Exchange Traded Funds {ETF } Aluma Capital

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1 Exchange Traded Funds {ETF } Aluma Capital

2 Index What is an ETF? 5 What are the advantages of investing in ETFs? 6 WHAT ARE THE COSTS? 7 WHO PROVIDES THE ETFs? 7 SATRIX FUNDS 8 SATRIX 40 8 SATRIX FINI 8 Satrix Resi 8 Satrix Rafi 8 Satrix Indi 9 Satrix Swix 9 Satrix Divi 9 ABSA CAPITAL 10 erafi 10 NewRand 10 NewGold 10 Shari ah Top NewSA 11 2 Exchange Traded Funds (ETF)

3 erafi Industrial erafi Financial erafi Resource 11 DEUTSCHE BANK 12 DB X-TRACKERS EURO STOXX50 12 DB X-TRACKERS FTSE DB X-TRACKERS MSCI JAPAN 12 DB X-TRACKERS MSCI USA 12 DB X-TRACKERS MSCI WORLD 13 INVESTEC 14 Z SHARES GOVI 14 NEDBANK CAPITAL 14 BETTABETA 14 RAND MERCHANT BANK 15 BIPS INFLATION-X 15 BIPS TOP Exchange Traded Funds (ETF) 3

4 4 Exchange Traded Funds (ETF)

5 What is an ETF? Exchange Traded Funds or ETFs are collective investment schemes that pool investor funds in a very cost-effective instrument that gives investors access to a large basket of shares. Instead of purchasing one share on the market, you can get exposure to the 40 best performing companies listed on the JSE or the top companies listed in the financial and resource sectors. Exchange traded funds are similar to Unit Trusts because you are investing in a group or basket of shares rather than investing in a single share. Like Unit Trusts, exchange traded funds are open ended which means that they have no fixed amount of shares. In contrast to Unit Trusts, an ETF is a passively managed investment. This means the shares which make up the exchange traded fund basket are not selected on merit by a Fund Manager but are shares that represent a particular index. The ETF is then able to track the performance of that index. Even though an ETF is passively managed, shares are actively traded as each company moves up or down a particular index. ETFs are listed on a securities exchange and offer the same benefits as share trading. This means your asset value and investments holdings will always be valued at prevailing market prices and investments can be redeemed at any time. In addition, ETFs are eligible for automatic dividend reinvestment. Investing in gold or platinum has become very popular, but Investing in gold or platinum requires special attention to the logistics of the purchase. Gold ETF and platinum ETF funds provide a method for investing in gold and platinum without the logistical issues of insurance, storage, moving, and reselling, along with others. Gold ETF and platinum ETF funds are ideal way to get commodity market exposure with limited risks. Exchange Traded Funds (ETF) 5

6 What are the advantages of investing in ETFs? Diversification ETFs represent a basket of shares, commodities or properties and provide broad exposure to a particular index, sector or commodity such as gold or platinum. Flexibility Access to a wide range of ETFs from a number of different ETF providers, including ABSA, Deutsche and SATRIX. Liquidity ETFs are actively traded as a cost-effective instrument to gain sector and market exposure. Investors can access their investment at any time. Cost Effective ETFs offers smaller monthly investment amounts with a low cost structure. Accessibility ETFs can be traded using your Online share trading account. Transparency ETF owners know exactly what stocks or underlying assets they are holding and what the value is. 6 Exchange Traded Funds (ETF)

7 ETFs can serve as a cornerstone of your long-term strategy for creating wealth. It gives you the opportunity to make smaller monthly investments while still getting exposure to the financial markets. The long -term benefit of a passive investment as opposed to active fund manager involvement is your savings will increase in value rapidly. ETFs also help to spread your risk by virtually eliminating portfolio fallout from a single stock plunge, while you will benefit from the growth possibilities of many other stocks. ETFs are exempt from securities transfer tax because a basket of securities is transferred to the redeeming party and no cash is exchanged. However, ETFs are subject to capital gains tax when you sell your investment. An exchange traded fund investment fund meets all the criteria for sound, long-term financial planning. ETFs are low-cost, diversified and tax-efficient WHAT ARE THE COSTS? Note: You are able to either make a once-off purchase into an ETF Investment Plan or a monthly debit order. If you wish to make a once-off purchase you will need to deposit funds into your account prior to making the purchase. WHO PROVIDES THE ETFs? Online provides the investment platform through which you can invest in a range of exchange traded funds provided by different companies. SATRIX ABSA CAPITAL DEUTSCHE INVESTEC NEDBANK RMB Exchange traded funds offer investors several advantages that give you more choice, more control, and more protection over your investment portfolio. However, like all investments the role of exchange traded funds in your overall strategy is dependent on your goals and preferences. Exchange Traded Funds (ETF) 7

