SIM GLOBAL EQUITY INCOME FUND DOUW STEENEKAMP The appointed investment manager of the SIM Global Equity Income Fund is Denker Capital, a division of Sanlam Investment Management (Pty) Ltd, an authorised financial services provider in terms of Financial Advisory and Intermediary Act, 2002, FSP 579.
Fund characteristics Global long only equity portfolio Primary objective - distribution of a dividend payout greater than the yield offered by the MSCI World High Dividend Yield Index Secondary objective - achievement of real growth in the investment capital over rolling three year periods Predominantly exposed to well established businesses in developed markets Market imposes a natural sell discipline 2
1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Percent Global yields are at an historic low 12 10 10yr US Govt Yield Moody's AAA Corp Bond Yield S&P 500 Div Yld 1m US Benchmark Bill 8 6 4 2 0-2 Source: FactSet 3
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 High dividend yield strategies outperform 700 600 500 MSCI World High Div Yield Index - Total Return MSCI World High Div Yield Index - Price MSCI World Index - Total Return MSCI World Index - Price 400 300 200 100 0 Source: FactSet 4
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 High dividend yield strategies outperform Difference in rolling three year total returns 15% 10% 5% 0% -5% -10% Source: FactSet 5
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 High dividend yield strategies outperform Difference in rolling five year total returns 10% 8% 6% 4% 2% 0% -2% Source: FactSet 6
Italy Belgium France Germany Spain Ireland Japan Norway Switzerland Netherlands Denmark United Kingdom Finland World New Zealand Canada Sweden United States South Africa Australia 2.0 2.5 2.5 2.2 2.5 3.1 2.9 2.8 3.1 Percent 3.6 3.6 3.5 3.8 3.6 3.8 3.9 4.2 4.2 3.9 4.4 5.0 5.1 4.9 5.3 5.1 5.4 5.3 5.2 5.5 5.8 5.9 5.8 5.6 6.3 6.3 6.6 6.8 6.9 7.3 7.4 Dividends matter a lot! 9.0 Annualised real equity return Contribution from dividend yield and growth 8.0 Annualised real returns 1900-2010 7.0 6.0 5.0 4.0 3.0 2.0 1.0 0.0 Source: Equity Premia Around The World, Elroy Dimson, Paul March & Mike Staunton, 2011 7
High payouts lead to higher earnings growth! Source: Surprise! Higher Dividends = Higher Earnings Growth, Robert D. Arnott & Clifford S. Asness, 2003 8
What do we look for? Attractive initial dividend yield (net of dividend taxes) Well established business Healthy balance sheet Strong historic and prospective cash flows History of dividend growth and payments Clear dividend policy Management s commitment to the dividend 9
What have we been able to find? Source: FactSet, Cannacord Quest Company Country Sector Dividends received (% of starting price, 10yrs) Annualised dividend growth rate (10yrs) Annualised Total Return USD (10yrs) Israel Chemicals Israel Chemicals 211% 13% 13% Amlin UK Insurance 117% 11% 16% British American Tobacco UK Tobacco 98% 12% 16% Reynolds American USA Tobacco 96% 11% 22% Vodafone UK Telecoms 88% 12% 9% Scor France Insurance 74% 18% 12% Singapore Telecomm Singapore Telecoms 71% 16% 12% AstraZenaca UK Pharmaceuticals 64% 12% 9% Unilever UK Personal care & household products 64% 5% 12% Imperial Tobacco UK Tobacco 59% 11% 13% Legal & General UK Insurance 51% 7% 12% MITIE Group UK Facilities management 45% 15% 9% 10
What have we been able to find? Years of consecutive dividend progression Procter & Gamble PepsiCo McDonalds Verizon Roche Mitie Singtel Sanofi Total SA Novartis Imperial Tobacco Eli Lilly GlaxoSmithKline British American Tobacco 29 28 23 21 21 20 18 18 17 15 15 38 42 59 Source: FactSet, Cannacord Quest 11
Sep 12 Nov 12 Jan 13 Mar 13 May 13 Jul 13 Sep 13 Nov 13 Jan 14 Mar 14 May 14 Jul 14 Sep 14 Nov 14 Jan 15 Mar 15 May 15 Jul 15 Sep 15 Performance vs. benchmark (USD) 130 125 120 115 110 105 SIM Global Equity Income Fund Composite Index USD total return since inception (annualised) 6.6% p.a. 4.3% p.a. 100 95 Source: Morningstar 12 12
Sep 12 Dec 12 Mar 13 Jun 13 Sep 13 Dec 13 Mar 14 Jun 14 Sep 14 Dec 14 Mar 15 Jun 15 Sep 15 Performance vs. benchmark (ZAR) 220 200 180 160 140 120 SIM Global Equity Income Fund ZAR Composite Index ZAR 26.1% p.a. 23.3% p.a. ZAR total return since inception (annualised) 100 80 Source: Morningstar 13 13
Performance vs. global peer group SIM Equity Income Fund A USD 1/122 2/119 2/103 20/92 Source: Morningstar As at 30 September 2015 SIM Global Equity Income A EAA OE Global Equity Income MSCI World NR USD 14 14
Performance vs. SA peer group SIM Equity Income Feeder Fund A1 ZAR 1/37 2/35 5/28 Source: Morningstar As at 30 September 2015 SIM Global Equity Income FF A1 (ASISA) Global EQ General 14
Regional and sector exposure Region UK (40%) Sector Consumer Staples (28%) Health Care (18%) USA (32%) Financials (15%) Europe (23%) Asia (3%) Australasia (2%) Middle East & Africa (1%) Telecomms (8%) IT (8%) Industrials (7%) Consumer Discretionary 7%) Energy 5%) Materials (2%) 16 16
Fund characteristics 30 September 2015 SIM Global Equity Income Fund ROE P/NAV PE Div Yield Fund 21.0% 2.3 17.8 3.8% Index 17.1% 2.1 17.6 2.5% 24 20 16 12 8 4 Fund Index 0 Source: Factset Index: MSCI World Index ROE P/NAV PE Div Yield 17
Largest holdings Imperial Tobacco Vodafone Unilever Reynolds American Fwd DY: 4.1% Years paid: 18 Years growth: 18 Fwd DY: 5.4% Years paid: 25 Years growth: 0 Fwd DY: 3.2% Years paid: 30+ Years growth: 30+ Fwd DY: 3.1% Years paid: 17 Years growth: 17 Micro Focus Eli Lilly & Co British American Tobacco Novartis Fwd DY: 2.8% Years paid: 10 Years growth: 1 Fwd DY: 2.4% Years paid: 30+ Years growth: 17 Fwd DY: 4.2% Years paid: 30+ Years growth: 15 Fwd DY: 3.1% Years paid: 18 Years growth: 18 Philip Morris Int. Lockheed Martin Legal & General AstraZeneca Fwd DY: 4.9% Years paid: 10 Years growth: 9 Fwd DY: 2.9% Years paid: 26 Years growth: 15 Fwd DY: 5.3% Years paid: 30+ Years growth: 7 Fwd DY: 4.5% Years paid: 22 Years growth: 2 18
Conclusion Dividends are a crucial component of long-term investment returns Dividend focused investment strategies outperform in the long-term Dividends can provide a growing and reliable source of income Denker Capital has the ability and experience to successfully manage dividend focused mandates Initial performance of the SIM Global Equity Income Fund has been very encouraging