PROGRESSIVESMOOTH BONUSFUND

The Progressive Smooth Bonus Fund is the first and only empowered smoothed bonus

portfolio in South Africa, managed by 27four Investment Managers and guaranteed by Sanlam.

PROGRESSIVESMOOTH BONUSFUND

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SMOOTHED BONUS PORTFOLIOThis is a smoothed bonus portfolio where volatile investment returns are smoothed by way of monthlybonus declarations, thereby lessening the roller-coaster ride that investors in market-linked portfolios mightexperience. These monthly bonuses are designed to grow members’ retirement savings in a smooth andstable manner and to limit downside risk. Over and above the benefit of smoothing, the portfolio providesexposure to skilled and experienced black investment managers.

BOOK VALUEThe book value is the value that is guaranteed to be paid out for benefit payments (death, disability,resignation, retrenchment and retirement). The book value is the net amount invested accumulated at thebonus rates declared and consists of a Guaranteed Portion and a Non-Guaranteed Portion. The marketvalue is the amount obtainable on the open market by the sale of the underlying assets.

MEETING TRANSFORMATION OBJECTIVES• We bring to you a solution that is inclusive – one that enhances black participation within the sector as

well as meets fiduciary investment responsibilities.

• A solution that rewards black excellence – there is no shortage of black intellectual capital within the industry.

• A solution that is aligned to the Amended Financial Sector Code of 2017 – helping retirement fundsachieve a good score.

• This is achieved through the procurement of underlying asset managers in the portfolio who are selectedbased on the following criteria:

- Greater than 50% effective black ownership with equivalent voting rights;

- Greater than 50% black board members; and

- Greater than 50% black investment professionals.

INVESTMENT MANDATE• The underlying portfolio is a Regulation 28 compliant multi-managed multi-asset class portfolio diversified

by geography, asset class and investment manager. The maximum exposure to volatile assets (unhedgedRSA equity and foreign assets) is limited to 59% of the portfolio.

• The fund is modelled to target an investment return of CPI + 4% over a rolling three year period net of fees.

WHO SHOULD INVEST IN THIS PORTFOLIO?• Retirement funds supportive of broad-based black economic empowerment efforts within the savings

and investments industry.

• Retirement fund members who require the volatility of the financial markets to be smoothed out over time.

• Retirement fund members requiring a partial guarantee on benefit payments.

BONUSESBonuses are declared monthly in advance. The Bonus declared will be based on the formula provided:

Bonus = i + 0.05 (m)i: CPI related target based on funding levelm: is a multiple based on CPI and funding levels

Funding level is the market value of the portfolio expressed as a percentage of the book value.

• While the portfolio is fully funded (funding level > = 100%), the bonus formula will target at least CPI+ 3.5% over a rolling 3 year period. Surpluses will be added to this in a stepped fashion depending onthe funding level of the portfolio.

• Should the portfolio be in a deficit (funding level < 100%), the CPI-related target is removed and thebonus only depends on the funding level of the portfolio.

• The aim is to deliver stable and predictable bonuses over time to clients, smoothing out spikes and fallsin asset values. For a funding level below 92.5% the net bonus should be zero.

• Bonuses are declared net of the guarantee premium but gross of the investment fee.

• Sanlam retains the right to change the bonus formula without prior notice.

• Details about the bonus formula and methodology can be found in the product's Practices and Principlesof Financial Management document.

GUARANTEE LEVELThe portfolio has an 80% guarantee level on book value. This means that 80% of capital, contributionsand declared bonuses are allocated to the Guaranteed Portion and the remainder to the Non-GuaranteedPortion.

In severe negative market conditions, the Non-Guaranteed Portion (which constitutes a maximum of 20%of the book value) can be removed. If this happens, all declared bonuses will be added to the Non-Guaranteed Portion of the book value, until the original ratio between the Guaranteed Portion and the Non-Guaranteed Portion has been restored.

FEESThe following fees are applicable:

• Investment Fee: A maximum fee of 0.70% p.a. (plus VAT on underlying manager costs) will belevied in the portfolio. As the portfolio increases in size, underlying manager fees will be negotiateddownwards and any savings will be passed on to the clients within the portfolio. The investmentadministration fee to a specific client will therefore be independent of the size of investment andwill allow all clients to benefit from economies of scale as the portfolio grows.

• A guarantee premium of 0.70% p.a. is recovered from the assets in the Investment Plan.

• The underlying investment managers may be incentivised with performance fees, but only if thenecessary performance benchmarks are exceeded. Details of the performance fees actually paidover the past calendar year are available on request.

CASH FLOWThe portfolio facilitates daily cash flows for contributions, benefit payments and disinvestments.

BENEFIT PAYMENTSBook value is paid on resignation, retirement, death, retrenchment and disability.

MEMBER SWITCHES (transfer to other portfolios)

Switches by individual members are done at the lower of book value and market value.

DisclaimerAll rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, without the prior permission in writingof 27four Investment Managers (Pty) Ltd. Copyright in all information, material and logos are protected by both national and international intellectual property laws. Accordingly,any unauthorised copying, reproduction, retransmission, distribution, dissemination, sale, publication, broadcast or other circulation, or exploitation of this material will constitutean infringement of such protection. The information contained in this publication is provided ‘as is’ without warranty of any kind. The entire risk as to the result and performance ofthe information supplied in this publication is assumed by the user and in no event shall 27four Investment Managers (Pty) Ltd be liable for any direct, consequential, or incidentaldamages suffered in the course of using the information contained herein as a result of the use of, or the infringement of any copyright laws. The copyright in all material of 27fourInvestment Managers (Pty) Ltd and all its subsidiaries shall continue to vest in 27four Investment Managers (Pty) Ltd. 27four Investment Managers (Pty) Ltd is an authorised financialservices provider with license number 31045.

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TERMINATION CONDITIONSBook value is paid as soon as practicable (but within 30 business days), unless it is considered not to bein the interests of remaining policyholders to pay out the book value immediately, e.g. if the market valueis less than the book value, payment will be spread over a period. Alternatively, the fund may requestSanlam to pay out the market value immediately.

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