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Coronation FlagshipIncome and Growth
Solution
The Coronation Balanced Defensive Fund
Charles de Kock04 September 2010
Agenda
A very brief view of the macro economy and financial markets
Coronation Balanced Defensive Fund
Slow take-off for global economy
Currency turmoil
Weak global economic recovery
Particularly slow jobs growth in US
Has led to yet more stimulus in US and a weaker dollar
Chinese RMB pegged to US dollar therefore does not strengthen
Emerging currencies including the rand firms
Talk of currency wars and protectionism abound
Gold and other commodities rise
Stock markets too as zero interest rate regime looks likely to remain for longer
bond yields fall sharply as talk of exit strategies evaporate
Implications of zero interest rates
As money flows from developed (zero interest rate world)
Emerging currencies appreciate
Asset prices rise
Inflation and interest rates stay low
Great environment for consumers
Credit expansion will follow
Current accounts will deteriorate
When global interest rates normalize the whole process will reverse
US Bonds vs Equities past 100 yearsbonds have won only 3 times over a 10 year cycle
10 Year rolling total return – S&P 500 vs. 10 Year US Treasuries10 Year rolling total return – S&P 500 vs. 10 Year US Treasuries
Source: J.P. Morgan and Shiller. S&P 500 total return includes dividend and the return for US Treasuries assumes bonds will be held until maturity. Note: Past performance is not indicative of future results
SA economy
South Africa: macro environment
Global environment has led to huge portfolio inflows chasing higher yields
Rand has been very strong as a result…..hurting manufacturing competitiveness
Inflation lower than anticipated leading to more rate cuts by SARB
Lots of talk of measures to weaken the rand…..but success not assured
Huge divergence on JSE
Source: I-Net Bridge
General retailersSignificant outperformance over 3 years
Favourable economic tailwinds
Rand appreciation
Big interest rate cuts
World-class management
Focused on value creation
Extremely shareholder friendly (buybacks, big dividends)
Foreigners aggressive buyers of domestic retailers
MSM = 72%, TRU = 62% foreign held
Wal-Mart offer for MSM implies 19.5x PE multiple
3-year compound annual total return: General retailers vs. All Share
JALSH
CLS
TFG
MSM
MPC
PIK
SHP
SPP
TRU
WHL
0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
50%
JALSHCLSTFGMSMMPCPIKSHPSPPTRUWHL
The Coronation Balanced Defensive Fund
Risk (Annualised Standard Deviation)
Avg 15%Max 25%
(0% normal shares)Reg 28
Avg 50%Max 60%Reg 28
Avg 70%Max 85%Reg 28
100%
Exposure to Growth Assets
Avg 35%Max 40%Reg 28
Long-term Growth(Equity Only)
Investment Objective
Long-term Growth(Multi-asset)
CoroBalanced
Defensive
CoroTop 20
3 Years →
Income & Growth(Multi-asset)
Income(Multi-asset)
CoroStrategic Income
CoroCapital Plus
CoroBalanced
Plus
Conservative Moderate Aggressive
Risk Profile
Ave
rag
e ex
po
sure
to
gro
wth
ass
ets
thro
ug
h t
he
cycl
e (5
yea
rs)
Th
e ex
po
sure
will
flu
ctu
ate
as v
alu
atio
ns
chan
ge
Growth Assets are defined as local and foreign equities, properties and commodities.
• Aim to outperform Cash+3% over the medium term
• Protect Capital over any 12 month period
Coronation Balanced Defensive FundCautious investors requiring stable returns
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Strategic Income Balanced Defensive
Capital Plus Balanced Plus Top 20
SA Cash
Int Fixed Income/Cash
SA Fixed Income/Bonds
SA Pref Shares/Other
SA Real Estate
Int Equity
SA Equity
Growth Assets are defined as local/foreign equities (excl. pref shares) and real estate.
Max exposure to growth assets
Coronation Balanced DefensiveMax 40% exposure to growth assets
25%
40%
60%
85%
100%
Coronation Balanced DefensiveThe strategy has delivered...
Performance quoted from Morningstar as at 30 September 2010 for a lump sum investment with income distributions reinvested
R140 317
R126 908
R 100.000
R 105.000
R 110.000
R 115.000
R 120.000
R 125.000
R 130.000
R 135.000
R 140.000
R 145.000
Feb-
07
Mar-
07
Apr-
07
May-
07
Jun-
07
Jul-07
Aug-
07
Sep-
07
Oct
-07
Nov-
07
Dec-
07
Jan-
08
Feb-
08
Mar-
08
Apr-
08
May-
08
Jun-
08
Jul-08
Aug-
08
Sep-
08
Oct
-08
Nov-
08
Dec-
08
Jan-
09
Feb-
09
Mar-
09
Apr-
09
May-
09
Jun-
09
Jul-09
Aug-
09
Sep-
09
Oct
-09
Nov-
09
Dec-
09
Jan-
10
Feb-
10
Mar-
10
Apr-
10
May-
10
Jun-
10
Jul-10
Aug-
10
Sep-
10
Value of a R100,000 investment on 1 February 2007
Coro Balanced Defensive
Mean Prudential Low Equity
Coronation Balanced Defensive Capital protection is key...
