BASIC INVESTMENT PRINCIPLES MARCH 2014 Presentation at the Nigerian Stock Exchange Investors Clinic for Registered Shareholders Associations INVESTMENT

BASIC INVESTMENT PRINCIPLES

M A R C H 2 0 1 4Presentation at the Nigerian Stock Exchange Investors Clinic for Registered Shareholders Associations

INVESTMENT BANKING | ASSET MANAGEMENT | TRUSTEESHIP | SECURITIES TRADING


Peculiarities of Financial Products

The Investment Process

Why you need an “Investment Advisor”?

Understanding “YOURSELF” as an investor

Outline

2

UBA Capital Group – The One-Stop Shop for your Financial NeedProducts and Services

Investnow.com.ng

Understanding “YOURSELF” as an investor - The Age Factor

The age factor in investing – it helps to define who you are

The young generation can accommodate more risk

The middle age category has a balanced risk appetite

Old investors should be discouraged from taking “excess risk”

Even within asset classes, consider age in selecting specific asset

20’s 30s-40’s

40s-50’s

60’s+Wealth accumulation stage

Split savings into long- and short-term goals

Think equities for long-term; “liquid” assets for short-term

Growth is the target

Consolidation stage

Preparing for retirement

Less appetite for risk, strong appetite for physical assets like real estate

Increasing preference for income

A fulfilled retirement

Very low risk appetite

Less energy

Focus on stable income

Fixed income products and realty are often the attraction

A Starter

Strong appetite and natural headroom for high risk

Alternative income sources

Less need for liquidity from investment

3 INVESTMENT BANKING | ASSET MANAGEMENT | TRUSTEESHIP | SECURITIES TRADING

Set clear “Investment Objectives” - This should include time horizon - Consider your liquidity needs

- Risk tolerance and other constraints - Tax considerations etc

Determine your “Asset Allocation” - The principle of diversification is crucial - Balance your risk with return expectation - Within each asset, also diversify

Minimize transaction cost - Only buy and sell when necessary - Ensure best execution - Mutual Funds/ETFs minimize cost

Be Disciplined - Focus on your objective - Ignore short term noises - Rebalance portfolios - Restructure when necessary - Do not be part of the herd - Reset objectives if need be

4INVESTMENT BANKING | ASSET MANAGEMENT | TRUSTEESHIP | SECURITIES TRADING

The Four Cardinal Principles of Investing

Understanding “YOURSELF” as an investor - Investing

INVESTMENT BANKING | ASSET MANAGEMENT | TRUSTEESHIP | SECURITIES TRADING 5

Peculiarities of Financial Products - Asset Classes

– Diversification from purely financial

instruments

– A good hedge against inflation

– Components of both long term capital

appreciation and current return in form of

rental income

– Moderate risk investment– Steady income from coupon payments

– Income also earned from capital appreciation

– Traded OTC

– Low risk investments

• Money Market

– On a steady recovery path in 2012

– Historically, has outperformed all other

investment vehicles in the long run

– Good hedge against inflation

– Moderate risk

– Reliable source of income

– Flexible choice amongst quality, maturity

dates, returns

– Liquidity

– Low risk investments

• Bonds

• Equities

• Real Estate

• Private Equity

– Additional diversification opportunity to

portfolio

– Commodities offer best hedge against

inflation

– Private equity provide market-independent

(absolute) returns on investment

– Lock-in periods (investment horizon) for

private equity could be high

– High risk investmenrts


Let’s think about the risk of financial products What are the risk

factors that may reduce return or cause loss of value?

Interest rate

Exchange rate

Economic growth

Fiscal policies

Credit risk

Corporate governance

Which product does these risk factors affect?

Potential Return 0.0%

100.0%

Risk

FGN Bonds

Private Equity

Real Estate

Equity

Cash (TBs, BAs,CPs,etc)

State & Corporate Bonds

6

Peculiarities of Financial Products - Risk

Cash is king; when do you need back the cash?When you need back the cash determines the tenor of the product

The earlier you need cash, the lower the return

Consider how easy it is to transform a product back into cash

Cash is king

Potential Return 0.0%

100.0%

Liquidity

FGN Bonds

Corporate Bonds

Cash (TBs, BAs, CPs, etc)

State Government Bonds

Real Estate/

Private Equity

Quoted Equities


Peculiarities of Financial Products - Liquidity

0.0

10.0

20.0

30.0

40.0

6.0%

8.0%

10.0%

12.0%

14.0%

16.0%

18.0%

20.0%Comparing Returns between equities and bond over a 20-year

period: Equities rallied 17% CAGR Vs. Fixed Income Yield of 13.0% over same period

NSE Return trajectory

Smoothed Return on Equity

Return comparison: Equity Vs. Bonds

Does equities truly compensate investors for the risk of volatility

Is the long term benefit of equities true in reality?

