Agenda Highlights Business update Financial results Closing - - PowerPoint PPT Presentation

for the six months ended 31 March 2018

2018 Reviewed Interim Results

2

22 May 2018

Anton Pillay: Chief Executive Officer John Snalam: Chief Financial Officer

Highlights Business update Financial results Closing comments

Agenda

Highlights

• Author

5

For the six months ended 31 March 2018

Business highlights

Business performing in line wit h management expect at ions AUM of R588bn & slowdown in net out flows t o R15.5bn Act ive management delivered excellent performance over t he long

• t erm for client s -

near-t erm performance in line wit h peer average Focused invest ment in our business infrast ruct ure, t echnology and people t o achieve st rat egic obj ect ive of becoming a global, world-class asset management company Init iat ives t o achieve t rue t ransformat ion cont inue t o deliver meaningful and subst ant ive result s

Revenue

R2.1bn

Diluted headline earnings per share

223.4c

Total dividend per share

223.0c

6

Business update

7

Coronation: 25 years of building a sustainable business

We remain an act ive manager wit h a long-t erm focused valuat ion-driven invest ment philosophy Our business is cyclical - revenue is geared t o market ret urns and t he out performance we generate on behalf of client s As a significant manager of savings in Sout h Africa, we cont inue t o focus on being a good corporat e cit izen and ensuring t he best out comes for all our st akeholders We put clients’ interests first – wit hout client s we do not have a business

– Our key focus is on invest ment out performance and service excellence – Re-opened st rat egies t hat were closed t o new inst it ut ional client s for a period of five years – Changes t o administ ration model represents a seminal moment in our hist ory

• Asset services and t ransfer agency t o be provided by new service providers will be fully implement ed in 2018

8

Consolidated to ensure integrated delivery of world-class service

Asset administration services

Growing global franchise necessit at es change t o achieve single, consist ent oversight model Fund account ing services t o be provided by J.P. Morgan delivers addit ional benefit s

– ‘ Follow t he sun’ service allowing ext ended daily availability of services – Globally dist ribut ed operating model allowing for seamless servicing from mult iple j urisdictions

Transit ion progressing well and current ly running new and exist ing syst ems in parallel Proj ect on t rack for complet e t ransfer of service in Q3 2018

9

Establishing transfer agency platform for delivery of exceptional client service

Support of black-owned business

Since our incept ion, Coronat ion’ s ent repreneurial spirit has been t he cat alyst for t he creat ion of numerous new financial services businesses, allowing us t o remain purely focused on asset management We support a number of proj ect s t hat will deliver t angible result s in SME space (e.g. CEO Init iat ive SA SME Fund, Black S t ockbroker S upport Programme) More recent ly, we are support ing t he est ablishment of a new black-owned business, Int embeko, t o provide t ransfer agency services t o Coronat ion

– 100%

black owned (Coronat ion has no shareholding)

– Infrast ruct ure and people in place t o deliver world-class service – New service t o be provided from Q4 2018

10

A key strategic focus… not about ticking the boxes

Transformation journey

Cont inue t o play a role in achieving meaningful and sust ainable t ransformation in all areas of our business & societ y Indust ry-leading t ransformation across our business

– 56%

• f our employees are black

– 50%

• f all our employees are female

– 75%

• f key business execut ives are black

– 63%

• f t he board of direct ors are black

Real progress on transformation of S A -focused invest ment t eam

– 3 out of 4 key invest ment leadership roles are black (Head of Fixed

Income, Head of S A Equity Research, Head of S A Equity)

– 43%

• f senior port folio managers in t he S

A-focused invest ment t eam are black

Black ow ned

23%

As m easured by the FSC

59%

Of our black em ployees are fem ale

75%

Of all new hires over past 18 m onths are black

11

Positive local changes… but need to see translation into growth

The environment will remain challenging

Global growt h remains support ive but volat ile given geopolit ical risks Domest ic economy has been ext remely const rained for a long t ime, impact ing economic growt h More recent dat a point s t o a t urnaround

– Moody’ s maint ained sovereign credit rat ing and rerat ed out look t o st able – S

t abilisation of unemployment (albeit at unaccept ably high levels)

– Improved confidence levels (business & private sect or) – Import ant polit ical changes & correct ive act ions t o arrest t he descent of count ry and

economy Expect SA GDP growt h of 2% for 2018 (vs global growt h of 4% ), but need st ruct ural changes t o effect sust ainable growt h Realist ic expect at ions required given t he t ime frame required t o implement changes

