Welcome to Ecsponent’s national roadshow

November 2018

In 2010…

2

and for Ecsponent…

3

(Originally E-data)

2011 - 2017

4

Terence Gregory

Ecsponent Limited CEO

November 2018

Seeing around corners

Business as usual in unusual times

6

Short and medium term debt facilities providing high gross profit and liquidity. Meet needs of:▪ SME credit▪ Enterprise development▪ Specialist procurement

and logistics

Credit

Capital raising through investment products.Advisory services providing life insurance, retirement funding and short-term investment products.

Longer term capital growth

objectives. Listed and

private equity

investments in high-growth

areas, with high IP and barriers to

entry, offering

high yields.

Investment Services

Equity Holdings

Business as usual in unusual times

7

20152014 2016 2017 2018

7

Business as usual in unusual times

8

Resulted in exponential growth

Focus

Consistency

Seeing opportunity in the face of fear

Relentless stewardship of investors’ funds and trust

9

10

Fast forward to 2018

Global economy is recovering

Trump and trade wars

More corporate scandals

Credit policies are improving but still

excluding some

Only 12% companies part of the

Fortune 500 in

1995 still exist

11

Beyond 2018

What we expect

Local• Rising interest rates• Political policy uncertainty• Poor market performance• Effects of poor administration

Global and local• Civil and political unrest,

terrorismo Trump, UN funding cut etc.

• US/China fallout• Global interest rates rising• Potential market crash• Growing youth unemployment • Growth of sharing economy

12

Beyond 2018 - opportunities

Trends influencing our operations and investments

▪ Africa’s infrastructure development

o Exploding population, urbanisation

o China’s new silk road

o Food security under threat

13

Beyond 2018 -opportunities

Trends influencing our operations and investments▪ Renewable energy

o Improved technology

• Global scramble for materials (lithium, copper, cobalt, nickel, graphite

o Increased emphasis on climate change

o South Africa losing in Africa’s energy race

• Especially in delivering clean energy solutions

14

Beyond 2018 - opportunities

Trends influencing our operations and investments▪ Fourth industrial revolution

o Fintech

o AI

o VR, gaming and entertainment

First industrial revolution

Second industrial revolution

Third industrial revolution

Fourth industrial revolution

Mechanisationof the textile industry –

18th century

The assembly line –

20th century

Software revolution

Artificial intelligence

and the data explosion

Beyond 2018 - opportunities

Trends influencing our operations and investments▪ Growing

wellness movement

o Doctor Google and self medication

o Biotechnology, personalised medicine

o Wearables

17

Beyond 2018 - opportunities

Trends influencing our operations and investments

▪ Tax reforms

▪ Currency wars

o Cryptocurrency and blockchain

18

How we adapt and help investors to secure and generate wealth

More of the same…

▪ Remaining agile and responsive

▪ Investing for the short and long term

▪ Hedging and diversification

▪ Seeking sensible growth not just for the sake of it

▪ Capital growth

19

How we adapt and help investors to secure and generate wealth

More of the same…

▪ Expanding vanilla product range

o Focus on costs and performance

o Small, efficient fund managers

o Personalised service, backed by technology not just

technology

▪ More tax-effective structures

o Bond

o 12J

20

Conclusion

Despite uncertainty, volatility and fear, investors are

never out of options. We will:

▪ continue to build on this success

▪ remain a learning organisation

▪ learn from the past…

o Progress happens on the fringes, not in headlines.

o The best innovations don’t make money, it is the ability to

commercialise it that does.

o The world will remain unstable and the rate of change will

continue to accelerate at a dizzying speed.

The best way to predict the future is to invent it.

21

ecsponent.comThank you

Gray Swan Financial Services (Pty) Ltd (Reg No: 2010/009813/07) is an authorised Financial Services Provider (FSP No: 42290).

