Grindrod Asset Management Presentation November 2013

THE BENEFITS & POTENTIAL OFPAYERS & GROWERS™November 2013

INTRODUCING PAYERS & GROWERS™

What are Payers & Growers™?

Simple definition:

“Companies that pay a dividend and grow that dividend continuously over time.”

Dividend aristocrats (US) definition:

“These are large, blue chip companies that have historically provided better performance and lower volatility than the S&P 500 as a whole.”

SOURCE: Grindrod Asset Management & Forbes

Why invest in Payers & Growers™?

"According to Ned Davis Research, stocks with growing dividends outpaced the U.S. market from January 1973 through September 2011, registering annualized total returns of 9.21%. Yet they had a lower annual standard deviation, at 16.45%, than those that paid little or no dividend."

Annualised Return Standard Deviation

S&P500 Dividend Cutters -1.02% 25.9%

S&P500 Dividend Non-Payers 1.74% 25.9%

S&P500 No Change in Dividends 7.00% 18.6%

S&P500 Dividend Growers 9.21% 16.5%

SOURCE: Barron’s & Ned Davis Research

SOURCE: I-Net Bridge & Grindrod Asset Management

'01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13f '14f '15f0

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Standard Bank (SBK)

Dividends per share (RHS) Share price (LHS)

Share prices rise as earnings/dividends rise

“Capital growth is a function of earnings/dividend growth. Businesses become more valuable as their profits rise.”

Payers & Growers™ equity portfolio

AVI BIDVEST

BRITISH AMERICAN TOBACCO

CORONATION

FIRSTRAND

INVESTEC PLC

LIBHOLD

LIFE HEALTHCARE

MMI HLDGSMR PRICEMTNOLD MUTUAL

REUNERT

SAB MILLER

STANDARD BANK

SASOL

SPAR

TIGER BRANDS

TRUWORTHSVODACOM

“A portfolio of businesses that reward shareholders with consistent growth in earnings & dividends.”

Equal weighting – a disciplined approach to investing

Equal weights = disciplined approach sell expensive income streams Investing proceeds into more appropriately priced income streams

Equal weighting (vs market cap weighting) added approximately 2% per annum to portfolio total return over the past 10 years

Each security enjoys an equal weight in the equity portfolio

SOURCE: Grindrod Asset Management

Listed property – the ultimate Payers & Grower™?

SOURCE: Grindrod Asset Management & Forbes

Valued relative to bonds (i.e. on a yield-relative basis)• listed property yields are high• companies pay out 100% of earnings

Distribution growth exceeds inflation• contractual rental escalations• gearing• internalised management companies• active asset management

Total returns are expected to exceed 15% per annum

Volatility of returns should be lower than the equity market

Diversification benefits of listed property


Date period for upper right: October 2003 – October 2013 (10 years

Listed property All Share All Bond Small Cap

Listed property 1.00 0.26 0.65 0.63

All Share 0.13 1.00 0.07 0.68

All Bond 0.73 0.21 1.00 0.34

Small cap 0.40 0.70 0.35 1.00

Date period for lower left: October 2008 – October 2013 (5 years)

COMPARATIVE TOTAL RETURN INVESTMENT CORRELATION

Diversification benefits of listed property


Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec-15

-10

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15 Monthly Returns - 2008

100% Equities 50% Equities / 50% Listed Property

“Listed property provides significant diversification benefits due to its lower volatility and high absolute returns.”

Payers & Growers™ listed property portfolios

Securities are selected to suit portfolio mandate• A & B unit structures afford opportunities• able to construct a high yield or high growth portfolio or a

combination of both

Opportunities exist to enhance returns• private placements (issued shares at a discount to market or

receive a pre-commitment fee)• smaller listed property companies deliver superior returns due to

higher yields and income growth rates

APPLYING PAYERS & GROWERS™

Grindrod Stable Growth FundSouth African – Multi-Asset – Low Equity

Payers & Growers™ Equities

Payers & Growers™ Listed Property

Fixed Income


INCOME YIELD = 6.58% (before expenses)

