Truffle Asset Management

6 November 2014

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Agenda:

• The Business

• Asset allocation principals

• Funds and Performance

• Questions ?

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Truffle The business

• Owner managed

• Quality boutique managing co-investor assets

• Fundamental valuation philosophy

• Disciplined investment process

Shareholder Structure

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RMIHoldings

RMB Structured Insurance(BEE 28%)

76%

23%

Staff & Management

TruffleCapital

Truffle AssetManagement

100%

77%

43%

(Enhanced Beta)

Maru Asset Management

BEE 50.15%

(active)

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The Truffle Business

- >6 years old

- R 6 billion Assets Under Management

- CIS R2.2billion

- 12 Institutional Mandates- R 3bn in Specialist Equity

- R 1.6bn in Flexible & Balanced

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Truffle AuM at 30 September 2014: R6 billion

Structured Products R 604 million Equity Funds R 3 158 millionFlexible Funds R 1 741 million Hedge Funds R 62.7 millionBalanced Funds R 351 million Money Market R 89 millionFlexible Income R 10 million

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Truffle’s Performance Framework

- Generate consistent alpha

- Maximise independent positions –

don’t bet the farm

- Manage to any benchmark or risk

tolerance

Truffle’s edge

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• Experienced investment team

• Sound philosophy

• Disciplined and rigorous process

• Proprietary risk management

• ‘The Truffle’

Truffle’s edge

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100+ years experience. Small, focussed team

Demonstrated Success – in prior positions and at Truffle

Stable team

Total Staff Compliment 15

Truffle Key Team MembersLouis van der Merwe 25 + years market experience

B Com Investment Management

CEO / Alternative Investments

CIS – Flexible Income Fund

Hannes van der Westhuyzen 25 + years market

experience

CA (SA)

Fixed Interest

CIS – Flexible Income/ Money Market

Charles Booth 30 + years market experience

Chem Eng, MBA,CFA

CIO

CIS Equity / Balanced/ Flexible Fund

Iain Power 20 years market experience

B.Com (Hons)

Portfolio Manager

CIS Equity/ Balanced/ Flexible Fund

Jonathan du Toit 8 years market experience

CA(SA), CFA

Portfolio Manager

CIS Equity/ Balanced/ Flexible Fund

Non-core responsibilities outsourced

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• Custody: Any of the recognised / registered custodians (segregated) Societe Generale (unit trust)

• Administration: Maitland (segregated) Prime CIS Management Co. (unit trust)

• Regulatory compliance Independent Compliance Services (Pty) Ltd

• We intend to remain small and focused on our core skills

Truffle’s edge

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Truffle’s investment philosophy

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• Exploit short term inefficiencies that market will recognise in the long term

• This inefficiency is not obvious and difficult to find

• Experienced and skilled managers can succeed through a disciplined, rigorousinvestment process

Truffle’s edge

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Disciplined & rigorous process

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• Establish Intrinsic Values

• Compare all opportunities

• Construct portfolios within risk framework

Determining intrinsic value

• Intrinsic value is the fair price for the entire business to own it

forever.

• Determined through rigorous bottom-up research involving:

Detailed business analysis

Management interaction

Assessing the quality of management

Assessing the quality of the business & industry

• Establish thru’ the cycle valuations by normalisation.

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Truffle’s Edge

• We use a proprietary system (not off-the-shelf risk management systems)

• Manage all active positions relative to volatility• Size, sector, economic group, single stock

• Independent positions maximised

Risk management and portfolio

construction

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Truffle’s edge

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• Disciplined and repeatable process


• ‘The Truffle’ - that bit extra

‘The Truffle’

Size matters

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• Asset size allows more alpha opportunities

We can exploit large, mid and small cap opportunities

We can outperform in all market phases

Mid-Cap alpha opportunities!Size matters

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SharePrice

appreciation annualized

Avg % of assets

Holding Period in Months

Market Cap Rm

R5bn AuM2% Holding

% of company

equity

R50bn AuM2% Holding

Hulamin 109% 1.3% 5 2 500 R100m 4.0% 40%

GPI 95% 1.2% 10 3 000 R100m 3.3% 33%

Super Group 53% 2.0% 30 9 100 R100m 1.1% 11%

Mpact 50% 2.5% 23 4 400 R100m 2.3% 23%

Pinnacle Tech 43% 2.5% 33 2 000 R100m 5.0% 50%

Discovery 40% 3.0% 33 54 000 R100m 0.2% 2%

Cipla Medpro 27% 2.2% 18 4 500 R100m 2.2% 22%

‘The Truffle’

