liberty2012

Liberty’s Investments

Senate Group

Juan Jacobs

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Agenda1. Excelsior Property Update

2. Retirement Positioning

3. Flexible Investment Plan Focus

4. Budget Overview



2011 REVIEW OF THE LIBERTY BALANCED PROPERTY PORTFOLIO



Return Components of 2011

0

5

10

15

20

25

1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

Capital

Income

Total

Capital: 3.62%Income: 6.89%Total: 10.51%

Direct Property: 10.74%Non Direct Property: 8.91%



LBPP vs. CPI

0.00

5.00

10.00

15.00

20.00

25.00

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

CPI AVERAGE FOR YEAR LIBERTY PROPERTIES GROSS RETURN

Yr CPI Average Return

2006 4.63 19.952007 7.08 20.602008 11.30 14.932009 6.30 11.492010 4.29 11.912011 4.98 10.51

Reflection of consistent, inflation beating returns over the long term



Asset Class Performance 2011

South Africa %Equities (ALSI) 2.6

Bonds (ALBI) 8.8

Cash 5.5

Listed Property (SAPY) 8.9

LBPP 10.5

International Property Total Returns %Americas 7.8

Asia -17.0

Europe -11.3

Oceania -1.3

Source: Inet, Stanlib, Avior Research



Prospects for 2012

§ Interim bonus 8.0% gross

§ Economic recovery still fragile

§ Cash drag

§ Net income reasonably certain

§ Growth on net income constrained due to high escalating operating costs

§ Focus to reduce costs in the portfolio by use of technology and enforce more discipline in cost management

§ Risky to forecast capital movement

§ No big developments being completed for 2012 and re rating on assets are unlikely

§ Embarked on an investigative process of acquiring / developing assets not currently in the portfolio



FUND COMPOSITION AND ATTRIBUTES



Fund Composition as at January 2012

65%10%

11%

1%5% 8%

Retail

Offices

Hotels

Other Fixed Property

Listed Property and property linked assets

Money Market/ Cash Type Instruments

5%

78%

8%9%

Eastern Cape Gauteng

Kwa-Zulu Natal Western Cape



Sandton City Extension and Refurbishment

§ 30 000 m² retail extension completed and opened for trading in early November 2011

§ Many International Brands launching for the first time in Africa at Sandton City

§ 900 new parking bays

§ Enabling work for subsequent phases

§ Due to the construction industry slump, new tenders have been granted in favour of Liberty Properties

§ Refurbishment plans underway for Sandton Offices and Parking deck

§ 100% let

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§ Likely tenants:

§ Toys R Us

§ Wetherleys

§ Builders warehouse

§ Hi Fi Corporation

§ Coricraft

§ Furncity

§ Golfers Club

§ Pre- let

§ 80% pre-let conditions need to be achieved before commencing development

Liberty Midlands Mall Lifestyle Centre



Retirement Positioning



Retirement Provision – Looking at it differently

Why is an RA one of the best ever products for Retirement?

• Inaccessibility

• Protect your investment from temptation

• Protect it from creditors

• Portability

• Not dependent on employer or employer benefits

• Tax Benefits

o SARS is currently paying up to 40% of contributions

o While invested, the returns are tax free.

o Withdrawals on lump sums enjoy preferential tax treatment.

o Annuity income post retirement exempt § Tax Threshold R59 750p.a. < 65, R93 150 p.a. < 75, R104 150 ≥ 75

o When you die, RAs fall outside of the estate duty calculation.13



Why Liberty?

• Competitive RIY – not reliant on “bells and whistles”

• Wide range of portfolio guarantees (from conservative to aggressive)

• Higher of death guarantee

• Retrenchment premium waiver unique to Liberty Investments

• Disability Premium Waiver

• Maternity premium holiday on retirement builder

• On RA’s there is a premium holiday benefit

• The policy bonus is not performance related or fund specific (applies to paid up policies)

• Cost neutral commission structure

• Reducing management fee



A client who wants the flexibility to address different needs in one investment

A client who wants the benefit of compounding growth

A client who wants funds to be paid out quickly to beneficiaries should they pass on

A client who wants low ongoing fees

A client who might need multiple access to funds

A client who likes our higher of death guarantee

A client who may need guaranteed portfolios

A client who would like a lump sum, free of additional tax (if original owner), at the end of five years

A client who requires emergency access to funds

A client who does not want to incur any early termination charges

Who will benefit from the Flexible Investment Plan?



