BCI INVESTMENT CONFERENCE 20 May 2015

“It was the best of times, it was the worst of times, it was the age of

wisdom, it was the age of foolishness”.

– Charles Dickens

The Story Of Rising Rates

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The Story Of Rising Rates

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Fund M Duration (Excl. Linkers)

Portfolio Yield (Gross)

Efficient BCI Fixed Income Fund 0.6 years 8.3%

Source: Efficient Select , May 2015

What Does This Mean?

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Fund M Duration (Excl. Linkers)

Portfolio Yield (Gross)

Efficient BCI Fixed Income Fund 0.6 years 8.3%

Investors with a 12 month investment horizon

Scenario 1 Scenario 2

Capital Gain 0% (1.2%)

Interest Income 8.3% 10.3%

Total Return 8.3% 9.1%

Source: Efficient Select , May 2015

• Rates remain exactly constant Scenario 1

• Rates rise by 2% (parallel) tomorrow and then remain exactly constant Scenario 2

Rising Rates Can Be Good For Bond Prices

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Source: Avior, May 2015

Price of AB011 Bond Before & After 2% Interest Rate Hike

Base Risk Free Rate + 2.00%

Corporate bond: 99.17 Corporate bond: 99.54

Stress curve: 2.000%

Difference 0.38

Difference (%) 0.38%

VALUE OF BOND INCREASES AS INTEREST RATES RISE

Opportunity

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The Opportunity Set

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Source: Avior, May 2015

Rest of the World

South Africa

The Benefit

9

Source: Goldman Sachs, May 2015

• Buy a Bond South African Bond (R186)

• Buy a US Bond, hedge currency risk and interest rate risk

US 10 year Bond

• Buy a US TIPS Bond, hedge currency risk, inflation risk and interest rate risk

US 10 year TIP Bond

8.17%

8.54%

10.17%

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OUR BUSINESS

“We aspire to significantly enhance the financial well-being

of all investors.”

Summary

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Playing in the smaller pool of opportunity restricts returns and increases risk. Offshore bonds are very attractive at the moment and add risk free alpha. Fixed Income can be attractive in a rate hiking cycle.

Efficient Offering Strategy 1 Year Return

Efficient Fixed Income Fund Domestic Flexible Income 9.12%

Efficient African Flex Income African Eurobonds 13.52%

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Contact Address:

Tel: +27 (0)21 410 6000

Fax: +27 (21) 421 8085

E-mail: info@efselect.co.za

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DISCLAIMER: All information used in this presentation and any material referred to herein is subject to copyright and may not be reproduced or used (other than for information purposes) in any way, unless prior written permission has been granted by Efficient Select (Pty) Ltd or the appropriate copyright owner. This presentation is intended for information purposes only and none of the information contained in this presentation constitutes investment advice or a recommendation, solicitation or offer by Efficient Select (Pty) Ltd to buy or sell any financial product. The information contained in this presentation has been prepared without consideration of the investment objectives, financial situation or particular needs of any particular recipient. Any transactions described in this presentation may give rise to substantial risk, including the possible loss of principal value, and are not necessarily suitable for all investors. This presentation should accordingly not be considered as a substitute for the exercise of your own judgment or for obtaining independent advice based on your personal preferences and circumstances. Although all precautions have been made to ensure reliability of data and information contained in this presentation, Efficient Select (Pty) Ltd cannot guarantee the reliability or accuracy thereof. Past performance referred to in this presentation is not necessarily indicative of future performance. Similarly, forecasts contained in this presentation involve risks and uncertainties which may result in future performance, outcomes and results which differ materially from such forecasts. You are accordingly cautioned not to place undue reliance on any historical data, general information or forecasts used in this presentation. Efficient Select (Pty) Ltd accepts no liability whatsoever for any loss, damage (direct or consequential) or expense suffered by a recipient as a result of undue reliance placed on any information contained in this presentation. Authorised Financial Services Provider • FSP No: 859

Efficient Select Value Proposition