THE SHOPPING LIST BY GLACIER RESEARCH

Transcription

1 THE SHOPPING LIST BY GLACIER RESEARCH February Review of Quarter 4 A reference guide to superior collective investment schemes in SA THINK WORLD CLASS

2 FOREWORD Welcome to the Glacier Research Shopping List your reference guide to superior collective investment schemes in South Africa. When the Glacier Research team selects funds for the Shopping List we are looking for quality fund managers who have displayed the ability to produce consistent outperformance over meaningful time periods and the ability to protect capital in adverse market conditions, relative to peers. We strive to ensure that the most objective and independent selections are made - always keeping our clients in mind. The process focusses on both quantitative and qualitative assessments but the ultimate fund selection is tilted towards the latter. Please have a look at our fund selection process for a better understanding of what we take into account when selecting a fund. From a South African investor s perspective, 2016 will be remembered as another difficult year for risky assets. The JSE All Share returned 2.63%, with the SWIX managing to deliver 4.13%. Property fared somewhat better, returning 10.20% for the year. Comparing these returns to headline inflation (6.34%), only property managed to deliver positive real returns. If you invested offshore you would not have been better off. In rand terms the S&P 500 delivered -1.19%, the FTSE 100 was down 11.90%, and the Japanese Topix returned % for the year. Overall the MSCI World and MSCI ACWI were also down -5.12% and -4.81% respectively (in rand terms). Locally, an asset class that did do well during 2016, was bonds and more specifically longer duration bonds. The Beassa 12 Year Index returned 17.43% followed by the 7-12 Year Index at 15.37% and the 3-7 Year Index that returned 13.41% for the year. Rand appreciation played a major role in investment performance during The rand reached some of its lowest levels in January 2016, only to recover strongly and appreciate around 11%, 26% and 14% against the US dollar, British pound and the euro respectively. This detracted from the performances of offshore assets, but also had a meaningful impact on rand-hedge stocks as well as listed property counters, specifically those with material UK exposure. From a South African investor s perspective, 2016 will be remembered as another difficult year for risky assets. Last year was therefore yet another very difficult period for both local and global asset managers to navigate through. Generally those local funds that were short SA Inc. stocks and resources and long offshore assets (impacted by rand appreciation) performed relatively poorly Conversely, funds with high exposure to fixed income instruments, resources, mid and small-caps and that were also long on the SA rand with little offshore exposure tended to outperform their peers during Last year clearly highlights the merits of fund manager diversification - selecting quality managers that perform differently in different market environments is therefore crucial. The Glacier Research team completed 106 asset manager interviews and due diligence meetings in Our interactions with top local and global asset managers provide us with unique qualitative insights which form a large part of our fund assessment process. New addition to the Shopping List We are very excited to announce the addition of the Glacier Global Stock Feeder Fund to the Shopping List. The fund will feed directly into the Dodge and Cox Global Stock Fund. Dodge and Cox, established in 1930 in San Francisco, is one of the most experienced and largest money management firms in the world. To date, the company manages more than $360 billion AUM. They are long-term investors (average stock holding of seven years) with more than 95 investment professionals supporting their investment strategy and process. On a qualitative basis, Glacier Research is firmly of the opinion that Dodge and Cox is a superior fund management firm, and that the fund should fare particularly well in difficult market conditions. Some of the key features of the manager that stand out for us are as follows: The size, experience and stability of the investment team The Dodge & Cox team is led by very experienced investment professionals with an average tenure of more than 20 years. The size of the team allows greater coverage and identification of investment ideas. The rigour of the investment process The rigour and discipline of the investment process is a highlight of the Dodge & Cox Global Stock Fund. The process is clear and defined all stocks go through an individual analyst assessment, followed by a team-based review, and then a collective judgementbased review by the policy committee, which is composed of the most experienced investment team members. The independence of the firm and active employee ownership The fact that the company is completely investment focussed, independent and wholly-owned by active employees are definitely standout attributes. The team is therefore able to focus exclusively on generating the best possible returns. We d like to thank you for your on-going support and assure you of our commitment to meeting the investment needs of your clients. Please contact the team at any stage if you have any queries or if we can assist in any way. Leigh Köhler Head: Glacier Research THE SHOPPING LIST BY GLACIER RESEARCH - Q4 - FEBRUARY

3 QUARTERLY ECONOMIC AND FINANCIAL MARKET REVIEW The South African economy rose by a disappointing 0.2% q/q in Q3 - well below market expectations for an increase of 0.6% q/q. This was largely due to a sharp decline in manufacturing activity (-3.2% q/q). Growth over the last year to end September 2016 rose by a modest 0.7%. Overall growth is expected to moderate to 0.3% in 2016, improving modestly to 1.2% in 2017 on the back of an anticipated increase in agricultural activity, lower inflation and some recovery in commodity prices. However, business and consumer confidence remains weak and the South African economy has struggled to gain momentum since the financial market crisis. Unless South Africa is able to lift domestic economic activity it continues to face the risk of further credit rating downgrades. The SARB kept the repo rate unchanged at 7% at its November meeting on the back of muted economic growth and the upside risk to inflation. South Africa s headline inflation rose to 6.6% y/y in November after increasing to 6.4% y/y in October. This was in line with market expectations and the highest reading since February While the SARB remains concerned about the upside risk to inflation they are forecasting that it could move back into the target range in 2017 should there be a recovery in agricultural activity in 2017 and the rand remain range-bound. Over the quarter, the rand appreciated against the US dollar (-0.19%), the euro (-6.36%), the British pound (-4.6%) and the yen (-13.18%) will be remembered by events such as Brexit, Trump and Renzi. Despite this, developed market risky assets posted gains in November and December, delivering 1.48% in USD and 1.29% in ZAR for Q4 - outperforming emerging market equities which delivered -4.56% in USD and -4.74% in ZAR. With the hopes of stronger growth, rising inflation and higher interest rates, the US dollar strengthened in Q4 and capital flew out of emerging markets. US GDP exceeded market expectations in Q3, growing 3.5% q/q opposed to the 1.4% increase in the previous quarter. This is the highest growth rate in two years. US inflation increased 1.7% y/y in November after the 1.6% increase in October. This was in line with market expectations and the highest reading since October It is largely attributed to higher energy costs. As widely expected, the Federal Reserve raised interest rates by 0.25% in December What did surprise the market is the anticipated increase in the number of interest rates hikes in 2017 from two to three. Developed market bonds (-7.07% in USD and -7.25% in ZAR) underperformed developed market property (-6.22% in USD and -6.40% in ZAR). The ALSI outperformed emerging markets but still lost ground delivering -2.09% in ZAR and -1.9% in USD in Q4. s remained dispersed with mid- and small-caps delivering +1.02% and +0.58% while large-caps delivered a negative 3%. By tradable industries, SA Industrials (including dual-listed companies) was the worst performer, delivering -4.69%, followed by Resources which delivered a negative -1.20%. Industrials and Financials were the best performers delivering +5.26% and 2.89% respectively. The ALBI returned a muted +0.35% (+0.54% in USD) with the shorter end of the yield curve (1-3 Yr) performing the best (+1.42%) as foreigners were net sellers of R52bn worth of bonds in Q4 (-R26.1bn in 2016). Inflation linked bonds was the worst performing fixed interest asset class, returning -1.07%. Preference shares and cash increased +1.98% and +1.86% over the same period. Foreigners were net sellers of R28.4bn worth of equities in Q4 (-R124.8bn in 2016). Overall growth is expected to moderate to 0.3% in 2016, improving modestly to 1.2% in 2017 on the back of an anticipated increase in agricultural activity, lower inflation and some recovery in commodity prices. THE SHOPPING LIST BY GLACIER RESEARCH - Q4 - FEBRUARY

4 THE TEAM Cindy Mathews-De Vries Cindy holds a MSc (Cum Laude) degree in Computational finance, BSc (Computer science and Mathematics) degree and Associate in Management (AIM). She has 9 years financial services industry experience of which seven years were spent as an equity analyst. She started her career as a software developer at Tellumat and later as a quantitative analyst at Futuregrowth Asset Management. Cindy joined Glacier in January Darren Burns Darren is a CFA charter holder and holds a degree in Investment Management (Stellenbosch University) and a BCom (Hons) in Financial Analysis and Portfolio Management from the University of Cape Town. He has completed RE 1, 3 and 5 exams and has the relevant experience as a representative and key individual for both a Cat I and Cat II licences. Darren joined Glacier from Secure Wealth, where he worked for seven years as a director, financial advisor and analyst. He joined Glacier as a Fund and Client solutions specialist in October Francis Marais Francis is a CFA Charter holder and holds a BCom (Hons) degree in Financial Analysis from the University of Stellenbosch. He started his career at Sanlam Employee Benefits as a fund accountant and later on as a review manager. He then spent four years as the Operations and Research manager at Nostic Asset Management (Category 2 Discretionary FSP). Francis joined Glacier Research in March Imraan Khan Imraan holds a BCom (Finance and Economics) degree and BCom (Hons) degree specialising in Finance and Investment from the University of the Western Cape (UWC). He joined Glacier in 2011 as a Client Service Consultant from a Graduate Program in Santam. Imraan joined the Glacier Research team in November Johan Louwrens Johan holds a BCom (Hons) degree in Financial Analysis from the University of Stellenbosch, and obtained his CFA Charter in October 2015 while completing his MSc in Financial Markets and Investments (Summa Cum Laude) at SKEMA Business School (Paris Campus). He started his career as a Corporate Action Specialist at Maitland Fund Services, subsequently he worked as a Fund Accountant at Kleinwort Benson Fund Services, and later joined SunGard Financial Systems as a Product Specialist. Johan joined the Glacier Research team in November Johann-Hendrik Vlok Jan holds a BComm degree in Investment Management as well as a Post Graduate Diploma in Financial Planning. He has completed all three CFA exams. Jan started his career as an administrator and underwriter at MUA Insurance, he joined MyWealthbook as a trader and later joined Findata Financial Services as a Para Planner. He joins the Glacier Research team in December Leigh Köhler Leigh joined Glacier in 2003 after completing his BCom undergraduate degree in Politics, Philosophy and Economics from the University of Cape Town. He later qualified with a BCom (Hons) in Economics from UNISA. Leigh was previously the head of the Investment Administration team at Glacier before taking up the role as head of Glacier Research in Liesl-Mari de Jager Liesl-Mari holds a BA (Hons) degree in Industrial Psychology (Cum Laude) and MBA (Cum Laude). She has 18 years financial services industry experience of which five years were spent as an equity analyst. Liesl-Mari joined Glacier in 2002 and was previously the head of Glacier Risk and Compliance, then head of Glacier Research before taking up the role as head of Client and Fund Solutions. Luke McMahon Luke holds a BCom (Acc) degree and BCom (Hons) degree in Business Administration from the University of the Western Cape (UWC). He is completing a Masters degree in Business Management from UWC. Luke joined Glacier Research in January Shawn Phillips Shawn holds a Bcom (Hons) degree in Financial Analysis and Portfolio Management from the University of Cape Town. He also holds a BSocSci degree in Philosophy, Politics and Economics from the University of Cape Town. Shawn joined Glacier Research in January Thobela Mfeti Thobela is a BCom (Hons) (Financial Analysis and Portfolio Management) graduate from the University of Cape Town. She also holds a postgraduate Diploma in Management from the University of Cape Town and a BBA (Bachelor in Business Administration) degree from TSiBA Education and has passed CFA Level I exam. She joined Glacier in May 2013 and the Glacier Research team in October THE SHOPPING LIST BY GLACIER RESEARCH - Q4 - FEBRUARY

5 CONTENTS Fund selection process 6 Fund Index 7 Glacier Research s Guide to Portfolio Construction 8 Annual s of Asset Classes, Sectors and Categories 11 Multi Asset Portfolio Construction SA - Multi Asset Global Worldwide Specialist Asset Class Building Block Portfolio Construction SA - Interest Bearing SA - Real Estate SA - Equity SA - Equity Specialist Global User Guide (Glossary) 78 THE SHOPPING LIST BY GLACIER RESEARCH - Q4 - FEBRUARY

6 FUND SELECTION PROCESS AIM To identify funds that deliver consistent, long-term out-performance and display the ability to protect capital when markets are falling. 1INITIAL SCREENING Fund size greater than R250 million Three-year track record of managing the fund 3Year Single managers 2QUANTITATIVE ANALYSIS Performance analysis using both rolling and cumulative (static) return measures but most emphasis placed on rolling returns (useful for examining the behaviour of returns for holding periods similar to those actually experienced by investors). We look for funds that consistently display first and second quartile outperformance relative to peers over all periods where possible (1 10 years) with most of the emphasis placed on the longer periods. Statistical risk measure analysis aimed at understanding the volatility of the fund this includes standard deviation and downside deviation. Statistical risk-return measure analysis of the fund aimed at understanding the achieved return per unit of risk taken this includes Sharpe, Sortino, Treynor, Calmar and Information ratios. Drawdown analysis aimed at understanding the capital preservation ability of the fund this includes maximum drawdowns, up and down capture. Consistency: We look for funds that consistently outperform peers across risk, risk-return and drawdown measurements and are therefore consistently ranked above peers over all periods where possible (1 10 years) with most of the emphasis placed on the longer periods. Correlation analysis aimed at understanding how well the fund can be combined with others in a portfolio. The quantitative analysis process is conducted quarterly. 3QUALITATIVE ANALYSIS Investment Philosophy: Convincing and wellarticulated investment philosophy. Investment Process: Disciplined, methodical and repeatable investment process with exceptional risk management capabilities. Investment Team: An investment team that has been together for a long period of time; with individuals who have relevant experience, proven investment expertise and a track record within the relevant asset class. Remuneration and incentive structures: Fair and aligned with the investor objectives. Stable business: Stable group and management structures. Healthy financial position. Focus on stewardship and long-term investing Culture of co-investment: Evidence of investing alongside the clients Passion, perspective, purpose and progress: Managers who are highly motivated and intensely competitive are more likely to be focused on excellence in performance results. 4FINAL SELECTION The output from the research process, both quantitative and qualitative, is discussed by the Glacier Research Investment Committee to decide the final composition of the Shopping List. In line with the philosophy of longterm investing, the list of funds will remain fairly stable over time. Any changes will be highlighted in the fund/sector comment. The number of funds appearing per category will be proportionate to the size of the category. THE SHOPPING LIST BY GLACIER RESEARCH - Q4 - FEBRUARY

7 FUND INDEX Funds suited for multi-asset portfolio construction SA - Multi Asset Income Low Equity Medium Equity High Equity Flexible Coronation Strategic Income Prescient Income Provider Prudential Enhanced Income SIM Active Income Coronation Balanced Defensive* Nedgroup Stable (Foord Asset Managers) Prudential Inflation Plus* SIM Inflation Plus Coronation Capital Plus* Nedgroup Investments Opportunity Fund* (ABAX Investments) Allan Gray Balanced* Coronation Balanced Plus* Foord Balanced* Investec Opportunity* SIM Balanced* Bateleur Flexible Prescient Laurium Flexible Prescient PSG Flexible Truffle Flexible Global Worldwide Passive Fund Alternatives Multi Asset High Equity Multi Asset Flexible SA Multi Asset Low Equity SA Multi Asset High Equity Coronation Global Managed Investec Global Strategic Managed Feeder Foord Flexible FoF Satrix Low Equity Balanced Index # Satrix Balanced Index ## Funds suited for specialist asset class building block portfolio construction SA - Interest Bearing Money Market Short Term Variable Term Glacier Money Market Old Mutual Income Stanlib Bond Nedgroup Investments Money Market (Taquanta Asset Managers) Nedgroup Investments Core Income (Taquanta Asset Managers) Stanlib Income SA - Real Estate SA - Equity SA Real Estate Equity General Marriott Dividend Growth Catalyst SA Property Coronation Equity Prudential Dividend Maximiser Foord Equity PSG Equity Investec Equity Fund SIM General Equity SA - Equity Specialist Mid & Small Cap Financial Industrial Resources Nedgroup Investments Entrepreneur (ABAX Investments) Nedgroup Investments Financials (Denker Capital) SIM Industrial Investec Commodity Global** Equity General Real Estate Glacier Global Stock Feeder Investec Worldwide Equity Feeder Old Mutual Global Equity Feeder Nedgroup Investments Global Equity Fund (Veritas Asset Management) Catalyst Global Real Estate Feeder * Regulation 28 compliant ** Glacier Global Stock Feeder Fund has been added to the Shopping List. Please see the Global Equity General category for commentary. # Strategic Asset Allocation Equity: 35%; Property: 5%; Nominal Bonds: 25%; ILBs: 10%; Cash: 25%. Local: 80%; Foreign: 20% ## Strategic Asset Allocation Equity: 70%; Property: 6%; Nominal Bonds: 13%; ILBs: 6%; Cash: 5%. Local: 80%; Foreign: 20% THE SHOPPING LIST BY GLACIER RESEARCH - Q4 - FEBRUARY

