Investec Global Franchise

Senate Group

Investec Global Franchise

Morkel Kincaid – Sales Manager

Louis Niemand – Investment Director

Darren Jocum – Investment Specialist

March 2016

2 Investec GSF Global Franchise Fund Confidential | Investec Asset ManagementP20160314_502P

Confidential | Investec Asset Management

Investec Asset Management

Focused on the long term, committed to South Africa

Investments and Client group

As at 31 December 2015

* Towers Watson “The World’s 500 Largest Asset Managers - Year end 2013”, measuring third party AUM for Investec Group

Combining global perspective with local insight

● Founded in 1991 by current leadership

● Global staff complement: 870

● Investment hubs in London, Cape Town,

Hong Kong & Singapore

‒ UK: 105 investment professionals

‒ SA: 67 investment professionals

‒ USA and Asia: 6 investment professionals

● Top 100 3rd party asset manager

globally*

Africa

Americas

and Japan

Asia Pacific

Europe

UK



Continually evolving our fund offering in line with the

changing environment

Offshore fund changes

● Launched Sterling versions of our flagship Global Strategic Managed & Global Franchise Funds

● Launched Global Multi-Asset Income

● Reduction in our offshore funds clean fees (via platforms) to 0.75% p.a.

SA foreign unit trust – New funds

● Global Opportunity Income FOF Global Multi-Asset Income Feeder

● Global Opportunity Equity FOF Global Franchise Feeder

Investec Worldwide Flexible unit trust - Launching April 2016

● Managed by our award winning SA Equity and Balanced fund team

● Multi-asset solution that is not constrained by geographic or asset class limits



Exp

ecte

d R

etu

rnInvestec core fund solutions

Note: [ ] indicates maximum in equities. Offshore funds available as feeder funds

Global Strategic Managed

(USD / GBP / ZAR)

[75%]

Global Franchise

(USD / GBP / ZAR)

[100%]

Global Multi-Asset Income

(USD / ZAR)

[50%]

Lo

ca

lIn

tern

ati

on

al

Diversified

Income

Opportunity

[75%]Cautious

Managed

[40%]

Value

[100%] Equity

[100%]

Expected Risk (Volatility)

GrowthIncome

Exp

ecte

d R

etu

rn

Worldwide

Flexible

[100%]



Consistent long-term performance

As at 31 January 2016

Past performance should not be taken as a guide to the future, losses may be made. Data is not audited. Source: Morningstar, dates to 31 January 2016, NAV based, inclusive of all annual management fees but

excluding any initial charges, gross income reinvested, fees are not applicable to market indices, where funds have an international allocation this is subject to dividend withholding tax, in South African Rand.

The performance quoted for periods before the launch of A Class is based on older R class’s performance, is adjusted for any fee differences and is for illustrative purposes only.

Peer Group Quartile Rankings 1 year 5 years

Since

Inception

SA

Investec Diversified Income 1 1 1

Investec Cautious Managed 1 1 1

Investec Opportunity 1 2 1

Investec Equity 1 1 1

Investec Global Strategic Managed Feeder 2 2 1

Investec Global Franchise Feeder 1 1 1

Offshore (US$)

Investec (GSF) Global Multi-Asset Income 1 - 1



Relative strength in sideways to down markets

Investec Opportunity – relative to sector average over the last 15 years*

Past performance should not be taken as a guide to the future, losses may be made. Data is not audited.

Source: Morningstar, dates to 31 December 2015, NAV based, inclusive of all annual management fees but excluding any initial charges, gross income reinvested, fees are not applicable to market indices, where

funds have an international allocation this is subject to dividend withholding tax, in South African Rand.* Data since January 2000

Competitor Basket includes managers within the same peer group. Funds are equal weighted and rebalanced monthly

Meaningful participation in rising markets, but the true strength of our approach

is in sideways to down markets

Average rolling 12 month performance

23%

11%

-2%

24%

10%

-5%

20%

7%

-6%-10%

-5%

0%

5%

10%

15%

20%

25%

30%

Sector > 10% Sector between 0% and 10% Sector < 0%

Investec Opportunity R

Peer group basket of funds

Sector average



Rob ForsythHead of Research

Quality investment team

Subject to change not necessarily with prior notification. As at February 2016

Pan Africa, Africa & Africa Opportunities core team (not fund specific)

