FIRSTGLOBAL ASSET MANAGEMENT QUARTERLY REPORT QUARTER 3

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1 FIRSTGLOBAL ASSET MANAGEMENT QUARTERLY REPORT QUARTER 3 September 2017 FIRSTGLOBAL Asset Management is an authorised financial services provider FSP nr 20987

2 MARKET COMMENTARY Edrich Jansen MCom Finance (UP) PG Dip Financial Planning (UFS) Market participants who were patient enough - or put differently - had the risk tolerance to stay invested in the market, would have been handsomely rewarded in the third quarter. In stark comparison to the end of the second quarter where markets sold off severely, the beginning of the third quarter got off to a flying start with the local market ending the month seven percent up. Despite the fact that this entire article could be written on the geopolitical tensions between the US and North Korea, the most notable events over the quarter included the launch of an intercontinental ballistic missile that could reportedly strike the entire continental US coast, tweets from President Trump stating that North Korea will be met with fire and fury, referring to the North Korean leader as Little Rocket Man and also stating that the United States (US) will have no choice but to totally destroy North Korea during a United Nations address. July was a good month for risk assets, with most major indices ending the month higher. Solid second quarter growth was recorded higher for the US (2.6% revised to 3.0% in August), but markets were underwhelmed as it came in below expectations. A dovish Federal Reserve resulted in the dollar weakening against all major currencies with the exception of the rand. The US dollar s weakness was, however, the over-riding feature during July, which consequently led to the assets that are priced in dollars, specifically commodities, rising sharply over the month. Bucking the trend, economic growth in the Eurozone exceeded expectations and resulted in a stronger euro. Understandably, safe haven asset like gold and global bonds performed well as investors sought refuge amidst rising tensions. Healthy economic growth out of China along with a rise in Chinese corporate profits, combined with dovish comments from the US Federal Reserve, propelled emerging market returns to new highs in August. The Federal Open Market Committee (FOMC) however confirmed during their meeting towards the end of September that it plans to reverse its stimulus programme from October, causing emerging markets and currencies to retreat. The FOMC left interest rates unchanged at their meeting but signalled that it still expects one more rate hike by the end of the year. by the MSCI Emerging Markets Index, were up 7.7% over the quarter and are up 24% year-to-date as at the end of September. The European Central Bank President Mario Draghi unveiled plans to start tapering their balance sheet. The ECB s minutes suggest that the central bank s policy-setting body is becoming concerned about the euro s strength creating a drag on growth, putting themselves in a precarious position since their plans to scale back their quantitative easing programme should theoretically support the euro even further. European bourses however recorded their best month for the year in September on the back of positive economic data releases. Chancellor Angela Merkel secured a fourth term as the German election concluded as expected. The local market had a very strong quarter despite giving up some ground in September. The major drivers behind the strong performance of our local market could be attributed to the Resources index adding 13.7% in July, further aided by Naspers - which now makes up 18% of the FTSE/JSE All- Share index - which surged by 14.3% in the same month. The market finally broke out of its sideways trading pattern that has been in place for the past three years in August and managed to reach a new all-time high, buoyed again by resources which were up 4.5%. The South African Reserve Bank s monetary policy committee surprised markets, firstly by lowering the repo rate by 25 basis points to 6.75% in July, and then by keeping it unchanged in September when consensus economist forecasts expected a 25-basis point cut. Local political risks remain a concern for investors, and will most likely remain a concern until we get more direction after the ANC conference in December. The uptick in US inflation to a seven-month high, thanks to higher energy prices as well as robust economic growth, plays into the Fed s hands to raise rates before year-end. Notwithstanding this, emerging markets as measured Page 02

3 FG IP JUPITER INCOME OF S Performance and Quartile Ranking in Sector Launch date 15 August 2005 FG IP Jupiter Income FoF 4.18% 6.41% 8.10% 8.03% 7.33% 8.10% STEFI Composite Index 3.77% 5.68% 7.66% 7.06% 6.40% 7.33% SA Multi Asset Income Category Average 4.04% 6.11% 7.70% 7.54% 6.88% 7.91% Nedgroup Investments Flexible Income Fund Cadiz Absolute Yield ABIL Retention Fund Coronation Strategic Income Fund Prescient Income Provider Fund Prudential Enhanced Income Fund SIM Active Income Fund Highest 12-month performance 11.61% 11.77% Lowest 12-month performance 4.78% 5.17% % positive months 92.41% % The FG IP Jupiter Income Fund of Funds returned +2.22% in the third quarter of 2017 and +8.10% over the past 12 months, outperforming both the quarterly and annual return of the benchmark Alexander Forbes Short Term Fixed Income Index return of +1.88% and 7.66% respectively. The Prudential Enhanced Income fund made the most positive contribution to performance over the quarter, returning +2.82% overall. There were no changes made to the fund over the past quarter. LOCAL EQUITY LOCAL PROPERTY LOCAL BONDS LOCAL CASH FOREIGN FG IP Jupiter Income FoF 0% 4% 29% 61% 6% Page 03