8 GLACIER RESEARCH S GUIDE TO PORTFOLIO CONSTRUCTION There are a number of approaches that can be followed when constructing investment portfolios for clients. This section focuses on arguably the two most popular approaches, namely the prudential (or multi-asset fund) approach and the building block approach. Below, we outline the portfolio construction process of each approach, using practical examples where possible. We also highlight some of the key characteristics of each approach to assist you in selecting the best method for you and your clients. 1 MULTI-ASSET FUND APPROACH The key characteristics of this approach include: The use of multi-asset funds to construct the investment portfolio The financial adviser being responsible for the strategic (long-term) asset allocation Outsourcing of the tactical (short- to medium-term) asset allocation duties to the portfolio or asset manager Advice risk being less of a concern for the adviser if the portfolio is structured using maximum mandated limits The five steps involved in constructing a multi-asset fund portfolio? STEP 1: Determine the client s risk profile Use the RITA or Oxford tool (or other risk profiling tool) to determine the client s risk profile. STEP 2: Determine the strategic asset allocation Having determined the client s risk profile, the adviser can loosely match this profile to the respective ASISA categories. The two tables below illustrate the abovementioned point. ASISA Category Maximum Equity Exposure Maximum Property Exposure Maximum Foreign Exposure SA Multi-Asset Income 10% 25% 25% SA Multi-Asset Low Equity 40% 25% 25% SA Multi-Asset Medium Equity 60% 25% 25% SA Multi-Asset High Equity 75% 25% 25% SA Multi-Asset Flexible 100% 100% 25% Type of investor Maximum Equity Exposure Maximum Property Exposure Maximum Foreign Exposure Conservative investor 10% 25% 25% STEP 3: Select funds In this step, the adviser selects the funds for the investment portfolio. An extensive understanding of the funds in the CIS universe is extremely important when it comes to this section of the portfolio construction process to ensure a well-diversified portfolio for the client. Cautious investor 40% 25% 25% Moderate investor 60% 25% 25% Moderately Aggressive investor 75% 25% 25% Aggressive investor 100% 100% 25% The Shopping List and the Glacier Research team can add value and assist the adviser with this step. When constructing multi-asset fund portfolios, it is important to note that it is not a requirement to only use funds from one ASISA category - the adviser may combine funds from different categories. The portfolio below is an example of the construction of a moderate investment portfolio and is for illustrative purposes only. ASISA Category Moderate Portfolio SA Multi-Asset Medium Equity Coronation Capital Plus (20%) SA Multi-Asset Low Equity SIM Inflation Plus (20%) SA Multi-Asset Low Equity Prudential Inflation Plus (20%) SA Multi-Asset High Equity Allan Gray Balanced (20%) SA Multi-Asset Medium Equity Foord Conservative (20%) STEP 4: Ensure risk profiles match Having constructed the portfolio, the next step is to ensure that the risk profile of the portfolio matches the risk profile of the client. This process is illustrated in the graph on the following page (ICE risk rating). When using the prudential or multi-asset fund approach, the adviser is also able to ensure that the portfolio does not breach certain asset class limits. This is done using the fund s maximum mandated limits. By doing this, the adviser also eliminates potential portfolio drift and consequent advice risk at the same time. The example below illustrates how to ensure that a moderate risk-profiled portfolio stays within its predetermined asset class limits with a maximum equity exposure of 60%. THE SHOPPING LIST BY GLACIER RESEARCH - Q4 - FEBRUARY

9 Ensure risk profiles match (continued) Conservative Cautious Moderate Moderately aggressive Aggressive Portfolio Risk rating: 4.18 Correlation Risk rating: 3.98 Fund category Fund name Max equity % in portfolio Max Equity (actual) Max foreign Max foreign (actual) MA Medium Equity Coronation Capital Plus 60% 20% 12% 25% 5% MA High Equity Allan Gray Balanced 75% 20% 15% 25% 5% MA Low Equity SIM Inflation Plus 40% 20% 8% 25% 5% MA Low Equity Prudential Inflation Plus 40% 20% 8% 25% 5% MA Medium Equity Nedgroup Investments Opportunity 60% 20% 12% 25% 5% 100% 55% 25% STEP 5: Quarterly review of the portfolio Reviewing the portfolios regularly is very important. Glacier Research can add value to this step by not only providing reasons for the respective funds performances, but also by providing insights into their positioning, key strengths and weaknesses and their roles in the portfolio. Glacier Research is also able to provide substitute funds if required. Factors to consider when choosing this approach: The adviser makes the strategic asset allocation calls the ASISA category limits can loosely be used as a proxy for strategic asset allocation. The tactical asset allocation calls are made by an experienced portfolio manager. This relieves the adviser of having to take a view on any particular asset class. Diversification is obtained across all asset classes and funds. Investment advice risk is reduced, provided the portfolio is constructed using maximum mandated limits. The adviser requires an extensive understanding of the funds when constructing a portfolio. Glacier Research can add value by providing the adviser with the necessary fund research and insights needed to construct a well-diversified portfolio for the client. 2 BUILDING BLOCK APPROACH The key characteristics of this approach include: The use of asset class specific funds to construct the investment portfolio; and Assuming responsibility, as the financial adviser, for both the Strategic (longterm) and Tactical Asset Allocation (short- medium-term) of the portfolio. The seven steps involved in constructing a building block portfolio? STEP 1: Determine the client s risk profile Use the RITA or Oxford tool (or other risk profiling tool) to determine the client s risk profile. STEP 2: Determine the strategic asset allocation Having determined the risk profile, SIM s recommended bands (right) can be used as a guide to how much of the portfolio should be invested in each of the respective asset classes. Conservative Cautious Moderate Moderate Aggressive Aggressive Equities (%) Bonds (%) Cash (%) Property (%) Domestic (%) International (%) THE SHOPPING LIST BY GLACIER RESEARCH - Q4 - FEBRUARY

10 STEP 3: Tactical asset allocation When following the building block approach, the financial adviser is responsible for the tactical asset allocation calls in the portfolio. This refers to the short to medium calls that are made relative to the strategic asset allocation (SIM s recommended bands) above. Example: If an adviser is of the opinion that local equities are expensive, an option - based on the strategic asset allocation is to reduce local equity exposure to 30%, which is at the low end for local equity exposure for a moderate client in a discretionary investment. At the same time the adviser may be of the opinion that local property is cheap and sees a significant amount of value in the asset class. The decision can be made to increase the exposure to 15%, which is at the high end for local property exposure in a moderate discretionary investment. The Glacier Bull & Bear document can potentially assist in making tactical asset allocation calls in a portfolio. STEP 4: Select funds In this step, the adviser must select the funds to be included in the portfolio and at the same time make sure that they fall within the recommended asset bands on the previous page. The Shopping List and the Glacier Research team can add value and assist the adviser with this step. The table below is an example of a moderate portfolio for a discretionary investment, and is for illustrative purposes only. STEP 5: Ensure risk profiles match After constructing the portfolio, the next step is to ensure the risk profile of the portfolio matches the risk profile of the client. This can be seen in the graph below (ICE risk rating). SIM s Recommended Asset Bands Fixed Interest Money Market (15% - 30%) Moderate Portfolio Glacier Money Market - 24% Fixed Interest Bonds (15% - 30%) Stanlib Bond 26% Property (5% - 15%) Catalyst SA Property Equity PSG 6% Equity (30% - 50%) SIM General Equity Equity 33% Conservative Cautious Moderate Moderately aggressive Aggressive Foreign (10% - 20%) Investec Worldwide Equity Feeder 6% Prudential Global High Yield Bond 5% Portfolio Risk rating: 5.86 Correlation Risk rating: 4.74 STEP 7: Quarterly review of the portfolio STEP 6: Ensure allocation matches asset bands In this step, the adviser needs to ensure that the underlying asset exposure of the portfolio falls within SIM s recommended asset bands per risk profile. Using the information from the moderate portfolio example above, the graph below shows that the underlying asset exposure in the portfolio does fall within the recommended bands as set out by SIM. This step is extremely important, especially when following the building block approach. If the portfolio were left unchecked over the past few years, it would have shifted from a moderate portfolio to a moderately aggressive portfolio, with the consequent advice risk implications for the adviser. As a result, these portfolios should be reviewed on a quarterly basis and rebalanced when applicable to make sure that the risk profile of the client still matches the risk profile of the investment portfolio. Asset Classes Actual % Reg 28 Max % SIM Sense Guide % Equity 34.85% 75% 30-75% Property 5.96% 25% 5-15% Bonds 29.55% 100% 15-35% Cash 29.64% 100% 15-30% Other 0% 100% 0-100% Foreign 10.97% 25% 10-20% Africa 0% 5% 0-5% Factors to consider when choosing this approach: The adviser makes the strategic asset allocation calls SIM s recommended bands can assist with this step. The adviser also makes the tactical asset allocation calls this means determining if a particular asset class is looking attractive or not and allocating accordingly. The adviser has to be able to allocate between the different asset classes (having an overweight position in a certain asset class, while having an underweight position in another asset class). The investment portfolios must be reviewed more regularly to manage portfolio drift, and indirectly, the potential advice risk. The adviser needs an extensive understanding of the funds included in the portfolio. Having an extensive understanding of the fund universe allows the adviser to express investment views more effectively. To be truly effective, the building block method does require more skill, more time, and a more hands-on approach when it comes to the management of investment portfolios. THE SHOPPING LIST BY GLACIER RESEARCH - Q4 - FEBRUARY

11 ANNUAL RETURNS OF ASSET CLASSES,SECTORS AND CATEGORIES Asset Class s Property (35.88%) Foreign (52.6%) Property (26.64%) Foreign (31.05%) Bonds (15.42%) Equity (26.68%) Equity (21.43%) Foreign (14.63%) Property (7.99%) Property (10.2%) Foreign (22.28%) Property (8.39%) Equity (10.88%) Cash (6.46%) Cash (7.37%) Bonds (15.95%) Cash (5.18%) Bonds (10.15%) Equity (5.13%) Equity (2.63%) Cash (5.54%) Bonds (0.64%) Cash (5.9%) Bonds (-3.93%) Foreign (-4.34%) Sector s Financials J580T (38.08%) Small Cap J202T (26.31%) Financials J580T (27.28%) Top 40 J200T (7.52%) Resources J258T (34.24%) Industrials J520T (36.53%) Top 40 J200T (22.77%) Small Cap J202T (20.57%) Financials J580T (3.91%) Mid Cap J201T (26.89%) Mid Cap J201T (29.48%) Industrials J520T (21.5%) Mid Cap J201T (19.62%) Small Cap J202T (-3.92%) Industrials J520T (21.55%) Small Cap J202T (28.95%) Financials J580T (19.1%) Top 40 J200T (9.17%) Mid Cap J201T (-7.54%) Small Cap J202T (20.9%) Top 40 J200T (26.12%) Mid Cap J201T (12.99%) Industrials J520T (6.99%) Industrials J520T (-17%) Financials J580T (5.44%) Resources J258T (3.05%) Resources J258T (1.38%) Resources J258T (-14.74%) Resources J258T (-36.99%) Top 40 J200T (-1.6%) Bond s Years (18.74%) 1-3 Years (4.4%) 12+ Years (12.91%) 1-3 Years (4.1%) 12+ Years (17.43%) 7-12 Years (18.34%) 3-7 Years (1.45%) 7-12 Years (8.3%) 3-7 Years (0.93%) 7-12 Years (15.37%) 3-7 Years (13.62%) 7-12 Years (-0.21%) 3-7 Years (7.9%) 7-12 Years (-3.19%) 3-7 Years (13.41%) 1-3 Years (8.29%) 12+ Years (-0.68%) 1-3 Years (6.23%) 12+ Years (-7.04%) 1-3 Years (16%) THE SHOPPING LIST BY GLACIER RESEARCH - Q4 - FEBRUARY

12 Category s SA - Equity - Financial (34.87%) Global Equity General (52.17%) Global Real Estate General (28.57%) Global Real Estate General (32.82%) SA - Equity - Resources (24.57%) SA Real Estate General (31.51%) Global Multi Asset Flexible (43.27%) SA Real Estate General (25.12%) Global Interest Bearing Short Term (30.96%) SA - Interest Bearing Variable Term (12.79%) SA - Equity Industrial (30.88%) SA - Equity Industrial (32.72%) SA - Equity - Financial (22.65%) Global Equity General (29.13%) SA - Equity Mid & Small Cap (10.69%) Global Real Estate General (28.37%) Worldwide - Multi Asset Flexible (32.56%) SA - Equity Industrial (16.68%) Global Multi Asset Flexible (27.75%) SA - Interest Bearing Short Term (8.31%) SA - Equity Mid & Small Cap (27.47%) Global Real Estate General (23.37%) Global Equity General (11.96%) Global Interest Bearing Variable Term (24.64%) SA Multi Asset - Income (7.91%) SA - Equity - General (19.98%) Global Interest Bearing Short Term (23.15%) Worldwide - Multi Asset Flexible (11.17%) Worldwide - Multi Asset Flexible (18.54%) SA - Interest Bearing MoneyMarket (7.55%) Global Equity General (18.59%) SA - Equity Mid & Small Cap (27%) SA - Equity - General (10.31%) SA - Equity Industrial (12.88%) SA Inflation (6.76%) SA - Multi Asset - Flexible (17.8%) Global Interest Bearing Variable Term (19.47%) Global Multi Asset Flexible (9.94%) SA Real Estate General (10.82%) SA Real Estate General (5.78%) Worldwide - Multi Asset Flexible (16.92%) SA - Equity - General (19.36%) SA - Multi Asset - Flexible (9.7%) SA - Multi Asset High Equity (7.66%) SA - Multi Asset Low Equity (3.59%) SA - Multi Asset High Equity (16.27%) SA - Equity - Financial (19.04%) SA - Multi Asset High Equity (9.5%) SA - Multi Asset Low Equity (7.6%) SA - Equity - Financial (3.41%) SA - Multi Asset Medium Equity (15.78%) SA - Multi Asset High Equity (18.03%) SA - Equity Mid & Small Cap (9.22%) SA - Multi Asset Medium Equity (7.4%) SA - Equity - General (3.12%) SA - Interest Bearing Variable Term (15.37%) SA - Multi Asset - Flexible (17.76%) SA - Multi Asset Medium Equity (9.14%) SA - Interest Bearing Short Term (6.45%) SA - Multi Asset Medium Equity (1.54%) Global Multi Asset Flexible (14.74%) SA - Multi Asset Medium Equity (15.8%) SA - Interest Bearing Variable Term (8.96%) SA - Interest Bearing MoneyMarket (6.41%) SA - Multi Asset - Flexible (1.41%) SA - Multi Asset Low Equity (13.1%) SA - Multi Asset Low Equity (12.17%) Global Interest Bearing Variable Term (8.3%) SA Multi Asset - Income (6.33%) SA - Multi Asset High Equity (1.31%) Global Interest Bearing Variable Term (11.52%) SA Real Estate General (9.22%) SA - Multi Asset Low Equity (8.2%) SA - Multi Asset - Flexible (6.11%) Worldwide - Multi Asset Flexible (-4.19%) SA Multi Asset - Income (8.57%) SA Multi Asset - Income (5.75%) Global Interest Bearing Short Term (7.28%) SA Inflation (5.23%) SA - Equity Industrial (-6.03%) SA - Interest Bearing Short Term (6.7%) SA - Interest Bearing Short Term (5.57%) SA Multi Asset - Income (5.88%) SA - Equity - Financial (1.04%) Global Equity General (-7.43%) SA Inflation (5.71%) SA Inflation (5.4%) SA - Interest Bearing MoneyMarket (5.8%) SA - Equity - General (1.01%) Global Multi Asset Flexible (-8.36%) SA - Interest Bearing MoneyMarket (5.41%) SA - Interest Bearing MoneyMarket (5.13%) SA - Interest Bearing Short Term (5.54%) SA - Equity Mid & Small Cap (0.32%) Global Interest Bearing Variable Term (-10.13%) Global Interest Bearing Short Term (3.81%) SA - Interest Bearing Variable Term (1.1%) SA Inflation (5.31%) SA - Interest Bearing Variable Term (-1.97%) Global Real Estate General (-13.53%) SA - Equity - Resources (-0.57%) SA - Equity - Resources (0.8%) SA - Equity - Resources (-3.16%) SA - Equity - Resources (-12.84%) Global Interest Bearing Short Term (-13.82%) THE SHOPPING LIST BY GLACIER RESEARCH - Q4 - FEBRUARY

13 FUNDS SUITED FOR MULTI ASSET PORTFOLIO CONSTRUCTION THE SHOPPING LIST BY GLACIER RESEARCH - Q4 - FEBRUARY

14 SA - MULTI ASSET - INCOME Category Analyst: Jan Vlok These portfolios invest in a spectrum of equity, bond, money market, or real estate markets with the primary objective of maximising income. The underlying risk and return objectives of individual portfolios may vary as dictated by each portfolio s mandate and stated investment objective and strategy. These portfolios can have a maximum effective equity exposure (including international equity) of up to 10% and a maximum effective property exposure (including international property) of up to 25% of the market value of the portfolio. Many of the funds that were in the old Fixed Interest Varied Specialist (FIVS) category have subsequently moved to the Multi Asset Income category. All the former FIVS Shopping List funds now fall under this new category. At present none of these funds intend to amend their mandates. Shopping List selection: Coronation Strategic Income Fund, SIM Active Income Fund, Prescient Income Provider Fund, Prudential Enhanced Income Fund. Quartile Ranking As of Date: 31/12/2016 Top Quartile 2nd Quartile 3rd Quartile Bottom Quartile YTD 1 year 2 Years 3 years 5 years 7 Years Coronation Strategic Income A SIM Active Income A1 Prescient Income Provider A1 Prudential Enhanced Income A Maximum Drawdown: Monthly Coronation Strategic Income A SIM Active Income A1 Prescient Income Provider A1 Prudential Enhanced Income A Risk-Reward: 3-Year Annualised Time Period: 01/01/2014 to 31/12/ Std Dev Coronation Strategic Income A SIM Active Income A1 Prescient Income Provider A1 Prudential Enhanced Income A s As of Date: 31/12/2016 Source Data: Total YTD 1 year 2 Years 3 years 5 years 7 years Coronation Strategic Income A SIM Active Income A Prescient Income Provider A Prudential Enhanced Income A Risk Statistics Time Period: 01/01/2014 to 31/12/2016 Coronation Strategic Income A SIM Active Income A1 Prescient Income Provider A1 Prudential Enhanced Income A Std Dev Max Drawdown (monthly) Up Period Percent Down Sharpe Period Ratio Percent Rolling 2-Year s Time Period: 01/08/2009 to 31/12/2016 Rolling Window: 2 Years 1 Month shift Coronation Strategic Income A SIM Active Income A1 Prescient Income Provider A1 Prudential Enhanced Income A THE SHOPPING LIST BY GLACIER RESEARCH - Q4 - FEBRUARY

