MAIDEN FULL YEAR FINANCIAL RESULTS PRESENTATION September 2018
PRESENTERS JOHAN VAN DER MERWE CO-CEO, AFRICAN RAINBOW CAPITAL BRIDGET RADEBE • Member of ARC Board CHIEF FINANCIAL OFFICER, UBI • Member of UBI Board • Member of ARC Investments Board • Member of UBI General Partner Board • Member of Investment Advisory Committee of the General Partner • Member of Investment Advisory Committee of the General Partner • Member of FinHoldCo Board • Member of FinHoldCo Board 2
OUTLINE STRATEGY FINANCIAL REVIEW PORTFOLIO OVERVIEW OUTLOOK 3
01 ARC INVESTMENTS STRATEGY Johan van der Merwe co-CEO, ARC
BACKGROUND & TIMELINE ARC INVESTMENTS Ubuntu-Botho Investments (UBI) Empowerment Partner Deal matured in 2013 – to Sanlam 2004 new 10 year partnership signed 2004 Shareholding in Sanlam African Rainbow Capital African Rainbow Capital valued at formed in 2015 Investments listed September 2017 R15 billion in 2013 (51.7% owned by ARC) (UBI funds & owns ARC) (R20.5bn at 30 June 2018) 5
STRATEGIC POSITIONING ARC INVESTMENTS ARC leadership Underlying Diversified portfolio Permanent capital black- and partners high quality of investments – owned have a solid track record listed & unlisted sector specific focused and black-controlled entity and access to portfolio companies building blocks a strong balance sheet Black economic ARC facilitates access Investments into portfolio Listed platform empowerment to investments companies are made provides liquidity is a suitable framework that would otherwise at appropriate to investors for redistributing wealth be difficult to access BEE discounts in SA 6
STRATEGIC FOCUS ARC INVESTMENTS ARC INVESTMENTS FINANCIAL SERVICES DIVERSIFIED INVESTMENTS ARC has extensive experience in financial services ARC team evaluates opportunities with partners to evaluate investment opportunities who are leading sector experts (i.e. Mining, Agri) Investments are made with stand-alone and synergistic potential Investments are made with stand-alone and synergistic potential in mind across all businesses in FS portfolio in mind within sub-category (i.e. Telecoms or Property) Significant synergistic opportunities exist Businesses in Diversified Investments offer to unlock shareholder value over time significant client pool value to Financial Services businesses 7
INVESTMENT SELECTION CRITERIA ARC INVESTMENTS Commercial prospects Experienced, A demonstrable which can be enhanced qualified and track record by having strong aligned management BEE credentials Opportunities for Robust growth prospects Established market position, consolidation and synergies among either existing or disruptive portfolio companies target return of >16% within the ARC Fund 8
OPERATING ENVIRONMENT KEY POINTS Significant political uncertainty Economic transformation remains, which impacts level of an imperative for SA consumer, investor and overall business confidence in economy Weak equity markets Some businesses in our portfolio for most of the period experienced unfavourable under review trading conditions 9
FUND STRUCTURE OVERVIEW 13.1% ARC Investments ARC Investments UBI Sanlam is incorporated ordinary shares in Mauritius listed on the JSE 100% Outside ARC investors ARC Fund established ARC Investments owns in SA as a 49.9% of financial services 51.7% BEE investment vehicle portfolio companies 48.3% ARC Investments 50.1% Limited partner 99.5% ARC Fund, an ARC Investments owns 100% of the non-financial en commandite partnership, 100% 49.9% Diversified Financial services portfolio companies houses investments ARC Fund Investments Services 10
OUR EMPOWERMENT STATUS KEY POINTS We boast Our investment selection criteria significant empowerment status are supported by with broad base of black individuals our empowerment status and groups since 2004 Currently about 550 individuals Large number of groups Development trusts doing significant who each became millionaires (trade unions, churches, youth, women) investments in social infrastructure (gross income) 11
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PORTFOLIO OVERVIEW AS AT 30 JUNE 2018 FINANCIAL SERVICES DIVERSIFIED INVESTMENTS Mining, Construction, Asset Insurance Specialist Banking Agriculture Property Telecoms BPO Other Management Energy Alexander Forbes A2X TymeDigital RAIN Humanstate Last Mile Fund Fledge Capital Acorn Agri & Food ARC Properties Alternative Lima Mbeu Metrofibre Bluespec Elandsfontein ARC Investments BKB Majik Prosperity Colourfield Autoboys Afrimat Bravura RSA Val de Vie InFund Solutions GemCap GAM EdgeGrowth Subtropico ARC Real Estate Payprop Sinayo Constellation Infoslips Capital Consumer Ooba Friend Anglo African CSG Finance EOH Life Short term Health Capital Appreciation EBS International Santam Afrocentric LifeCheq Indwe ARC Health 13
