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SEAN MELNICK

NEDCOR SECURITIES – MIDCAP CONFERENCE. SEAN MELNICK. GROUP SNAPSHOT. The Peregrine group is a leading provider of wealth and asset management solutions. Assets under management currently exceed R 22 billion. Citadel R 10 billion Quant R 9 billion Hedge funds R 3 billion

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SEAN MELNICK

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  1. NEDCOR SECURITIES – MIDCAP CONFERENCE SEAN MELNICK

  2. GROUP SNAPSHOT • The Peregrine group is a leading provider of wealth and asset management solutions. • Assets under management currently exceed R 22 billion. • Citadel R 10 billion Quant R 9 billion Hedge funds R 3 billion • 10th biggest broker by value, 7th by shares traded and 5th by deals settled. • Market capitalisation (net of treasury shares) @ R7.50 of R1.5 billion. • Capitalised at 6.7% of assets under management. • PE ratio per trading update (@ R7,50) between 8.2 times and 9.3 times to end March 06.

  3. GROUP PROFILE Contribution to Sep 05 • WEALTH MANAGEMENT23% Citadel • ASSET MANAGEMENT 35% Hedge Funds Peregrine Capital Peregrine Investment Managers (PIM) Caveo FOHF (JV with IS) PeregrineQuant • TRANSACTIONAL 26% Broking & Structuring • PROPRIETARY CAPITAL 16% Investment returns (net of group costs)

  4. 1.WEALTH CREATION (“What you do for a living”) 2.YOUR LIFESTYLE ASSETS (‘How you live”) 3.WEALTH PRESERVATION (“Securing your future”) 4.EXCESS ASSETS (“More than enough”) WEALTH MANAGEMENT - CITADEL PERSONAL FINANCIAL FRAMEWORK

  5. WEALTH MANAGEMENT CITADEL • Focussed on individual high-net-worth wealth management • Clients with R 2 million plus to invest • Average current top-up client size R 5,0 million • Average new client size R 8,0 million • Total assets under management approximately R 10 billion • New inflows of R 100 million per month • Client retention of 96% • Annuity outflows of almost R600 million

  6. WEALTH MANAGEMENT CITADEL - PROFITABILITY • Annuity profit R 4 million per month = approx R50 m per annum • PLUS 20% performance fee above lifetime benchmark per client • Benchmark is inflation after accounting for all costs and taxes • High watermark catch up from late 2001 / early 2002 • Performances fees currently averaging R 3 million per month plus • Approximately half the client base now at, or above, high watermark • Strong gearing to weaker currency over time

  7. WEALTH MANAGEMENT CITADEL – PERFORMANCE FEE “RUN RATE” • At current level of AUM of R 10 billion : • if all clients at benchmark: run-rate of R 20 million per 1% real • if half the clients at benchmark: run-rate of R10 million per 1% real • Half the clients at benchmark: 5% real = R 50 million fees per annum • Half the clients at benchmark: 10% real = R 100 million fees per annum

  8. ASSET MANAGEMENT PeregrineQuant • Over R9 billion in AUM • Cashflow positive • Good progress in both the institutional and retail markets • All the infrastructure costs have been spent • Belief that quantitative asset management will continue to gain ground on the more traditional styles

  9. HEDGE FUNDS • Peregrine is the biggest player in the local hedge fund industry. • The group’s exposure to the hedge fund industry is extensive with investments across a broad range of strategies exceeding R5 billion on a worldwide basis. • In excess of R 2,5 billion is managed in single strategy hedge funds. • Within the group’s wealth management arm, Citadel, over R1 billion is invested with leading hedge fund managers on a multi - strategy approach. • In addition, R1,7 billion is currently managed globally on a fund of hedge fund basis with an international joint venture partner. • Caveo, a newly formed FOHF joint venture with Investment Solutions currently has R 330 million under management. • The group also houses one of the country’s leading derivative, equity and prime broking operations.

  10. OUR INTEGRATED HEDGE FUND STRATEGY • FUND OF HEDGE FUNDS / MULTISTRAT Caveo Citadel Multistrat • SINGLE STRATEGY FUNDS Peregrine Capital Peregrine Investment Managers (PIM) • PRIME BROKER Peregrine Prime

  11. ASSET MANAGEMENT CAVEO – Top of the funnel • Combining Peregrine’s hedge fund experience and reputation • with Investment Solutions distribution (and manager access) • Currently R330 million under management • Potential to manage several billion • Conflict of interest resolved by “non-Peregrine” products

  12. OUR INTEGRATED HEDGE FUND STRATEGY • FUND OF HEDGE FUNDS / MULTISTRAT Caveo Citadel Multistrat • SINGLE STRATEGY FUNDS Peregrine Capital Peregrine Investment Managers (PIM)

  13. ASSET MANAGEMENT PEREGRINE CAPITAL • Fundamental equity hedge fund management company • Over R2.1 Billion in AUM • Comfortable at current AUM , but closed to new flows • Hedge fund : 44% p.a. gross compounding since July 98 • Performance fund : 65% p.a. gross compounding since July 98 • 50/50 economic deal with management – stability in team • Profit from annual fees of only R 10 million BUT

  14. ASSET MANAGEMENT PEREGRINE CAPITAL – PERFORMANCE FEES AT AUM of R 2,1 BN

  15. OUR INTEGRATED HEDGE FUND APPROACH • FUND OF HEDGE FUNDS / MULTISTRAT Caveo Citadel Multistrat • SINGLE STRATEGY FUNDS Peregrine Capital Peregrine Investment Managers (PIM) • PRIME BROKER Peregrine Prime

  16. TRANSACTIONAL BROKING AND STRUCTURING • Peregrine Securities • Equity Broking • Peregrine Prime • Peregrine Equities • Derivative Broking • Derivative & Quantitative Research • Structuring

  17. Base Case (?) Earnings for Peregrine (note assumptions)

  18. Balance sheet • No external gearing at year end • R 360 million in cash / near cash investments • Approximately R 150 million cash in working capital • Generating cash at a rate of R 20 million per month (pre tax) • BUT • Earnings do rely on good investment performance • Business is highly people dependent

  19. FINALLY, AN INTERESTING COMPARISON AND SOME HOMEWORK • Man Group Plc (www.mangroupplc.com) • Largest listed hedge fund manager. Listed on the LSE. • Man Group Plc is a : “leading global provider of alternative investment products and solutions. One of the world’s largest future’s brokers.” • Assets under management @ 12 Jan 06 - $ 45.8 billion Market Capitalisation - $ 11.9 billion Market cap : AUM = 26% !!!! Fiscal PE (trailing) – 19.3 times

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