3 YEAR INCOME GROWTH = 7.21%

INCOME YIELD4.29%

INCOME GROWTH12.40%

40% of portfolio

INCOME YIELD8.86%

INCOME GROWTH8.76%

25% of portfolio

INCOME YIELD7.52%

INCOME GROWTH0%

35% of portfolio

Grindrod Managed Growth FundSouth African – Multi-Asset – High Equity



Fixed Income




INCOME YIELD4.29%

INCOME GROWTH12.48%

65% of portfolio

INCOME YIELD8.65%

INCOME GROWTH9.85%

25% of portfolio

INCOME YIELD4.82%

INCOME GROWTH0%

10% of portfolio

Grindrod High Income FundSouth African – Multi-Asset – Income

INCOME YIELD0%

INCOME GROWTH0%



Fixed Income




INCOME YIELD9.50%

INCOME GROWTH9.58%

20% of portfolio

INCOME YIELD8.05%

INCOME GROWTH0%

80% of portfolio


Grindrod Equity Income Growth FundSouth African – Equity – General



Fixed Income

INCOME YIELD0%

INCOME GROWTH0%



INCOME YIELD4.30%

INCOME GROWTH12.47%

90% of portfolio

INCOME YIELD8.39%

INCOME GROWTH13.51%

10% of portfolio


High Income Stable Growth Managed Growth Equity Income Growth6.00

6.50

7.00

7.50

8.00

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9.50

10.00

Listed Property Portfolio Yields

Optimising portfolio objectives with listed property

20%

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“Maximising the income produced in those portfolios where income is a key objective.”

Conservative Aggressive


High Income Stable Growth Managed Growth Equity Income Growth0.00

2.00

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Listed Property Portfolio Growth Rates

Optimising portfolio objectives with listed property

“Maximising the potential for capital growth in those portfolios where long-term growth is required.”

20%

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10%

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Conservative Aggressive

BENEFITS OF PAYERS & GROWERS™

Predictable, growing distributions

Stable Growth Fund Managed Growth Fund

High Income Fund Equity Income Growth Fund


“Clients are able to prepare better budgets because their cash flows are more predictable (don’t rely on capital gains).”


06/12 07/12 08/12 09/12 10/12 11/12 12/12 01/13 02/13 03/13 04/13 05/13 06/13 07/13 08/13 09/13 10/13-2

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Grindrod Stable Growth FundMonthly returns from 31/05/2012 to 31/10/2013

CUMULATIVE RETURN = 27.13%

WORST MONTH = -1.44%


Grindrod Managed Growth FundMonthly returns from 31/05/2012 to 31/10/2013



06/12 07/12 08/12 09/12 10/12 11/12 12/12 01/13 02/13 03/13 04/13 05/13 06/13 07/13 08/13 09/13 10/13-4

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Grindrod High Income FundMonthly returns from 31/05/2012 to 31/10/2013



06/12 07/12 08/12 09/12 10/12 11/12 12/12 01/13 02/13 03/13 04/13 05/13 06/13 07/13 08/13 09/13 10/13-0.5

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Domestic portfolio range

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Medium-term income growth

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Grindrod High Income Fund

Grindrod Stable Growth Fund

Grindrod Managed Growth Fund

Grindrod Equity Income Growth Fund


INCOME YIELD AND INCOME GROWTH

BELOW LONG-TERM INFLATION

“Maximising the clients chance of beating inflation for a given level of risk.”

Questions

This presentation has been compiled by Grindrod Asset Management ((Pty) Ltd (‘GrAM’), a wholly owned subsidiary of Grindrod Financial Holdings Limited. It is confidential and presented as a general information service to the addressee only and therefore should not be considered to be investment advice. Accordingly, it contains no recommendation (whether express or implied), guidance, or proposal that any particular security is appropriate to the investment objectives, financial situation or particular needs of the addressee. Conflicts of interest may exist with any one or more of the securities recommended in this presentation, which include situations where the author/s of the presentation or a member of his/her family owns a direct interest in securities issued by a company mentioned, an employee of GrAM acts as a director of a company mentioned in the presentation, GrAM owns securities in a company mentioned in the presentation, or GrAM receives compensation for providing financial services to a company mentioned in the presentation. This presentation shall not be reproduced in whole or in part, without GrAM’s permission. The information contained herein has been obtained from sources which, and persons whom, we believe to be reliable but is not guaranteed for accuracy, completeness or otherwise. Any opinions expressed are subject to change without notice. While care has been taken in the preparation of the information contained in the presentation, GrAM will not be liable for any loss or damage of any nature arising from this presentation, or incurred as a result of acting on the contents thereof.

Grindrod Asset Management (Pty) Ltd is an Authorised Financial Services Provider (License 29834).

Disclaimer

Grindrod Asset Management Presentation November 2013

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Transcript of Grindrod Asset Management Presentation November 2013