FINANCIAL REVIEW RETURN ON INTRINSIC PORTFOLIO VALUE (IPV) R million 9 000 Fair value adjustments 708 708 Dividend income and directors’ fees 87 231 Interest income on shareholder loans 18 6 000 2 735 Return before fees 813 Fund management fee (88) Net IPV returns for the year 725 3 000 Opening IPV Weighted Average IPV 6 413 4 473 Additions - cash Period under Annualised review Additions - non-cash Fair value adjustments Return on IPV: 0 Before dilution 11.3% 13.9% Intrinsic Portfolio Value After dilution 9.5% 11.7% INAV increase: Before dilution 9.1% 11.2% After dilution 7.8% 9.6% 14
02 FINANCIAL REVIEW Bridget Radebe Chief Financial Officer, UBI
FINANCIAL REVIEW KEY HIGHLIGHTS 296 DAYS SINCE LISTING ARC INVESTMENTS LISTED ON INTRINSIC NET ASSET VALUE INAV PER SHARE THE JSE ON (INAV) (after fees) 7 September 2017 ▲9.1% ▲R9.23 TO R9 528 million (R9.12 on a diluted basis) (7 September 2017: R8 734 million) (7 September 2017: R8.46) CASH IN THE ARC FUND INTRINSIC PORTFOLIO VALUE CASH CONVERSION – AT YEAR END OF NET INVESTMENTS OF ▲R8 147 m ▲R2 735 m R1 576 m (7 September 2017: R4 473 million) 16
FINANCIAL REVIEW STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR TO 30 JUNE 2018 From A VIEW INTO THE ARC FUND 7 Sept 2017 to 30 June 2018 R million R million 30 June 2018 Fair value movement on the Investment 794.7 888.9 Income in the ARC Fund at FVTPL* Other income 2.1 Fair value movements on Diversified Investments 619.2 Other expenses (7.2) Fair value movements on Diversified Financial Services 23.3 Performance participation expense (115.1) Income from Diversified Investments 89.9 Profit/(loss) before taxation 674.5 Income from Diversified Financial Services 25.2 Taxation - Interest income on cash and cash equivalents 131.3 Profit/(loss) for the period 674.5 Expenses (94.2) Other comprehensive income/(loss) Fees paid to the Fund Manager (94.2) 674.5 Total comprehensive income/(loss) Net foreign exchange gains/(losses) on mark-to-market of (12.9) foreign denominated loans and receivables in the portfolio Earnings per share Other expenses 12.9 Basic earnings per share (cents) 81 Total 794.7 79 Diluted earnings per share (cents) * FVTPL: Fair value through profit or loss 17
FINANCIAL REVIEW STATEMENT OF FINANCIAL POSITION AS AT 30 JUNE 2018 Unaudited at listing Reviewed as at incorporation A VIEW INTO THE ARC FUND R million 30 June 2018 7 Sept 2017 Unaudited at ASSETS 794.7 listing Reviewed as 2.1 Non-current assets incorporation at 30 June Investment in the ARC Fund at FVTPL* 9 581.7 8 787.0 7 Sept 2017 R million 2018 Current assets Investment in the ARC Fund at FVTPL* Trade and other receivables 0.9 1.3 The segmental analysis of the Investment is as follows: Cash and cash equivalents 28.5 45.1 Diversified Investments 6 649.9 3 565.7 Total assets 9 611.1 8 833.4 Diversified Financial Services 1 555.0 992.8 EQUITY IFRS Portfolio Value 8 204.9 4 558.5 Stated capital 8 831.8 8 831.8 Cash and cash equivalents in the ARC Fund 1 576.3 4 221.9 Retained income/(Accumulated loss) (131.4) (12.4) Other net assets in the ARC Fund (199.5) 6.6 Performance participation reserve 115.1 - Total Investment in the ARC Fund at FVTPL 9 581.7 8 787.0 Fair value reserve 794.7 - Number of ordinary shares in issue (million) 1032.0 LIABILITIES Diluted number of ordinary shares (million) 1 045.0 Current liabilities 1 045.0 million Trade and other payables 0.9 14.0 931 NAV per share (cents) Total equity and liabilities 9 611.1 8 833.4 923 INAV per share (cents) Number of ordinary shares in issue (million) 1 032.0 1 032.0 920 Diluted NAV per share (cents) Diluted number of ordinary shares (million) 1 045.0 - 912 Diluted INAV per share (cents) Net asset value per share (cents) 931 849 Diluted net asset value per share (cents) 920 849 * FVTPL: Fair value through profit or loss INAV per share (cents) 923 846 1. FVTPL: The net asset value per shares was derived from the (R11.2 million) net asset Diluted INAV per share (cents) 912 846 value divided by 100 shares at incorporation 18
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