8 SATRIX FUNDS Funds SATRIX 40 Satrix 40 endeavours to replicate the performance of the FTSE/JSE Top 40 index. This index constitutes the forty largest companies, by market capitalisation, listed on the JSE. SATRIX FINI The Satrix Fini endeavours to replicate the performance of the FTSE/JSE Financial 15 index. This index comprises the 15 largest financial shares listed on the JSE. Satrix Resi The Satrix Resi endeavours to replicate the performance of the FTSE /JSE Resources 20 index. This index consists solely of resources based stocks, including mining companies, mining holding companies, mining finance and exploration companies and resource based stocks, such as Sasol. Satrix Rafi This index weights the underlying constituents using four fundamental factors, rather than pure market capitalisation. These four factors are dividends, cash flow, sales and book value. Secondly, Satrix RAFI 40 will track the total return version of the FTSE /JSE RAFI 40 index, measuring the total return of the underlying index by combining the capital performance plus the reinvestment of income of the constituent companies in the index. All dividends received will be immediately reinvested on behalf of investors. 8 Exchange Traded Funds (ETF)

9 Satrix Indi Satrix Indi endeavours to replicate the performance of the FTSE/ JSE Industrial 25 index. This index comprises the top 25 industrial companies listed on the JSE. Satrix Swix The Satrix Swix Top 40 endeavours to replicate the performance of the FTSE/JSE Swix Top 40 index. This shareholder weighted Top 40 index makes use of the share register of the top forty companies to reduce the constituent weights for foreign shareholders in these stocks. In addition, the Swix Top 40 is adjusted for cross-holdings and strategic holdings. The impact is to reduce the weightings of mainly resource and dual-listed stocks in the Top 40 index by approximately half. Satrix Divi The Satrix Divi portfolio will invest in the FTSE/JSE Dividend Plus Index. This consists of 30 companies, selected from the JSE Top 40 and Mid- Cap indices, that are expected to pay the best normal dividends over the forthcoming year. The high yield nature of the Satrix Divi provides a defensive investment for the risk averse investor. Exchange Traded Funds 9

10 ABSA CAPITAL erafi Funds The erafi ETF methodology weights shares based on fundamental valuation metrics - sales, cash flow, book price and dividends, as well as two additional filters (the quality of earnings screen and the financial distress risk screen) - rather than traditional market capitalisation. NewRand NewRand tracks the NewRand Index, which was designed by Absa Capital and calculated by FTSE (FTSE International Limited) and the JSE (JSE Limited). The NewRand Index tracks the performance of a basket of the top 10 South African Rand hedge stocks listed and traded on the JSE. NewGold Certified Shari ah Compliant: The NewGold ETF is a non-interest based product investing directly in gold bullion. NewGold continuously tracks the gold price and enables investors to invest in a listed instrument (structured as a debenture) in which each security is equivalent to approximately 1/100 ounces of real gold held in a secured stockpile of gold bullion. Shari ah Top 40 Certified Shari ah Compliant : NewFunds Shari ah Top 40 tracks the Shari ah Top 40 jointly established by London s FTSE International Limited (FTSE) and Johannesburg s JSE Limited (JSE). This FTSE /JSE Shari ah Top 40 is designed to reflect the Shari ah compliant companies identified from the top 40 companies listed on the main board of the JSE as measured by market capitalisation. A dual step Yasaar Ltd (Yasaar ) approved screening process is undertaken by the FTSE and the JSE and verified by Yasaar to ensure that all companies included in the index are Shari ah complaint. Yasaar Research Inc scholars represent all of the major Shari ah schools of thought, creating a best practise approach that has credibility across all regions of the Islamic world. 10 Exchange Traded Funds (ETF)

11 NewSA NewSA tracks the performance of the NewSA Index, a modified Top40 index that weights the top 40 JSE listed companies in accordance with their empowerment ratings (as measured by Empowerdex, an independent empowerment rating agency). These ratings are calculated according to the Department of Trade and Industry s (dti s) Codes of Good Practice on B-BBEE, which take into account the seven pillars of transformation: ownership, management, employment equity, skill development, preferential procurement, enterprise development, and socio-economic development. The NewSA index is independently calculated by the FTSE (FTSE International Limited and the JSE (JSE Limited) and updated daily. erafi Industrial 25 The NewFunds erafi SA Industrial 25 Index ETF Portfolio, in the NewFunds Collective Investment Scheme, is a portfolio of Constituent Securities held with the objective of tracking the erafi Industrial 25 Index,. The index is comprised of securities in the 25 companies with the largest fundamental value, selected from a universe of the industrial sector companies that fall within the top 100 companies listed on the JSE, as measured by market capitalisation. erafi Financial 15 The erafi Financial 15 Index ETF in the NewFunds Collective Investment Scheme, is a portfolio of Constituent Securities held with the objective of tracking the erafi Financial 15 Index. The index is comprised of securities in the 15 companies with the largest fundamental value, selected from a universe of the financial sector companies that fall within the top 100 companies listed on the JSE, as measured by market capitalisation. erafi Resource NewFunds erafi SA Resource 20 Index ETF Portfolio, in the NewFunds Collective Investment Scheme, is a portfolio of Constituent Securities held with the objective of tracking the erafi Resource 20 Index. The index, which is calculated by RisCura, is comprised of securities in the 20 companies with the largest fundamental value, selected from the universe of the resource sector companies that fall within the top 100 companies listed on the JSE, as measured by market capitalisation. Exchange Traded Funds (ETF) 11