Experienced and well-resourced

Kagiso SedimoInvestment Specialist

Tshepang LoetoInvestment Specialist

Investment Specialists

Ben NeedhamInvestment Specialist

Anna FarmbroughInvestment Specialist

Blake HutchinsPortfolio Manager

Richard LadbrookInvestment Specialist

Eihorere WesigyeInvestment Specialist

Joseph RohmPortfolio Manager

Julien VeronInvestment Specialist

Michael Hayward Investment Specialist

Paul VincentInvestment Specialist

Scott WinshipInvestment Specialist

Abrie PretoriusPortfolio Manager

Sumesh Chetty

Portfolio Manager

Darren JocumInvestment Specialist

Yaser Surve*Investment Specialist

Jade MisplonInvestment Specialist

Co-Heads of Quality

Strategy Leaders

Clyde RossouwGlobal

Khaya Gobodo Africa

Simon BrazierUK

Clyde RossouwSimon Brazier

Nontle KabanyaneProduct Specialist

Global Investment Infrastructure Support

Dealing | ESG | Risk & Performance | Implementation

Product Specialists

Neil FinlayProduct Specialist

Danielle LavanProduct Specialist

Louis NiemandInvestment Director

Market outlook

Louis Niemand



-2%

0%

2%

4%

6%

8%

10%

12%

199

6

199

7

199

8

199

9

200

0

200

1

200

2

200

3

200

4

200

5

200

6

200

7

200

8

200

9

201

0

201

1

201

2

201

3

201

4

201

5

Global growth is very weak and uncertain

Will this persist for the medium term?

Source: IMF, Investec Asset Management, October 2015. Forecasts are inherently limited and should not be relied upon as an indicator of future performance. Mckinsey, Investec Asset Management

Growth is slowing, deleveraging still to occur – global liquidity is becoming more

constrained

Growth in world nominal GDP Global debt – deleveraging still has to

occur



-5

0

5

10

15

20

25

30

Au

g-0

5

Fe

b-0

6

Au

g-0

6

Fe

b-0

7

Au

g-0

7

Fe

b-0

8

Au

g-0

8

Fe

b-0

9

Au

g-0

9

Fe

b-1

0

Au

g-1

0

Fe

b-1

1

Au

g-1

1

Fe

b-1

2

Au

g-1

2

Fe

b-1

3

Au

g-1

3

Fe

b-1

4

Au

g-1

4

Fe

b-1

5

Au

g-1

5

Proprietary GDP

China official GDP

China remains extremely unclear

Is China stalling?

Source: Bloomberg to 31 December 2015

China GDP, reported versus our estimated

?



Companies that have stood the test of time

Global franchise companies with trading histories of over 100 years, on average

This is not a buy or sell recommendation for any particular security

World leaders with established histories

(1866) (1886) (1806) (1823)

(1909) 3M (1902) (1930) (1901)

(1852) (1898) (1715) (1909)

(1938) (1847) (1801) (1896)



Investec GSF Global Franchise A Acc

GIFS OE Global Large-Cap Blend Equity

MSCI ACWI NR USD

-10.0

-7.0

-4.0

-1.0

2.0

5.0

8.0

11.0 13.0 15.0 17.0 19.0 21.0 23.0 25.0

Risk vs. return since April 2007

Investec GSF Global Franchise Fund

Attractive risk-adjusted returns


Source: Morningstar, data to 29 February 2016, NAV based, inclusive of all management fees but excluding any initial charges, gross income reinvested, in US Dollar.

* Inception is 30 April 2007. The fund performance is based on the OEIC Investec Global Select Equity Fund from 10 April 2007 which then merged into the Luxembourg-domiciled Investec GSF Global Franchise

Fund on 04 July 2009.

USD Investec GSF Global Franchise Fund A Acc F000003USC Other

Annualis

ed p

erf

orm

ance %

change

Annualised standard deviation

USD Investec GSF Global Franchise Fund A Acc F000003USC Other



19.9%

10.4%

-5.7%

9.0%

20.9%

5.4%

-16.4%

4.7%

-25%

-20%

-15%

-10%

-5%

0%

5%

10%

15%

20%

25%

42 months

MSCI > 10%

20 months

0% < MSCI < 10%

33 months

MSCI < 0%

95 rolling 12 months

total

Investec GSF Global Franchise S Acc MSCI ACWI (MSCI World pre Oct 2011)

Quality companies: for reduced uncertainty in an

uncertain world


Source: Investec Asset Management, 29 February 2016. Performance is gross of fees in USD.