NOVEMBER 201813

“OUT THE BOX THINKING…”

CEO : DUNCAN THERON

24

THINKING OUT OF THE BOX

25

BLACKSWANS

SOURCE: http://www.visualcapitalist.com/

26

OUR NAME : GRAYSWAN

0

20

40

60

80

100

120

140

160

0 100 200 300 400 500 600 700 800 900 1000

Var

iab

le

Days

> R20 billion > 90 years 10% profits offices

assets under advice

of investment experience

to our charitable trust

Gauteng & Western Cape

GRAYSWAN IN NUMBERS

THE PAST IS NOT THE FUTURE

28

BIG DOES NOT MEAN SAFE!

29

LEHMAN BROTHERS

30

ANCHORING EFFECT

How many pairs of animals into the ARC …?

31

SA CORPORATES ARE WORLD LEADERS BUT …

South Africa produces best investment returns over 100 years: global survey

Source: biznews.co.za

32

THE PAST IS NOT THE FUTURE

LAST 10 YEARS P.A. (ZAR) 10 YEAR FORECAST P.A. (ZAR)

LOCAL EQUITY 12,5% 8 - 12%

GLOBAL EQUITY 14,8% 8 - 12%

LOCAL PROPERTY 13,5% 9 - 12%

LOCAL BONDS 8,6% 8 - 9%

GLOBAL BONDS 8,6% 4 - 5%

CASH 6,8% 6 - 7%

INFLATION 5,2% 4 - 6%

Source: Coronation – Latest Update 30 September 2018

THE PAST IS NOT THE FUTURE

OLD VERSUS NEW THINKING

34

THE WORLD HAS CHANGED…

35

HOW TO FIND THE SHORT TERM WINNERS?

36

Kingston Jamaica (2.8 million people).

3 gold medals at 3 consecutive Olympics for a total of 9 gold medals over the

course of his Olympic career.

Source: The Goldmine effect

FOOLED BY RANDOMNESS

37

“No. It’s not the YAM potato.”

38

WHAT YOU SEE IS NOT WHAT YOU GET?

> R20 billion > 90 years 10% profits offices

assets under advice

of investment experience

to our charitable trust

Gauteng & Western Cape

GRAYSWAN IN NUMBERS

SHORT TERM THINKING …

40

US 10 YEAR MINUS 2 YEAR : NOT IN RECESSION YET BUT …

41

US RATES STILL LOW – STILL ROOM FOR INCREASES

Source : Prescient

42

BEAR AND BULL MARKETS

43

GLOBAL EQUITY MARKETS…….TECH DRIVING THE MARKET

44

CUMULATIVE NEGATIVE REAL EQUITY RETURNS

US MARKETS – WHAT HAPPENS AFTER A FALL?

*Source: Morgan Housel

VALUE VS GROWTH?

47

REST OF WORLD HAS STRUGGLED

48

SA EQUITY MARKETS

49

SA EQUITY MARKETS

50

SA INVESTMENT SUMMIT: 25 – 27 OCTOBER 2018

SandtonConvention

Centre

1000 delegates

2/3 audience was South

African

R290 Billionin fixed investment

spending, mot from

SA Companies

Sector focus included agro-processing, mining, energy, manufacturing, communication, transport and water.