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• Asset size allows more alpha opportunities

• Efficient implementation

• A competitive fee

• Personal Service

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Asset Allocation Principals

• Asset allocation funds are build from the bottom up

and are driven primarily by Equity stock selection

Shares have to give the targeted return i.e. CPI

plus 4% in case of Balanced Fund and CPI plus

5% in the case of Flexible Fund

Down side protection and capital preservation is

key

We do not target asset allocation %

Property compete with Fixed interest

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The current positioning in our Asset Allocation

funds are driven by the relative lack of

opportunities in the Equity stock selection

Once Equity and property have been allocated –

left to allocate to Fixed Income

Has to be liquid, low duration, readily available to

deploy in the Equity Market

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Asset Allocation

Equity

Fixed Income

Cash

Property

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Asset Allocation

Equity

Fixed Income

Cash

Property

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Floating rate Bonds

Issuer Maturity Rate

Steinhoff Jun 2017 JIBAR + 168

Resilient Nov 2017 JIBAR + 145

Nedbank March 2017 JIBAR + 93

Barloworld Dec 2018 JIBAR + 132

Growthpiont May 2016 JIBAR + 84

Imperial Group May 2021 JIBAR + 157

Values Value 28

Property stocks - looking attractive

Source: Company data, Truffle

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

7.0%

8.0%

9.0%

10.0%

0.0% 2.0% 4.0% 6.0% 8.0% 10.0% 12.0% 14.0%

FWD

Yie

ld

3Y CAGR EPS

SA Corp Growthpoint Redefine Emira

Hyprop Resilient Vukile Fortress A

NEPI Intu Redefine Int GOZ

Values Value 29

Property stocks - looking attractive

• Attractive distribution yields

• Low distribution forecast risk

• Leverage is up over the last 5 years but….

• Most companies have hedged the majority of their debt

• Many companies have expanded offshore offering further

portfolio diversification

• Domestic stock risks

• Major Rand weakness - likely in medium term

• Rise in bond yields - likely in medium term

• Offshore stock risks

• Rise in global interest rates - looks unlikely

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Truffle’s Funds and PerformanceR

isk

Expected Return

Money Market

Flexible Income

Balanced

Flexible

Equity

Black Truffle Hedge Fund

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Truffle’s Funds and Performance

Downside Risk

An

nu

alis

ed

Ret

urn

Money Market

Flexible Income

Balanced

Flexible

Equity

Black Truffle Hedge Fund

Flexible

Balanced

Flexible Income

19.4%

19.4% 17.6%

7.2%

6.5%

5.3%

Values Value 32

Truffle retail fund’s performance

Fund Fund Return to September

2014Benchmark

Sector Average

Inception Date

Truffle General Equity Fund 17.6% 15.7% 1 13.6% Jan 2011

Truffle Flexible Fund 19.4% 11.2% 2 12.4% Jan 2011

Truffle Balanced Fund 19.4% 10.0% 3 14.0% Nov 2011

Truffle Flexible Income Fund 7.2% 5.5%4 - Mar 2013

1. All Share Index2. CPI+5%3. CPI+4%4. SteFi

* Returns are annualised since inception

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Truffle Flexible Income Fund

High income Monthly distributions

Preserving capital / Low volatility Diversified across asset classesMinimum exposure to general equity market Combination of Dividend/Interest/Rental

income = Tax efficient

Target Investor

• Requires regular income

• Protection from equity and bond volatility

• Look to increase portfolio’s liquid holdings

• With a better total return yield than a money market fund

• With optimised after tax return

Product Description

• Combination of

– Listed perpetual preference shares

– Listed corporate bonds

–Property

• CISCA – Unit trust

• Liquid

Portfolio Construction

• Corporate Paper – Up to 5 years (fund)– Floating rate – JIBAR linked– Rating A or better– No duration