4 FG IP VENUS CAUTIOUS OF S Performance and Quartile Ranking in Sector Launch date 2 July 2007 FG IP Venus Cautious FoF 5.52% 8.51% 9.04% 8.70% 9.74% 9.39% SA Multi Asset Low Equity Category Average 4.25% 6.49% 6.10% 6.63% 8.32% 7.95% 36One MET Equity Fund ABSA Property Equity Coronation Optimum Growth Fund Coronation Strategic Income Fund Investec Diversified Income Fund Nedgroup Investments Entrepreneur Fund Nedgroup Investments Opportunity Fund Nedgroup Investments Property Fund Old Mutual Global Equity Fund Prescient Income Provider Fund Prudential Enhanced Income Fund Saffron MET Opportunity Income Fund SIM Active Income Fund Cadiz Absolute Yield ABIL Retention Fund Highest 12-month performance 15.12% 16.56% Lowest 12-month performance -1.41% -2.82% % positive months 73.98% 73.98% The FG IP Venus Cautious Fund of Funds returned +4.03% in the third quarter of 2017 and +9.04% over the past 12 months, outperforming the benchmark peer group average quarterly return of +3.49% and 12-month return of +6.10%. Underlying funds with offshore and local property exposure contributed most to performance, specifically, the Coronation Optimum Growth fund and the ABSA Property Equity fund, which returned % and % respectively over the quarter. No changes were made to the fund over the past quarter. LOCAL EQUITY LOCAL PROPERTY LOCAL BONDS LOCAL CASH FOREIGN FG IP Venus Cautious FoF 17% 8% 15% 40% 20% Page 04

5 FG IP SATURN FLEXIBLE OF S Performance and Quartile Ranking in Sector Launch date 15 August 2005 FG IP Saturn Flexible FoF 4.41% 7.31% 5.91% 7.30% 10.40% 11.31% SA Multi Asset Medium Equity Category Average 4.99% 7.34% 6.05% 6.30% 9.32% 9.62% 36ONE BCI Flexible Opportunity Fund Coronation Market Plus Fund Investec Opportunity Fund Nedgroup Investments Opportunity Fund Rezco Value Trend Fund SIM Inflation Plus Fund Truffle MET Flexible Fund Visio BCI Actinio Fund Highest 12-month performance 31.40% 26.41% Lowest 12-month performance % % % positive months 71.03% 67.59% The FG IP Saturn Flexible Fund of Funds returned +3.84% over the third quarter of 2017 and +5.91% over the past 12 months, underperforming the benchmark peer group average quarterly return of +4.63% and 12-month return of +6.05%. The 36ONE BCI Flexible Opportunity fund and the Coronation Market Plus fund contributed the most to performance over the quarter, returning +6.65% and 5.82% respectively. The Visio BCI Actinio fund disappointed over the quarter, adding only +0.80% over the quarter No changes were made to the fund over the past quarter. LOCAL EQUITY LOCAL PROPERTY LOCAL BONDS LOCAL CASH FOREIGN FG IP Saturn Flexible FoF 42% 5% 12% 19% 22% Page 05

6 FG IP NEPTUNE GROWTH OF S Performance and Quartile Ranking in Sector Launch date 1 September 2014 FG IP Neptune Growth FoF 5.36% 7.97% 7.20% 6.86% N/A 6.62% SA Multi Asset High Equity Category Average 4.83% 7.42% 6.05% 6.42% N/A 5.89% Catalyst Global Real Estate Prescient Feeder Fund Coronation Jibar Plus Fund Fairtree Equity Prescient Fund Investec Equity Fund Laurium Flexible Prescient Fund Nedgroup Investments Property Fund Old Mutual Global Equity Fund Prudential Balanced Fund PSG Flexible Fund Rezco Value Trend Fund Truffle MET General Equity Fund Highest 12-month performance 10.59% 10.63% Lowest 12-month performance 0.30% -0.62% % positive months 67.57% 62.16% The FG IP Neptune Growth Fund of Funds returned +5.55% over the third quarter of 2017 and +7.20% over the past 12 months, outperforming the benchmark peer group average quarterly return of +4.95% and 12-month return of +6.05%. Both our local as well as global underlying equity funds performed well over the quarter, but it was the ABSA Property Equity Fund that was the star performer, returning 9.80%. The Old Mutual Global Equity Fund was the second best performing fund, returning 9.28% over the quarter, benefitting from the rand depreciation. There were no changes made to the fund over the quarter. LOCAL EQUITY LOCAL PROPERTY LOCAL BONDS LOCAL CASH FOREIGN FG IP Neptune Growth FoF 44% 6% 6% 19% 25% Page 06