Returns are calculated on a bid to bid basis of the S class with gross income reinvested in USD. Relevant Fund TERs have been added back. Rolling 12 month periods since inception: 30 April 2007.

Average rolling 12 month performance

Update: Monthly

Strong markets Moderate markets Falling markets All periods



Our local funds have benefitted from exposure to

Global Franchise

Investec Opportunity Fund currency exposure: ZAR (72.53); Non-ZAR (27.47) Investec Cautious Managed Fund currency exposure: ZAR (73.67); Non-ZAR (26.33)

Source: Investec Asset Management as at 29 February 2016

30.8%

33.0%

3.4%

12.4%

1.8%

1.7%

2.0%

0.1%5.6%

SA Equities

Offshore Equities

Inflation Linked Bonds

Fixed Interest Bonds

SA Cash

SA Property

Offshore Property

Offshore Cash

Offshore Bonds

Commodities

Investec Opportunity Fund Investec Cautious Managed

11.4%

25.1%

9.0%

16.7%

5.1%

25.6%

1.4%

0.8%

2.9%

0.1%

2.1%

Our offshore equity has been the largest contributor to absolute performance



The Rand is under pressure

Source: I-Net Bridge & Investec Asset Management as at 29 February 2016; Log Scale

0.4

2.8

19.6

197

2

197

4

197

6

197

8

198

0

198

2

198

4

198

6

198

8

199

0

199

2

199

4

199

6

199

8

200

0

200

2

200

4

200

6

200

8

201

0

201

2

201

4

201

6

201

8

202

0

202

2

202

4

202

6

USDZAR

PPP

Lower Limit (2SD)

Upper Limit (2SD)

Forecast PPP

1.07% depreciation p.a.



Limited high quality exposure within South Africa

Source: Investec Asset Management as at 29 February 2016

Sector composition ALSI

Investec

Global

Franchise

Basic Materials 17.4% Avoid. High capital intensity, no pricing power

Financials 21.5% ~ Typically low exposure. High leverage

Consumer Goods 22.2% Quality Rich. Capital light, innovation, pricing power

Consumer Services 25.0% Selected Quality niches

Telecommunication 4.5% Avoid. High capital intensity, no pricing power

Oil & Gas 0.0% Avoid. High capital intensity, no pricing power

Industrials 5.3% ~ Selected Quality niches

Health Care 3.7% Selected Quality niches

Technology 0.4% Selected Quality niches

100.0%



Diversification benefits of adding Global Quality to a

SA portfolio

Source: Bloomberg, Investec Asset Management, 5 years as at 29 February 2016

SA Equities (FTSE/JSE All Share), Global Equities (MSCI World Index), SA Equities (JSE All Share Index) SA Balanced (AF Domestic-Only LMW). Composites assumes monthly re-balancing back to indicated weights

Adding ‘Quality’ to a SA portfolio has historically reduced risk

Adding ‘Quality’ to a SA Equity portfolio Adding ‘Quality’ to a SA Multi-Asset portfolio

SA Equities

Adding global equities (25%) to SA Equities

Adding Global Franchise

(25%) to SA Equities

11%

12%

13%

14%

15%

16%

17%

18%

8.0% 9.0% 10.0% 11.0% 12.0% 13.0%

Retu

rn p

er

an

nu

m (

5 y

ears

)

Volatility per annum (5 years)

Balanced portfolio

(Domestic-only)

Adding 25% offshore equities

(MSCI ACWI)

Adding 25% Quality

(Investec Global

Franchise)

9%

10%

11%

12%

13%

14%

15%

16%

6.0% 6.5% 7.0% 7.5% 8.0%

Retu

rn p

er

an

nu

m (

5 y

ears

)Volatility per annum (5 years)

Determining the quality of a company

Darren Jocum



Apple Inc

The world’s most valuable company

This is not a recommendation to buy, sell or hold a particular security. The specific companies listed or discussed herein are included as representative transactions of the portfolio. No representation is being made

that any investment will or is likely to achieve profits or losses similar to those achieved in the past, or that significant losses will be avoided.