• Preference Shares– Risk Buckets– CISCA – Liquidity/Investability– Floating rate – Prime linked

Flexible Income Fund - Current Indicative Returns (21/10/2014)

8.98

7.53

5.6

8.22

(0.57)

(2.02)

5.53

PrefShares CorBonds Cash Fund Fee Tax AfterTax

%

Values Value 38

Truffle Balanced Fund

Invests in Equities, Property and Fixed Income Assets

SA and global exposures

Complies with the Pension Fund Act of

1956 (Regulation 28 compliant)

Target return CPI +4%

Managed to preserve capital over rolling 3 years

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Truffle CIS Balanced Fund as at September 2014

8.1%

18.2%19.4% 19.4%

4.3%

11.2%

14.8% 14.0%

3.9%

7.0%

4.6% 5.4%

0%

5%

10%

15%

20%

25%

6 months rolling 12 months rolling 2 years rolling Annualized since inception(November 2011)

Truffle CIS Balanced Fund Sector Median Active Performance

Rank: 2/106 9/90 5/823/99

Source Fund Analytics

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Truffle CIS Balanced Fund Asset allocation September 2014

39.7%

13.8%

15.5%

10.1%

8.5%

12.4%Domestic Equity

Domestic Property

Domestic Fixed IncomeHoldings

Domestic Cash

Foreign Equity

Foreign Fixed IncomeHoldings

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Truffle CIS Balanced Fund Asset allocation September 2014

Q4 2011 Q3 2012 Q2 2013 Q1 2014

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%


Foreign Equity

Domestic Cash


Domestic Property

Domestic Equity

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Flexible Fund

Invests in Equities, Property and Fixed Income Assets

SA and global exposures

Does not comply with the Pension Fund Act of 1956

Target return CPI +5%

Managed to preserve capital over rolling 3 years

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7.9%

19.2%

22.0%

19.4%

3.9%

10.8%

16.0%

12.4%

4.0%

8.4%

6.0%7.0%

0%

5%

10%

15%

20%

25%

6 months rolling 12 months rolling 3 year rolling annualized Annualized since inception(January 2011)

Truffle Flexible Fund Sector Median

11/65Rank: 4/76 5/72 6/62

Truffle CIS Flexible Fund as at September 2014

* Class A returns after management fee of 1.4% per annum, source Fund Analytics

Values Value 44

Truffle CIS Flexible Asset allocationSeptember 2014

48.6%

14.0%

5.5%

9.0%

14.0%

8.8%Domestic Equity

Domestic Property


Domestic Cash

Foreign Equity


Values Value 45

Truffle CIS Flexible Asset allocation September 2014

Q4

20

11

Q1

20

12

Q2

20

12

Q3

20

12

Q4

20

12

Q1

20

13

Q2

20

13

Q3

20

13

Q4

20

13

Q1

20

14

Q2

20

14

Q3

20

14

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%


Foreign Equity

Domestic Cash


Domestic Property

Domestic Equity

Values Value 46

Limiting downside is key!

Month Truffle Flexible ALSI Month Truffle Flexible AlSI

Jan 10 -1.0% -3.5% Mar 12 2.6% -1.4%

Apr 10 1.1% -0.1% May 12 -3.7% -3.6%

May 10 -2.1% -5.1% Feb 13 -1.2% -1.9%

Jun 10 -0.8% -3.2% Apr 13 -1.3% -2.5%

Aug10 -0.6% -3.5% Jun 13 -4.1% -5.7%

Nov 10 0.7% -0.5% Nov 13 -0.1% -1.1%

Jan 11 -0.3% -2.2% Jan 14 -1.37% -2.36%

May 11 1.5% -0.8% Jul 14 -0.24% 0.93%

Jun 11 -1.9% -2.0% Aug 14 -0.02% -0.46%

Jul 11 0.5% -2.0% Sep 14 0.69% -2.58%

Aug 11 0.1% -0.3% Total -8.3% -48.53%

Sep 11 1.6% -3.6%

Dec 11 1.7% -2.5%

Closing remarks

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• Experienced and passionate team.