15 CORONATION STRATEGIC INCOME Fund manager Mark le Roux, Nishan Maharaj, Adrian van Pallander No of quarters 20 Benchmark 110% STeFi 3-month Index Risk Description Conservative Role of Benchmark Agnostic Inception Date 02 July 2001 Focus Absolute Fund Size (Rm) R Philosophy Fundamental, bottom up valuation driven Fee Description (retail class) Annual management fee Glacier Risk Rating 0.96 Total Investment Charge 1.00% The fund has a flexible mandate with no maturity limits for the securities that it invests in. It also has a flexible duration policy to protect capital during times of bond market weakness. Risky assets (property, preference shares, foreign) will be maintained at a combined maximum weight of 25% with zero exposure to equity. Exchange rate risk is also actively managed. The fund s offshore exposure has typically been below 10% in the past. The fund will aim to provide a higher level of income than a regular money market fund while providing greater diversification. It will also add a layer of capital protection when bond markets decline in a conservative to cautious multi-asset portfolio. Coronation is a bottom-up investment house that focuses on proprietary research. Interest rate management (duration and yield curve) and security selection (credit and liquidity management) are two of the major focus areas of the fixed interest team. The fixed income portfolios are positioned with a long-term strategic market view in mind, with short-term tactical opportunities being taken when the market differs from the strategic view. The fixed interest team is headed by Nishan Maharaj and consists of 12 investment professionals. Analysts research responsibilities span numerous industry sectors, giving them a better perspective of the industry as a whole. Latitude is given to allow them to find opportunities that are not fashionable or short term fads. Adrian van Pallander has joined as co-portfolio manager on the Strategic Income Fund and Mark le Roux now fulfils an analyst and portfolio manager role. The fund delivers better drawdowns than many of its peers over rolling two- year periods. It has performed well, outperforming its peer group average over all periods longer than three months, whilst having lower volatility relative to peers over two-year rolling periods since It has also been able to outperform its benchmark over all periods above one year. The fund remains in the first and second quartiles of performance for all periods above six months. It has experienced some short-term volatility but it does have the highest exposure to local property of all the Shopping List funds. Current Portfolio Positioning The fund slightly outperformed the category average over the last quarter of 2016 with 8% by delivering 1.39%. Over the calendar year 2016, the fund returned 9.28%, beating the peer group average by 1.37% and its benchmark by 1.5%. The fund s assets under management yet again grew for a consecutive quarter by a respectable 3.77% to R23.7 billion. The fund experienced some shifts in the overall asset allocation over the fourth quarter, with cash being reduced by 4% to 31% whilst SA bonds and foreign bonds were increased by 2.6% and 3% to 53.6% and 6.8%, respectively with the managers seeing opportunity in the global fixed interest market. Furthermore, the local property component was increased by 1.4% with attractive valuations in the sector emerging. The fund s modified duration increased to 1.3 years with the addition of more fixed interest, whilst delivering a yield of 9.2%. SA bonds was the best performing asset class for the year, with the fund s exposure to the longer end of the yield curve contributing positively to performance. The portfolio managers continue to favour preference shares as the top performing fixed income asset class for 2016 (18.8%), and maintain the current level of 3% of the fund. Foreign assets were the only minor detractor from performance due to the rand strength persisting throughout the fourth quarter. 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% SA Cash SA Bonds SA Property SA Prefs SA Other International Cash International Bonds International Property THE SHOPPING LIST BY GLACIER RESEARCH - Q4 - FEBRUARY

16 PRESCIENT INCOME PROVIDER 0.86 Guy Toms, Farzan Bayat & JP du Plessis No of quarters 9 Benchmark STeFi Call 110% Risk Description Conservative Role of Benchmark Agnostic Inception Date 31 December 2005 Focus Absolute Fund Size (Rm) R Philosophy Quants valuation and risk focused Fee Description (retail class) Annual management fee Glacier Risk Rating 0.86 Total Investment Charge 0.89% Even though the fund is benchmarked against the STeFi Call Rate, the managers internal targets are to outperform inflation, cash and the ALBI 1-3 index. The fund focuses heavily on capital preservation and aims to make no capital losses over any rolling three-month period. Prescient has very strong in-house quantitative and derivative capabilities. This fund is highly uncorrelated with the other Shopping List funds, which adds diversification and portfolio construction benefits. This is primarily due to the higher exposure to credit-linked notes that the fund has relative to its peers. Moreover, the fund won t have any equity exposure and will typically have a higher offshore exposure in comparison to its Shopping List peers. The fund, while offering a cash alternative, is highly uncorrelated with other more vanilla type funds in the Multi Asset Income category. The fund is exposed to unique instruments that are actively managed allowing for superior risk-adjusted returns. Furthermore, this fund can be used in a client s portfolio in order to draw an income. Prescient follows a quantitative approach to managing money. They focus on what is priced into the markets and make decisions based on asset pricing. Risk is defined as the probability of not meeting investment objectives, which means that any positions taken in the portfolios are mathematically tested using different scenarios. The team consists of highly qualified, quantitative individuals, ranging from physicists to engineers, who have extremely strong modelling and derivative capabilities. The team has recently lost one of its members, Sanveer Hariparsad, who was a highly regarded individual within the team. Prescient is however of the opinion that his function will be easily transferred and the CIO indicated that they are in the process of looking at replacing him. A keen eye will be kept on how this transpires. The fund displays very low correlations (ranging from -3 to 0.19) against the other Shopping List funds. Although historically a more volatile fund relative to peers, the fund has recently moved into first quartile volatility and has the lowest volatility among Shopping List peers. It has also delivered the best risk-adjusted returns over the past three years and remains in the top quartile over all one- and twoyear rolling periods. It has outperformed its benchmark by more than 200bps since inception, on an annual basis. The quantitative, riskfocused process that is employed to construct the portfolio also sees it deliver some of the lowest drawdowns in its category. The fund has outperformed its internal target of inflation+3% over the past 10 years, returning an annualised return of 9.53%. Current Portfolio Positioning The fund delivered a modest 1.78% over the fourth quarter, outperforming the peer group average by 0.47%, but marginally underperforming its benchmark. Over the calendar year 2016 the fund returned 8.7%, 0.8% ahead of peers and 1.2% above the fund s specific benchmark, 110% SteFI Call deposit index. Assets under management within the fund grew impressively for a consecutive quarter, increasing by 17% over the last quarter of the year to R15.7 billion. During the quarter, the fund incurred some significant changes within the portfolio, with 16% of the fund changing composition. Prominent changes include: introduction of step-up notes at 3% and forex linked paper at 2.72% of fund value and a 1% increase in cash to 1.1%, whilst exposure to corporate floating-rate notes was reduced from a third quarter 6% allocation to 0%, and finally, international exposure was trimmed 2.6% to 15.5% of total fund value. The fund s duration was further reduced to 0.35 years from 0.4 years in the previous quarter, which is 1.41 years less than the ALBI 1-3 year index. The fund s current yield has decreased slightly over the quarter to 9.4% but is ahead of the 3-month JIBAR rate (7.35%) & ALBI 1-3 year rate (8.05%). The portfolio managers feel that, although the market is pricing in flat rates for the next 12 months, it is overly optimistic, given the US is in a rising interest rate cycle. Consequently they see more value in floaters than fixed-rate instruments, hence the positioning of the fund. The main contributor to performance was the high credit and funding spreads whilst the appreciation of the rand detracted slightly from the performance of the currency option, which expired in December. Given that the managers feel that the rand is cheap on an inflation differential basis, and the currency option on offshore holdings has expired, the fund s offshore currency exposure is now fully hedged. 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Q Q Q Q Q Q Q Q Q Cash FRN CLN Step up Notes NCD's Fixed Paper Forex Linked Credit bonds Floating rate bonds Inflation Linked Bonds Swap and Option Mkt Val Preference shares Property International Fixed Bonds THE SHOPPING LIST BY GLACIER RESEARCH - Q4 - FEBRUARY

17 PRUDENTIAL ENHANCED INCOME Fund manager David Knee & Roshen Harry No of quarters 9 Benchmark STeFi Composite over 36m rolling period Risk Description Cautious Role of Benchmark Agnostic Inception Date 01 July 2009 Focus Absolute Fund Size (Rm) R Philosophy Long term, relative valuation Fee Description (retail class) Annual management fee Glacier Risk Rating 1.48 Total Investment Charge 1.29% The fund is benchmarked against the ALBI 1-3 year index but its primary objective is to achieve cash+2%, with no capital losses over rolling one year periods as its secondary objective. Prudential employs a Strategic Asset Allocation (SAA) approach in their multi asset portfolios, which offers a different approach to portfolio construction. The SAA is derived from numerous multi-variable efficient frontier analyses with long run economic forecasts built into the models. The SAA for the Enhanced Income fund is currently: 50% to cash, 10% to inflation-linked bonds, 10% to government bonds, 5% to foreign government bonds, 15% to local corporate bonds, 5% to foreign corporate bonds, 5% to local property and 0% to local equity. The portfolio managers are also able to tactically allocate within defined limits around the SAA, with the fund being limited to 20% exposure in foreign assets. The fund will look to achieve a moderate level of capital growth whilst providing a stable level of income return. It may display higher levels of volatility in comparison to its Shopping List peers. The Strategic Asset Allocation approach should offer diversification benefits when used with other Shopping List funds, despite being highly correlated with these funds. Qualitative Highlights The team consists of seven highly qualified and experienced professionals, led by David Knee, who has recently been promoted to CIO of Prudential SA following Marc Beckenstrater s decision to join M&G in the UK to focus on Prudential s offshore capability. The credit team leverages off the offshore team, M&G, who are based in London, to gain insights on foreign companies that issue local debt. Prudential believes that market prices are broadly efficient over the long term but can be very inefficient over the short term. The fund has consistently managed to outperform its benchmark since inception on an annualised basis, as well as being successful in achieving its secondary goal of not incurring negative returns over rolling 12-month periods. Although the fund has dropped into the third quartile over a two-year period, mainly due to a below average 2015, it is back in the top 10% of performers on a one-year basis, as well as in the first and second quartile for all preceding periods. This slight variation of returns is due to the fund s higher standard deviation and drawdowns when compared to its Shopping List peers. Current Portfolio Positioning The fund underperformed its benchmark over the final quarter of 2016 but for the calendar year ending 31 December 2016, managed to beat the benchmark quite materially. Over the fourth quarter of 2016 the fund returned 1.43% compared to its benchmark return of 1.86%. Annually, the fund delivered a net return of 1% compared to its benchmark return of 7.37% and is consequently the best performer amongst Shopping List peers. The fund s assets under management have increased by 1.5% over the quarter from R2.1 billion to R2.2 billion. Moreover, the fund s composition has changed over the quarter. The fund s exposure to SA cash was decreased by 2.31% but still remains the highest holding at 40.25%, which is 9.75% lower than the fund s SAA. SA bonds were increased by 5.16% to 33.46%, inflation-linked bonds were decreased by 0.19% to 5.71% and the overall offshore exposure was further reduced to 15.61%, due to a 2.31% downsizing of Foreign bonds. The fund has the highest modified duration compared to its Shopping List peers, which was reduced to 2.22 years from 2.32 years as a result of the reduction in SA bond exposure. Furthermore, the fund s underweight SA cash & inflation-linked bonds position relative to its benchmark were the major contributors to performance, while being overweight SA bonds also contributed positively. The overweight position in SA cash, from an absolute perspective, detracted from value. 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Q Q Q Q Q Q Q Q Q Q SA Property SA Bonds SA Inflation Linked Bonds SA Cash SA Equity International Equity International Bonds International Cash International Property THE SHOPPING LIST BY GLACIER RESEARCH - Q4 - FEBRUARY

18 SIM ACTIVE INCOME Fund manager Philip Liebenberg No of quarters 34 Benchmark STeFi Composite + 1% Risk Description Conservative Role of Benchmark Agnostic Inception Date 03 November 2006 Focus Absolute Fund Size (Rm) R Philosophy Bottom up, pragmatic value approach Fee Description (retail class) Annual management fee Glacier Risk Rating 0.93 Total investment charge 0.93% The portfolio manager has an internal mandate to never include equity in the fund. He also leverages off the Sanlam Investments credit team quite heavily, as they provide a formidable competitive advantage. The fund is invested in local assets only. Barring one quarter in September 2009, the fund has never been below 60% cash and money market assets. The nature of the fund reflects Liebenberg s conservative and cautious nature. The fund is a money market alternative that is able to consistently add extra yield relative to cash, while providing very low levels of volatility and drawdowns. The fund delivers a very stable return profile and will not give investors any unwelcome surprises. In times of adverse market conditions, this fund will protect capital very well and is thus very suitable in a building block portfolio for regular income withdrawals. Philip Liebenberg is the sole portfolio manager on the fund. He does utilise the expertise and knowledge of the fixed interest team at Sanlam Investments (SI). He is a very conservative portfolio manager by nature and this will always be reflected in the funds he manages. The credit process in the fixed interest team is one of the outstanding competitive advantages for this fund and SI as a whole. The Fixed Interest Model Portfolio Group (MPG) within SI, which used to consist of Chris Hamman, Philip Liebenberg and Gerhard Cruywagen, determines the strategic direction of the fixed interest portfolios and house view. However, as from 1 August 2016, this picture will change as Hamman leaves SI and his replacement from Argon Asset Management, Mokgatla Modisha joins as Head of Fixed Interest. As from 1 July 2016, Cruywagen also leaves the MPG as he shifts his focus from retail to institutional portfolio management for the Sanlam Group. The MPG is merely there to provide guidance for the direction within fixed income assets but as the sole portfolio manager, Liebenberg, Head of Absolute, still maintains his ability to manage his portfolios as he sees fit. The fund has done well over longer periods, outperforming its benchmark over three and ten years and its category average over all periods. The fund is heavily allocated to cash and money market instruments and is one of the lowest volatility funds in the category, while delivering some of the lowest drawdowns. Although the fund consistently found itself in the second quartile of performance over two-year rolling periods it has recently moved into the top quartile whilst maintaining the lowest volatility relative to Shopping List peers. The fund has also maintained first & second quartile risk-adjusted performance over all periods whilst ensuring a smooth return profile. Current Portfolio Positioning The fund delivered 1.87% over the fourth quarter of 2016, outperforming the peer group average by 0.56% and equalling the SteFI composite return for the period. For the calendar year ending 31 December 2016 the fund returned 9.85%, compared to peer group average performance of 7.91% and benchmark performance of 8.37%, firmly consolidating in the first quartile of performance. The fund continues to be the more conservative fund relative to Shopping List peers, barely changing the asset allocation over the course of the quarter and maintaining an 84% allocation to cash and money market instruments. The other marginal change was local property being increased by 0.2% to 1.9% exposure, whilst allocation to inflation linked bonds and interest-bearing investments staying primarily unchanged. Contributors to performance over the year was SA fixed interest investments, returning 16.87% for 2016 while the large cash position slightly detracted from performance, delivering 9.8% over the year, although a good return for cash in absolute terms. 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Q Q Q Q Q Q Q Q Q Q Q Q Cash and Money Market Assets Inflation Linked Bonds Interest Bearing Investments Property Equities International THE SHOPPING LIST BY GLACIER RESEARCH - Q4 - FEBRUARY

19 SA - MULTI ASSET- LOW EQUITY Category Analyst: Jan Vlok Funds in this sector display reduced volatility relative to general equity funds, with a strong focus on capital preservation and a net equity exposure (including international equity) that typically would not exceed 40% of the portfolio. Funds in this sector are mostly funds of funds and consequently are not considered for the Shopping List. That said, the number of single manager funds has increased substantially and this sector is becoming increasingly competitive. Shopping List selection: Coronation Balanced Defensive Fund, Nedgroup Investments Stable Fund, Prudential Inflation Plus Fund, SIM Inflation Plus Fund Quartile Ranking As of Date: 31/12/2016 Top Quartile 2nd Quartile 3rd Quartile Bottom Quartile YTD 1 year 2 Years 3 years 5 years 7 Years Prudential Inflation Plus A Coronation Balanced Defensive A Nedgroup Inv Stable A SIM Inflation Plus Maximum Drawdown: Monthly (ASISA) South African MA Low Equity Prudential Inflation Plus A Coronation Balanced Defensive A Nedgroup Inv Stable A SIM Inflation Plus (ASISA) South African MA Low Equity Risk-Reward: 3-Year Annualised Time Period: 01/01/2014 to 31/12/ Std Dev Prudential Inflation Plus A Coronation Balanced Defensive A Nedgroup Inv Stable A SIM Inflation Plus (ASISA) South African MA Low Equity s As of Date: 31/12/2016 Source Data: Total YTD 1 year 2 Years 3 years 5 years 7 Years Prudential Inflation Plus A Coronation Balanced Defensive A Nedgroup Inv Stable A SIM Inflation Plus (ASISA) South African MA Low Equity Risk Statistics Time Period: 01/01/2014 to 31/12/2016 Prudential Inflation Plus A Coronation Balanced Defensive A Nedgroup Inv Stable A SIM Inflation Plus (ASISA) South African MA Low Equity Std Dev Max Drawdown (monthly) Up Period Percent Down Period Percent Sharpe Ratio Rolling 2 Year s Rolling Window: 2 Years 1 Month shift Prudential Inflation Plus A Coronation Balanced Defensive A Nedgroup Inv Stable A SIM Inflation Plus (ASISA) South African MA Low Equity THE SHOPPING LIST BY GLACIER RESEARCH - Q4 - FEBRUARY