51

GOVERNMENT BONDS

6,0

6,5

7,0

7,5

8,0

8,5

9,0

9,5

10,0

10,5

11,02

00

3/0

6/2

0

20

03

/11

/20

20

04

/04

/20

20

04

/09

/20

20

05

/02

/20

20

05

/07

/20

20

05

/12

/20

20

06

/05

/20

20

06

/10

/20

20

07

/03

/20

20

07

/08

/20

20

08

/01

/20

20

08

/06

/20

20

08

/11

/20

20

09

/04

/20

20

09

/09

/20

20

10

/02

/20

20

10

/07

/20

20

10

/12

/20

20

11

/05

/20

20

11

/10

/20

20

12

/03

/20

20

12

/08

/20

20

13

/01

/20

20

13

/06

/20

20

13

/11

/20

20

14

/04

/20

20

14

/09

/20

20

15

/02

/20

20

15

/07

/20

20

15

/12

/20

20

16

/05

/20

20

16

/10

/20

20

17

/03

/20

20

17

/08

/20

20

18

/01

/20

20

18

/06

/20

SA 1

0 Y

ear

Go

vern

men

t B

on

d Y

ield

%

SA 10 Year Government Bond Yield

Buying OpportunityR186 > 9.2

52

USDZAR : HEDGING STRATEGIES

11,0

11,5

12,0

12,5

13,0

13,5

14,0

14,5

15,0

15,5

16,02

01

7/0

7/0

3

20

17

/07

/24

20

17

/08

/14

20

17

/09

/04

20

17

/09

/25

20

17

/10

/16

20

17

/11

/06

20

17

/11

/27

20

17

/12

/18

20

18

/01

/08

20

18

/01

/29

20

18

/02

/19

20

18

/03

/12

20

18

/04

/02

20

18

/04

/23

20

18

/05

/14

20

18

/06

/04

20

18

/06

/25

20

18

/07

/16

20

18

/08

/06

20

18

/08

/27

20

18

/09

/17

20

18

/10

/08

20

18

/10

/29

20

18

/11

/19

20

18

/12

/10

20

18

/12

/31

USD

ZAR

Exc

han

ge R

ate

USDZAR Rate Bought Put 15.04 Sold Put 13.05

Bought Put 15.04

Sold Put 13.05

53

ZAR IS OVERSOLD, SHOULD RECOVER

54

USDZAR : MINIMISE THE TIMING

> R20 billion > 90 years 10% profits offices

assets under advice

of investment experience

to our charitable trust

Gauteng & Western Cape

GRAYSWAN IN NUMBERS

THINKING OUTSIDE THE BOX …

HOW TO FIND THE LONG DISTANCE WINNERS?

56

Bekoji Ethopia (17000 people).

10 Olympic gold medals, 32 World Championships and have set 10

world records.

Source – The Goldmine Effect

57

PRIMARY RESEARCH

58

STRUCTURAL MEGA TRENDS

59

STRUCTURAL MEGA TRENDS

Total US Household Net Worth as % of GDP (1952-2017)

✓ Asset prices have grown much faster than GDP since the early 1980s and, in the long run, one cannot outgrow the

other.

✓ Every single time US wealth has deviated meaningfully from 370% of US GDP, it has regressed to the mean, and US

wealth is now 500% of US GDP.

Source : ARP Investments

60

OFFSHORE INVESTMENT OPPORTUNITY : CREDIT

61

OFFSHORE INVESTMENT OPPORTUNITY : CREDIT

62

OFFSHORE INVESTMENT OPPORTUNITY : CREDIT

63

LOCAL INVESTMENT OPPORTUNITY : CREDIT

SA Bank Deposit Rate

SA Listed Property

SA Fixed Rate Bonds

SA Inflation Bonds

SA Equities

-5,00%

0,00%

5,00%

10,00%

15,00%

20,00%

0,00% 2,00% 4,00% 6,00% 8,00% 10,00% 12,00% 14,00% 16,00%

An

nu

aliz

ed R

etu

rn

Annualized Standard Deviation

Local credit manager universe

64

LOCAL INVESTMENT OPPORTUNITY : CREDIT

ESG IS AN INVESTMENT OPPORTUNITY

65

66

ESG MATTERS

Source: Old Mutual

META-STUDY OF 190 DIFERENT SOURCES

88% of reviewed sources find that companies with robust sustainability practices demonstrate better operational performance, which ultimately translates into cash flows

80% of the reviewed studies demonstrate that prudent sustainability practices have a positive influence on investment performance

67

RESPONSIBLE INVESTING

“Prudent investing should give appropriate consideration to any factor which may materially affect the sustainable long-term performance of a fund’s assets, including factors of an

environmental, social and governance character.”