• Disciplined and repeatable process.

• Positive track record.

• ‘The Truffle’ - size matters.

• A combination that would be difficult to replicate even

in well established organisations.

Values Value 48

Questions?

Thank you-The Truffle Hogs

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Truffle Asset Management is a registered Financial Services Provider (FSP Number: 36484). Registered for Categories I, II andIIA.

This document does not constitute an offer or solicitation to any person in any jurisdiction in which such offer or solicitationis not authorised or to any person to whom it would be unlawful to make such offer or solicitation, and is only intended forthe use by the original recipient/addressee. If further distributed by the recipient, the recipient will be responsible to ensurethat such distribution does not breach any local investment legislation or regulation.

Prospective investors should inform themselves and take appropriate advice as to any applicable legal requirements and anyapplicable taxation and exchange control regulations in the countries of their citizenship, residence or domicile which mightbe relevant to the subscription, purchase, holding, exchange, redemption or disposal of any investments.

Opinions expressed are current opinions as of the date appearing in this material only. The information is confidential andintended solely for the use of Truffle’s client’s and prospective clients, and other specific addressee’s. It is not to bereproduced or distributed to any other person except to the client's professional advisers. This document is not fordistribution in the United States.

While information obtained is from sources we believe to be up to date and reliable, Truffle does not guarantee theaccuracy or completeness thereof. Truffle does not accept any liability for inaccurate or incomplete information contained,or for the correctness of any opinions expressed.

Past performance is not an indication of future performance

Values Value 51

Truffle Equity Fund

Invested in JSE listed shares (no global)

Fully invested at all times

Benchmarked to All Share Index

Hope to deliver market return plus Truffle outperformance

Values Value 52

4.6%

15.6%

22.7%

17.5%

3.9%

13.5%

19.1%

13.6%

0.8%2.1%

3.7% 3.9%

0%

5%

10%

15%

20%

25%

6 months rolling 12 months rolling 3 year rolling annualized Annualized since inception(January 2011)

Truffle Equity Fund Sector Median Active Performance

24/106Rank: 65/134 46/126 14/99

Truffle CIS Equity Fund as at September 2014

* Class A returns after management fee of 1.4% per annum, source Fund Analytics

Values Value 53

Global economic outlook

• US economy continues to recover

Rates expected to rise in H2 2015

Collapsing commodity prices reduce inflation risk

Expect the Dollar to strengthen into 2015

• Euro zone still struggling

German growth stalling as China & Russia slow

Deflation still a major concern

High debt levels have not gone away……..

• Chinese growth surprising on the downside

Property bubble continues to deflate

Values Value 54

SA economic outlook

• Growth continues to slow on the back of:

Slowing Chinese growth, falling commodity prices

Over indebted consumers

Structural bottlenecks

• Twin deficits remain a major problem

Rand likely to remain under pressure

At risk of capital outflows

• Collapsing commodity prices reduce inflation pressure

• Strong Dollar a risk to Rand, equities and bonds

Values Value 55

SA Equity Market – Overview

• The SA equity market continues to trade above fair

value

Current forward market PE 14.5 times

The longer term historic PE 12.1 times

Ratings have driven returns at the expense of

earnings

The overall market may move sideways for a few

years till earnings catch up!