7 FG IP MERCURY EQUITY OF S Performance and Quartile Ranking in Sector Launch date 15 August 2005 FG IP Mercury Equity FoF 4.53% 7.23% 5.05% 5.16% 9.48% 11.60% FTSE/JSE Africa All Share (Total Return) 8.48% 12.58% 10.22% 7.18% 12.53% 14.39% SA Equity General Category Average 4.13% 6.76% 4.33% 4.65% 10.11% 12.37% 36One MET Equity Fund Anchor BCI Equity Fund Coronation Optimum Growth Fund Fairtree Equity Prescient Fund Foord Equity Fund Gryphon All Share Tracker Fund Investec Equity Fund Nedgroup Private Wealth Core Equity Fund Nedgroup Investments Entrepreneur Fund Old Mutual Global Equity Fund Prudential Equity Fund Truffel MET General Equity Fund Highest 12-month performance 41.30% 48.30% Lowest 12-month performance % % % positive months 63.45% 62.76% The FG IP Mercury Equity Fund of Funds returned +5.81% in the third quarter of 2017 and +5.05% over the past 12 months, underperforming the quarterly and annual return of the benchmark FTSE/JSE All Share Total Return of +8.91% and % respectively. Underlying equity funds are finding it increasingly difficult to outperform the FTSE/JSE All Share Total Return index due to their underweight in Naspers which makes up nearly 20% of the index. Mercury however managed to outperform the peer group average over both aforementioned timeframes. The underlying global funds made the most positive contribution to performance over the quarter, benefiting from rand weakness and strong emerging market performance. The Coronation Optimum Growth returned over the quarter. No changes were made to the fund over the quarter. LOCAL EQUITY LOCAL PROPERTY LOCAL BONDS LOCAL CASH FOREIGN FG IP Mercury Equity FoF 80% 2% 0% 7% 10% Page 07

8 FG IP INTERNATIONAL FLEXIBLE OF S Performance and Quartile Ranking in Sector Launch date 17 October 2007 FG IP International Flexible FoF 7.56% 10.51% 8.36% 10.21% 16.72% 9.43% Benchmark 8.00% 10.83% 9.24% 10.56% 15.23% 10.64% Global - Multi Asset - Flexible Average 8.00% 10.83% 9.24% 9.85% 15.72% 9.01% FGAM Global Cautious Fund FGAM Global Growth Fund Investec Global Strategic Managed Fund Nedgroup Global Flexible Fund Highest 12-month performance 40.26% 34.52% Lowest 12-month performance % % % positive months 57.98% 60.00% The FG IP International Flexible Fund of Funds returned +6.23% in the third quarter of 2017 and +8.36% over the past 12 months, underperforming the quarterly and 12-month peer group average return of and +9.85%. The rand s 3.13% depreciation relative to the US dollar over the quarter acted as a tailwind for the fund, resulting in strong absolute returns. There were no changes made to the fund over the quarter. GLOBAL EQUITY GLOBAL FIXED INCOME GLOBAL CASH GLOBAL PROPERTY LOCAL CASH FG IP International Flexible FoF 58% 11% 21% 7% 3% USD GBP EUR JPY OTHER ZAR Currency Breakdown 57% 5% 14% 8% 13% 3% Page 08

9 MARKET PERFORMANCE INDEX ASSET CLASS 4Q Q Q Q 2017 YTD 2017 STEFI Composite Index Local Cash 1.88% 1.84% 1.85% 1.88% 5.68% Beassa ALBI Total Return Local Bonds 0.32% 2.49% 1.49% 3.66% 7.82% FTSE/JSE SA Listed Property (Total Return) Local Property 1.26% 1.37% 0.91% 5.73% 8.15% FTSE/JSE Africa All Share (Total Return) Local shares -2.09% 3.78% -0.39% 8.91% 12.58% JP Morgan World Govt Bond index (USD) Global Bonds -8.30% 1.44% 2.59% 1.65% 5.78% EPRA/NAREIT Global Index (USD) Global Property -6.22% 1.36% 1.83% 0.95% 4.20% MSCI AC World (USD) Global Shares 0.81% 6.41% 3.61% 4.69% 15.42% USD/ZAR (+ weaker, - stronger) Exchange Rate -0.44% -2.12% -2.39% 3.13% -1.46% *(Return until 30 September 2017) Page 09