What is Bundling?

Up to 10 policiesOne policy document

– Separate schedule per policyEach policy independent:

– Initial consideration– Upfront Advisory fees – Ongoing Commission– Portfolios– Lives assured– Servicing requests– Cessions– Surrenders/ Advances




Single Premium Endowment Comparison: Excelsior Moderate & LA Excelsior Moderate (Inv Builder) with 3% IAF

Investment Plan Early

termination charges apply

(1st 4 years)

Flexible Investment

Plan

Single Premium

Investment Builder

Multi Acc Inv Plan

Potential Secondary CGT

Multi Acc Inv Plan

Potential Secondary CGT

Consideration R 1,000,000 R 1,000,000 R 1,000,000 R 1,000,000 R 1,000,000

Net Allocation R 995,739 R 965,800 R 965,800 R 965,800 R 965,800

Allocation Enhancement +R 29,940 R 0 R 0 R 0 R 0

Initial advisory fee (plus VAT) R 34,200 R 34,200 R 34,200 R 34,200 R 34,200

Management fee 1.92% pa

Initially 1.23% pa reducing based on growth

achieved

1.96%p.a. in 1st 5yrs, and

reduces thereafter

1.92% pa 1.2% pa

RIY at Year 5 2.2% 2.1% 2.3% 2.8% 2.1%

RIY at Year 10 2.1% 1.7% 2.0% 2.5% 1.7%

Reduced Fees on these funds if selected on MAIP:

Income Fund, Bond Fund, High Yield & Money Market

NB!! Be cautious about selecting Money Market as client will compare to bank where no fees are levied and there is still the impact of secondary CGT



Guaranteed PortfoliosGrowth Investment Series



Growth Investment SeriesCapital (C) Guarantee Option



Growth Investment SeriesCapital Plus (C+) Guarantee Option



ConsistencyInvestors are more likely to achieve their objectives if portfolios are structured to deliver consistent performance.

DiversificationPortfolios using multiple managers with complementary approaches diversify risk and have the ability to generate more

consistent results — therefore greater potential success for the investor.

Process Successful investment results from an ongoing, disciplined process that requires regular monitoring and periodic corrective

action as conditions change through cycles.

Time à

Rank

1st Quartile

4th Quartile

Single Manager volatility

More consistent Multi Manager returns

The case for Multi-Manager



Excelsior Multi-Manager Risk Profiled Portfolios

Equity Building Block Allocation Property

Building Block Allocation Bond Building Block Allocation Cash Building

Block Allocation

Afena Equity 10.5% Cash 1.4% Cash 1.3% Taquanta 30.5%AG Equity 14.4% Catalyst 34.3% Cadiz 29.7% OMIGSA 30.4%Cash 0.4% Prudential 20.0% Coronation 30.7% Prescient 39.1%Coron. Equity 20.2% STANLIB 44.3% Prescient 38.3%Foord Equity 15.0%Element Earth 10.1%Kagiso 14.8%Oasis Equity 14.6%

0%10%20%30%40%50%60%70%80%90%

100%

Conservative ModerateConservative

Moderate Moderate Aggressive Aggressive

Equity Excluding Property Listed Property Bonds Cash



The hidden cost of going external

PortfolioProduct

Management Fee*

GuaranteeFee

Ongoing Commission

Recovery Fee

Foreign Currency

Management Fee

Asset Manager Fee

Total Ongoing Fees

Excelsior Multi-Manager

Aggressive 1.23% p.a. n/a n/a n/a 0.60% p.a.

1.83% p.a.

No additional performance fees

levied

Fund Xternal 1.23% p.a. n/a n/a n/a 1.71% p.a.

(Fee at benchmark)

Max 3.42% p.a.

2.94% p.a.

Max 4.65% p.a.

Management fee = effective tiered management fee at inception based on a R1m investment with 2+ policies in the bundle and a 3% initial advisory fee (excl. VAT)Source :Liberty



Reduction in Yield versus Total Expense Ratio

Reduction in Yield (RIY) Total Expense Ratio (TER)

High Figure = relatively expensive.

Low Figure = relatively cost effective.

High vs. Low Ratio not necessarily expensive or cheap!

