UCTRF

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UCTRF MEMBER INVESTMENT CHOICE
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AGENDA

• Design of the Fund
• Your main risks
• Channels offered by the UCTRF
• Your choices
• Common mistakes

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The design of the Fund

• The UCTRF is a defined contribution provident
  fund.
• So, the amount available for your retirement will
  depend on
• Your contributions allocated to retirement
  savings, and
• The net investment returns earned on your
  retirement savings.
• The Fund and its associated schemes also provide
  benefits on resignation, retrenchment, death and
  disability.

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Three KEY RISKS

• Inflation risk
• Final payment risk
• Contributions insufficient

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INFLATION RISK

• Your retirement savings do NOT earn a sufficient
  return to provide reasonable retirement income
  after long service
• Investment return of 5 to 6 p.a. above
  inflation needed to provide reasonable retirement
  benefits

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FINAL PAYMENT RISK

• You retire, your funds are in the market, and
  take out your retirement benefit at a time when
  the market is low
• Not important if you resign and re-invest your
  benefit in a similar vehicle for your retirement

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Contributions Insufficient

• The UCTRF SIP targets a replacement ratio of 75
  to 85 of your pensionable salary after 35 to 40
  years of contributions
• If your contributions are below the guideline
  levels or you contribute for a shorter period
  this will reduce the funds available to provide a
  pension on retirement

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MANAGING RISKS

• Optimal asset class mix equities generally best
  protection for inflation risk cash best for
  final payment risk
• Time horizon for which retirement savings
  invested longer investment period, lower risk
  of capital loss
• Diversification

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UCTRF Investment Channels

• Income Fund (Portfolio A) designed for final
  payment risk
• Smoothed Bonus Fund (Portfolio B) designed for
  mix of inflation and final payment risk
• Market Portfolio (Portfolio C) designed to deal
  with inflation risk

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REAL INVESTMENT RETURNS _at_ 31.12.2008
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Statement of Investment Principles (SIP)
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Statement of Investment Principles (SIP) cont
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Income FundPortfolio A

• Assets are invested in money-market and
  short-dated bond instruments with maximum term of
  3 years
• Targets investment return 1 p.a. above inflation
  
• Designed mainly for members wanting final
  payment risk protection

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SMOOTHED BONUS FUNDPortfolio B

• Insurer smooths investment returns over a period
  of 5 and 10 years
• Over long term bonus reflects return earned on
  underlying assets less Insurer charges
• Insurer guarantees contributions (including
  transfers from other channels) but not the
  investment return
• Targets investment return 3 p.a. above inflation
  over the long-term

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TWO ACCOUNTS

• Vested Account
• Guaranteed portion
• Non-vested Account
• Non-guaranteed portion

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VESTED ACCOUNT

• Retirement saving contributions plus transfers
  from other portfolios plus
• Vested bonuses declared monthly minimum monthly
  bonus 0 after deducting fees
• Balance in Vested Account guaranteed by Insurer
  subject to policy conditions

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NON-VESTED ACCOUNT

• Part of monthly bonus may be non-vesting, which
  means that the Insurer has discretion to remove
  it (in full or part)
• Balance in Non-Vested Account reflects
  accumulated non-vested bonuses declared
• Up to 5 of balance in Non-Vested Account
  transferred to Vested Account every 6 months

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STRATEGIC ASSET ALLOCATION
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KEY FEATURES

• Multi-manager investment strategy (reduces risk
  to Metlife Asset Management significantly)
• Governance provided by the Discretionary
  Participation Committee ito FSB directive 147
• Smoothing formula specified to and monitored by
  Governance committee

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SWITCHING LIMITATIONS

• If you switch out (and have invested in Portfolio
  B for less than 5 years) you will receive lesser
  of
• Balance in vested non-vested account and
• Market value of underlying investments
• Care needs to be exercised in switching out at a
  time when the smoothing reserves are low

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MARKET PORTFOLIOPortfolio C

• Get full return on the underlying assets (after
  expenses)
• no smoothing and returns will be negative from
  time to time
• No guarantee
• Targets to provide a return of some 5 p.a. above
  inflation over the long-term

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ASSET ALLOCATION31 December 2008
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UCTRF GOVERNANCE

• Trustees select the investment managers for
  Portfolios A, B and C
• Statement of Investment Principles
• (see http//www.uctrf.uct.ac.za/)
• Investment Committee monitor performance on an
  on-going basis

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INVESTMENT MANAGERS

• Income Fund (Portfolio A)
• - Prescient
• Smoothed Bonus Fund (Portfolio B)
  - Metlife Multi-Manager Smoothed Growth
  Fund
• Market Portfolio (Portfolio C)
• - SA equities InvestecAllan Gray
• - SA bonds Prescient
• - International Orbis (Allan Gray)

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YOUR CHOICES

• You can decide separately how you want to invest
  your
• Accumulated retirement savings (includes TRR)
• Future retirement savings (monthly contributions)
  
• Choice permitted twice yearly (31 March and 30
  September) 1st switch free, other R235

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LIFE STAGE MODEL

• Designed for members that are happy to follow a
  structured model
• Model reflects normal retirement age of 65 for
  all UCTRF members
• Model simply varies investment strategy on period
  to assumed normal retirement age
• Members are invested 100 in Portfolio C until
  age 59, thereafter 20 of savings is transferred
  to Portfolio A every year until age 65, when 100
  is in Portfolio A.

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TWO COMMON MISTAKES

• Trying to time the market no evidence that
  investment professionals can get this right
  consistently
• Too conservative choice

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NEXT STEPS

• If you do NOT want to change your strategy, there
  is no need to fill in an option form
• If you wish to change your strategy fill in the
  option form and return it by 6 March 2009

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Nomination of Beneficiaries

• You MUST complete the nomination of beneficiaries
  under the separate Group Life Assurance Scheme
  
• complete and return form HR155
•  
• You MUST complete the recommendation of
  beneficiaries under the UCTRF
• complete and return form HR151

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• Thank you
• Any Questions?