10 GLOBAL BRIEF MEMBERS OF THE FIRSTGLOBAL GROUP DISCLOSURE: Collective Investment Schemes are generally medium to long term investments. The value of participatory interests or the investment may go down as well as up. Past performance is not necessarily a guide to future performance. Collective investment schemes are traded at ruling prices and can engage in borrowing and scrip lending. A schedule of fees and charges and maximum commissions is available on request from the manager. The Manager does not provide any guarantee either with respect to the capital or the return of a portfolio. Fund of funds and feeder funds invest in portfolios of other Collective Investment Schemes that levy their own charges, which could result in a higher fee structure for the fund of funds. The Manager retains full legal responsibility for the Fund, regardless of Co-Naming arrangements. Transaction cutoff time is 14:30 daily. Each portfolio may be closed for new investments. Valuation time is 15:00 (17h00 at quarter end) and 20:00 for fund of funds and certain funds with significant investments in CIS. Prices are published daily and available newspapers countrywide, as well as on request from the Manager. IP Management Company (RF) Pty Ltd is the authorised Manager of the Scheme contact or clientservices@ipmc.co.za. Standard Bank is the trustee / custodian contact compliance-ip@ standardbank.co.za. Additional information including application forms, the annual report of the Manager and detailed holdings of the portfolio as at the last quarter end are available, free of charge, from clientservices@ipmc.co.za. IP Management Company is a member of ASISA. Financial Advisor fees as agreed between the Investor and the Advisor may apply and payment to the Advisor will be facilitated on behalf of the Investor. A statement of changes in the composition of the portfolio during the reporting period is available on request. The portfolio may include foreign investments and the following additional risks may apply: liquidity constraints when selling foreign investments and risk of non-settlement of trades; macroeconomic and political risks associated with the country in which the investment is made; risk of loss on foreign exchange transactions and investment valuation due to fluctuating exchange rates; risk of foreign tax being applicable; potential limitations on availability of market information which could affect the valuation and liquidity of an investment. All of these risks could affect the valuation of an investment in the fund. JOHANNESBURG: Bear Vision Investment Services (Pty) Ltd Klaas Venter: klaasv@global.co.za Reinette Venter: bearvision@global.co.za Tel: FIRSTGLOBAL Investment Counsel (Pty) Ltd Hennie Fourie: henniefourie@firstglobal-ic.co.za Riaan Kemp: riaan@firstglobal-ic.co.za Tel: Finleks (Pty) Ltd Jacques du Plessis: jaduplessis@global.co.za Tel: FIRSTGLOBAL Capital (Pty) Ltd Ernst Beukes: elb@firstglobalcapital.co.za Tel: DURBAN: Borland Financial Services Group (Pty) Ltd Mike Borland: mborland@bbfs.co.za Sarah Drake: sdrake@bbfs.co.za Tammy Loots: tloots@bbfs.co.za Dee Sunny: dsunny@bbfs.co.za Tel: Harcourt Martens & Associates (Pty) Ltd Sandy Aitken: sandy@hma.co.za Tel: PRETORIA: FIRSTGLOBAL Capital (Pty) Ltd John Swart: jrs@firstglobalcapital.co.za Jan Labuschagne: jhl@firstglobalcapital.co.za Kobus Venter: kventer@firstglobalcapital.co.za Tel: CAPE TOWN: FIRSTGLOBAL Wealth Management (Pty) Ltd Jacques Hattingh: jacques@firstglobal.co.za PG Engelbrecht: pg@firstglobal.co.za Wayne Liebenberg: wayne@firstglobal.co.za Tel: RICHARDS BAY: Harcourt Martens & Associates (Pty) Ltd Mike Harcourt: mharcourt@hma.co.za Louwrens Badenhorst: louwrens@hma.co.za Francois Marais: francois@hma.co.za Tel: All of our members are licensed Financial Services Providers (FSPs) DISCLAIMER: This document is for information purposes only and is not intended for the solicitation of new business. FIRSTGLOBAL Asset Management shall not accept any liability or responsibility of whatsoever nature and however arising in respect of any claim, damage loss or expense relating to or arising out of or in connection with the reliance by anyone on the contents of this document. FIRSTGLOBALAssset Management is a licenced Financial Services Provider FSP number