12

31 March 2018

Market movements

Source: Deutsche Bank

Economic group 3 months to March 2018 % 6 months to March 2018 % 12 months to March 2018 % All S hare (ZAR) (5.97) 1.03 9.60 Resources (3.83) 0.85 10.44 S mall Cap (1.27) 2.28 (2.77) Indust rials (7.99) (3.69) 5.70 Financials (3.56) 11.85 17.58 US D/ ZAR exchange 4.67 14.58 13.42 MS CI All Count ry World Index (0.96) 4.17 14.85 MS CI Emerging Market s (US D) 1.42 8.96 24.93

13

Our key focus remains on asset management and the delivery of investment excellence

Investment performance

We underst and periods of average performance are part and parcel of being an act ive manager While long-t erm performance across st rat egies is excellent , recent performance across cert ain st rat egies has been in line wit h peer average Focus remains on delivering performance over meaningful periods Our invest ment approach remains unchanged over t he last 25 years Our bot t om-up, long-t erm valuat ion-driven approach does however require pat ience for benefit s t o mat erialise All our key st rat egies cont inue t o perform against bot h benchmarks and peers over meaningful periods

14

Local and global strategies annualised alpha at 31 March 2018

Investment performance - Institutional

Local st rat egies Annualised act ive ret urn (gross of fees) 10 years S ince incept ion

– Mult i-Asset (Global)

1.92% 1.28%

– S

pecialist Equity 2.51% 2.54%

– Absolut e Ret urn

5.57% 9.29%

– Fixed Income (Bond)

1.46% 1.48% Global strategies (US D) Annualised act ive ret urn (gross of fees) 5 years* S ince incept ion

– Mult i-asset

0.31% 1.55%

– GEM

0.44% 4.24%

– Africa Front iers

5.81% 10.61%

* S trategies do not have 10-year performance track records

15

As at 31 March 2018

Assets under management

Local: Equit y 48.6% ; Fixed Int erest and Cash 22.8% ; Ot her 0.4% Foreign: Equit y 22.9% ; Fixed Int erest and Cash 5.0% ; Ot her 0.3%

47 57 75 92 122 113 144 188 223 299 407 461 469 444 438 435 7 7 7 9 12 12 11 15 24 40 85 127 141 155 176 153 100 200 300 400 500 600 700 Sept 2003 Sept 2004 Sept 2005 Sept 2006 Sept 2007 Sept 2008 Sept 2009 Sept 2010 Sept 2011 Sept 2012 Sept 2013 Sept 2014 Sept 2015 Sept 2016 Sep 2017 Mar 2018 Local Rbn International Rbn Avg AUM Rbn

588 155 125 134 101 82 64 54 203 247 339 492 610 599 614 588

16

Institutional business

Full range of product s and dedicat ed t eam available globally t o sat isfy all our client requirements Tot al inst it ut ional client out flows significant ly declined t o R14bn (FY 2017 R36bn)

Other; 6% South Africa; 76% Namibia; 6% USA; 5% United Kingdom, 4% EU; 3% AUM BY CLIENT LOCATION - INSTITUTIONAL

Total institutional client AUM of

R355bn

Local institutional client AUM of

R295bn

Global institutional client AUM of

R60bn

17

SA institutional clients

Significant manager of institutional assets in SA

SA inst it ut ional client s represent R295bn Expect small level of net out flows t o cont inue in foreseeable fut ure Local client net out flows affect ed by:

– S

A ret irement fund indust ry remains a net out flow market

– Local economic environment improvement not flowing t hrough as yet

Reduced t ot al net out flows from SA inst it ut ional business of R11.1bn (FY 2017: R43.7bn) Re-opening of some of our t op-performing port folios which were closed for five years has been posit ively received by client s, but not yet t ranslat ed int o meaningful inflows

18

Global institutional clients

Over past decade we have made great st rides in growing our global franchise, which now represent s R60bn of asset s under management

– Int ernational client s net out flows of $260m over t he six mont hs – We cont inue t o enhance our relat ionships wit h global asset allocat ors, mainly in our Global

Emerging Market s and Global Managed st rat egies We are cont inuing t o build t he t rack records for our Global Equit y and Global Front iers st rat egies A compelling business in it s own right and growing t his franchise will be a key focus going forward, given t hat t he S

