Aylett Fund Managers

Walter Aylett

June 2016

SE

NA

TE G

RO

UP

PR

ESEN

TATI

ON

1

Agenda

Business update

Investment philosophy & process - snapshot

Aylett & Co capabilities

Market view

Discussion

2

Aylett & Co Fund Managers

Business update

3

Founded 2005

Tested philosophy &

process

Long-term, legacy

inspired

Bottom-up stock pickers

Behaviour:

Integrity

Energy

Intelligence

AUM R3bn

Uncorrelated

returns Independent

Business update

Aylett & Co Fund Managers 4

Walter Aylett

B.Compt Hons (Unisa)

CA(SA) / CFA

Since inception

Dagon Sachs

B.Sc Eng (Mechanical) (Wits)

CFA

Since inception

Justin Ritchie

PGDA (UCT) B.Acc (Stell)

Passed Level 3 CFA

CA(SA)

November 2010

Jacques Haasbroek

B. Acc Hons (Stell)

CFA Level 2 Candidate

January 2015

Aylett & Co investment team



Operations Team Marketing & Support

Kirsten Parkins Head of Operations

B.Compt Hons (Unisa) CA(SA)

Megan Fraser Business Development

John Nel Business Support

B.Bus.Sci Hons (UCT), Passed Level 1 CFA

Megan Peters Business Assistant

Ashleigh Grobler Fund Accountant

B.Comm (Varsity College) CFA Level 1 Candidate

David Heany B.Com (UCT)

Passed CFA 1 (Dec 2014)

Operations & support team



Investment philosophy & process - snapshot

7

What we do

Invest on client’s behalf

‘Buy businesses’ Define risk:

permanent loss of capital

What we don’t do

Technical analysis

Top down investing

Momentum investing

Growth vs.

value


Global

RSA

ALSI 40

42 companies

Mid/small cap

+-100 stocks

Aylett & Co’s investment universe


CAUTION:

MAY EXHIBIT SIGNS

OF INDEPENDENT

THINKING


How we buy

Source: Bloomberg

Lewis share price vs. purchases


• Hulamin

• Arcelor

• Exxaro

• Glencore

• Tongaat

• Sun International

• MTN

Stocks we avoided


A

B C

D

Source: Bloomberg

What to expect from Aylett & Co?



Aylett & Co capabilities

14

Bravata Equity Balanced Hedge

Stock picking Asset

allocation

Capital protection Unconstrained

Fun

d

Cap

abili

ty


43%

23%

16%

14% 4%

Financials Industrials Commodities Foreign Other

Aylett Portfolio

0%

20%

40%

60%

80%

100%

Small caps

Bowler Metcalf

Italtile

RECM & Calibre

Sovereign Foods

Transaction Capital

Transpaco

Core Holdings

AECI

Reinet

Tsogo Sun

Recovery

Afrox

Anglo

Nampak

Omnia

RB Platinum

Top Ideas To Portfolio Construction


Stock stories

18

OPTIMIST

PESSIMIST


Source: annual reports and presentations Date: March 2016

Operating Margin - Plastics


Source: annual reports and presentations Date: March 2016 Aylett & Co Fund Managers 21

19.84

15.50

22%

Source: Company reports, Aylett & Co, Bloomberg Date: Aylett & Co Fund Managers

Source: Company, Aylett & Co, Bloomberg Date: March 2016 Aylett & Co Fund Managers


Collections AUM



Operating Profit



EBIT/Assets

Restructure Costs & Savings

ZARm


Source: Company reports Date: March 2016 Aylett & Co Fund Managers


Mining


Source: Company reports, J.P. Morgan Date: March 2016 Aylett & Co Fund Managers


Mining Operating Margin


Source: annual reports and presentations Date: March 2016 Aylett & Co Fund Managers 31


SUN TSOGO

Owned EBITDA 2.1 4.2

Debt 9.4 9.4

Casino Revenue Growth



Market view

33

Relative strength of SA Indices

Date: 31 April 2016


What worries us?