20 CORONATION BALANCED DEFENSIVE Fund manager Charles de Kock & Duane Cable No of quarters 27 Benchmark Alexander Forbes 3-month (STeFI) Index +3% Risk Description Cautious Role of Benchmark Agnostic Inception Date 01 February 2007 Focus Absolute Fund Size (Rm) R Philosophy Fundamental, bottom-up valuation driven Fee Description (retail class) Annual management fee with reduced fees should the fund lose capital over any 12-month period. Glacier Risk Rating 3.39 Total Investment Charge 1.85% Coronation has arguably one of the best research teams and broad asset class capabilities in the industry. The fund has an internal limit of maximum 40% exposure to risky assets (including total equity and property). The fund will thus at all times have a minimum of 60% allocated to fixed interest assets. Given the fund s 40% risky asset (property and equity) exposure limit, this fund can be viewed as a less aggressive option when compared to more traditional funds in its category - where risky asset exposure can reach a maximum of 65%. The fund is suited to a cautious portfolio with an absolute return focus and a strong emphasis on capital preservation. As the fund will not have more than 40% risky asset exposure it would blend well with a more aggressive cautious fund to temper overall portfolio volatility. This fund can be used as a core holding in a cautious risk, absolute return focussed portfolio with the aim of outperforming inflation by 2-3% over a 3+ year period. The fund is managed by Charles de Kock and Duane Cable. Charles has over 30 years of investment experience, ten of which have been spent at Coronation, while Cable is Head of SA Equity and has over ten years investment experience, spent with Coronation. Cable was announced as co-manager in August The investment team consists of three former Coronation CIOs. The culture remains one of ownership and accountability, and is client focused. Given that staff ownership is 25%, the interests of the managers and clients are well aligned. De Kock has stated that the fund has two levels of conservatism, the first being asset allocation and the second stock selection. Their asset allocation is a bottom-up valuation process and they make use of a proprietary asset allocation tool implemented in A team of key individuals determines the macro-economic variables that will be the inputs to the proprietary models used at Coronation. Key macro drivers are used as inputs, such as interest rates, inflation and also expected return. While the model will guide asset allocation decisions, each manager is responsible for the management of the funds given the risk budget of the fund. De Kock and Cable are thus responsible for the asset allocation weighting and stock selection of the fund. Proprietary research is the foundation of their investment proposition. From this platform, they construct portfolios that meet the varying risk and return objectives. All portfolios reflect the same Coronation DNA which comprises Coronation s best investment ideas, leveraging off the same investment process. The fixed interest instruments selection is managed by the portfolio managers. They interact and leverage off the fixed interest team headed up by Mark le Roux. There is no formal house view portfolio, as flexibility is encouraged amongst portfolio managers. Current Portfolio Positioning 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Although the fund has underperformed its benchmark over a 3-year period, it has consistently achieved the target returns over the longer term by delivering 10.5% over 5 years and 10.2% since inception. The fund has also consistently delivered better than category average three-year rolling risk-adjusted returns since inception despite displaying second quartile volatility. On a rolling three-year basis, the fund has achieved its performance objective over 70% of the time. It is important to note that virtually all the underperformance was experienced up to the three year period ending 31 August The fund has also delivered positive returns over every 12-month period since inception and maintained first or second quartile rolling three-year performance since inception. The fund was down 0.36% over the last quarter of 2016, marginally underperforming the category average performance by 0.14% and just dropping to third quartile performance. For the calendar year ending December, the fund delivered 3.9%, slightly outperforming the category average of 3.65% whilst underperforming the 3-month SteFI + 3% benchmark of 10%. The most prominent changes throughout the fourth quarter was a 3.2% increase in SA bonds, proving to contribute positively to performance with it being the best performing local asset class, returning 15.42% for the year Other notable changes to asset allocation was a 1.7% increase in SA property coupled with a 1.5% decrease in SA equities. The three largest holdings in the fund remain Coronation Global funds: The Global Opportunities fund (9.90%), the Global Capital Plus fund (10.50%) and the Global Emerging Markets fund (2.10%). Individual holdings were only marginally adjusted over the quarter, with the largest position move in the fund being the increase in exposure to Growthpoint Properties from 0.80% to 1.2%. The fund s largest detractors from performance over the quarter as well as the year was the fund s offshore assets, primarily due to an 11.5% appreciation of the rand to the US dollar and property, returning -3% mainly due to the impact of Brexit on international property counters. Local assets, bonds and equities, were the biggest contributors to the fund s performance over the year, delivering 11.4% & 8% respectively. SA Equity Foreign Equity SA Property Foreign Property SA Cash SA Bonds SA Pref Shares & Other Foreign FI & Cash Foreign Pref Shares & Other THE SHOPPING LIST BY GLACIER RESEARCH - Q4 - FEBRUARY

21 NEDGROUP INVESTMENTS STABLE Fund manager Foord Asset Management (Dave Foord, Dane Schrauwen, William Fraser & Nick Balkin) No of quarters 20 Benchmark Inflation + 4% over a rolling three year period Risk Description Cautious Role of Benchmark Agnostic Inception Date 01 November 2007 Focus Absolute Fund Size (Rm) R Philosophy Top-down, bottom-up, valuation driven approach Fee Description (retail class) Annual management fee with 2.50% maximum performance fee Glacier Risk Rating 3.83 Total Investment Charge 1.95% The fund s stock selection applies an absolute overlay to Foord s strong fundamental process, meaning stocks in the portfolio need to have a large margin of safety. The fund therefore has a low probability of capital loss, which is how Foord defines risk. The team has limited fixed interest capabilities relative to Shopping List peers. The fund will therefore look to use vanilla instruments to express their fixed income views. The relative weakness in fixed income capabilities is largely offset by Foord s excellent equity capabilities. The fund can take on higher risky asset exposure and does not have any internal mandate limits. With the introduction of the multi-counsellor approach in 2011, key man risk has been significantly reduced. The fund has been managed using a multi-counsellor approach since late 2011, with Dave Foord, Dane Schrauwen, William Fraser and Nick Balkin each managing a portion of the assets and being individually accountable for that portion. Foord believes that meaningful investment returns are not earned by making incremental decisions, but that superior long-term returns are generated by identifying and taking advantage of economic cycles, and that buying at the right price is crucial. They do not take benchmarks into consideration when constructing portfolios as they are often representative of what is simply big or in vogue. Guided by asset allocation parameters, each manager is allowed flexibility in the portion of the portfolio they manage. Their asset allocation style is predominantly top-down value orientated, but incorporates bottom-up portfolio construction. All research, both on equities and fixed interest, is done in-house and portfolio managers also undertake research. They place an intrinsic valuation on the company and assess to what extent the market is pricing that valuation. Foord looks for stocks with good management teams and are willing to pay for what they deem fair value for quality businesses. The fund has relatively low turnover, which is a result of being a concentrated portfolio with a few good ideas that will only be replaced when a better opportunity arises. The fund combines a top-down macroeconomic view for asset allocation with a bottomup analysis of stocks in portfolio construction. Foord has a dedicated offshore team in Singapore which manages the equity fund that forms part of the offshore exposure in the Foord Balanced fund. Current Portfolio Positioning This fund can be used as a core holding in a cautious or moderate risk, absolute return focussed portfolio with the aim of outperforming inflation by 3-4% over a three+ year period. The fund has produced top quartile performance over longer investment periods of 4 years and more. Since inception, the fund has consistently delivered better than category average risk-adjusted returns at slightly higher volatility and has also achieved its performance objective over 90% of the time. Despite recent slight underperformance, the fund continues to deliver first & second quartile performance over three-year rolling periods since inception. The fund has been the least correlated to other funds on the Shopping List in the low equity category. The fund has, however, during the financial crisis, experienced a greater drawdown than the peer average but at a lower down percent ratio. Since inception, the fund has managed to maintain a smooth alphagenerating profile as compared to peers, which speaks to its stock selection capabilities. The fund was down 0.90% for the quarter, underperforming the peer group average of -0.22% and its inflation +4% benchmark. Subsequently the fund finds itself in the bottom quartile performance for the third consecutive quarter. This can be explained by their offshore exposure and majority of local equity exposure to rand hedge counters, in a year where the rand appreciated significantly against major currencies, consequently detracting from performance. Over the 2016 calendar year ending December, the fund returned 0.38% compared to a peer group average performance of 3.65% and benchmark return of 10.9%. During a year when local bonds was the best performing asset class, relative underperformance can be partly explained by underweight positions in the fixed interest space. Local equity was also a detractor from performance over the quarter, given the sizable positions in Industrial counters, which was down 4.7% for the quarter combined with underweight positions in resource counters, which again experienced a stellar year. The fund currently holds 13.9% in SA equities, with a predominant exposure to industrials, and 19.3% foreign equities to add to a total of 42.8% risky assets in the fund. There were slight changes to asset allocation over the quarter with local and foreign cash increasing by a total of 1.4%. Local equities were decreased by 0.4% and SA bonds were decreased by 1.4% over the fourth quarter, locking in some of the performance of the top-performing bond sector during The largest holding in the fund is still the R186 bond, with a 10.5% coupon, although down from 6.90% in the previous quarter, to 5.3% in Q4, followed by the NewGold ETF at 5%, down from 5.4%. Floating-rate notes continue to occupy three positions in the top 10, with a total weight of 6.9%. The fund remains conservatively positioned with a high allocation to cash (38%) and precious metals ETF holdings, to provide downside risk protection. This is the strategy of the asset managers until they are comfortable that the market presents opportunities to exploit and deploy cash in riskier assets. 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Equities Property Commodities Bonds Cash Global Equities Global Bonds Global Cash Other THE SHOPPING LIST BY GLACIER RESEARCH - Q4 - FEBRUARY

22 PRUDENTIAL INFLATION PLUS Fund manager Michael Moyle, David Knee, Duncan Schwulst & Johnny Lambridis No of quarters 10 Benchmark CPI + 5% p.a. over a rolling three-year period Risk Description Cautious / Moderate Role of Benchmark Agnostic Inception Date 01 June 2001 Focus Absolute Fund Size (Rm) R Philosophy Relative value Fee Description (retail class) Annual management fee Glacier Risk Rating 3.40 Total Investment Charge 1.69% The fund is managed according to a strategic asset allocation (SAA) process which is the cornerstone of the investment process. This differs from how the other low equity funds on the Shopping List are managed. The fund has a high strategic allocation to ILBs and will thus have a higher duration relative to peers. It is also slightly more aggressive given its performance objective of CPI+5% and is a more risky option in the low equity category - but has achieved its risk benchmark 95% of the time since inception. Be cautious when combining this fund with a fund like ABSA Absolute - as both funds have a high strategic weighting to ILBs. The house has very good asset allocation, equity and fixed income capabilities and leverages off strong offshore capabilities at M&G - Prudential s international parent company. The fund is Prudential s flagship real return offering and has a primary performance objective of CPI + 5% p.a. over a rolling three-year periods, and secondly aims to not incur any capital losses over a rolling one-year period. This speaks to the fund s real return focus. Prudential follows a strong value-based approach using historical and current factual information, rather than forecasting to determine the fair value of an asset class. When constructing portfolios they are always cognisant of risk. They will assess the relative value of an asset by looking at its current valuation and comparing that to its own historical valuation range and alternative assets within the investment universe. Instrument selection within each asset class is outsourced to the relevant specialist teams. The local AA team, in conjunction with Prudential s global teams, decides on exposure to individual markets, government vs corporate bonds and currencies. Weekly meetings as well as intra-quarterly teleconferences are held, as well as a quarterly meeting in London. When constructing real return portfolios an internal long-term Strategic Asset Allocation is established. The SAA of the Prudential Inflation Plus fund is set at 26.3% ILBs, 22.5% local equity, 15% local bonds, 7.5% local property, 3.8% local cash, 12.5% foreign equity and 12.5% foreign bonds. Tactical asset allocation (TAA) calls are made relative to the SAA within a range of 0% to 10% to adjust the exposure to asset classes, and these decisions are made using valuation-based techniques. The TAA calls are made with both the fund s risk and return objectives in mind. Once the TAA calls have been made, instruments are selected within each asset class through active stock-picking in equities, listed properties and bonds using the prudent value philosophy. The fund leverages off each specialist team for instrument selection. Marc Beckenstrater who was previously a manager on the fund, as well as CIO, will be relocating to the UK in March As of 01 July 2016 David Knee has been appointed as the CIO. He will retain his responsibilities but systematically start reallocating duties to other FI team members. Michael Moyle who was previously Head of Absolute will now serve as Head of Multi-Asset. These changes will be closely monitored and we are comfortable that no changes will be made to existing processes. Current Portfolio Positioning This fund can be used in a cautious or moderate risk, absolute return focussed portfolio with the aim of outperforming inflation by 3-4% over a three-year+ period. This fund would complement a portfolio of extremely cautious funds and can also be used in a moderate solution given its slightly more aggressive nature and performance objective. The fund is the more aggressive option relative to Shopping List peers. Given the fund s more aggressive performance objective, we do expect a relatively higher volatility profile when compared to peers. Over a rolling twoand three-year basis the fund has had the highest standard deviation of all the Shopping List funds. It has, however, compensated for this in performance and has produced above-category-average risk-adjusted returns over the same rolling periods. The fund also retains top-quartile or better performance over annual periods from 3-10 years and outperformed the CPI+5% benchmark by 2% since inception. The fund has been successful in reducing risk of capital loss and delivered positive returns more than 90% of the time over 12-month rolling periods. Due to its high strategic allocation to riskier assets, the fund will typically experience larger drawdowns when compared to Shopping List peers as well as the category average. This can be evidenced in the drawdown figures where the fund experienced a maximum drawdown of 8.6% against the category average of 2.7% over the period, while the next lowest Shopping List fund had a maximum drawdown of 5.7%. The fund shed -0.85% for the quarter, underperforming its peer group average by 0.63%. Over the calendar year 2016 the fund delivered 3.61%, which was in line with the peer group average annual performance of 3.65% and subsequently fell into the second quartile. Over a 12-month period the fund is lagging its inflation objective of 11.6%. Although this fund is more aggressive regarding asset allocation relative to its Shopping List peers, it hasn t outperformed over the 3-12 month short term. Over the longer term of 5-7 years, the fund however still remains the top performing fund within the category and has managed to beat its inflation plus 5% benchmark meaningfully over these periods. The fund also remains in the top quartile for performance over annual periods from 3 to 10 years. On a relative basis, the fund s underweight position in international fixed income and SA bonds added the most value, as did an underweight position in inflation-linked bonds. Overweight positioning in international cash combined with a neutral SA equity holding, detracted most from value. Over the quarter there was an increase in SA equity and bonds with 2.1% to 22.6% and 1% to 21.2% respectively, with international bonds also being increased by 1% to 6.9% of fund value. International equities and SA inflation-linked bonds were reduced by 1.8% and 1.7% to 13.5% and 20.3% respectively, whilst cash was also reduced by 0.8% to 6.3%. However, it has still been able to produce the lowest downside deviation and better capital preservation capability than the category average and Shopping list peers. The largest holding in the fund remains the Prudential Corporate Bond fund, increased by 0.2% to 6.6%. Naspers was downsized from 4.6% to 3.1%, moving the SA ILB R202 nominal bond exposure of 3.4% to the second largest holding. Relative to Shopping List peers the fund has one of the highest offshore exposure allocations at 25.3% and domestic bond exposure, which includes inflation-linked bonds, at 41.5%. 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Domestic Equities Domestic Property Domestic Bonds Domestic ILBs Cash (Domestic & Offshore) International Equities International Bonds THE SHOPPING LIST BY GLACIER RESEARCH - Q4 - FEBRUARY

23 SIM INFLATION PLUS Fund manager Philip Liebenberg & Natasha Narsingh No of quarters 20 Benchmark CPI + 4% over a rolling three year period Risk Description Cautious Role of Benchmark Agnostic Inception Date 01 April 1999 Focus Absolute Fund Size (Rm) R Philosophy Pragmatic value approach Fee Description (retail class) Annual management fee Glacier Risk Rating 2.83 Total Investment Charge 1.33% The risk/return profile has improved immensely given the more disciplined management approach of Liebenberg and previous fund manager Gerhard Cruywagen, and there is a strong focus on investing in stocks with a large margin of safety. The equity carve-out will not be different to the house-view equity carve-out: moderate SWIX portfolio. Fixed income will be similar to the SIM Active Income fund with the only difference being the magnitude of calls. The fund is managed with a strong absolute mind-set and the managers will be very active in the derivative space. There is a strong focus on where the managers can add value, specifically fixed interest, asset allocation and derivatives. The fund is managed by Philip Liebenberg and Natasha Narsingh with a strong absolute focus, as well as placing a great deal of emphasis on capital preservation. This ties in with the fund s explicit risk benchmark of no negative returns over rolling 12-month periods. Investment decisions at SI are team-based with Liebenberg leveraging off SI s house view on asset allocation. Liebenberg is responsible for the asset allocation overlay and management of the fixed interest portion of the fund. Asset allocation is directed by the Asset Allocation Model Portfolio Group (AA MPG), although the fund manager has discretion on the size of his over-/ underweights given the objective of the mandate. Fixed interest decisions are guided by the Fixed Income Model Portfolio Group (FI MPG) which will be headed up by Mokgatla Madisha as of 1 August 2016 following the departure of Chris Hamman. The fixed interest carve-out will look similar to the SIM Active Income fund, which is also managed by Liebenberg. Cruywagen is responsible for the equity selection of the fund and direction is given by the Equity Model Portfolio Group (EQ MPG). The equity carve-out of the fund will look similar to that of the moderate SWIX house-view portfolio. Offshore exposure is obtained through investments in CIS funds, whilst the offshore fixed income exposure is managed by BlackRock. Offshore property exposure is split between the biggest global diversified stocks and the other half is managed by Alliance Bernstein. Global cash is managed by Cameron Hume. From a risk management perspective, the managers will make use of derivatives to protect the portfolio from adverse market movements when necessary. Current Portfolio Positioning The fund can be used in a cautious to moderate risk, absolute return focussed portfolio with the aim of outperforming inflation by 3-4% over a three-year period. It can also be used as a core fund in a portfolio. The fund is the most conservative option relative to Shopping List peers. On a rolling three-year basis, the fund has consistently delivered above-category-average returns since the three-year period ending 31 July It has also managed to achieve this at lower volatility (on a rolling three-year basis) than all of the Shopping List funds. Since 2009, the fund s volatility of returns has significantly decreased and this coincides with the management changes. Although the fund is lagging its CPI+4% target over one and three years, it is ahead of the target over 5 years and well ahead of the category average. The fund has managed to remain in the top quartile for risk-adjusted return since inception as well as top quartile drawdown figures. Since January 2014 it has delivered the lowest volatility compared to Shopping List peers as well as category average and has experienced the least down periods & best risk-adjusted return figure. It is important to note that, since Philip Liebenberg and Gerhard Cruywagen took over management in April 2009, the fund has achieved its performance objective 100% of the time and over rolling one-year periods, has had no negative returns. The fund also remains in the top two quartiles for rolling three-year performance since inception. The fund delivered 0.51% over the last quarter of the year, outperforming the peer group average of -0.22% but underperforming its absolute benchmark during this period. Over the calendar year ending 31 December 2016, the fund returned a modest 4.69% compared to its CPI+4% benchmark of 10.8%, although outperforming on a relative basis, beating the category average performance by 1.04%. Main contributors to the fund s performance over the year was fixed interest, being the top performing asset class for 2016, and its positioning in SA property and ILBs further enhancing returns. The prominent detractor from fund performance was the fund s large exposure to international assets, mainly due to strong rand performance over the year. The equity selections within the fund also slightly detracted from performance whilst the significant cash allocation of 52% contributed positively. Changes to asset allocation over the quarter included an increase in SA equities of 1.97% to 13.72% and International assets by 1.92% to 22.88%, and a significant decrease in cash and money market holdings by 4.46% to 52.14%, indicating that the portfolio managers are seeing favourable valuation emerging in the equity space. Relative to Shopping List peers the fund has the highest exposure to cash at 52.88%. 100% 90% Current Long Term Portfolio Asset Positioning Allocation 80% 70% 60% 50% 40% 30% 20% 10% 0% Q Q Q Q Q Q Q Q Q Q Q Q Equities Preference shares Property International Assets Inflation Linked Bonds Interest Bearing 0-3 years Interest Bearing 3-7 years Interest Bearing 7-12 years Interest Bearing 12+ years Cash/MM THE SHOPPING LIST BY GLACIER RESEARCH - Q4 - FEBRUARY