BAT

SAB

BHPBilliton

Naspers

Richemont

SteinhoffSasolMTN

FirstrandVodacom

-

100

200

300

400

500

600

Apple Inc Top 10 SA shares

$'b

n

Market cap ($'bn)



Apple Inc

Prior to 2004, Apple was a PC manufacturer



Has Apple become a one-trick pony?

0%

20%

40%

60%

80%

100%

FY

20

04

FY

20

05

FY

20

06

FY

20

07

FY

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08

FY

20

09

FY

20

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FY

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FY

20

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FY

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13

FY

20

14

FY

20

15

$'m

Other Products

Services

iPod

Macintosh

iPad

iPhone

Apple revenue split



Apple Inc

Smartphone profits

Source: Canaccord Genuity



Is this sustainable?

● Despite a market share of about 15%, Apple

commands almost the entire global

smartphone profit pool

Share of global operating profit or loss



Nokia





BlackBerry



BlackBerry unit sales and market share



Apple Inc

Lets put the size in context



In order to grow revenue by 5%, Apple needs to add $12bn in revenue

Revenue

● In 2015 Apple’s revenue was $234bn

● In 2015 Apple added more revenue than

75% of Fortune 500 companies have

0

50

100

150

200

250

Apple Inc BAT SABMiller Shoprite

$'b

n

Revenue ($'bn)

Profit

● Most profitable company in the world

● Apple’s profit = combined profits of 210

least profitable companies in the S&P500

0

10

20

30

40

50

60

70

80

Apple Inc BAT SABMiller Shoprite

$'b

n

Operating profit ($'bn)Revenue ($’bn) Operating profit ($’bn)



Why we don’t own banks in Global Franchise Fund



A bank’s ROA is low and needs to be geared up to achieve a satisfactory ROE

-2

0

2

4

6

8

10

12

14

16

18

20

FY

19

89

FY

19

90

FY

19

91

FY

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92

FY

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93

FY

19

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FY

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95

FY

19

96

FY

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00

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01

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FY

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FY

20

07

FY

20

08

FY

20

09

FY

20

10

FY

20

11

FY

20

12

FY

20

13

%

Barclays plc

Johnson & Johnson

Return on assets



Why we don’t own banks in Global Franchise Fund

Banks are highly geared



Banks are highly geared companies

This is what you

are buying as a

shareholder!

-

200,000

400,000

600,000

800,000

1,000,000

1,200,000

Assets Equity & liabilities

GB

P '

mil

Barclays plc: balance sheet

Assets

Liabilities

Equity

Barclays plc: balance sheet



Stock example: VISA (US, since 1958)

Brand: Visa

Source: Visa and Bloomberg, as of 31 October 2015. This is not a recommendation to buy, sell or hold a particular security. The specific companies listed or discussed herein are included as representative

transactions of the portfolio. No representation is being made that any investment will or is likely to achieve profits or losses similar to those achieved in the past, or that significant losses will be avoided.

● Largest payment processing network globally

● High barriers to entry; unrivalled scale across consumers,

merchants and banks

● Strong industry trends as 85% of the world’s transactions

are still conducted with cash and cheques

● Growth in e-commerce is another driver of top line growth

● Visa has reached agreement to buy Visa Europe, a move

which further enhances its dominant position in the

payments industry

Sector Information Technology

Established In 1958

Market cap US$ 131.9bn

Number of employees 9,500

Dividend yield 0.6%

VISA stock price performance

0

10

20

30

40

50

60

70

80

90

Oct-10 Oct-11 Oct-12 Oct-13 Oct-14 Oct-15

US

D



Visa

Global Franchise

Portfolio

Qu

ality

Operating margin 61% 23%

EBITDA margin 65% 28%

Cashflow margin 33% 16%

ROIC 68% 20%

Capex: Sales 4% 6%

Gro

wth

FCF growth (7yr historic) 85% 9%

Sales growth (7yr historic) 15% 6%

EPS growth (7yr historic) 32% 11%

0%

10%

20%

30%

40%

50%

60%

2006 2007 2008 2009 2010 2011 2012

Visa

MasterCard

American Express

Discover

JCB

Diners Club

Top holdings

Visa

Source: Investec Asset Management, Bloomberg, FactSet, Company Reports, June 2014

● The card payment landscape provides many

investment opportunities

● Visa and MasterCard are some of the best

and provide growth and quality in excess of

our portfolio

● Currently, Visa provides the better exposure

to the card payment landscape for our

process:

‒ Dominance in the US and emerging markets

(50% market share vs. MasterCard at 32%)

provides pricing power should it wish to

compete on price

‒ Superior capital allocation to MasterCard

‒ Low capital intensity relative to American

Express and Discover

‒ Superior valuation using a DCF methodology

Gross dollar volume ex cash by network



6%15%

25% 27% 27%15%

21%26%

29%

30% 31% 32%

20%19%

21%

24%

24% 24% 24%64%

58%47%

32%22% 19% 16%

0%

20%

40%

60%

80%

100%

1990 1995 2000 2005 2010 2011 2012

Debit Credit Cash Checks

3.3

2.6

2.2

1.91.7

1.1 10.8 0.8

0.4

0

0.5

1

1.5

2

2.5

3

3.5

US

Can

ada

UK

Bra

zil

South

Kore

a

Japan

Spain

Fra

nce

Tu

rkey

Russia

Top holdings

Visa

Source: Investec Asset Management, JP Morgan, June 2014

● Visa provides exposure to the rapid growth in

card payment utilisation

● The convenience and reduced security risk of

cards has led to their rise as the dominant

payment medium

● Under penetration in many developed

economies (Germany and Japan) and most

emerging economies creates a strong growth

trajectory

● Coupled with the rise of ecommerce and the

associated mobile platforms has potential to

provide growth in excess of our portfolio

Payment medium wallet share

Bank cards per capita



Conclusions

Looking ahead to 20/20

Reduced uncertainty in an uncertain world

● Looking ahead, the macro environment is very unstable and uncertain

● Quality, franchise companies have been less vulnerable to volatility and uncertainty,

enabling them to grow profits sustainably over 100 years, on average!

● This has compounded shareholder wealth at superior rates of return over the long term,

outperforming through multiple cycles

● Adding ‘Quality’ to a SA portfolio has historically reduced risk

● With limited Quality exposure in South Africa, investing in Global Franchise, either directly or

indirectly via Investec Opportunity and Cautious Managed Funds, has clear return and

diversification benefits for a SA investor

● The weak Rand has not been the only driver of positive returns for a SA investor in Global

Franchise - the Fund has generated positive alpha in USD

Thank you

www.investecassetmanagement.com

Global Insights 2015



Disclaimer

Collective investment schemes (CIS) generally medium to long term investments and the manager gives no guarantee with respect to the capital

or the return of the Fund. CIS are traded at ruling prices and can engage in scrip lending. A schedule of charges, fees and advisor fees is

available on request from the manager. Additional advisor fees may be paid and if so, are subject to the relevant FAIS disclosure requirements.

Performance shown is that of the Fund and individual investor performance may differ as a result of initial fees, actual investment date, date of

any subsequent reinvestment and any dividend withholding tax and past performance is not necessarily a guide to the future. Different classes of

units apply to the fund and the information presented is for the most expensive class. Excessive withdrawals from the portfolio may place it under

liquidity pressures and in such circumstances the processing of redemptions will deferred if this amounts to more than 10% of the Fund. Fund

valuations and transaction cut-off time are 16h00 SA time each business day. Performance figures above are based on lump sum investments,

using NAV to NAV figures net of fees with gross income reinvested, in US Dollars. This portfolio may be closed in order to be managed in

accordance with the mandate. Fluctuations or movements in exchange rates may cause the value of underlying international investments to go

up or down. A higher ongoing charges figure (OCF), equivalent to total expense ratio, does not necessarily imply a poor return, nor does a low

OCF imply a good return. Where portfolios invest in the participatory interests of foreign collective investment schemes, including Investec’s

foreign funds, these may levy additional charges which are included in the relevant OCF. The ratio does not include transaction costs. The current

OCF cannot be regarded as an indication of the future OCFs. Fund prices are published each business day in selected media. Additional

information on the Fund may be obtained, free of charge, at www.investecassetmanagement.com. The portfolio is a sub-fund in the Investec

Global Strategy Fund, 49 Avenue J.F. Kennedy, L-1855 Luxembourg, Grand Duchy of Luxembourg, and is approved under the CIS Control Act.

This is the copyright of Investec and its contents may not be re-used without Investec’s prior permission.

http://www.investecassetmanagement.com/

Investec Global Franchise

Investor Relations

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