Value still to found in selective sectors

Values Value 56

Flexible Fund expected returns –October 2014

Share % Assets

1 Yr FWD

DY

EPS 2yr

CAGR

Total

Return

Money

Weighted

Return

Index Holdings

Steinhoff International Holdings Ltd 6.8% 3.2% 17.2% 20.4% 1.4%

Old Mutual plc 7.1% 5.2% 12.2% 17.4% 1.2%

Network Healthcare Holdings Ltd 3.6% 2.5% 17.6% 20.1% 0.7%

Firstrand Ltd 3.6% 4.2% 13.7% 17.9% 0.6%

Nedbank Group Ltd 3.8% 4.4% 12.1% 16.5% 0.6%

MMI Holdings Ltd 3.6% 7.5% 9.6% 17.1% 0.6%

British American Tobacco Corp 3.6% 4.6% 11.9% 16.5% 0.6%

Grand Parade Investments Ltd 2.8% 4.0% 15.0% 19.0% 0.5%

Mondi plc 2.2% 4.2% 11.6% 15.8% 0.3%

Hulamin Ltd 1.7% 2.2% 16.8% 19.0% 0.3%

Discovery Holdings Ltd 2.0% 1.7% 14.0% 15.7% 0.3%

The Foschini Group Ltd 1.7% 4.4% 11.9% 16.3% 0.3%

Phumelela Gaming & Leisure Ltd 1.7% 4.8% 10.9% 15.7% 0.3%

Values Value 57


Share % Assets

1 Yr FWD

DY

EPS 2yr

CAGR

Total

Return

Money

Weighted

Return

Index Holdings

Metair Investments Ltd 1.1% 2.2% 17.2% 19.5% 0.2%

Woolworths Holdings Ltd 1.0% 4.3% 15.1% 19.5% 0.2%

Tsogo Sun Holdings Ltd 1.3% 3.4% 11.2% 14.5% 0.2%

Super Group Ltd 0.9% 4.2% 14.6% 18.8% 0.2%

Sasol Ltd 0.9% 4.3% 11.7% 16.0% 0.2%

Aquarius Platinum Ltd 0.5% 0.0% 0.0% 0.0% 0.0%

Pan African Resources plc 0.7% 6.5% 9.5% 16.0% 0.1%

MTN Group Ltd 0.5% 5.5% 11.6% 17.1% 0.1%

Sephaku Ltd 1.5% 3.5% 15.0% 18.5% 0.3%

Alexandra Forbes Holding Group 0.7% 4.6% 15.0% 19.6% 0.1%

Basil Read Holdings Ltd 0.3% 4.1% 6.5% 10.6% 0.0%

Ellies Holdings Ltd 0.1% 2.4% 18.1% 20.5% 0.0%

54.0% 9.5%

Values Value 58


Share % Assets

1 Yr FWD

DY

EPS 2yr

CAGR

Total

Return

Money

Weighted

Return

Index Holdings

Redefine International Ltd 2.2% 6.7% 14.0% 20.6% 0.5%

Vukile Property Fund Ltd 2.4% 7.6% 9.9% 17.5% 0.4%

Fortress Income Fund A 2.4% 7.2% 5.0% 12.2% 0.3%

New European Property Investments PLC 1.5% 4.3% 13.0% 17.3% 0.3%

Equites Property Limited 1.0% 8.5% 13.0% 21.5% 0.2%

Resilient Property Income Fund Ltd 2.0% 4.4% 6.5% 10.9% 0.2%

Investec Australia Property Fund 1.4% 7.0% 6.5% 13.5% 0.2%

SA Corporate Real Estate Fund 0.9% 7.9% 9.0% 16.9% 0.2%

Growthpoint Properties Ltd 1.0% 6.5% 8.0% 14.4% 0.1%

Capital & Counties Properties plc 1.0% 0.4% 15.0% 15.4% 0.2%

Intu Group plc 0.0% 4.0% 7.0% 11.0% 0.0%

15.9% 2.5%

Values Value 59


Share % Assets

1 Yr FWD

DY

EPS 2yr

CAGR

Total

Return

Money

Weighted

Return

Index Holdings

Indiabulls Financial Services Ltd 2.7% 6.0% 18.0% 24.0% 0.7%

DB MSCI Global $ ETF 2.2% 2.7% 14.0% 16.7% 0.4%

Growthpoint Properties Australia Ltd 1.5% 7.4% 7.0% 14.4% 0.2%

The Buckle Inc 1.0% 2.0% 12.0% 14.0% 0.1%

CF Industries Holding Inc 1.0% 2.3% 13.0% 15.3% 0.1%