24 SA - MULTI ASSET - MEDIUM EQUITY Category Analyst: Thobela Mfeti These portfolios invest in a spectrum of investments in the equity, bond, money, or property markets. These portfolios tend to display average volatility, aim for medium to long term capital growth and can have a maximum effective equity exposure (including international equity) of up to 60% and a maximum effective property exposure (including international property) of up to 25% of the market value of the portfolio. The underlying risk and return objectives of individual portfolios may vary as dictated by each portfolios mandate and stated investment objective and strategy. Shopping List selection: Coronation Capital Plus Fund, Nedgroup Investments Opportunity Fund Quartile Ranking As of Date: 31/12/2016 Top Quartile 2nd Quartile 3rd Quartile Bottom Quartile YTD 1 year 3 years 5 years 7 years 10 Years Coronation Capital Plus Nedgroup Inv Opportunity A (ASISA) South African MA Medium Equity Maximum Drawdown: Monthly Risk-Reward: 5 Years Annualised Std Dev Coronation Capital Plus Nedgroup Inv Opportunity A (ASISA) South African MA Medium Equity s As of Date: 31/12/2016 Source Data: Total YTD 1 year 3 years 5 years 7 years Coronation Capital Plus Nedgroup Inv Opportunity A (ASISA) South African MA Medium Equity Risk Statistics Coronation Capital Plus Std Dev Max Drawdown (monthly) Up Period Percent Down Period Percent Sharpe Ratio 0.68 Nedgroup Inv Opportunity A Coronation Capital Plus Nedgroup Inv Opportunity A (ASISA) South African MA Medium Equity Rolling 3 Year s Rolling Window: 3 Years 1 Month shift 2 (ASISA) South African MA Medium Equity Coronation Capital Plus Nedgroup Inv Opportunity A (ASISA) South African MA Medium Equity THE SHOPPING LIST BY GLACIER RESEARCH - Q4 - FEBRUARY

25 CORONATION CAPITAL PLUS Fund manager Charles de Kock & Duane Cable No of quarters 46 Benchmark CPI + 4% Risk Description Low to medium Role of Benchmark Agnostic Inception Date 02 July 2001 Focus Absolute Fund Size (Rm) R Philosophy Fundamental, bottom-up valuation driven Fee Description (retail class) Annual management fee with reduced fees should the fund lose capital over any 24-month period. Glacier Risk Rating 4.96 Total Investment Charge 1.81% The fund has an internal risky assets (equity and property) limit of 60%, and can therefore be viewed as a less aggressive option when compared to a more traditional fund in its category - where risky asset exposure can reach a maximum of 85% (60% equity and 25% property). The equity portion in this fund, however, is slightly more aggressive when compared to the equities in a fund such as the Coronation Balanced Defensive Fund. This fund will make use of derivatives to hedge certain currency and equity exposures. Coronation has extensive experience and capabilities across all asset classes - which is a key advantage in the management of this multi-asset fund. The fund was managed by Charles de Kock and Henk Groenewald up to August Charles has over 30 years investment experience, 11 of which have been spent at Coronation. Duane Cable, head of SA Equity was appointed co-manager on the Capital Plus fund alongside Charles de Kock in August Groenewald s focus shifted to co-managing the Resources Fund and subsequently joining Gavin Joubert s Global Emerging Markets team as an analyst. Cable previously co-managed the absolute return portfolios with Louis Stassen and Groenewald for two years and is well positioned to manage this fund. Having joined Coronation in 2006 as an investment analyst, he is well experienced. Coronation has a highly skilled and experienced investment team, consist of 3 former Coronation CIOs. The single investment process, philosophy and research platform ensures that changes made on portfolio has minimal impact on investments and clients experience. Coronation has developed a proprietary central research system which is available to all analysts and portfolio managers. The culture remains one of ownership and accountability that is client focused. This is evident in the fact that staff owns 25% of the holding company of the South African and international operating subsidiaries. All analysts are rotated among industries so as to become generalists in every industry and avoid developing biases. Coronation believes in conducting comprehensive research on a company rather than just analysing it and spends a vast amount of time looking at different ways of trying to understand a company and its operating environment for that extra bit of information the market may be overlooking. Due to Coronation s extensive expertise across all asset classes, this fund can be used as a core holding in a cautious to moderate risk, absolute return focussed portfolio with the aim of outperforming inflation by 4% over a three - five year period. The fund s dual mandate of no negative returns over any 12 month period and 4% real return will work equally well for a retiree with a slightly higher risk appetite or a discretionary investor with a slightly lower risk appetite. The fund has outperformed its benchmark of CPI + 4% consistently over longer, more meaningful periods. It does tend to achieve this with slightly higher levels of volatility relative to peers, but protects capital well in times of adverse market conditions. This is not a fund that will deliver massive outperformances, due to its more conservative nature. When comparing this fund to its peers in the medium equity category, one should be cognisant of the internal limit of risky assets to 60% (peers limit = 85%). The fund has been very consistent in implementing its dual mandate of no negative 12-month returns and CPI+4% over rolling 3-year periods. Since inception, the fund has outperformed its CPI + 4% benchmark 64% of the time while outperforming its average peers 78% of the time. On risk-adjusted returns using the Sharpe and Sortino ratios, this fund delivers lower risk-adjusted returns when compared to peers, especially its Shopping List peer. Current Portfolio Positioning The fund delivered -0.50% for the quarter ending 31 December This was 0.75% ahead of its average peer which delivered -1.25% over the same period. The fund s 3-year performance continues to lag CPI+4% over a 3-year period and this continues to be a concern. However, underperformance can be expected from time to time and it is important to consider the fund s duel objective of real returns and no negative 12-month returns. The fund s yearto-date performance is 4.27%. This compares very favourably with the broader JSE that only managed to deliver 2.63% over the same period, indicative of a market with benign returns. However, the fund underperformed its benchmark, which returned 10.4% over the same period. This can be attributed to the 25.8% international exposure of this fund, which returned -7.6%. This detracted from performance and was a result of the 11.5% rand strength against the US dollar over the year. The fund s offshore hedging managed to somewhat limit the negative impact of a stronger rand, decreasing offshore exposure during times of currency weakness and increasing exposure during currency appreciation. During the quarter, the fund s offshore exposure marginally increased in line with rand strength. Equity remains the preferred asset class to deliver inflation-beating returns, and the fund remains fully exposed offshore despite the rand strength and this hurting performance. This is based on long-term valuations and diversification benefits. During the quarter, local assets contributed to performance, while foreign assets detracted from performance on the back of continued rand strength. Both equities and local bonds contributed strongly to performance. The biggest contributors included positions in Anglo American, Exxaro and Standard Bank on the back of a strong year for resources and financials. The biggest detractors were positions in Anheuser-Busch InBev, Woolworths and Mediclinic on the back of underperformance form industrials, especially rand hedge stocks on the back of rand strength. Property also detracted from performance. This includes counters such as Intu and Capital & Counties, which are still held on the portfolio because they remain attractive over the long-term. The funds has significantly increased duration from 2.91 years in the previous quarter to 3.82 years, as they believe local bonds are attractive, given a favourable inflation outlook in the medium term. The increase in duration was a result of its 4.54% exposure to longer-dated fixed government bonds, which has increased from 1.9% in the previous quarter. Corporate bonds and inflation linkers consequently make up the bulk of the fund s fixed income exposure. On a relative basis the fund s duration of 3.82 years is significantly higher than its Shopping List peer, the Nedgroup Investment Opportunity Fund, which had a duration of 0.33 years as at quarter end. 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q SA Equity SA Cash SA Gov Bonds SA Corp Bonds SA IL Bonds SA Pref Shares & Other SA Property Foreign Property Foreign Equity Foreign Preference Share Foreign Commodities Foreign Other Foreign FI THE SHOPPING LIST BY GLACIER RESEARCH - Q4 - FEBRUARY

26 NEDGROUP INVESTMENTS OPPORTUNITY FUND Fund manager Abax Investments (Rashaad Tayob & Omri Thomas) No of quarters 6 Benchmark Inflation + 5% over a rolling three-year period Risk Description Moderate Role of Benchmark Agnostic Inception Date 27 June 2011 Focus Absolute Fund Size (Rm) R Philosophy Bottom-up, fundamental research Fee Description (retail class) Annual management fee Glacier Risk Rating 4.78 Total Investment Charge 2.07% Abax places a large emphasis on return modelling and establishing expected returns for asset classes / securities. As inputs to this return modelling, a significant amount of emphasis is placed on sell-side research, which could potentially be seen as a possible weakness. However, the strength of Abax lies in how they use this sellside research as well as their asset allocation and modelling abilities and portfolio implementation. Their investment process seems very effective in incorporating this research and delivering strong investment returns. With the addition of Rashaad Tayob in 2012, Dean Marks in 2013 and Dylan Oelofse in 2015, Abax has expanded their fixed income capabilities extensively and fixed income seems to have contributed positively to Abax s ability to deliver excess returns. Abax defines risk as drawdowns and uses this as input in their portfolio optimisation process. With regard to portfolio management, Tayob will be responsible for asset allocation and, together with Dean Marks and Dylan Oelofse, also for the fixed income portion of this fund. Omri Thomas will primarily be responsible for the equity portion, as well as the structuring of any derivative positions. Abax will make use of derivative strategies to construct asymmetrical payoff profiles. The equity portion in this fund is essentially a carve-out of the Nedgroup Investments Rainmaker Fund, but with different weights, due to the difference in the return and risk mandates. Abax s investment philosophy is brought to fruition through a well-defined, proprietary investment process that has allowed this fund to deliver excellent riskadjusted returns. Its absolute return mindset is clearly visible in its performance figures. The team is made up of highly experienced and well qualified individuals. Dean Marks and Dylan Oelofse have recently been added as assistant portfolio managers to help Tayob with respect to the fixed income part of the portfolio, which is a positive development. This will help build additional skills in the team as well as bring some continuity and help negate possible key man risk. The offshore capability of the team could be expanded a bit more, but the current screening methods and processes employed do make sense. The Opportunity Fund s offshore equity exposure is gained through investing in the Abax Global Equity fund managed by Steve Minnaar. They will also buy direct offshore counters should they want an undiluted exposure to a particular stock. Minnaar is supported by Campbell Parry on the offshore research side. However, everyone in the research team has international research responsibility. This significantly adds to the team s offshore capability. There is very little to fault in terms of investment philosophy and process and this fund is a good alternative in the multi-asset medium equity space. This fund is an excellent choice for an investor who prefers a broad exposure to multiple asset classes, where the asset manager has the responsibility of both strategic and tactical asset allocation. This is a benchmark agnostic fund with an absolute return mindset. This fund is suitable for a client with a moderate risk profile seeking no more than 60% equity exposure (equity + property < 85%). The fund has a low correlation to its peers and this, together with its low volatility profile, will add excellent diversification benefits and lower the overall volatility profile of a portfolio. The Nedgroup Investments Opportunity Fund is a top performer in its category and has outperformed its inflation + 5% mandate over any rolling three-year period since its exception, with an exception of the recent rolling 3 year period ending December 2016, where this fund s performance was in line with CPI+4%. The fund s volatility has trended upwards recently, but this is in line with its peers. It has also managed to compensate the investor sufficiently for these higher levels of volatility by delivering higher returns and subsequently maintaining its superior risk adjusted returns as measured by its Sharpe ratio. The fund s focus on downside protection has also translated into a superior Sortino ratio when compared to its peers, with its overall volatility mainly stemming from its upside performance. The volatility profile does seem to be characterised by larger than average drawdowns as opposed to a consistently high level of volatility. This indicates a susceptibility to unforeseen tail risk, and is confirmed by a consistently higher rolling VAR measure, since December On average, from December 2012, this fund captures 67% of the upside movement of the JSE All Share, and only 19% of the downside, reflecting an asymmetrical performance profile which is so important for an absolute focussed portfolio. Current Portfolio Positioning The year was characterised by abnormal macro and political events locally and internationally. This resulted in dislocations in the markets but also in opportunities. This fund managed to take advantage of some of these dislocations. The Nedgroup Investment Opportunity Fund performed relatively well over the three months ending 31 December 2016, returning -0.33% for the quarter, significantly outperforming its peers, who managed to return on average -1.25% over the same period. During the quarter, an increased allocation to equities (local and offshore) added to performance. The fund s total equity exposure was at 55.1% (excluding property), which is close to the 60% mandated limit. Property also went up this quarter, to 7.4% from 7.1%. However, it is still below a high of 10% allocation held in the beginning of the year. Net risky assets (total equity and property) increased only fairly to 62.5% from 62.2% from the previous quarter. This was a result of unchanged property allocation and also the fund s reduction of its offshore equity exposure to increase domestic equity exposure. The fund s large exposure to financials, especially banking stocks, also added to performance. Avoiding Richemont, SAB, Sasol and UK property stocks also added to performance. Subsequently, the fund bought into Sasol and UK property. Active duration management and allocation to offshore denominated Eskom and Old Mutual bonds contributed to performance. The fund s duration varied from 2.3 years at the beginning of the year to almost zero, as the managers tactically exploited market reactions to abnormal news throughout the year. Despite an increase in duration from the previous quarter, the fund has maintained a very short duration position, currently sitting at 110 days, up from 66 days as at the end of the previous quarter. The currency protection strategy, initiated in 2015, to protect some of the offshore exposure against a strengthening rand, benefited the fund in The fund s hedging positions on single stocks also contributed to positive portfolio changes, removing the downside form counters such as Anglos, Naspers, Steinhoff, FirstRand and MTN. Detractors from performance included allocation to British American Tobacco, Mediclinic, Old Mutual and gold stocks. The fund continues to hold EuroStoxx EFTs at 8.48% to provide geared exposure in rand terms to the change in the Eurostoxx index. These had positive double digit returns compared to a -15% return of the EuroStoxx in rands. The fund, however, continues to be positioned cautiously but also in a position to take advantage of opportunities as they arise. 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Q Q Q Cash Floating Rate Notes Bonds Inflation Linked Bonds Preference Shares Convertible Bonds Property Equities: Domestic Equities: International Offshore Cash Offshore Bonds THE SHOPPING LIST BY GLACIER RESEARCH - Q4 - FEBRUARY

27 SA - MULTI ASSET - HIGH EQUITY Category Analyst: Johan Louwrens These portfolios invest in a spectrum of investments in the equity, bond, money, or property markets. These portfolios tend to have an increased probability of short-term volatility, aim to maximise long term capital growth and can have a maximum effective equity exposure (including international equity) of up to 75% and a maximum effective property exposure (including international property) of up to 25% of the market value of the portfolio. The underlying risk and return objectives of individual portfolios may vary as dictated by each portfolio s mandate and stated investment objective and strategy. Shopping List selection: Allan Gray Balanced Fund, Coronation Balanced Plus Fund, Foord Balanced Fund, Investec Opportunity Fund, SIM Balanced Fund Quartile Ranking As of Date: 31/12/2016 Top Quartile 2nd Quartile 3rd Quartile Bottom Quartile YTD 1 year 3 years 5 years 10 years Allan Gray Balanced A Coronation Balanced Plus A Foord Balanced R SIM Balanced R Investec Opportunity R Maximum Drawdown: Monthly Allan Gray Balanced A Coronation Balanced Plus A Foord Balanced R SIM Balanced R Rolling 3 Year s Investec Opportunity R Rolling Window: 3 Years 1 Month shift Risk-Reward: 3 Years Annualised Time Period: 01/01/2014 to 31/12/ Std Dev Allan Gray Balanced A Coronation Balanced Plus A Foord Balanced R SIM Balanced R Investec Opportunity R s As of Date: 31/12/2016 Source Data: Total YTD 1 year 3 years 5 years 10 years Allan Gray Balanced A Coronation Balanced Plus A Foord Balanced R SIM Balanced R Investec Opportunity R Risk Statistics Time Period: 01/01/2014 to 31/12/2016 Std Dev Max Drawdown (monthly) Up Period Percent Down Period Percent Sharpe Ratio Allan Gray Balanced A Coronation Balanced Plus A Foord Balanced R SIM Balanced R Investec Opportunity R Allan Gray Balanced A Coronation Balanced Plus A Foord Balanced R SIM Balanced R Investec Opportunity R (ASISA) South African MA High Equity THE SHOPPING LIST BY GLACIER RESEARCH - Q4 - FEBRUARY