Balanced Defensive has not suffered capital losses over
any 12 month period
Performance quoted from Morningstar as at 30 September 2010 for a lump sum investment with income distributions reinvested
-5.00%
0.00%
5.00%
10.00%
15.00%
20.00%
Fe
b-0
8
Mar-
08
Ap
r-0
8
May-
08
Jun-0
8
Jul-0
8
Au
g-0
8
Se
p-0
8
Oct-
08
No
v-0
8
De
c-0
8
Jan-0
9
Fe
b-0
9
Mar-
09
Ap
r-0
9
May-
09
Jun-0
9
Jul-0
9
Au
g-0
9
Se
p-0
9
Oct-
09
No
v-0
9
De
c-0
9
Jan-1
0
Fe
b-1
0
Mar-
10
Ap
r-1
0
May-
10
Jun-1
0
Jul-1
0
Au
g-1
0
Se
p-1
0
Rolling 12 Month Returns & Standard Deviation
Coro Balanced Defensive Mean Prud Low Eq Coro Ann Std Dev Mean Ann Std Dev
Since Inception – 01 February 2007
3 months 6 months YTD 1 year 2 years 3 years
Ranking 12/53 2/53 3/52 5/52 3/48 1/40
Quartile 1st 1st 1st 1st 1st 1st
Returns 6.2% 6.5% 9.8% 13.1% 12.1% 10.1%
Cat AVG 4.7% 3.8% 6.7% 9.6% 9.2% 6.1%
Performance quoted from Morningstar as at 30 September 2010 for a lump sum investment with income distributions reinvested
Coronation Balanced Defensive Consistent 1st quartile performance...
Our objective is to deliver top quartile returns over all meaningful performance periods, for this fund being a 3 year period
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Mar
07
Jun
07
Sep
07
Dec
07
Mar
08
Jun
08
Sep
08
Dec
08
Mar
09
Jun
09
Sep
09
Dec
09
Mar
10
June
10
Sep
10
SA Cash
Int Fixed Income/ Cash
SA I L Bonds
SA Corp Bonds
SA Gov Bonds
SA Pref Shares/ Other
SA Real Estate
Int Equities
SA Equity
Coronation Balanced Defensive FundAsset allocation history since inception...
40% max exposure to growth assets
Growth Assets are defined as local and foreign equities and real estate
Coronation Balanced Defensive Portfolio positioning – 30 September 2010
Reg. 28 Compliant
0.2
2.8
4.4
17.9
19.4
23.4
SA Gov Bonds
SA Pref Shares
Int Cash/FI
SA IL Bonds
SA Cash
SA Corp Bonds
3.8
12.2
16.1
SA Real Estate
Int Equity
SA Equity
Growth Assets are defined as local and foreign equities and real estate
Income Assets 67.8%
Growth Assets 32.1%
Coronation Balanced Defensive Portfolio positioning – 30 September 2010
Growth Assets
Growth Assets are defined as local and foreign equities and real estate
3.8
12.2
16.1
SA Real Estate
Int Equity
SA Equity
SA EQUITY TOP 10 HOLDING DIVIDENDMTN 1.8% 3.3%STANDARD BANK 1.4% 4.4%NASPERS 1.1% 1.0%SASOL 1.1% 3.1%CORONATION 1.0% 6.8%ANGLO AMERICAN 0.9% 2.7%BHP BILLITON 0.9% 2.9%FIRSTRAND 0.6% 4.5%RICHEMONT 0.6% 1.4%SABMILLER 0.6% 2.6%OFFSHORE EQUITY HOLDINGCORO GEM FUND 3.7%CORO GLOBAL OPP EQUITY FOF 6.4%SA REAL ESTATE HOLDING YIELDACUCAP 0.9% 8.0%CAPITAL SHOPPING CENTRE 0.7% 3.9%REDEFINE 0.5% 8.8%FORTRESS 0.5% 8.9%SA CORPORATE 0.4% 9.8%
Coronation Balanced Defensive Portfolio positioning – 30 September 2010
Income Assets
0.2
2.8
4.4
17.9
19.4
23.4
SA Gov Bonds
SA Pref Shares
Int Cash/FI
SA IL Bonds
SA Cash
SA Corp Bonds
SA PREFERENCE SHARES HOLDING YIELDABSA 1.1% 7.0%INVESTEC 0.5% 3.4%FIRSTRAND 0.2% 6.7%PSG 0.1% 7.9%NETCARE 0.1% 7.7%SA I L BONDS HOLDING YIELDABSA (ABCPI3) 2.8% 3.5%FIRSTRAND (FRBI28) 2.2% 3.4%FIRSTRAND (FRBI23) 2.1% 3.4%STANDARD BANK (SBSI11) 2.1% 3.4%NEDBANK (NBKI1) 1.5% 3.3%SA CORP BONDS HOLDING YIELDSTANDARD BANK (SBS9) 2.2% 8.6%NEDBANK (NBK2A) 2.2% 8.5%ANGLO AMERICAN (AAO3) 1.6% 8.8%FIRSTRAND (FRX15) 1.5% 8.5%ABSA (ABS5) 1.5% 8.7%
1. This fund has delivered on it’s mandate to provide investors with a stable income and to preserve capital in real terms
2. This is the top performing fund in the Prudential Low Equity category since the inception of the fund on 02 February 2007
3. Different to the average fund in the category, the fund has suffered no capital losses over any 12 month period
4. This fund will charge 0% fees if we deliver negative returns over any 12 month period
5. The fund is managed by Coronation’s most experienced portfolio managers, backed by the research of Coronation’s global investment team
Coronation Balanced Defensive FundOur value proposition
Questions?
Disclaimer
Coronation Asset Management is an Authorised Financial Service Provider.
The content of this presentation and any information provided may be of a general nature and may not be based on
any analysis of the investment objectives, financial situation or particular needs of the client. (as defined in the
Financial Advisory Intermediary Services Act) As a result, there may be limitations as to the appropriateness of any
information given. It is therefore recommended that the client first obtain the appropriate legal, tax, investment or
other professional advice and formulate an appropriate investment strategy that would suit the risk profile of the
client prior to acting upon such information and to consider whether any recommendation is appropriate considering
the client’s own objectives and particular needs.
Any opinions, statements and any information made, whether written, oral or implied are expressed in good faith.
THANK YOU!