• ut h African market is ex growt h

19

Coronation remains one of the foremost managers in the local unit trust industry

Retail business

Retail AUM R233bn Net out flows of R1.4bn (-R4bn H1 2017; -R6.9bn FY 2017)

– Encouraging support for long-t erm growt h funds – Net flow volumes at indust ry level st ill very subdued, with a st rong bias t o fixed income funds

We remain focused on client out comes

– Recent performance average across most mandat es, long-t erm t rack record remains except ional –

core funds delivered 1st quart ile performance over 10 years and since incept ion

– Invest ment in ret ail client -facing infrast ruct ure cont inuing

• Move of t ransfer agency t o newly est ablished black administ rator on t rack (Q4 2018)
• S

uccessfully insourced client correspondence

– Fee reductions implement ed

• Absolut e funds during Oct ober 2017
• Int ernational funds during February 2018

20

Financial results

21

Robust revenue in tough environment

March 2018 March 2017 Change Revenue (from fund management ) R2 079m R1 936m 7% Profit (from fund management ) R1 034m R1 012m 2% Profit aft er t ax R782m R763m 2% Cost t o income rat io 49.3% 47.9%

22

100%

• f DHEPS declared

Interim dividend increased

Change March 2018 March 2017 Dilut ed HEPS (cent s) 1% 223.4 220.7 Int erim dividend per share (cent s) 1% 223.0 220.0 Act ual shares in issue 349 799 102 349 799 102

23

Stable margin over past 4 years

Total net fee

0,58% 0,59% 0,68% 0,69% 0,70% 0,52% 0,56% 0,70% 0,69% 0,59% 0,79% 0,79% 0,64% 0,60% 0,61% 0,62% 0,61% 0,00% 0,10% 0,20% 0,30% 0,40% 0,50% 0,60% 0,70% 0,80% 0,90% 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 H1 2017 2017 H1 2018

24

Variable cost model continues to contribute to effective management of total costs

Change March 2018 R’m March 2017 R’m Fixed cost s* (18% ) 342 291 Variable cost s – including dist ribution cost s (2% ) 645 633 Operat ing expenses (7% ) 987 924 Ot her expenses* 68 9 Tot al operating expenses** (13% ) 1 055 933

* Excludes share-based payment expense and unrealised foreign exchange losses show under

• ther expenses

** Excludes finance expense

42% 43% 44% 45% 46% 47% 48% 49% 50%

• 1 000

2 000 3 000 4 000 5 000 2014 2015 2016 2017 2018 Tot al revenue (R'm) Variable Cost s (R'm) Fixed Cost s (R'm) Cost t o Income Rat io (RHS )

25

Fixed costs

Increase due to continued investment in business

Change March 2018 R’m March 2017 R’m Tot al fixed cost s* (18% ) 342 291

• Employee cost s

(13% ) 154 136

• Informat ion syst ems

(23% ) 63 51

• Professional fees

(45% ) 28 19

• Market ing

(47% ) 56 38 Employee complement 319 294

*Excludes foreign exchange losses and share based payments

26

Closing comments

27

Our focus

We remain committed to providing world-class investment excellence

We are singularly focused on the delivery of active returns over meaningful periods and remain committed to our long -term investment approach Near-term performance of our funds has been in line with peer average. We remain focused on long-term valuation and seek to take advantage of attractive opportunities in the market The high levels of optimism in S

• uth Africa should translate into economic growth, if structural changes are implemented -

but it will take time to see the benefits flow through S imilar to our investment approach we manage the business for the long term

–

Providing excellent service to all our local and global clients

–

Continuing to invest in the business and our people to ensure we remain world class

–

Supporting the creation of a new black-owned service provider

–

Focusing on expanding on our well-established relationships with global asset allocators in the years ahead

–

Demonstrating good corporate citizenship Our success in achieving this will ensure long -term value for all stakeholders

28

Questions

29

Annexure A: Coronation information

30

About Coronation Fund Managers

Founded in Cape Town, Sout h Africa, in 1993 wit h zero asset s under management Listed in 2003 25% Employee-owned An independent fund manager wit h no safet y-net of in-house asset s Singular focus on asset management , out sourcing non

• core component s of business

An act ive manager wit h a long-t erm valuat ion-driven invest ment approach A single global invest ment t eam and process S A-based business wit h offices in Cape Town, Johannesburg, Durban, Pretoria, London and Dublin