28 ALLAN GRAY BALANCED Fund manager Benchmark Duncan Artus, Andrew Lapping, Simon Raubenheimer, Ruan Stander & Jacques Plaut No of quarters 33 ASISA SA MA High Equity category mean (excl Allan Gray Balanced Fund) Risk Description Moderate Aggressive Role of Benchmark Agnostic Inception Date 01 October 1999 Focus Absolute Fund Size (Rm) R Philosophy Fundamental, bottom-up, value, contrarian approach Fee Description (retail class) Annual management fee with a performance fee, maximum annual fee 1.50% (excl VAT) Glacier Risk Rating 5.84 Total investment charge 1.67% Property is not viewed as a separate asset class at Allan Gray as a result, property needs to compete with equities for a place in the portfolio. Historically, the fund has been able to protect capitalwell compared to some of its peers (in 2008/2009 for example). Using futures also makes it easier for Allan Gray to increase/decrease equity exposure without having to buy/sell the actual equity. The hedged equity portion of the portfolio can also limit losses if there is a market correction, but will detract from performance in rising markets. Fixed income capabilities are not as strong as Shopping List peers, and thus allocation is vanilla. This is a consequence of not finding enough attractive equity opportunities. Allan Gray has strong offshore capabilities in Orbis. The fund is considerable in size and thus manoeuvrability in terms of selling or buying sizeable positions in certain stocks is hampered. The fund is managed on a multi-counsellor basis with each fund manager effectively managing a separate balanced portfolio, and thus each deciding upon the asset allocation and stock selection. Allan Gray s investment philosophy is value-orientated, with their research efforts focused on identifying good quality assets that are priced below intrinsic value. A rigorous and disciplined process is applied and investments are usually made with a four-year view. Portfolio turnover therefore tends to be low. First and foremost on Allan Gray s list of priorities is absolute risk. Therefore, short-term performance will sometimes be sacrificed to try and mitigate this risk. The domestic equity committee, called the Share Policy Group (SPG), makes use of a voting system in order to determine which counters appear on the ranking table. Each manager still has full discretion over which counters they buy and there is no house-view portfolio. Allan Gray follows a bottom-up equity selection process. The SPG determines the broad margins within which the portfolio managers are required to allocate assets. Asset allocation is a consequence of the availability of attractively valued equities relative to the other asset classes within the set parameters. Andrew Lapping, who co-manages the Allan Gray Money Market fund, and Sandy McGregor are responsible for managing the fixed interest portion of the fund. The offshore portion is managed by Orbis. Following the passing of Simon Marais, Ian Liddle will be stepping down as CIO and relinquishing portfolio manager responsibilities to assume the position of chairman. Andrew Lapping has assumed the position as CIO in March These are changes that we will monitor closely, as Liddle, one of the most experienced portfolio managers, has been managing a large portion of the Balanced fund. The associate portfolio managers Ruan Stander and Jacques Plaut have been promoted to portfolio managers as of November The impact of Liddle s departure from portfolio management on the fund and the investment team is a critical qualitative consideration that will be taken into account when assessing the Balanced Fund. Current Portfolio Positioning The fund is suited for use in a portfolio with the aim of minimising drawdowns in down markets as well as a strong focus on real return. The fund s focus on capital protection further aids to temper overall volatility in a portfolio, particularly in adverse market conditions. It can be used in a moderate or moderate aggressive risk, absolute or relative return focussed portfolio with the aim of outperforming either inflation by 5% or the category average of the SA MA High Equity category over a five to ten year period. The fund has delivered above category average risk-adjusted returns since 2002, but tends to lag over the shorter term. Over the same measurement period on a five-year rolling basis, the fund has experienced no negative returns. The fund has protected capital well in down markets, particularly in the period 2007 to 2009 when the market fell 40% and the average balanced fund lost 17%. Over the same period, the Allan Gray Balanced fund was down 10%. Over five-year rolling periods since inception, the fund has achieved its risk benchmark of CPI +5% 80% of the time and consistently delivered above category-average returns. The fund has also historically had the lowest volatility amongst Shopping List peers, but since the fiveyear period ending June 2014, the Investec Opportunity fund has had the lowest volatility. The fund has been seeing decreased alpha generation capability and this could be directly attributable to size and the fund s ability to take meaningful positions in certain counters. The fund returned -1.62% for the quarter, underperforming the peer category average of -1.46%. The fund has however still managed to be one of the top performers on the Shopping List within its category, returning 6.31% for the year. Over longer periods, the fund has managed to remain in the top quartile for performance compared to its category peers, returning 12.78% per annum over 5 years. In addition to its stellar long-term absolute performance, it has managed to move into the top quartile for risk-adjusted returns at the end of 2015 on a rolling 5-year basis, as measured by the Sharpe ratio. SA equity exposure was increased slightly along with SA bonds, while SA and foreign hedged equity continued to contract. There were no other notable changes to asset class exposure within the fund. Local equity was the biggest contributor to performance for the year, with notable counters like Sasol and Standard Bank. Even with a strong showing internationally from Orbis, the contribution to performance was muted due to the appreciation of the rand. 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q SA Net Equity SA Hedged Equity SA Property SA Bonds SA MM/Cash Commodities Offshore Net Equity Offshore Hedged Equity Offshore Property Offshore Bonds Offshore MM/Cash Africa ex-sa THE SHOPPING LIST BY GLACIER RESEARCH - Q4 - FEBRUARY

29 CORONATION BALANCED PLUS Fund manager Karl Leinberger No of quarters 28 Benchmark Composite Benchmark (52.5% equity, 22.5% bonds, 5% cash, 20% international) Risk Description Moderate Aggressive Role of Benchmark Agnostic Inception Date 15 April 1996 Focus Relative Fund Size (Rm) R Philosophy Fundamental, bottom-up valuation driven approach Fee Description (retail class) Annual management fee Glacier Risk Rating 6.91 Total Investment Charge 1.75% This fund is managed by Karl Leinberger who is also the CIO of Coronation. The house arguably has one of the best research teams in the industry and has strong capabilities in all asset classes. The size of the fund may however become an issue going forward. This fund can be used in a moderate-aggressive risk, relative return focussed portfolio with the aim of outperforming the category average of the SA MA High Equity category over a seven to ten year period. The fund is managed by Karl Leinberger. Leinberger is the current CIO and has over 16 years investment experience, all of which have been spent at Coronation. He is supported by one of the largest and most experienced investment teams in SA. Duane Cable was formerly a comanager on this fund, but was announced as co-manager of Coronation Balanced Defensive and Coronation Capital Plus fund alongside Charles de Kock. The investment team consists of three former Coronation CIOs. The culture remains one of ownership and accountability and is client-focused. Given that staff ownership is 25%, the interests of the managers and clients are well aligned. Asset allocation is a bottom-up valuation process and they make use of a proprietary asset allocation tool implemented in A team of key individuals determine the macro-economic variables that will be used as inputs to the proprietary models used at Coronation. Key macro drivers are used as inputs, such as interest rates, inflation and also expected return. While the model will guide asset allocation decisions, each manager is responsible for the management of his/her funds given its risk profile. Leinberger is responsible for the asset allocation and stock selection of the fund. Coronation has developed a proprietary central research system which is available to all analysts and portfolio managers. Proprietary research is the foundation of their investment proposition. From this platform they construct portfolios that meet the various risk and return objectives. All portfolios reflect the same Coronation DNA, which comprises Coronation s best investment ideas, leveraging off the same investment process. All portfolio managers also have analyst responsibilities. Analysts are assigned cross-sector and this provides them with the tools to price-profit across sectors. The managers are style agnostic and take a long-term view by attempting to see through the business cycle in an attempt to identify intrinsic value. They are bottom-up investors and ignore market timing and catalysts. Fixed interest exposure is leveraged off the research by Mark le Roux s fixed interest team. The fund s offshore exposure is obtained through investing in a combination of Coronation s offshore fund offerings. Current Portfolio Positioning On a rolling five-year basis, the fund has delivered consistent abovecategory average, risk-adjusted returns since 31 July 2004, except during a brief stint from May to July The fund tends to have drawdowns greater than the category average and its peers, and over the last three years had a maximum drawdown of 5.54%, while the category average had a maximum drawdown of 4.13% over the same period. The fund also tends to have a higher volatility when compared to its Shopping List peers. Coronation as house tends to focus on longer-term periods (5 years plus) when evaluating equities, and since it has had an average exposure to equities of 66% since March 2007, it should also be judged according to this longer, more meaningful period. The fund has however had no negative returns over any fiveyear period since inception. The fund has delivered -2.64% for the last quarter, underperforming the category-average of -1.46%, bringing the total return for 2016 to 0.54%, compared to the category-average of 1.31%. Local equity detracted from returns, while international equity performed well in dollar terms, with the appreciating rand muting returns locally and detracting overall. Global equities are still preferred based on valuations, with the fund almost maximising its 25% offshore allowance. Contrary to equity, local versus international fixed income is preferred, given a favourable medium-term outlook on inflation in South Africa. This sentiment is reflected in the positive return of 0.37% provided by South African fixed income in quarter 4. Within the local equity held in the fund, a high exposure to consumer services and basic materials had a negative impact on performance, with the sectors producing % and -1.20% respectively for the quarter. Rand hedge stocks like Naspers, Steinhoff International Holdings and British American Tobacco are still held extensively, due to their management structure and diversification benefits. The strong rand has however, once again, eroded value with most of these shares performing poorly due to their currency exposure. 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q SA Equity Foreign Equity Property SA Cash SA Bonds SA Pref Shares & Other Foreign FI & Cash Foreign Pref Shares & Other THE SHOPPING LIST BY GLACIER RESEARCH - Q4 - FEBRUARY

30 FOORD BALANCED Fund manager Dave Foord, Daryll Owen & Dane Schrauwen No of quarters 33 Benchmark ASISA SA MA High Equity category mean (excl Foord Balanced Fund) Risk Description Moderate Aggressive Role of Benchmark Agnostic Inception Date 01 September 2002 Focus Relative Fund Size (Rm) R Philosophy Top-down, bottom-up, valuation driven approach Fee Description (retail class) Annual management fee with a performance fee Glacier Risk Rating 6.36 Total Investment Charge 1.47% Foord is a more equity focussed house. The fund s stock selection applies an absolute overlay to Foord s strong fundamental process, meaning stocks in the portfolio need to have a large margin of safety. The fund therefore has a low probability of capital loss, which is how Foord defines risk. The team has limited fixed interest capabilities relative to Shopping List peers. The fund will use vanilla instruments to express their fixed income views. With the introduction of the multi-counsellor approach in 2011, key man risk has been significantly reduced. This fund can be used in a moderate aggressive risk, absolute or relative return focussed portfolio with the aim of outperforming either inflation by 5% or the category average of the SA MA High Equity category over a seven to ten year period. The fund has been managed using a multi-counsellor approach since late 2011, with Dave Foord, Dane Schrauwen and Daryll Owen each managing a portion of the assets. Foord believes that meaningful investment returns are not earned by making incremental decisions, but that superior long-term returns are generated by identifying and taking advantage of economic cycles, and that buying at the right price is crucial. They do not take benchmarks into consideration when constructing portfolios, as Foord believes that they are often representative of what is simply big or in vogue. Guided by asset allocation parameters, each manager is allowed flexibility in the portion of the portfolio they manage. Their asset allocation style is predominantly top-down value orientated, but incorporates bottom-up portfolio construction. Their asset allocation process is forward looking does not make use of any form of mean variance optimisation. They believe that it is possible to form a good directional view on the interest rate cycle. As opposed to larger houses, Foord does not have formalised investment committees and meetings and they cite this as being an advantage, in that they are able to reposition and implement changes within the fund quickly. They have daily meetings where markets and company specific information is discussed. The entire team also sits in close proximity to each other and this facilitates timeous and constant information sharing. All research, on both equities and fixed interest, is conducted in-house, and portfolio managers also undertake research. The analysts maintain a stock ranking table that covers all the relevant forward looking metrics across all the shares in their research universe. They place an intrinsic valuation on the company and assess to what extent the market is pricing that valuation. Foord looks for stocks with good management teams and is willing to pay for what they deem fair value for quality businesses. The fund has relatively low turnover which is a result of being a concentrated portfolio with a few good ideas that will only be replaced when a better opportunity arises. The fund combines a top-down macroeconomic view for asset allocation with a bottom-up analysis of stocks in portfolio construction. The house has limited fixed interest capabilities and will thus invest in vanilla instruments. Foord has a dedicated offshore team in Singapore which manages the equity fund that forms part of the offshore exposure in the Foord Balanced fund. Current Portfolio Positioning The Foord Balanced Fund has been a consistent long-term performing fund, delivering annualised returns in excess of 12% over both five and seven years. From a quantitative performance this fund has performed well, but its performances should be considered over more meaningful periods, at least five years, as it does tend to underperform over shorterterm periods. This speaks to Foord s philosophy of getting broader directional trends right, and being buy and hold investors with a longerterm focus. The fund delivered -1.68% over the fourth quarter, dragging down its annual performance for 2016 to -1.00%. Over longer periods, and in line with the fund s intended purpose, it has produced strong returns over 5 and 7 periods, 12.08% and 12.18% respectively. Asset class exposure changed slightly, with local equity being trimmed by 2%, local bonds decreasing by 1%, local property increasing by 1% and foreign assets remaining flat. Within the local equity allocation, large caps were reduced by 1%, offset by the increase in small cap exposure. Foreign assets weighed down on total return to the fund, while interest-bearing assets, both bonds and cash, contributed positively to overall performance. Foord believes that economic growth within South Africa is unlikely to make a dramatic recovery, with rand based enterprises earnings growth at risk. The portfolio remains conservatively positioned, with a focus on high quality global businesses, while government bonds exposure is as a result of high yields as opposed to capital appreciation. 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Domestic Equity Domestic Property Domestic Corporate Debt Domestic Government Bonds Domestic Commodities Domestic Cash Foreign Equity Foreign Corporate Debt Foreign Listed Property Foreign Commodities Foreign Cash THE SHOPPING LIST BY GLACIER RESEARCH - Q4 - FEBRUARY

31 INVESTEC OPPORTUNITY Fund manager Clyde Rossouw No of quarters 34 Benchmark CPI + 6% Risk Description Moderate Aggressive Role of Benchmark Agnostic Inception Date 02 May 1997 Focus Absolute Fund Size (Rm) R Philosophy Fundamental bottom-up, valuation driven approach with a key emphasis on quality companies Fee Description (retail class) Annual management fee with a performance fee Glacier Risk Rating 5.69 Total Investment Charge 2.14% The Quality team leverages off the capabilities of a strong specialist team. Clyde Rossouw is very experienced in managing multi-asset portfolios. The fund will generate good alpha when markets are falling, but may struggle relative to peers when markets are buoyant and driven by high-beta stocks with little regard for quality (i.e. a momentum-driven market). The team has taken on more responsibility, relying less on outsourcing. They have their own analysts who now focus purely on the quality process and philosophy, covering local and global opportunities. This fund can be used in a moderate or moderate aggressive risk, absolute return focussed portfolio with the aim of outperforming inflation by 4% to 5% over a 5 to 10 year period. The absolute return focus, together with the fund s defensive positioning, benefits a portfolio by lowering volatility, particularly in adverse markets conditions. Clyde Rossouw is head of Quality at Investec Asset Management and focuses on multi-asset, absolute return, low volatility, real return equity investing. He has managed the Opportunity strategy since 2003, having joined the firm in initially as an asset and sector allocation strategist. The fund has a primary focus on investing in good quality companies with a secondary focus on buying them when they are attractively priced. Rossouw is responsible for the fund s asset allocation, which is determined by following a bottom-up relative valuation approach. Asset classes are thus bought on merit while taking into account the relevant risk. Asset allocation starts with equities and the fund follows a structured and systematic process. The equity holding will usually be concentrated with low turnover. The majority of the team is based in the UK and they have added two new analysts to the Cape Town team, both of whom are relatively inexperienced. They will also leverage off the research conducted by Chris Freund s equity team. The Quality team makes the final decision on the fixed interest portion, and, while not aligned with the Fixed Income team, they do draw on the expertise and experience of the analysts and portfolio managers of the Fixed Income team, both locally and internationally. Offshore exposure is obtained via investing in two non-retail offshore funds. Both funds are managed by the Quality team. They bolstered their offshore capability with the addition of ex-threadneedle analysts and portfolio managers in Quantitative Highlights Current Portfolio Positioning The Investec Opportunity fund has delivered returns in excess of 11.0% per annum over both five and seven years. It has delivered these type of returns at lower levels of volatility when compared to its peers. These lower levels of volatility has led to excellent risk-adjusted returns as measured by its Sharpe ratio. This fund performs particularly well during times of high market volatility and periods characterised by slightly higher drawdowns. The fund has delivered a quarterly return of -1.58%, underperforming the category average of -1.46%. It has however managed to retain a positive one-year return of 1.30%, broadly in line with the category average of 1.31%. Foreign asset exposure has remained at the limit, with a gross exposure of around 29%, reducing the net exposure to 23.8% through the use of short foreign currency futures. Within the foreign assets, equity is still preferred, with minimal exposure to listed property. In dollar terms, offshore assets underperformed slightly. On the local side, asset class exposure has remained relatively stable, with the exception of the slight decrease in the cash holding. Domestic bonds and cash played a positive role in performance, with South Africa avoiding a sovereign credit rating downgrade and markets pricing in a more optimistic outlook on South Africa. On a relative basis, underweight positions in basic resources and media have delivered active returns, while underweight positions in technology and construction and materials have detracted. The top local equity holdings continue to show mixed results, with large exposures to Assore Ltd. and Sasol Ltd. providing handsome returns, while British American Tobacco Plc. and Mediclinic International Plc. reducing returns. Over longer, more meaningful periods, the fund still manages to perform well compared to peers in its category, outperforming the average on a 3, 5, 10 and 15 year basis. 94% 74% 54% 34% 14% -6% Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Foreign Assets Bonds Foreign Assets Cash / Money Market (incl FX) Foreign Assets Commodities Foreign Assets Equities Foreign Assets Property (listed) Local Assets Bonds Local Assets Cash / Money Market (incl FX) Local Assets Commodities Local Assets Equities Local Assets Property (listed) THE SHOPPING LIST BY GLACIER RESEARCH - Q4 - FEBRUARY

