“beyond the fiscal cliff” – foord asset management

SENATE GROUP

Mike Soekoe & Heather McCulloch,

15 March 2013

AGENDA

• Introduction

• Investment philosophy

• Performance

• Macro: Beyond the Fiscal Cliff

MARCH 2013 FOORD ASSET MANAGEMENT 2

INVESTMENT PHILOSOPHY

4 MARCH 2013

• Take a long term view and be patient

• Ignore the benchmark when building portfolios

• Diversify and manage risk

• Provide clients with the highest return at the lowest risk

• Top down macro economic analysis, and

• Fundamental, bottom up research

• Understanding drivers of company earnings

– Balance sheet / income statement / cash flow analysis

– Economic cycles and industry changes

– Qualitative research

• Concentrated portfolio of best ideas

• Avoid the losers

INVESTMENT PHILOSOPHY

PERFORMANCE

6

Source: Morningstar

MARCH 2013 FOORD ASSET MANAGEMENT

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

Foord Balanced Fund 19.6% 16.4% 16.1% 10.8% 12.7% 18.5%

Average (Domestic AA Prudential Variable Equity)

15.0% 11.9% 12.0% 8.0% 10.1% 16.0%

Rank 9/103 4/89 4/76 3/65 3/46 3/23

Foord Equity Fund 20.7% 20.3% 21.7% 13.3% 14.9% 22.0%

Average 15.5% 13.1% 15.0% 8.3% 12.0% 19.9%

Rank 19/110 6/98 1/92 4/80 7/62 6/45

Foord Flexible FoF 28.8% 23.2% 21.2%

Average 21.5% 14.6% 12.7%

Rank 3/21 1/19 1/18

Foord International FF 31.3% 18.6% 12.8% 6.3%

Average 27.2% 15.9% 10.7% 3.5%

Rank 1/18 3/17 5/17 3/17

FOORD UNIT TRUSTS LIMITED Performances to 28 February 2013

BEYOND THE FISCAL CLIFF

INTERNATIONAL OUTLOOK

• US recovery continues

– Partial resolution of fiscal cliff

– Supported by improvements in housing market

– Labour markets geared to residential market recovery

• Chinese growth accelerates

– Recovery in investment spend

– Shift to consumption supported by wage growth

• European decline stabilises

– Public and private consumption not recovering fast

• Commodity prices supported by China & US recovery

• US dollar the preferred developed market currency

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GLOBAL GROWTH ON TRACK

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USA GDP GROWTH 13 Consecutive quarters of positive growth

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Source: I-NET

US HOUSING MARKET Pent up demand building

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AFFORDABILITY OF HOMES Underpins recovery

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Source: I-NET

US EMPLOYMENT CREATION Sensitive to housing market recovery

US EMPLOYMENT CREATION Don’t fight the Fed

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OUTLOOK FOR EUROPE No lasting improvement in sight shorter term

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Source: I-NET

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EURO AREA Euro contagion risk has reduced substantially

CHINESE ECONOMIC GROWTH Rebalancing from investment to consumption

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Source: Macquarie Research

CHINESE ECONOMIC GROWTH Still some way to go…

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SOUTH AFRICAN OUTLOOK

• SA GDP growth remains pedestrian

– Led by private and government consumption, SOE investment

– Consumption growth supported by real wage increases; grants

• Terms of trade remains weak

– Falling mining output

– Fast growing imports at higher prices due to weaker currency

• Current account deficit remains a threat to the rand

– On-going foreign investment required to fund deficit

• Higher bond yields likely

– Ratings downgrades; higher bond yields globally

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CONSUMER FAVOURED OVER GDFI

GDFI GROWTH Driven by SOE’s and government

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Source: I-NET

CONSUMPTION GROWTH Driven by real wage increases

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Source: RMB Global Markets Research

DETERIORATING C/A DEFICIT

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Source: I-NET

FURTHER RAND DEPRECIATION LIKELY with sporadic rallies due to foreign asset inflows

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Source: I-NET

EQUITIES REMAIN THE ASSET CLASS OF CHOICE Especially over the Long term

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STRATEGY

26 MARCH 2013 FOORD ASSET MANAGEMENT

• Equity markets remain attractively priced

– Short term risks

– Time is required to realise potential returns

• Quality companies preferred

– Strong balance sheets, management teams, dividends

• Bond yields should rise significantly, but timing uncertain

– Negative real returns the most likely outcome

Questions

Foord Asset Management (Pty) Ltd and Foord Unit Trusts Ltd are authorised

Financial Services Providers (FSP: 578 & 21476)

Past performance is not necessarily an indication of future performance

INVESTMENT TEAM

MARCH 2013 28 FOORD ASSET MANAGEMENT

Main Responsibilities & Qualifications Experience At Foord Responsibility

Dave Foord CIO, Portfolio Manager

B Com, CA(SA) 35 31

Strategy, Balanced, Absolute return, Equity, Foreign, Company Research

Brian Davey Portfolio Manager, Analyst

B Com, CA(SA) 21 17 Equity, Company research, Private clients

Dane Schrauwen Portfolio Manager, Equities

BA LLB 20 4 Equity, Balanced, Company research, Private clients

Mike Townshend Head: Company Research

B Sc (Hons), BA, MBA 15 7 Company research, sector research

William Fraser Portfolio Manager, Strategy

B Com Actuarial, Cert (Financial Engineering) 13 7 Strategy, Balanced, Bonds, Property, Medical Aid

Mike Soekoe Head of Retail & Institutional Business

Member of SA Institute of Stockbrokers, CFP ® 32 4 Private clients

Nicholas Balkin Portfolio Manager, Research Analyst

B Com (Hons) Finance, CFA 10 7

Equity, Absolute return, Company research, Private clients

Vincent Ee Portfolio Manager, Head: International Research

B Sc (Hons) Acct & Finance, CFA 16 - Company research (Foreign)

Carolyn Levin Portfolio Manager, Research Analyst

B Bus Sc (Hons), CA(SA), CFA 7 5 Company research (SA and Foreign)

Andrew Coultas Equity Research Analyst

B Com (Hons), M Com, CA(SA) 4 2 Company research (Foreign)

Guy Shirtliff Equity Research Analyst

B Bus Sc (Hons), Cert (Financial Mkts & Instr) 6 1 Company research (Foreign)

Pravarshan Murugasen

Equity Research Analyst

CA(SA) 2 1 Company research (SA)

Daniel Gerdis Equity Research Analyst

CA(SA) 2 1 Company research (SA)

Wim Murray Equity Research Analyst

BA LLB 1 - Company research (SA)

FOORD BALANCED FUND Current Top 10 equity positions

% of portfolio

BHP Billiton 4.9

SABMiller 3.3

Aspen 3.3

Sasol 3.1

British American Tobacco 2.9

Standard Bank 2.9

CF Richemont 2.8

Anglos 2.8

Bidvest 2.4

RMB Holdings 2.3

30.7

MARCH 2013 FOORD ASSET MANAGEMENT 29

FEBRUARY 2013 FOORD ASSET MANAGEMENT 30

FOORD EQUITY FUND Top 10 equity positions

% of portfolio

BHP Billiton 8.3

Sasol 6.0

SABMiller 5.9

Anglos 5.2

CF Richemont 5.1

Standard Bank 4.9

British American Tobacco 4.6

Bidvest 4.6

Aspen 4.4

Coronation 3.9

52.9