How long can the long term be?


Peculiarities of Financial Products - Return Comparison

The Risk and Return Pay-off; More Risk , More Return

Source: UBA Capital Research, Vanguard Group


Peculiarities of Financial Products – Return vs Risk



The Client

Risk Tolerance/Aversion

Tax StatusInvestment Horizon

The Portfolio Manager’s Job

Asset Allocation Risk and Return- Measuring risk- Effects of diversification

Security Selection

- Which stocks? Which bonds? Which real assets?

Valuation based on- Cash flows- Comparables- Technicals

Private Information

Execution

- How often do you trade?- How large are your trades?- Do you use derivatives to manage or enhance risk?

Asset Classes: Stocks Bonds Real Assets

Countries: Domestic Non-Domestic

TradingCosts- Commissions- Bid Ask Spread- Price Impact

Trading Speed

Market Efficiency- Can you beatthe market?

Views on markets

Performance Evaluation

1. How much risk did the portfolio manager take?2. What return did the portfolio manager make?3. Did the portfolio manager underperform or outperform?

MarketTiming

StockSelection

UtilityFunctions

Tax Code

Views on- inflation- rates- growth

Trading Systems- How does trading affect prices?

Risk Models- The CAPM- The APM



Why you need an “Investment Advisor”?

o Expertise and in-depth knowledge of the financial market

o To determine optimal mix of investment to achieve set goals

o Access to a broad range of investment opportunities/products

o Timely and effective reaction to changes in the market

o Close monitor of investment portfolio

o Tracking of all returns, including dividends and bonuses


UBA Capital Group – The One-Stop Shop for your Financial Needs UBA Capital Group, a major financial and investment services provider listed on the main board

of the Nigerian Stock Exchange. It was spun-off from UBA Plc in 2012 following the directive of the Central Bank of Nigeria requiring all commercial banks to divest from non-core banking activities.

The Group's business is conducted primarily in Nigeria with a Pan-African footprint and aspirations to expand to other major business capitals globally by leveraging on its broad reach and extensive market access to provide both domestic and cross-border services.

As at 01 December 2013, the Group had 4 billion shares in issue, a market capitalisation of US$39.6 million, and total assets of over US$407 million.

UBA Capital Plc is a leading financial and investment services institution and is made up of businesses that are leading players in their respective business segments.

UBA Capital Plc is well positioned to play a strategic role in helping its clients achieve their strategic objectives through its robust suite of financial and investment service offerings… …UBA Capital Plc is poised to shape Africa’s financial future

UBA Capital Plc

UBA Asset Management

UBA Capital-Investment Banking

UBA MetLifeUBA Trustees

UBA Nominee

UBA Securities


UBA Capital Plc – Products and Services

UBA Capital Plc Service Offerings

Investment Banking Asset Management SecuritiesTrusteeship

Debt Capital Markets

Equity Capital Markets

Mergers and Acquisition

Project Finance

Portfolio Management

Mutual Funds

Securities Dealing (Fixed Income & Equity)

Equity Portfolio

ManagementReceiving

Agent to New Issues

Corporate Trusts

Bond Trusteeship

Private Trusts

Custodial Services

Research

Wealth Management

Structured Finance

Real Estate Advisory

Stock Broker to Primary

IssuesDesignated Adviser to

SMEs

Collective Investment

Trusts

Though UBA Capital operates out of Lagos, Abuja and Port-Harcourt in Nigeria, we have unlimited access to our customers due to our ability to leverage on broad reach and borderless access to key financial centres.