Netease Comm Inc ADR 2.6% 2.2% 18.0% 20.2% 0.5%

Sberbank 1.8% 4.0% 10.0% 14.0% 0.2%

SG Fleet Group Limited (AUL) 1.6% 6.0% 7.0% 13.0% 0.2%

14.3% 2.5%

SHF 6.375 05/26/2017 0.2% 6.0% 15.0% 21.0% 0.0%

SPDR Barclays Capital High Yield Bond ETF 4.3% 6.0% 0.0% 6.0% 0.3%

4.5% 0.3%4.4% 0.0% 0.0% 0.0% 0.0%

Cash 3.8% 5.5% 0.0% 5.5% 0.2%

100.0% Total expected return 15.2%

Values Value 60

Balanced Fund expected returns – October 2014

Share % Asssets

1 Yr FWD

DY

EPS 2yr

CAGR

Total

Return

Money

Weighted

Return

Steinhoff International Holdings Ltd 4.53% 3.2% 17.21% 20.4% 0.9%

Old Mutual plc 5.15% 5.2% 12.17% 17.4% 0.9%

Nedbank Group Ltd 4.30% 5.0% 12.11% 17.1% 0.7%

Firstrand Ltd 3.83% 4.7% 13.74% 18.4% 0.7%

MMI Holdings Ltd 2.74% 7.5% 9.62% 17.1% 0.5%

British American Tobacco Corp 2.73% 4.6% 11.94% 16.5% 0.5%

Network Healthcare Holdings Ltd 1.99% 2.5% 17.60% 20.1% 0.4%

Grand Parade Investments Ltd 1.54% 4.0% 18.00% 22.0% 0.3%

Discovery Holdings Ltd 1.60% 1.7% 14.01% 15.7% 0.3%

Phumelela Gaming & Leisure Ltd 1.49% 5.2% 15.00% 20.2% 0.3%

Hulamin Ltd 1.14% 2.2% 16.79% 19.0% 0.2%

Sephaku Ltd 1.09% 3.0% 15.00% 18.0% 0.2%

Tsogo Sun Holdings Ltd 1.32% 3.4% 11.16% 14.5% 0.2%

Mondi plc 1.08% 4.2% 11.58% 15.8% 0.2%

Super Group Ltd 0.89% 4.2% 14.58% 18.8% 0.2%

Sasol Ltd 0.95% 4.3% 11.71% 16.0% 0.2%

Values Value 61


Share % Asssets

1 Yr FWD

DY

EPS 2yr

CAGR

Total

Return

Money

Weighted

Return

Metair Investments Ltd 0.72% 2.2% 17.21% 19.5% 0.1%

Aquarius Platinum Ltd 0.45% 0.0% 0.00% 0.0% 0.0%

The Foschini Group Ltd 0.65% 4.4% 11.87% 16.3% 0.1%

SAB Miller plc 0.68% 1.9% 13.40% 15.3% 0.1%

Woolworths Holdings Ltd 0.53% 4.3% 15.14% 19.5% 0.1%

Reinet Investments SCA 0.77% 2.0% 11.30% 13.3% 0.1%

MTN Group Ltd 0.57% 5.5% 11.63% 17.1% 0.1%

Pan African Resources plc 0.54% 6.5% 9.47% 16.0% 0.1%

Alexandra Forbes Holding Group 0.40% 4.6% 13.00% 17.6% 0.1%

Afrimat Ltd 0.40% 2.8% 14.17% 17.0% 0.1%

OneLogic Group Ltd 0.10% 2.6% 20.00% 22.6% 0.0%

Ellies Holdings Ltd 0.10% 2.4% 18.12% 20.5% 0.0%

Basil Read Holdings Ltd 0.12% 4.1% 6.48% 10.6% 0.0%

Domestic Equities 42.38% 7.50%

Values Value 62


Share % Asssets

1 Yr FWD

DY

EPS 2yr

CAGR

Total

Return

Money

Weighted

Return

Indiabulls Financial Services Ltd 2.42% 6.0% 18.00% 24.0% 0.6%

Netease Comm Inc ADR 2.38% 2.2% 15.00% 17.2% 0.4%

Sberbank 1.30% 4.0% 10.00% 14.0% 0.2%

SG Fleet Group Limited (AUL) 1.07% 6.0% 7.00% 13.0% 0.1%

DB MSCI Global $ ETF 1.44% 2.7% 6.0% 8.7% 0.1%

CF Industries Holding Inc 0.98% 2.3% 10.00% 12.3% 0.1%

Growthpoint Properties Australia Ltd 0.90% 7.4% 4.0% 11.4% 0.1%

The Buckle Inc 0.99% 2.0% 8.00% 10.0% 0.1%

International Equities 11.48% 1.76%