68

RUNNING OUT OF FRESH WATER

✓ Between now and 2050, the world must produce more food than it has done in the last 10,000 years put

together.

✓ Food production accounts for over 60% of all water consumption globally.

✓ Water scarcity is widely perceived only to be a major problem in North Africa, Australia and the Middle

East, but the reality is quite different.

Source : ARP Investments

69

HOW TO INVEST IN WATER?

Water related public entities

Water ETF’s or passive funds

Water investment funds

Water rights funds / trusts

SRI, Clean Energy & Impact funds

Water infrastruture investments

Farmland investments

Source : ARP Investments

70

YOU MAY NEED A UNIQUELY BETTER PRODUCT?

71

LET’S TRY TO FIND A SOLUTION TO YOUR PROBLEM

72

WATER FUNDS VS. GLOBAL EQUITIES

Source : ARP Investments

73

ESG GLOBAL EQUITY

ROLE OF THE INVESTMENT ADVISOR

“… investment managers may or may not outperform their benchmarks, but if the investment adviser does not understand

how best to meet the investor’s requirements, it’s game over. It's actually the investment advisor and not the investment manager who has the greatest impact on

outcomes and performance.”

ASSET ALLOCATION DRIVES VALUE CREATION OVER THE LONG TERM

Fund Return

Strategic Asset Allocation

Manager Selection & Stock Selection

Tactical Asset Allocation & Hedging &

Rebalancing

12%

10%

1.0%

1.0%

Determining the optimum strategic asset allocation is crucial for creation value

75

76

WINNING THE LOSERS GAME

1 YEAR 3 YEAR 5 YEAR 8 YEAR 10 YEAR

Number of managers in the SA Equity Universe 224 176 136 106 89

% of managers outperforming the ALSI 12.05% 9.09% 11.03% 11.32% 26.97%

• The average equity manager underperforms the market over all the time periods.

• Over 10 Year the average manager underperformed the ALSI by -1.45% p.a (-13.59% cumulatively)

• Therefore constant manager research and analysis must be done to insure optimum managerselection.

UNDERSTANDING YOUR NEEDS / OBJECTIVES

INCOME PORTFOLI

O

CAUTIOUS PORTFOLI

O

MODERATE

PORTFOLIO

AGGRESSIVE PORTFOLIO

EXECUTIVE

PORTFOLIO

OFFSHORE PORTFOLIOS

78

INVEST DIFFERENTLY

"If you want to have a better performance than the crowd, you must do things differently from the crowd.”

THE ROAD LESS TRAVELLED

79

“Two roads diverged in a wood, and I,

I took the one less travelled by,

And that has made all the difference.”

~ Robert Frost

80

we keep the score,you secure the win

EMPOWERING YOU TO INVEST WITH THE BEST

81

In theory a "Black Swan" as first described in AD 82 depicted a creaturethat did not exist. However, in 1790 a Black Swan was discovered andtherefore proved the existence of the improbable.

Nicholas Taleb used the bird in his book, The Black Swan, to explain thatthe belief that "all swans are white" is based on the limits of ourexperience. Some occurrences are unpredictable because they deviateso far beyond what is normally expected. Such experiences are rare butwhen they occur they have massive consequences.

"Black Swan" events are therefore random and unexpected. They areunpredictable unknowns. However, “GraySwans”, as we coined theterm, are risks that can be identified and which have unintendedconsequences on investors’ portfolios and therefore should be managedor avoided.

At GraySwan we do not intend to predict the unpredictable.

“GraySwans” are risks that have unintended consequences but can

be identified and should be managed or avoided. Our superior

investment and risk advisory services empower you to do

exactly that.

83

AFRICA QUO VADIS ($)?

84

AFRICA QUO VADIS ($)?

85

PERIODS WITH THE LOWEST EQUITY RETURNS

Source : The End of Indexing

86

CUMULATIVE NEGATIVE REAL EQUITY RETURNS

Source : The End of Indexing