32 SIM BALANCED Fund manager Fred White & Patrice Rassou No of quarters 48 Benchmark ASISA SA Multi-Asset High Equity category mean Risk Description Moderate Aggressive Role of Benchmark Cognisant Inception Date 01 February 1995 Focus Relative Fund Size (Rm) R Philosophy Bottom-up and Top-down, pragmatic value approach Fee Description (retail class) Annual management fee with a performance fee Glacier Risk Rating 5.70 Total Investment Charge 1.77% This is a benchmark cognisant fund that will resemble SI s best view of all underlying asset classes and instruments. As of June 2016, Gerhard Cruywagen has relinquished the management of the fund, with this responsibility now vesting with Fred White, who has been an integral part of the asset allocation committee. Patrice Rassou, head of equities, will now assume the role of secondary manager on the fund. Going forward, White will make use of SI s house-view moderate SWIX portfolio, as opposed to managing equities against the institutionally focussed Alexander Forbes Large Manager Watch (LMW). From our interactions with White, it is clear that he will increase the risky asset exposure in the fund and will now aim to compete directly with the traditional large retail high equity managers, as opposed to the balanced strategy s institutional peers. White has indicated that more focus will be placed on risk management through the use of derivatives, which is a new innovation to the existing process. He has employed a new resource, Ralph Thomas, to assist him in this regard. Our initial view is that these changes are material and that the return signature will be different to Cruywagen s Balanced Fund going forward, however, it is also our view that most of the intended changes will be positive. White s main responsibility will be asset allocation and managing these exposures, either by means of derivatives or physical exposures. Underlying instrument selections such as equities, fixed income, property and offshore securities will be the responsibility of the various specialist teams within the broader SI group. The fund will therefore seek to leverage off the strengths of these various specialist teams, ultimately resembling a blend of the best views of these teams. From extensive engagements with White and senior management, it is clear that the intention is to create a highly competitive fund in the retail CIS, SA multi-asset high equity space. From a return perspective, we can expect the fund to be more competitive going forward, with risk actively managed through the use of derivatives. It is comforting to know that the lead portfolio manager, White, will be substantially invested alongside clients. This fund can be used in a moderate aggressive risk, relative return focussed portfolio with the primary aim of delivering long-term capital growth for investors, while also adhering to Regulation 28 limitations. The fund is a peer agnostic fund that will add additional diversification benefits when combined with its peers. As of June 2016, Cruywagen no longer manages the fund and this responsibility now vests with Fred White, who has always been an integral part of the asset allocation committee. Patrice Rassou is the secondary manager and provides input on the equity selection. The Balanced Fund is the best reflection of SI s house view. There is a strong focus on following SI s strong pragmatic value philosophy and process. Valuations are based on a belief that long run average returns are mean reverting within asset classes. There are three key committees, or Model Portfolio Groups (MPGs), that impact the Balanced Fund. Previously, Cruywagen constructed his own equity building block, in line with the equity MPG view. Going forward, White will make use of the house view moderate SWIX portfolio. Similarly, property, bond and cash exposure is also managed by leveraging off the asset class MPGs, and allocations are made according to the mandate and portfolio construction process. The decisions have to be carried through by all managers although they are allowed some flexibility. The direction must be the same, but magnitude of the over-/underweight can differ. The incumbent manager has a more aggressive style when compared to his predecessor, aiming to achieve maximum risk-adjusted returns and deliver superior capital growth over the longer term. Due to the diversification benefits, the fund will always be close to, or at full offshore exposure. Offshore equity exposure is currently primarily gained through unit trusts, index funds or ETFs. White has indicated that more focus will be placed on risk management through the use of protection, and SI has successfully balloted for the inclusion of derivatives in the fund. Ralph Thomas has been appointed as the dedicated resource in this regard. Quantitative Highlights The SI Balanced Fund is a peer agnostic fund and has delivered consistently high second quartile performances. It has delivered these returns with volatility levels higher than its peers. Amongst Shopping List peers the fund experienced the greatest drawdown during the financial crisis of (-24.0%, while the average balanced fund experienced -15.7%). It is important to note that this was prior to Cruywagen managing the fund. When looking at shorter-term figures it does seem that the overall volatility profile is steadily increasing. As the fund is cognisant of peers, it follows a similar volatility and drawdown profile as the category average. Given the fund s relative focus, we expect to see drawdowns similar to its Shopping List peers and for the quarter the fund s maximum drawdown was 1.32% while the category average was 2.35%. Current Portfolio Positioning The fund ended quarter four producing -1.24%, pushing down its one year return ending 2016 to 5.36%. The fund however still managed to outperform the category average and FTSE/JSE All Share Index, with one of the highest performances compared to its Shopping List peers. Local equity exposure has been increased by approximately 3% and international exposure has been decreased by approximately 1.15%. The remainder of the other asset class exposures have been left relatively unchanged. Local equity and fixed interest both had a positive impact on return over the year, while international assets detracted from performance. On a relative basis, an overweight exposure to rand hedge Naspers, along with an overweight position in Steinhoff International Holdings detracted from returns. On an absolute basis, the biggest contributions to performance were Anglo American Plc., Bidvest Ltd. and Murray & Roberts Holdings Ltd. Local equity is still underweight within the fund, citing a high P/E as the rationale behind the weighting, compared to a more optimistic outlook on local bonds, which are over weighted. Local property and global equities are both seen as being at fair value, with a neutral outlook. 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Q Q Q Q Q Q Q Q Q Q Q Q Cash and Money Market Assets Inflation Linked Bonds Interest Bearing Investments Property Equities International Assets Preference Shares THE SHOPPING LIST BY GLACIER RESEARCH - Q4 - FEBRUARY

33 SA - MULTI ASSET - FLEXIBLE Category Analyst: Johan Louwrens These portfolios invest in a flexible combination of investments in the equity, bond, money and property markets. The underlying risk and return objectives of individual portfolios may vary as dictated by each portfolio s mandate and stated investment objective and strategy. These portfolios may be aggressively managed with assets being shifted between the various markets and asset classes to reflect changing economic and market conditions and the manager is accorded a significant degree of discretion over asset allocation to maximise total returns over the long term. Shopping List selection: Bateleur Flexible Prescient Fund, Laurium Flexible Prescient Fund, PSG Flexible Fund, Truffle Flexible Fund Quartile Ranking As of Date: 31/12/2016 Top Quartile 2nd Quartile 3rd Quartile Bottom Quartile YTD 1 year 3 years 5 years 7 years 10 Years PSG Flexible Truffle MET Flexible A Bateleur Flexible Prescient A1 Laurium Flexible Prescient A1 Maximum Drawdown: Monthly (ASISA) South African MA Flexible PSG Flexible Truffle MET Flexible A Bateleur Flexible Prescient A1 Laurium Flexible Prescient A1 (ASISA) South African MA Flexible Risk-Reward: 5 Years Annualised Time Period: 01/01/2014 to 31/12/ Std Dev PSG Flexible Truffle MET Flexible A Bateleur Flexible Prescient A1 Laurium Flexible Prescient A1 s (ASISA) South African MA Flexible As of Date: 31/12/2016 Source Data: Total YTD 1 year 3 years 5 years 7 years PSG Flexible Truffle MET Flexible A Bateleur Flexible Prescient A Laurium Flexible Prescient A (ASISA) South African MA Flexible Risk Statistics Time Period: 01/01/2014 to 31/12/2016 PSG Flexible Truffle MET Flexible A Bateleur Flexible Prescient A1 Laurium Flexible Prescient A1 (ASISA) South African MA Flexible Std Dev Max Drawdown (monthly) Up Period Percent Down Period Percent Sharpe Ratio Rolling 3 Year s Rolling Window: 3 Years 1 Month shift PSG Flexible Truffle MET Flexible A Bateleur Flexible Prescient A1 Laurium Flexible Prescient A1 (ASISA) South African MA Flexible SA CPI + 5% THE SHOPPING LIST BY GLACIER RESEARCH - Q4 - FEBRUARY

34 BATELEUR FLEXIBLE PRESCIENT Fund manager Kevin Williams No of quarters 4 Benchmark CPI + 4% Risk Description Medium to High Role of Benchmark Agnostic Inception Date 1 July 2010 Focus Absolute Fund Size (Rm) R Philosophy Bottom-up stock picking, with a top-down macro overlay Fee Description (retail class) Performance fee Glacier Risk Rating 6.84 Total Investment Charge 2.66% One of the key strengths of the Bateleur Flexible Fund has to be the fund s very consistent returns, with very low levels of risk and drawdowns, consequently leading to excellent risk-adjusted returns. The two main portfolio managers, Kevin Williams and Charl Gouws have solid experience, and while the team is still relatively small, it is comforting to see that Bateleur is investing in their process and expanding their team. Galen Hossack has been with Bateleur since 2012 and has recently been made portfolio manager of the Bateleur Equity Fund. This will further contribute to experience and a reduction in key-man risk. They have added three additional analysts since Kevin Williams stepped down as a member of the Ranmore Fund Management investment committee and as co-portfolio manager of the Ranmore Global Equity Fund (RGEF) at the end of December This change has resulted in the Bateleur Flexible Prescient Fund commencing a process to reduce its exposure to the RGEF and at 31 January 2017 the fund exposure had reduced to 3.3% of the fund NAV. The remaining exposure will be redeemed in due course. This shift away from Ranmore Fund Managers will closely be monitored in the future. Bateleur is an equity biased house, preferring to run the flexible fund as an equity (including property) cash fund. Cash exposure is gained by investing in the Prescient Money Market fund. Bateleur combines a macro, top-down approach with its bottom-up fundamental research. They spend a fairly significant part (±30%) of their research process discussing the macro environment, and this sets them apart from the more bottom-up focussed flexible funds such as the PSG Flexible Fund and the Truffle MET Flexible Fund. Bateleur is an owner-managed boutique investment house with a hedge fund background. Their focus on managing risk and not losing clients money has led them to deliver excellent risk-adjusted returns. They have a clearly defined investment philosophy with a robust investment process. Their size allows them to be nimble and to discuss and evaluate opportunities quickly as they present themselves. Bateleur has expanded its team with a new team member who joined in 2014 and two new graduates who joined at the beginning of 2016, of whom one is staying on. The Bateleur Flexible Prescient Fund will work well in an absolute return focussed multi-asset portfolio, which seeks a real return of between 4% and 5%. It is an equity biased fund, typically moving between equity and cash depending on the availability of real-return opportunities. This fund will work well in combination with other multi-asset flexible funds such as the PSG Flexible and Truffle Flexible Fund. The fund is ideal for people seeking a slightly more aggressive real return profile but who are sensitive to capital losses, and who prefer a benchmark agnostic approach. While the fund does tend to have a higher exposure to equity than either the PSG or Truffle funds, it achieves these exposures at lower levels of systemic risk, delivering a lower risk profile overall. Consequently, this fund works well in a wide variety of portfolios, ranging from slightly conservative to more aggressive as it materially lowers overall portfolio risk. The Bateleur Flexible Fund has delivered excellent returns since its inception while taking on very little risk. This was particularly evident during 2015, a very volatile year in terms of investment performances. During this period the FTSE/JSE All Share TR Index returned 5.13%, with the Bateleur Flexible Prescient Fund returning 21% for the 12 months ending 31 December Over the last three years, the Bateleur Flexible Prescient Fund has managed to share on average 81% of the upside, and on average 29% of the downside. This type of asymmetrical return profile is exactly what a Flexible Fund should exhibit, with Bateleur having one of the most consistent and prevalent asymmetrical return profiles when compared to some of its peers. The fund has one of the lowest volatility profiles as reflected by its three-year rolling returns when compared to some of its top performing peers over the same period. Current Portfolio Positioning Over the last quarter, the fund has returned -4.30%, dragging down the year-to-date figure to -3.37%. Over longer, more meaningful periods, the fund has still performed admirably, delivering 10.84% per annum over 3 years and 16.02% per annum over 5 years. Over the course of 2016, standard deviation has picked up, but it still remains on the lower end when compared to its Shopping List peers over rolling 3-year periods. Asset allocation has remained unchanged over the quarter, and the fund has no concrete expectations on local vs. foreign assets, retaining its international exposure at 18%. Offshore exposure is however vicariously increased by holding rand hedge stocks like Steinhoff International Holdings and Naspers. The Ranmore Global Equity Fund struggled to find its feet in the final quarter of the year, detracting from overall fund performance. Value outperformed growth shares decisively, with the fund suffering due to a large exposure to Naspers. Insufficient commodity exposure hampered performance, along with real estate and consumer discretionary exposure. On the upside, financials played a positive role in performance along with some industrial exposure. The fund has been positioned according to more stock-specific choices, avoiding over-emphasis on topdown macro decisions. Compared to the fund s historical average, the number of holdings has increased, with smaller weightings taking centre stage. 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Q Q Q Q Q Q Domestic Equity Offshore Equity Cash THE SHOPPING LIST BY GLACIER RESEARCH - Q4 - FEBRUARY

35 LAURIUM FLEXIBLE PRESCIENT Fund manager Gavin Vorwerg, Murray Winckler No of quarters 4 Benchmark CPI + 5% Risk Description Medium to High Role of Benchmark Some benchmark cognisance Inception Date 1 February 2013 Focus Absolute, with a relative bias Fund Size (Rm) R Philosophy Bottom-up stock picking, with a top-down macro overlay Fee Description (retail class) Annual management fee with a performance fee Glacier Risk Rating 7.11 Total Investment Charge 2.65% The fund has an absolute return mandate, but the managers are cognisant of the broader JSE All Share Index as well as their peers. The fund is therefore slightly more relatively managed than its peers with a similar mandate. Laurium has a definite bias towards equity with exposure to other asset classes being opportunistic, or as a result of not finding sufficient opportunities in locally listed shares. Offshore exposure will be gained primarily through ETFs. Fundamental research in offshore stocks is limited to competitors of local counters, and could be included in the portfolio should they offer compelling value. The inclusion of direct offshore holdings is therefore as a result of local fundamental research as opposed to actively looking for offshore opportunities. Laurium also has some excellent African investment capabilities and, should opportunities avail themselves, they will be included in their local SA portfolios. These opportunities will be fundamentally researched. The investment team at Laurium has a strong accounting background and places a lot of emphasis on financial analysis of companies when conducting fundamental research. Furthermore the team at Laurium places a lot of emphasis on interactions with leaders in the SA business environment for idea generation and as part of their fundamental research. These interactions may be formal and informal in nature. Laurium has been managing hedge and long-only funds investing across Africa since 2008, when it was founded by Murray Winckler and Gavin Vorwerg. They have had the benefit of an extended bull run, but the senior members of the investment team bring with them years of experience. The investment team has won numerous hedge fund awards, while the long-only flexible fund has delivered some impressive returns since its inception when compared to the broader FTSE/JSE All Share TR Index. Murray Winckler and Gavin Vorwerg have over 26 years and 17 years investment experience respectively, while Craig Sorour and Paul Robinson as the two heads of research (local and Africa respectively) have over 16 years and 11 years experience, respectively. The team has been relatively stable with only one analyst leaving and being replaced since the firm s inception. The team is able to clearly articulate their philosophy and process, and based on their extensive experience, we believe this team to be of a high calibre. Laurium is well positioned to take advantage of African opportunities, should it be suitable for their SA portfolios, through their numerous African investments and experience. This is an SA Multi-Asset Flexible Fund, with a bias towards equity. Other asset classes such as money market instruments, bonds and property will be opportunistically added. The fund aims to deliver a real return of 5%, however, the fund is more relatively focussed than a pure absolute type fund, with the managers trying to outperform the broader SA equity market as well as their peers. This is an ideal fund for investors that seek long-term real growth. The fund will work well in a slightly more aggressive multi-asset portfolio, especially with funds such as the Truffle Flexible Fund, which is a strictly absolute, bottom-up focussed fund which more readily invests in other asset classes. The fund s performance over three years ending December 2016 has seen it registering a maximum drawdown of only 5.18%. Over this same period, the JSE registered a maximum drawdown of 8.33%. The fund delivered consistent first quartile returns over a rolling 3-year period. This fund has exhibited excellent, positive asymmetric returns as measured by the funds up and down capture ratios versus the FTSE/JSE All Share TR Index over rolling one-year periods since inception. It is a strong generator of excess returns. Despite the fact that the fund has an absolute return benchmark, it is managed on a more relative basis, with the team very cognisant of outperforming the JSE and also its peers. On a relative basis the fund s volatility tends to be slightly higher than its peers, albeit significantly less than the overall market. 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Current Portfolio Positioning The fund has outperformed the FTSE/JSE All Share TR Index over the quarter, as well as the category average, delivering -0.15%. Over rolling 3 year periods, the fund continues to exhibit top quartile performance, and has one of the highest Sharpe ratios amongst its Shopping List peers. Over the last quarter, cash has been mobilised and invested in local equity, property and bonds, albeit marginally. Foreign equity contributed positively to performance, while the limited exposure to international bonds had a limited effect on fund returns. On the local side, cash holdings propped up fund return, while equity had a negative effect. Large exposures to rand hedge stocks, in particular Naspers, Reinet Investments and Steinhoff International was detrimental to overall fund performance. Counters which contributed positively to performance over the quarter include MTN Group Ltd., FirstRand Ltd. and Foschini Group Ltd. Exxaro Resources was added in the top 10 holdings of the fund, citing a favourable valuation. An improved global outlook, along with reasonable local valuations, has tilted the fund towards emerging markets, while equities are preferred to property and bonds. Fund currency exposure over the quarter was 45% to South Africa, 36.8% to developed markets, 8.7% to emerging markets (ex SA), 5.3% to UK and 4.2% to Africa. Africa Equity Bond Cash Equity Foreign Equity Property THE SHOPPING LIST BY GLACIER RESEARCH - Q4 - FEBRUARY