SPDR Barclays Capital High Yield Bond ETF 6.07% 5.0% 0.00% 5.0% 0.3%

Ishares Iboxx $ Inv Grade Corp Bond ETF 1.50% 5.0% 0.00% 5.0% 0.1%

International Fixed income 7.57% 0.36%

Values Value 63


Share % Asssets

1 Yr FWD

DY

EPS 2yr

CAGR

Total

Return

Money

Weighted

Return

Redefine International Ltd 2.03% 6.7% 7.91% 14.6% 0.3%

SA Corporate Real Estate Fund 2.03% 7.9% 6.47% 14.4% 0.3%

New European Property Investments PLC 1.54% 4.5% 13.00% 17.5% 0.3%

Resilient Property Income Fund Ltd 1.49% 4.4% 13.00% 17.4% 0.3%

Fortress Income Fund A 1.72% 7.2% 5.00% 12.2% 0.2%

Equites Property Limited 0.97% 8.5% 13.00% 21.5% 0.2%

Vukile Property Fund Ltd 2.75% 7.6% 0.00% 7.6% 0.2%

Capital & Counties Properties plc 0.98% 0.4% 18.00% 18.4% 0.2%

Growthpoint Properties Ltd 1.04% 6.5% 6.79% 13.3% 0.1%

Intu Group plc 0.93% 4.0% 9.94% 13.9% 0.1%

Investec Australia Property Fund 1.10% 7.0% 3.50% 10.5% 0.1%

Hospitality Property Fund B 0.02% 2.0% 0.00% 2.0% 0.0%

Property 16.60% 2.31%

Fixed Income 15.80% 0.95%

Prefs 0.81% 0.13%

Call 5.35% 0.29%

100.0% Total expected return 13.30%

Values Value 64

SteinhoffBecoming a European heavyweight

• Steinhoff is a European furniture retailer in the value segment of

the market:

Trades on a forward EY of 9% and a DY of 3.2%.

Cost savings and efficiencies will drive growth rather than

growing the market.

Their scale and vertically integrated model will help them in

the consolidation of the market

Expect share buybacks to optimise capital structure &

minimize dilution from rights issue

Higher ROIC has helped drive the rerating

The offshore listing in will help realise more value from an

improved rating.

Values Value 65

British American TobaccoStable earnings growth in Sterling

• British American Tobacco (BTI) is one of our largest

overweights in the portfolio:

BTI is a Rand Hedge with very predictable earnings with

low volatility.

BTI currently trades on a forward PE of 15x and DY of 4.6%.

Expect earnings to grow at 7- 8% in Sterling plus Rand

depreciation of 4% p.a. = 11- 12% EPS growth in Rands.

Despite regulatory risks we still like the stock as it is

offering a 16% return before rating changes.

Core holding in the portfolio.

Values Value 66

SA Banks - reasonable value

Source: Company data, Truffle

Stock FWD PE EPS 3y CAGR

ROE FY15

FWD DY P/B

Barclays Africa 9.2x 11% 17.5% 6.0% 1.6x

FirstRand 11.6x 13% 23.0% 4.7% 2.9x

Nedbank 10.0x 11% 15.5% 5.1% 1.5x

Standard Bank 10.3x 10% 14.5% 5.0% 1.5x

Investec 11.2x 12% 12.0% 4.5% 1.4x

Values Value 67

SA Insurers are a mixed bag

• We are over weight Old Mutual, Discovery & MMI with

embedded values (EV) at or above their long term average:

Old Mutual

Sanlam

Liberty

Discovery

MMI

60%

80%

100%

120%

140%

160%

180%

10% 12% 14% 16% 18%

P/F

Y14E G

EV

ROGEV FY15E

Source: Company data, UBS

Values Value 68

Discovery – growth at a fair price

Discovery sum of the parts

Source: Company data

SA Health40%

SA Life34%

PruHealth6%

PruProtect3%

Insure7%

Balanced portfolio

9%

BEE loans1%

• Biggest medical schemes

administrator, size generates

economies of scale

• Serial entrepreneurs, have

successfully started Invest &

Insure

• Life business has grown

organically at the expense of

competitors

• Growth ventures Pru Health &

Pru Protect to contribute more

meaningfully to earnings

• Highest ROEV in the sector on a

FWD P/EV of 120%

Values Value 69

Old Mutual – Very attractively priced

Old Mutual valuation breakdown

Source: Company data

• Building critical mass in the

wealth cluster = high quality

business

• Wealth cluster gaining client

cash flows

• High operating leverage in the

platform business

• Will sell the rest of USAM

• Trades at a 20-50% discount to

competitors

• Buying Nedbank at a 20%

discount!

35%

27%

8%

10%

30%

4%

-14%

Life Insurance EM

Wealth management

OMIGSA

US Asset Management

Nedbank

Other

Debt

Values Value 70

Old Mutual - Very attractively priced

• We have built a large position in Old Mutual

Expect a DY of 5.0%

Expect EV growth of 12% driven by EM and Wealth

growth strategies.

Quilter Cheviot (QC) acquisition gives scale in the UK,

wealth business in a high growth market

Trading at a 18% discount to EV

Post Solvency II implementation potential special

dividends

If the discount persists the group may be split to unlock

value

The total expected return is DY of 5.5% + EV growth of

12% = 17.5% p.a. before rating changes.

Grand Parade Investments – cash underpin

Values Value

• Sold 70% of LPM business Sun International for +/-R1.0bn

• Sold its 25% equity interest in Grand West & other casinos for

R1.68bn

• The Burger King (BK) roll out continues, targets by 2020:

Rollout of 120 corporate stores

50 franchise stores & 120 Sasol forecourts

Est R4bn sales on 9% PAT margin in 2020

• Acquired 100% of Mac Brothers - catering equipment supplier

• Setting up their own supply chain for raw materials – further

enhance margins

• Bought 10% in Spur Group Holdings, exit vehicle for BK

Grand Parade Investments - Valuation

Values Value

Asset Value

Cash R2.5bn

30% LPM R600m

Mac Brothers R90m

Burger King R2.4bn

Less Burger King Capex (R1.0bn)

Total R4.590m

Shares in Issue 469m

Value per share R9.8

Current share price R7.0

Values Value 73

Sephaku Holdings Ltd

• Market capitalisation R1 billion

Owns 36% of Sephaku Cement

100% of Metier ready-mix

• Have a Kiln in Lichtenburg and second milling plant in Delmas

• SA’s current cement producing capacity is old and inefficient

• Latest technology

10% EBITDA cost advantage over PPC

High energy efficiency

Improved and more consistent quality

• Logistics advantage

Values Value 74


• Plant capacity 2.8mt, Dangote believes it can run at 3.3mt

• Commenced production September 2014

• Supplying all four major retailers

60% of production will go to retail

40% bulk market

• Risks

Price war

Imports

Not securing volumes

Values Value 75


• FY 2016 at 85% utilisation we expect EPS of 100cps

• FY 2018 EPS of 150cps

• Good cash generation

2016 expected dividend of 65 cps

• Low tax in initial years – 12C deductions

• Current share price R5.60

2016 PE of 5.6x

2016 DY of 11%

• We value the share at R10.50

Values Value 76

Current Market View - Summary

• We are finding value in selective cyclical, property, banking and

insurance stocks.

• Given our size we continue to find attractively valued companies

in the small and mid cap universe eg. Hulamin, Sephaku,

Metair, Super Group and Grand Parade Investments

• Remain at maximum offshore exposure with long term concerns

over the Rand

• Offshore equities offer significantly better value than domestic

equities

• Overall equities are not cheap but valuations are being supported

by low interest rates both locally and globally

Risk Parameters

• Income floating (linked to Prime/JIBAR)

• Company Risk

• Credit Risk

• Credit spread Risk

• Liquid assets

• Prime gearing risk

• Risk of capital loss (minimum)

• Regulatory risk

Truffle Asset Management

Economy & Finance

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