Source: LPL Financial, NYSE

Average holding period for stocks by decade

Nu

mb

er

of ye

ars

he

ld

1940 1950 1960 1970 1980 1990 2000 2010

Investors’ focus has become short-term


(40%)

Current

margins

10%

Margins decline by

20%

Margins reset

8%

Possibility: capacity for correction

Current

ratings (PE)

20x

Ratings decline by

20%

Rating reset

16x


Wheat price – SA vs.US

Source: Bloomberg, Nedbank


US corn prices




Drought induced spike in maize prices


40

US petroleum imports continue to fall



Real wage growth




US unemployment


43

Payrolls data



Household debt/income ration remains elevated


HCE: Q-o-q % saar Debt as a % of income

Household spending

Debt to Income ratio

Source: SARB

45

Current account deficit remains wider than expected

Current account saar as % GDP


Source: SARB

46


Policy stalemate amid stagflation scenario


47

Year S&P 500

2008 -37.0%

2009 26.5%

2010 15.1%

2011 2.1%

2012 16.0%

2013 32.4%

2014 13.7%

2015 1.4%

Date: December 2015

Stock market returns


SA GDP in US$ terms


Source: www.trandingeconomics.com | World Bank Group

49


Discussion

50

Collective Investment Schemes in Securities (CIS) should be considered as medium to long-term investments. The value may go up as well as down and past performance is not necessarily a guide to future performance. CIS’s are traded at the ruling price and can engage in scrip lending and borrowing. The collective investment scheme may borrow up to 10% of the market value of the portfolio to bridge insufficient liquidity. A schedule of fees, charges and maximum commissions is available on request from the Manager. There is no guarantee in respect of capital or returns in a portfolio. A CIS may be closed to new investors in order for it to be managed more efficiently in accordance with its mandate. CIS prices are calculated on a net asset basis, which is the total value of all the assets in the portfolio including any income accruals and less any permissible deductions (brokerage, STT, VAT, auditor’s fees, bank charges, trustee and custodian fees and the annual management fee) from the portfolio divided by the number of participatory interests (units) in issue. Forward pricing is used. The Fund's Total Expense Ratio (TER) reflects the percentage of the average Net Asset Value (NAV) of the portfolio that was incurred as charges, levies and fees related to the management of the portfolio. A higher TER does not necessarily imply a poor return, nor does a low TER imply a good return. The current TER cannot be regarded as an indication of future TER's. During the phase in period TER’s do not include information gathered over a full year. The Manager retains full legal responsibility for any third-party-named portfolio. Where foreign securities are included in a portfolio there may be potential constraints on liquidity and the repatriation of funds, macroeconomic risks, political risks, foreign exchange risks, tax risks, settlement risks; and potential limitations on the availability of market information. The investor acknowledges the inherent risk associated with the selected investments and that there are no guarantees. Please note that all documents, notifications of deposit, investment, redemption and switch applications must be received by Prescient by or before 13:00 (SA), to be transacted at the Net Asset Value price for that day. Where all required documentation is not received before the stated cut off time Prescient shall not be obliged to transact at the Net Asset Value price as agreed to. Money Market Funds are priced at 1pm and all other Funds are priced at either 3pm or 5pm depending on the nature of the Fund. Prices are published daily and are available on the Prescient website. Performance has been calculated using net NAV to NAV numbers with income reinvested. The performance for each period shown reflects the return for investors who have been fully invested for that period. Individual investor performance may differ as a result of initial fees, the actual investment date, the date of reinvestments and dividend withholding tax. Full performance calculations are available from the Manager on request. This document is for information purposes only and does not constitute or form part of any offer to issue or sell or any solicitation of any offer to subscribe for or purchase any particular investments. Opinions expressed in this document may be changed without notice at any time after publication. We therefore disclaim any liability for any loss, liability, damage (whether direct or consequential) or expense of any nature whatsoever which may be suffered as a result of, or which may be attributable directly or indirectly to, the use of or reliance upon the information. Aylett & Company (Pty) Ltd, Registration number: 2004/034008/07 is an authorised Financial Services Provider (FSP No. 26/10/20513) under the Financial Advisory and Intermediary Services Act (No.37 of 2002), to act in the capacity as investment manager. This information is not advice, as defined in the Financial Advisory and Intermediary Services Act (N0.37 of 2002). Please be advised that there may be representatives acting under supervision. For any additional information such as fund prices and application forms please go to www.aylett.co.za.

Thank you


Aylett Fund Managers

Investor Relations

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