Liberty2012

Liberty’s
Investments

Senate Group

Juan Jacobs

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Agenda
1. 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

25

20

15
Capital
Income
10
Total

5

0
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

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

Direct Property: 10.74%
Non Direct Property: 8.91%


LBPP vs. CPI

25.00

CPI 20.00

Yr Average Return
2006 4.63 19.95 15.00

2007 7.08 20.60 10.00
2008 11.30 14.93
2009 6.30 11.49 5.00

2010 4.29 11.91
0.00
2011 4.98 10.51
1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011
CPI AVERAGE FOR YEAR LIBERTY PROPERTIES GROSS RETURN

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

Eastern Cape Gauteng
Retail
Kwa-Zulu Natal Western Cape
Offices
5% 8% 9% 5%
1%
8%
Hotels
11%
Other Fixed
Property
10%
65% 78%
Listed Property and
property linked
assets
Money Market/ Cash
Type Instruments


Sandton City
Extension and Refurbishment

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§ 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
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tenders have been granted in favour of
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§ Refurbishment plans underway for Sandton
Offices and Parking deck

§ 100% let


Liberty Midlands Mall Lifestyle Centre

§ 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


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


Who will benefit from the Flexible
Investment Plan?
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


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What is Bundling?

Up to 10 policies
One policy document
– Separate schedule per policy
Each 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
Single Multi Acc Multi Acc
Plan Flexible
Premium Inv Plan Inv Plan
Early Investment Reduced Fees
termination Investment Potential Potential
charges apply Plan Secondary CGT Secondary CGT on these funds
Builder
(1st 4 years) if selected on
MAIP:
Consideration R 1,000,000 R 1,000,000 R 1,000,000 R 1,000,000 R 1,000,000
Income Fund,
Net Allocation R 995,739 R 965,800 R 965,800 R 965,800 R 965,800 Bond Fund,
High Yield &
Allocation Money Market
+R 29,940 R0 R0 R0 R0
Enhancement
NB!! Be
Initial advisory
R 34,200 R 34,200 R 34,200 R 34,200 R 34,200 cautious about
fee (plus VAT)
selecting
Initially Money Market
1.23% pa 1.96%p.a. in as client will
Management reducing 1st 5yrs, and compare to
1.92% pa 1.92% pa 1.2% pa
fee based on reduces bank where no
growth thereafter fees are levied
achieved and there is still
RIY at Year 5 the impact of
2.2% 2.1% 2.3% 2.8% 2.1% secondary CGT

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


Guaranteed Portfolios
Growth Investment Series


Capital (C) Guarantee Option


Capital Plus (C+) Guarantee Option


The case for Multi-Manager
Consistency
Investors are more likely to achieve their objectives if portfolios are structured to deliver consistent performance.
Diversification
Portfolios 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.

1st Quartile Single Manager
volatility

More consistent Multi
Manager returns

Rank

4th Quartile

Time à


Excelsior Multi-Manager Risk Profiled
Portfolios
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
Conservative Moderate Moderate Moderate Aggressive Aggressive
Conservative
Equity Excluding Property Listed Property Bonds Cash

Equity Building Property Bond Building Cash Building
Allocation Allocation Allocation Allocation
Block Building Block Block Block
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%


The hidden cost of going external

Ongoing Foreign
Product
Guarantee Commission Currency Asset Total Ongoing
Portfolio Management
Fee Recovery Management Manager Fee Fees
Fee*
Fee Fee

1.83% p.a.
Excelsior Multi-
Manager 1.23% p.a. n/a n/a n/a 0.60% p.a. No additional
Aggressive performance fees
levied

1.71% p.a. 2.94% p.a.
(Fee at benchmark)
Fund Xternal 1.23% p.a. n/a n/a n/a
Max 3.42% 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 vs. Low Ratio not necessarily expensive or cheap!
High Figure = relatively expensive.
Actively managed funds have higher figures than
Low Figure = relatively cost effective. passively managed funds – performance may be better
thus outweighing costs!

Large funds have economies of scale thus TER
relatively low but performance may be poor relative to
peers.
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. Not all costs included e.g. Upfront costs and advisory
fees not included, however most recent performance fees
Performance fee not included. Liberty includes included in ratio.
fee at benchmark as per CPQ.

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 Ratio
Converting 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 2013
Inclusion 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 scheme
credits) 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 !


Disclaimer

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).


Liberty2012

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