Supplemental Market Making


UBA Capital Plc – Asset Management Products and Services

Fixed Income Investment

Portfolio Management Investment

Mutual FundInvestment

Staff Investment Scheme

Funds invested in

• Fixed Income • Equities• Fixed Income

• Equities • Fixed Income

• Fixed Income

Principal Guaranteed

Yes No Depends on plan chosen

Yes

Returns Guaranteed

Yes No Depends on plan chosen

Yes

Expected Return Medium High Depends on plan chosen

Medium

Minimum Investment Amount

• N100,000 • N20,000,000 • N50,000 • N20,000

Minimum Investment Period

1 month 12 months 1 month 3 months

Risk Low Medium Medium Low


UBA Capital Plc – Private Trusts Products and Services

Products Services

Will & Executorships

Where a Trust is built into the Will and appointment is so made in the Will and we can also act as Executor and / or Trustee of your Will. In this respect, we undertake : Bury the deceased in the manner suitable to the Estate, determine the validity of the Will etc.

Private Education Trust

It is essentially a Trust set aside to secure the education of Beneficiaries

Private Investment Trust

it is a Trust for long term saving and investment under Trust towards pre –defined purposes such as future business, family holiday, real estate etc.

Family Trusts & Family Office

it is a Trust to manage family estate as a single entity , structuring family offices.

Nominee Services We hold shares for Private Clients in Nominee name and follow up with the collection of dividends and bonuses


UBA Capital Plc – Securities Trading Products and Services

UBAS High Prime

UBAS Prime UBAS Thrive II UBAS Thrive (ONLINE)

Target Investor High Net- worth Individual

Middle- class Income Earner

Retail Retail

Minimum Investment Amount

• Silver - N 50 m• Gold - N 100m• Platinum – N 150m or the equivalent in Stock value

N5 million or the equivalent in Stock value

N50,000.00 or equivalent in Stock value

Zero account opening balance

Commission Negotiable 1.35% 1.35% 1.35%

Additional Service

Special account set- up with CSCS

A dedicated account officer

A dedicated customer service desk

Execution only

We adopt an integrated approach that draws on the experience and competence of the firm, to deliver results above and beyond expectations and create value for our clients


UBA Securities Limited - Our Value Proposition• Listed on

the Nigerian Stock Exchange

• Effective Risk Management and Group governance structures

• Transparency

• Accountability

• Block Trades and Liquidity

• Fast and Efficient Execution

• Swift and Accurate Feedback

• Competitive Pricing

• Experienced• Skilled• Passionate• Professional• Access to

Networks

• Indebt, World Class Research

• Market Reports and Updates

• Corporate Access

• Access to Dedicated Research Analysts

.

PEOPLE & TECHNOLO

GY

RESEARCH

• Fast and efficient execution

• Swift and accurate feedback

• Competitive pricing

• Block trades and liquidity

• Independent research

• Prompt market information and guidance

• Corporate Access• Dedicated

analysts

• Skilled and Experienced Professionals

• Best-in-Class Technology

• On-line service platform

INTEGRITY & RELIABILITY


Introducing www.investnow.com.ng

http://www.investnow.com.ng/


InvestNow.com.ng - Features

A self service, real time on-line platform, providing independent online access to Securities Trading, Asset Management, Trusteeship from anywhere in the world.

FEATURES

Online Account Opening with zero account balance

Online/Real-time Account funding

24hr Online Client Portfolio Access / Account management

Online / Real time customer support services

Online access to transaction history and reports

Online trading capabilities

Access to real time market data

Access to UBA Capital research

Access to a product specialist


InvestNow.com.ng – Account and Portfolio Management


InvestNow.com.ng – Order Management


InvestNow.com.ng – Contract notes and transaction history


InvestNow.com.ng - Research

Abiola RasaqHead, Research Office: +234 1 280 8496Mob: +234 803 365 1808Email: [email protected]

Ijeoma Michelle DaramolaHead, Private Clients Office: +234 1 280 8341Mob: +234 809 990 5252Email: [email protected]

Our Contact


Motunrayo Ade-FamotiHead, Private Trust Office: +234 1 280 7853Mob: +234 814 227 0960Email: [email protected]

Ahmed MaibeClient Manager Office: +234 1 280 7540Mob: +234 803 307 0440Email: [email protected]


Feedback

Questions and Answers

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BASIC INVESTMENT PRINCIPLES MARCH 2014 Presentation at the Nigerian Stock Exchange Investors Clinic for Registered Shareholders Associations INVESTMENT