31

Annexure B: Market & selected strategy performance

32

Periods ending 31 March 2018

Local market indicators

3 years (p.a.) % 5 years (p.a.) % 10 years (p.a.) % All S hare 5.05 10.02 9.67 All Bond 8.65 7.72 9.63 List ed Propert y (0.48) 7.11 13.70 AF Money Market 7.21 6.64 7.10 MS CI World (ZAR) 7.04 15.27 10.00 Global Bonds (ZAR) 2.56 6.31 5.92 CPI 5.40 5.26 5.73 US D/ ZAR 0.87 (4.82) (3.73)

S

• urce: IRES

S

33

Compelling long-term performance (5 years)

Global Houseview Strategy

S

• urce: Alexander Forbes Global Large Manager Watch™

S urvey to 31 March 2018

8,0% 0% 8,4% 4% 8,5% 5% 8,8% 8% 9,5% 5% 9,9% 9% 10, 10,7% 10, 10,9% 11, 11,2% 11, 11,6% Competitor

• r 9

9 Competitor

• r 8

8 Competitor

• r 7

7 Competitor

• r 6

6 Competitor

• r 5

5 Competitor

• r 4

4 Cor

• ron
• nation

Competitor

• r 3

3 Competitor

• r 2

2 Competitor

• r 1

1

34

Compelling long-term performance (10 years)

Global Houseview Strategy

S

• urce: Alexander Forbes Global Large Manager Watch™

S urvey to 31 March 2018

8,8% 8% 9,1% 1% 10, 10,0% 10, 10,1% 10, 10,9% 11, 11,4% 11, 11,7% 11, 11,8% 12, 12,4% Competitor

• r 8

8 Competitor

• r 7

7 Competitor

• r 6

6 Competitor

• r 5

5 Competitor

• r 4

4 Competitor

• r 3

3 Competitor

• r 2

2 Competitor

• r 1

1 Cor

• ron
• nation

35

Compelling performance (10 years)

Fixed Income Strategies

S

• urce: S

A Bond Manager Watch™ to 31 March 2018

10, 10,1% 10, 10,2% 10, 10,2% 10, 10,3% 10, 10,3% 10, 10,4% 10, 10,4% 10, 10,4% 10, 10,5% 10, 10,5% 10, 10,6% 10, 10,7% 10, 10,8% 10, 10,9% 11, 11,7% 12, 12,1% Competitor

• r 1

15 Competitor

• r 1

14 Competitor

• r 1

13 Competitor

• r 1

12 Competitor

• r 1

11 Competitor

• r 1

10 Competitor

• r 9

9 Competitor

• r 8

8 Competitor

• r 7

7 Competitor

• r 6

6 Competitor

• r 5

5 Competitor

• r 4

4 Competitor

• r 3

3 Coronation

• n A

Act ctive B Bon

• nd P

Por

• rtfol
• lio
• (Com
• mpos
• site)

Competitor

• r 2

2 Competitor

• r 1

1

36

Exceptional long-term active returns (alpha) over 25 years

Houseview Equity Strategy

5 Years (p.a.) % 10 years (p.a.) % *Since inception (p.a.) % Houseview Equity 9.8 12.7 17.1 CAPI 10.1 10.2 14.6 Act ive ret urn (0.3) 2.5 2.5

*S ince Inception - October 1993 S

• urce: Independent Retirement Fund S

urvey as at 31 March 2018

37

Consistent delivery of real returns over significant periods

Global Absolute

5 years (p.a.) % 10 years (p.a.) % *Since inception (p.a.) % Global Absolut e 8.8 11.3 15.4 CPI 5.3 5.7 6.1

*S ince Inception –August 1999 S

• urce: Independent Retirement Fund S

urvey as at 31 March 2018

38

A highly compelling track record of alpha generation

Global Emerging Markets Equity (USD)

5 Years (p.a.) % *Since inception (p.a.) % Global Emerging Market s Equit y S t rat egy 5.6 8.1 MS CI Daily TR Net Emerging Market s US D 5.2 3.9 Act ive Ret urn 0.4 4.2

*S ince Inception –14 July 2008 Returns quoted in US D

39

US dollar returns since their respective launch dates

Strong international track record

Offshore USD Funds *Active return % Launch date Global Equit y Fund of Funds 2.0 01-Jul-00 Global Emerging Market s Equit y S t rat egy 4.2 14-Jul-08 Global Bond 2.1 01-Oct -09 Coronat ion Africa Front iers S t rat egy 10.6 01-Oct -08 Global Capit al Plus 6.6 01-S ep-09 Coronat ion Global Managed S t rat egy 1.5 01-Nov-09

