Source: Morningstar, Bloomberg*P Accumulation Share Class

SPI Strategic Investment Grade Bond Fund: 7.4%IMA £ Strategic Bond Fund Peer Group: 6.2%FTSE Actuaries Gilt All Stocks: 4.7%

This information is directed at investment professionals (e.g. authorised intermediaries) only and is not

suitable for distribution or communication to any other person

This article is for information purposes and should not be treated as a forecast, research or advice to buy or

sell any particular investment or to adopt any investment strategy. Any views expressed above are based on

information received from a variety of sources which we believe to be reliable, but are not guaranteed as to

accuracy or completeness by Sanlam Private Investments (UK) Ltd. Any expressions of opinion are subject

to change without notice.

Reproduction of this commentary is not allowed in whole or in part without prior written agreement from

Sanlam Private Investments (UK) Ltd

Issued by Sanlam Private Investments (UK) Ltd

Authorised and regulated by the Financial Services Authority

Part of the Sanlam Group

Past performance is not a reliable indicator of future results.

Investing involves risk. The value of investments, and the income from them, may fall as well as rise and is

not guaranteed. Investors may not get back the original amount invested

Disclaimer

66

Investment managers

panel

*Oliver Stones, Quilter

*Guy Ellison, Investec

*Craig Veysey, Sanlam Private Investments

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