Actively managed funds have higher figures thanpassively managed funds – performance may be betterthus outweighing costs!

Large funds have economies of scale thus TERrelatively low but performance may be poor relative topeers.

Looks forward over policy term. Historic view – calculates cost over previous year thus not an indication of future costs.

Calculated over the term of the policy. Only calculated over 1 year.

All costs to policyholder including upfront costs included in calculation.

Performance fee not included. Liberty includes fee at benchmark as per CPQ.

Not all costs included e.g. Upfront costs and advisory fees not included, however most recent performance fees included in ratio.

Simple, easy to understand comparison tool. Fairly simple figure but must be used with caution as a comparison tool.



How to Calculate a LISP’s “Reduction in Yield”

Reduction in Yield vs. Total Expense RatioConverting Total Expenses on a LISP quote to a FIVE YEAR RIY

Example based on above LISP Total Weighted Fee*:

Take 1.90% p.a. + (Initial advisory fee of 3% + Vat = 3.42% / 4 )=1.9% p.a. + (3.42% / 4) p.a.=1.9% p.a. + 0.86% p.a.

= Approximate RIY of 2.76% p.a. at YEAR 5 on LISP

(True RIY is 2.82% p.a.)



Budget 2012



BUDGET 2012

“Our development requires every one of us to ask –

what can I do for my country, my people, our future!”

Pravin Gordhan, Budget Speech, 22 February 2012



Interest and Foreign Dividend Exemption

2012 2013

Interest income under 65s R22 800 Unchanged Interest income over 65s R33 000 Unchanged

Foreign dividends R3 700 Unchanged



Dividend Withholding Tax

• STC to be replaced by a Dividend Withholding Tax –Effective date: 1 April 2012

• DWT rate – 15% (SA corporates and retirement funds are exempt)

• DWT will bring SA in line with international best practice and is expected to make SA more investor-friendly

• Corporate tax rate in SA is now simplified at a maximum of 28%



Capital Gains Tax

2012 2013Inclusion Rates:Individuals and Special Trusts 25% 33.3%Companies and Other Trusts 50% 66.6%Effective Rates:Effective rate (individuals & ST) 10% max 13.3% max Companies 14% 18.65%Trusts 20% 26.64%Exclusions:Individuals (annual) R20 000 R30 000 Deceased estates R200 000 R300 000 Primary Residence R1.5m R2m



Medical Tax Credit

• As from 1 March 2012 medical contributions will be subject to a tax credit as opposed to a tax deduction

• The monthly tax credit is R216 for the member and spouse and, R144 for each dependent

• Definition of dependent has been extended, now includes: spouse, child of a spouse, immediate family members for whom you are liable



Medical Tax Credit



Medical Expenses Deductions – S.18

Disabled persons Under 65’s The medical deduction comprises: The medical deduction comprises

the amount by which the aggregate of….

Medical scheme contributions Medical scheme contributions exceeding (4 x medical scheme exceeding (4 x medical schemecredits) credits)

+ +

All other medical expenditure All other medical expenditure

…..exceeds 7.5% of taxable income



Social Security

2012 2013

Disability and Old Age Grants R1 140 R1 200

Old Age Grants – over 75 R1 160 R1 220

Child Support Grants R 265 R 280



Proposal

• Tax-preferred savings and investment accounts – Government intends to introduce tax-preferred savings

and investment vehicles by April 2014. Returns generated in these savings products, such as interest, capital gains and dividends will be tax exempt. Withdrawals from such vehicles will also be tax exempt. Aggregate annual contributions will be limited to R30 000, with a lifetime limit of R500 000.

– A discussion document will be published by May 2012, and it remains to be seen whether private institutions will be able to offer such vehicles to the public.



Questions

Questions?



Thank you !



In formulating the information in this document, Liberty Life has taken due care to ensure that the views and opinions are based on information which is relevant and accurate. While every care has been taken before opinions and views are given, no representation, warranty or undertaking (expressed or implied) is given and no responsibility or liability is accepted by Liberty Life as to the accuracy of the information contained herein. Any recommendations made must take into account your clients specific needs and personal circumstances. Any legal, technical or product information contained in this document is not to be construed as advice by Liberty Life.

Liberty Group Limited – an Authorised Financial Services Provider in terms of FAIS Act (license no. 2409).

Disclaimer



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