12 DEUTSCHE BANK Funds DB X-TRACKERS EURO STOXX50 The underlying of the db x-trackers DJ Eurostoxx 50 Index ETF is the Dow Jones Euro STOXX 50 Index. This is one of the most widely-known European Blue Chip indices. The index is a free float market capitalisation weighted index, containing the 50 most liquid blue chip stocks from countries within the Eurozone. DB X-TRACKERS FTSE 100 The underlying of the db x-trackers FTSE 100 Index ETF is the FTSE 100 index, the most important United Kingdom Blue Chip index. The index is a free float market capitalisation weighted Index, containing the 100 largest United Kingdom shares in terms of market capitalization that are listed on the London Stock Exchange DB X-TRACKERS MSCI JAPAN The MSCI Japan Index reflects the performance of the Japanese equity markets. The Index contains about 400 constituent securities representing companies with a total market capitalisation of approximately US$3 trillion. The MSCI Japan Index is recognised as a barometer of the Japanese economy and as the holder of db x-trackers MSCI Japan Index ETF, an investor will essentially track the Japanese equity markets. DB X-TRACKERS MSCI USA The MSCI USA Index reflects the performance of the United States of America equity markets. The Index contains about 600 constituent securities representing companies with a total market capitalisation of approximately US$14 trillion. The MSCI USA Index is recognised as a barometer of the United States of America economy and as the holder of db x-trackers MSCI USA Index ETF, an investor will essentially track the United States of America equity markets. 12 Exchange Traded Funds (ETF)

13 DB X-TRACKERS MSCI WORLD The MSCI World Index reflects the performance of the developed world s equity markets. The Index contains about 1,900 constituent securities representing companies with a total market capitalisation of approximately US$30 trillion. The MSCI World Index is recognised as a barometer of the world s developed economies and as the holder of db x-trackers MSCI World Index ETF, an investor will essentially track the developed world s equity markets. Exchange Traded Funds (ETF) 13

14 INVESTEC Z SHARES GOVI Funds Zshares GOVI can be regarded as a core bond JSE-listed ETF which invests in government bonds. The GOVI Index is a Total Return index. All coupons paid from underlying bonds are theoretically reinvested, by acquiring additional bonds in the same proportion as the index composition. NEDBANK CAPITAL BETTABETA The Nedbank BettaBeta Equally Weighted Top 40 ETF tracks the BettaBeta Equally Weighted Top 40 Index, calculated independently by the FTSE/JSE. This index is comprised of the same companies as the FTSE/JSE Top 40 Index, but they are held in equal proportions of 2.5% each (as at the quarterly rebalancing date). The index is rebalanced in line with the quarterly review of the FTSE /JSE Africa Index Series and underlying constituents mirror the changes in the FTSE/JSE Top 40 Index. 14 Exchange Traded Funds (ETF)

15 RAND MERCHANT BANK BIPS INFLATION-X Inflation -X provides direct exposure to inflation -linked bonds issued by the South African Government. Inflation-X aims to track the performance of the Government Inflation Linked Bond Index ( GILBx ) and is listed on the JSE, providing a seamless and cost effective way to invest in Government inflation linked bonds. The underlying portfolio consists of the four Government Inflation Linked bonds. Any new issuances from National Treasury may be included in the fund and any existing bonds with less than one year to maturity will be excluded. BIPS TOP 40 Bips Top 40 is an Exchange Traded Fund (ETF) listed on the Johannesburg Stock Exchange. The aim of the fund is to provide returns linked to the performance of the FTSE/JSE Top 40 Index. The ETF invests in all the component securities of the index in proportion to their weightings in the index. The FTSE/JSE Top 40 index contains the 41 largest shares in terms of market capitalisation listed on the Johannesburg Stock Exchange. Exchange Traded Funds (ETF) 15