*Annualised active return for Institutional portfolios (gross of fees) since launch to 31 March 2018

40

Domestic flagship funds as at 31 March 2018

Investment performance - Retail

S

• urce: Morningstar as at 31 March 2018

Fund 10-year ranking Since inception ranking Long-t erm Growt h (equit y only) Top 20 1st Quart ile 1st Quart ile Long-t erm Growt h (mult i asset ) Balanced Plus 1st Quart ile 1st Quart ile Income & Growt h Capital Plus 1st Quart ile 1st Quart ile Balanced Defensive 1st Quart ile 1st Quart ile Income only S t rat egic Income 1st Quart ile 1st Quart ile

41

International flagship funds as at 31 March 2018

Investment performance - Retail

10-year ranking Since inception ranking LT Growt h (equit y only) Global Emerging Market s

• 1st Quart ile

Global Opport unities Equit y 1st Quart ile 1st Quart ile LT Growt h (mult i asset ) Global Managed

• 1st Quart ile

Preservat ion & growt h Global Capit al Plus

• 1st Quart ile

S

• urce: For GEM [US

D]: Bloomberg as at 31 March 2018 / For GCP and GM [US D]: Morningstar as at 31 March 2018 - custom peer groups based on funds available for sale on S

• uth

African platforms / For all other funds [Rand-denominated]: Morningstar as at 31 March 2018 based on AS IS A categories excluding Coronation funds in that category

42

Disclaimer

This presentation contains certain forward-looking statements. These forward-looking statements are based on current information and expectations, and involve a number of risks and

• uncertainties. Although Coronation Fund Managers Limited believes that the expectations reflected in such forward-looking statements are reasonable, no assurance can be given that

such expectations will prove to have been correct. Actual results may differ materially from those proj ected in such statements due to various factors, including but not limited to changes in economic and market conditions, changes in regulatory environment, fluctuations in security prices and exchange rates, and business and operational risk management. Coronation Fund Managers Limited is under no obligation to update these statements once it has been posted or released. Coronation Asset Management (Pty) Limited and Coronation Investment Management International (Pty) Limited are authorised Financial S ervices Providers regulated by the Financial S ector Conduct Authority of S

• uth Africa. Coronation Asset

Management (Pty) Limited and Coronation Investment Management International (Pty) Limited are subsidiary companies of Coronation Fund Managers Ltd, a company incorporated in S

• uth Africa and listed on the JS

E (IS IN:ZAE000047353). The Information is for information purposes only and does not constit ute or form part of any offer to the public to issue or sell,

• r any solicitation of any offer to subscribe for or purchase an investment, nor shall it or the fact of its distribution form the basis of, or be relied upon in connection with, any

contract for investment. Opinions expressed in this document may be changed without notice at any time after publication. Nothing in this document shall constitute advice on the merits of buying and selling an investment. Coronation Asset Management (Pty) Limited and Coronation Investment Management International (Pty) Ltd are investment advisers registered with the United S tates S ecurities and Exchange Commission (“ S EC” ). An investment adviser’ s registration with the S EC does not imply a certain level of skill or training. Additional information about Coronation Asset Management (Pty) Limited and Coronation Investment Management International (Pty) Limited is also available on the S EC’ s website at www.adviserinfo.sec.gov. The information in this document has not been approved or verified by the S EC or by any state securities authority. Unit trusts should be considered a medium-to long-term investment. The value of units may go down as well as up, and is therefore not guaranteed. Past performance is not necessarily an indication of future

• performance. Note that individual investor performance may differ as a result of the actual investment date, the date of reinvestment of distributions and dividend withholding tax

where applicable. Where foreign securities are included in a fund it may be exposed to macroeconomic, settlement, political, tax, reporting or illiquidity risk factors that may be different to similar investments in the S

• uth African markets. Fluctuations or movements in exchange rates may cause the value of underlying investments to go up or down.

Coronation Management Company (RF) (Pty) Ltd is a Collective Investment S chemes Manager approved by the Financial S ector Conduct Authority of S

• uth Africa in terms of the

Collective Investment S chemes Control Act. Unit trusts are traded at ruling prices set on every trading day. Unit trusts are allowed to engage in scrip lending and borrowing. Coronation Fund Managers Limited is a Full member of the Association for S avings & Investment S A (AS IS A).

Thank you