36 PSG FLEXIBLE Fund manager Paul Bosman & Shaun le Roux No of quarters 30 Benchmark CPI + 6% Risk Description Medium to High Role of Benchmark Agnostic Inception Date 02 November 1998 Focus Absolute Fund Size (Rm) R Philosophy Fundamental, bottom-up, value approach with a key focus on moat, management and margin of safety Fee Description (retail class) Annual management fee with a performance fee Glacier Risk Rating 6.06 Total Investment Charge 2.47% The fund will typically only be invested in either cash or equity and will not include other asset classes such as fixed income securities (longer duration bonds) or property. This is a fully flexible fund and the manager is prepared to invest a large amount of the fund in cash, should he feel that equities offer little value. Conversely, the fund may also invest up to 100% in equities as far as practically possible from a liquidity perspective and margin of safety. This is currently the largest fund in the multi asset flexible category. The fund is benchmark and peer agnostic, generating returns from specific shares that are different from its peers. As an example, this fund s performance will typically be driven by unique counters which are different to some of its more wellknown peers. The cash in this fund will be enhanced with a weighted average duration of around 164 days, mainly through the use of NCD instruments. As the name suggests, the fund offers flexibility to the manager. The manager can hold cash, should he feel equities are expensive. Holding more cash should result in less risk, but this will also lead to lower returns. This is a good option for investors that would like to take advantage of the manager s ability to make a decision as to whether equities seem expensive or not. It can also bring a sense of dynamism to a static portfolio split between equity and fixed income, overweighting equity in times when it is deemed to be inexpensive, or overweighting fixed income instruments or cash in high risk environments. Furthermore, it is ideal to use in an absolute focussed, moderate to aggressive portfolio. The investment team, both equity and fixed income, consists of 17 members. The fund was managed by Jan Mouton until 29 February From 1 March 2016, the management of the fund was taken over by Paul Bosman and Shaun le Roux. Paul Bosman has 11 years of investment experience, is the manager of both the PSG Stable Fund and the PSG Balanced Fund, and has assisted Mouton for the last 11 years in managing the PSG Flexible Fund. Shaun is the portfolio manager of the PSG Equity Fund and has 19 years of investment experience, 16 of which have been spent with PSG. Paul brings with him multi-asset management as well as asset allocation experience, while Shaun brings with him a wealth of equity management experience, particularly when it comes to idea generation. Jan Mouton continued to function as chairman of the equity investment committee until June He has subsequently decided to focus on his personal endeavours and is no longer chairman of the equity committee. Greg Hopkins, CIO, has taken over as head of the equity committee. These changes were effective as of middle July We believe this transition was transparent and very well managed. Hence we have maintained our favourable stance on this fund. The portfolio managers and team are co-investors in this fund and therefore clients and the managers interests are aligned. The investment process is well articulated and structured to ensure that idea generation takes place effectively and that these ideas are vetted and brought to fruition in a timeous manner. The asset management arm of PSG is part of the wider PSG group and can leverage off the group s extensive resources and experience should they need to. As a result, a culture of strong corporate governance is evident in how investment committees are structured and undertaken. The fund has a 15 year performance track record, one of the very few funds in the multi asset flexible category that offer such a long history. The fund has a low correlation with its peers and the category as a whole. The fund s excess returns are generated mainly through its ability to generate alpha as opposed to the interaction between the fund and the general market, i.e. beta. The fund s risk profile as measured by standard deviation and drawdowns improved markedly since 2008, and is one of the less risky funds in the flexible space today. The fund has delivered consistent 1st and 2nd quartile risk-adjusted returns as measured by its Sharpe, Sortino and Calmar ratios. PSG s investment process lends itself to stock selections that are slightly more contrarian in nature than some of its peers. This, together with their tendency to move into certain mean-reverting stocks early, may lead to periods of underperformance. Current Portfolio Positioning The fund has produced excellent fourth quarter returns, 4.74%, outperforming the category average with ease. Over the entire 2016 period, the fund has excelled, producing an impressive 17.67%, beating its CPI + 6% benchmark. This trend continues over the longer term, producing 11.47% per annum over 3 years, 15.68% per annum over 5 years and 14.07% over 10 years. The composition of the fund has changed slightly, with a slight shift in local equities, decreasing to just under 50%, with local cash being increased marginally and foreign equities being trimmed. Some international holdings which contributed to the fund s performance were counters like Berkshire Hathaway Inc., JPMorgan Chase & Co., Capital One Financial Corp. and Wells Fargo & Co. Locally, FirstRand Ltd. along with Glencore PLC contributed positively to performance. From a sector perspective, financial services and basic materials were the strongest contributors to success, while technology and consumer defensive detracted the most. The managers believe that higher quality rand hedge stocks are potentially overpriced and have therefore positioned the fund to take advantage of quality business with a margin of safety that they feel will produce satisfactory longer-term returns. 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Domestic Resources Domestic Financials Domestic Industrials Domestic Real Estate Cash, Derivative & Money Market Foreign Equities Foreign Cash, Derivative, Money Market THE SHOPPING LIST BY GLACIER RESEARCH - Q4 - FEBRUARY

37 TRUFFLE FLEXIBLE Fund manager Charles Booth, Ian Power, Jonathan Du Toit No of quarters 6 Benchmark CPI + 5% Risk Description Medium to High Role of Benchmark Agnostic Inception Date 1 January 2011 Focus Absolute Fund Size (Rm) R Philosophy Bottom-up stock picking, relative valuation process Fee Description (retail class) Annual management fee Glacier Risk Rating 6.90 Total Investment Charge 2.03% The fund is benchmarked against the mean of the SA multi-asset flexible category, but its primary objective is to deliver absolute returns of CPI+5% over rolling three year periods. The way Truffle views risk is unique, as they place a great deal of emphasis on quantifying the possible downside of any potential investment. Should the possible downside be acceptable and the investment s expected return is greater than CPI+5% it will be considered as a possible candidate for inclusion in the portfolio. Asset allocation is primarily a result of the bottom-up valuation process. The fund will also invest in bonds and property, with the latter, however, needing to compete with equities to justify its inclusion in the portfolio. The fund will make use of options strategies to hedge positions in the portfolio should the costs justify it. All investment team members invest alongside their clients in the most expensive fee classes and no personal trading accounts are allowed. The long-only investment team is led by a highly experienced team, consisting of three portfolio managers, one fixed income specialist and five additional analysts. The named portfolio managers are Charles Booth, Ian Power and Jonathan du Toit. Charles has over 35 years experience and began his career at Allan Gray Investment Council in He then entered stock broking and spent the next twelve years as head of research and director at Simpson McKie Inc. (Now HSBC) and JD Anderson (now UBS). Charles joined RMB Asset Management in 1993 and left in 2008 as their CIO. He joined Truffle in 2009 to develop their traditional asset management capability. Ian Power has over 22 years investment experience, and began his career at RMB Asset Management in During this time Ian managed various mandates including balanced mandates and segregated aggressive equity funds, and started the RMB Mid & Small Cap Fund which he ran for three years. He was part of the asset allocation committee, head of industrials and finally head of equities. Jonathan is a qualified CA(SA) and CFA charterholder. He completed his articles at Deloitte and Touche from 2003 to 2006 and joined Allan Gray/Orbis at the end of 2006, where he was primarily responsible for global financial stocks. Jonathan joined Truffle in August Nicole Agar, a senior investment professional with 19 years of experience joined in 2015, while two additional members, Saul Miller (19 years experience) and SM van Garderen (25 years experience) also joined during the second quarter of 2016, from Argon Asset Management. The team now boasts considerable skill and expertise with a good mix between senior and junior team members. Truffle has a clearly defined fundamental, bottom-up value philosophy and a well-defined, unique investment process that places a lot of emphasis on trying to quantify the downside of a potential investment. The fund is ideal for investors that target an absolute return of at least CPI+5%. These investors are typically able to take on more risk, either to save for retirement or as part of a diversified retirement portfolio to provide longerterm capital growth. The portfolio is not Regulation 28 compliant. Flexible funds are unique in that they offer an investor the opportunity to participate in a rising market, but also the opportunity to revert to more conservative asset classes should they feel valuations are stretched. Consequently the investor does not need to share in the downside. Equity funds are constrained in this aspect as they are forced to have a minimum of 80% invested at all times in risky equities. The Truffle Flexible Fund is certainly focussed on delivering such an asymmetrical return profile, with a lot of time being spent trying to quantify the possible downside to any investment included in the portfolio. This is also a good fund to use in combination with the PSG Flexible Fund, or the Bateleur Flexible Fund which has traditionally been managed on a cash/ equity basis, as the Truffle Flexible Fund will more readily include other asset classes such as property and bonds. It will also work well with a fund such as the Laurium Flexible Fund that is managed on a slightly more relative basis and has historically included a bigger exposure to risky assets. The Truffle Flexible Fund continues to deliver consistent 1st quartile performances over rolling 3-year periods. Since inception it has delivered consistent first and second quartile performances. On average the fund has captured 84% of the upside on the FTSE/JSE All Share, but only 25% of the downside. This confirms the team s unique approach to risk management and quantifying the potential downside of an individual investment. The fund s volatility is relatively low when compared to its peers, while it has protected capital well since its inception, as measured by its drawdowns. Based on rolling one-year returns the fund has outperformed CPI+5%, 79% of the time over the last five years, while the rolling three-year returns of the fund has outperformed its CPI+5%, 100% of the time over the same period. The fund has also outperformed the JSE All Share Index, 100% of the time, since 1 November 2011, at significantly lower levels of volatility and drawdowns. Finally the fund has displayed excellent risk-adjusted returns as measured by its Calmar, Sharpe and Sortino ratios. Current Portfolio Positioning For the three months ending 31 December 2016, the fund underperformed (-3.73%) compared to its CPI+5% benchmark (+1.80%), the broader JSE All Share Index that delivered -2.09% and the average peer that delivered -1.26%. The fund s short term performance figures continue to disappoint. Underperformance can mainly be attributed to a stronger local currency and the underweight exposure of the fund to basic resources that had a particularly good run over the year. The fund s underperformance can also be attributed to its exposure to UK assets, especially UK property equity. Exposure to precious metals in the fund detracted from performance over the quarter as US equities rallied after the US election and investors were bearish on safe-haven assets. Large positions in rand-hedge stocks also significantly detracted from performance, as the rand strengthened over the quarter. In terms of asset allocation, significant movements came from domestic equity, which was reduced by 3.10% to 41.4% of the fund s holdings, and an increase in domestic fixed income holdings (+2.00%) and local property (+1.50%) on an effective basis. Although there still remains significant exposure to UK assets in the fund, the portfolio managers were bearish on the UK over the quarter as many of these assets contributed negatively to performance. Exposure to Intu Properties Plc was reduced completely from 0.96% in to 0% in. Similarly, exposure to Capital & Counties Properties was reduced by 0.78% from 0.80% in the previous quarter to 2% in Q However, the portfolio managers still believe the investment case for this counter will bear fruition in three to five years. Exposure to Investec Plc was significantly reduced by 1.83% from 2.58% to 0.75%, even with it being the ninth highest contributor (+9%) to the fund s performance over the quarter. The fund s largest position was in rand-hedge counter, Naspers, at 5.09% and was the largest detractor from performance (-0.96%). Other rand-hedge counters such British American Tobacco (4.21%) and Compagnie Financiere Richmont (0.30%) detracted 0.50% and 6% respectively from performance. 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Q Domestic Equity Domestic Property Domestic Fixed Income Holdings Domestic Cash Foreign Equity Foreign Fixed Income Holdings & Money Market THE SHOPPING LIST BY GLACIER RESEARCH - Q4 - FEBRUARY

38 GLOBAL - MULTI ASSET - HIGH EQUITY Category Analyst: Shawn Phillips These portfolios invest in a spectrum of investments in the international equity, bond, money, or property markets. These portfolios tend to have an increased probability of short-term volatility, aim to maximise long-term capital growth and can have a maximum effective equity exposure of up to 75% and a maximum effective property exposure of up to 25% of the market value of the portfolio. The underlying risk and return objectives of individual portfolios may vary as dictated by each portfolio s mandate and stated investment objective and strategy. Most of the funds in this newly created category were previously in the Foreign Asset Allocation Flexible category. Shopping List selection: Coronation Global Managed FF and Investec Global Strategic Managed FF Quartile Ranking As of Date: 31/12/2016 Top Quartile 2nd Quartile 3rd Quartile Bottom Quartile YTD 1 year 3 years 5 years 7 years 10 years Investec Global Strategic Managed FF B Coronation Global Managed [ZAR] FF A Risk-Reward: 5 Years Annualised Std Dev Investec Global Strategic Managed FF B Coronation Global Managed [ZAR] FF A (ASISA) Global MA High Equity Maximum Drawdown: Monthly s As of Date: 31/12/2016 Source Data: Total YTD 1 year 3 years 5 years 7 years 10 years Investec Global Strategic Managed FF B Coronation Global Managed [ZAR] FF A (ASISA) Global MA High Equity Risk Statistics Std Dev Max Drawdown (monthly) Up Period Percent Down Sharpe Period Ratio Percent Investec Global Strategic Managed FF B Coronation Global Managed [ZAR] FF A Investec Global Strategic Managed FF B Coronation Global Managed [ZAR] FF A (ASISA) Global MA High Equity Rolling 1 Year s Rolling Window: 1 Year 1 Month shift (ASISA) Global MA High Equity Investec Global Strategic Managed FF B Coronation Global Managed [ZAR] FF A (ASISA) Global MA High Equity THE SHOPPING LIST BY GLACIER RESEARCH - Q4 - FEBRUARY

39 CORONATION GLOBAL MANAGED Fund manager Louis Stassen and Neil Padoa No of quarters 06 Benchmark 60% MSCI All Country World Index and 40% Barclays Global Bond Aggregate Risk Description Aggressive Role of Benchmark Agnostic Inception Date 29 October 2009 Focus Absolute Fund Size (Rm) R Philosophy Bottom-up, valuation-driven Fee Description (retail class) Annual management fee Glacier Risk Rating 9.96 Total Investment Charge 2.08% The fund is managed according to the Coronation DNA of employing a common sense, valuation-driven process of identifying mispriced assets that are trading at a discount to their long-term value. The fund is biased towards equities and primarily invests in developed economies (including the US, Europe and Japan) although the fund is also mandated to invest in emerging markets. The equity component of the Coronation Global Managed Fund also reflects Louis Stassen s best view in the Coronation Global Select Equity Fund. In addition to this, Stassen s team of seven members will express their high conviction views by making use of derivatives and ETFs in the Coronation Global Managed Fund. Stassen s team will also leverage off research conducted by Gavin Joubert s GEM (Global Emerging Markets) team should they want to increase their exposure to emerging markets. The fixed interest research is conducted by Nishaan Maharaj s (Head of Fixed Interest and Property) team. Stassen s team would then leverage off this research to implement their view in the fixed interest component of the CGM. The fund provides exposure to managed growth-oriented offshore multi-assets. Unlike the Investec Global Strategic Managed Fund (its Shopping List peer), this fund is a more traditional global balanced fund and is biased towards equity counters, with the remainder in cash. Meanwhile the fund is mandated to invest in bonds, cash, equity, property and commodities. The intent is to keep the parent fund fully invested offshore at all times. The fund s exposure will be in a variety of currencies, primarily the US dollar, British pound, euro and yen. This fund is suitable for investors who are looking to add developed markets and emerging markets exposure with relatively low volatility to their portfolios. Coronation s propriatery research is centralised, and the management of this fund leverages off a houseview and valuation-driven research process of picking stocks from a bottom-up approach. The asset allocation is determined by Coronation s long-term risk-adjusted returns proprietary model based on underlying fundamentals. Coronation s senior management would deliberate the asset allocation. Stassen would then implement active asset allocation to express his high convictions in the multi-asset portfolio. Regional allocation is merely a result of Coronation s fair value rankings. Qualitative research follows after the quantitative research, where some of the potential securities are flagged by the proprietary ranking table. The portfolio leverages off Gavin Joubert s GEM team and Nishaan Maharaj s team. Since the team is based in South Africa, they would lean towards industries with which they are comfortable. This fund is a more traditional multi-asset fund with an inclination towards equities. However, it is worth mentioning that this fund has expanded its asset allocation offering to include gold as a hedge against global uncertainty and merger arbitrage (companies involved in corporate transactions where the deal may favour patient investors). They have also increased their exposure to alternative asset managers. The fund has a history that commenced post 2008 s global recession. Since inception, the Coronation Global Managed fund has consistently risen by more than the benchmark in periods where the benchmark rose (high upcapture ratio), but also fell by more than the benchmark in periods where the benchmark fell (high down-capture ratio). Until recently, the fund has consistently outperformed peers and the benchmark over rolling three-year periods based on net returns and the Sharpe ratio since inception. A similar trend was observed where the fund displayed relatively larger downside deviations over rolling three-year periods. This also speaks to the equitybiased nature of the fund relative to the Shopping List peer. The fund s drawdowns were much more pronounced between 2010 and 2011, 2015 and in June 2016, where the fund experienced a drawdown of 12.10%. Current Portfolio Positioning The Coronation Global Strategic Managed Feeder Fund outperformed its composite benchmark for the fourth quarter of 2016 and the year ending 31 December 2016, returning 0.62% in ZAR (1.18% in USD) and -4.71% in ZAR (7.97% in USD) respectively. The benchmark returned -3.30% in ZAR (2.76% in USD) for the fourth quarter and -7.89% in ZAR (4.37% in USD) for the year ending 31 December The fund s robust performance over the past year can be attributed to a strong equity selection, with the fund s equity carve-out outperforming the ACWI part of the composite benchmark, while the merger arbitrage bucket (roughly 2.60% of the portfolio) contributed positively to performance. The fund s property exposure and its physical gold holding (used as a form of protection or diversification) detracted from performance. Moreover, the fund s negative performance as well as the category as a whole over a one-year period (with the exception of the Allan Gray Orbis Global Fund of Funds in ZAR terms) is the result of the rand strengthening against most major currencies over the fourth quarter and the year ending 31 December Over a more meaningful period of five years, the fund has outperformed its benchmark, returning 19.10% in ZAR (7.18% in USD) while its benchmark returned 15.43% in ZAR (3.88% in USD). Moreover, equity exposure (including the merger arbitrage allocation) has decreased by 3.03% over the quarter, from 64.20% to 61.17%. The regional equity exposure has changed over the quarter as well, with equity exposure to North America decreasing slightly, from 48.32% to 46.21%, equity exposure to Europe increased marginally, from 9.31% to 10.44%, and equity exposure to Asia decreased slightly from 3.35% to 2.23%. Bond exposure has increased dramatically by 14.35%, from 5.30% to 19.65%, while cash has decreased substantially from 20.80% to 7.92%. On a stock level, the biggest contributors to the fund s quartely performance were KKR, Apollo Global Management, Blackstone, Tempur Sealy and American Express, while TripAdvisor, Amazon and Facebook detracted from performance. Within property, some of the counters were trimmed while other property holdings such as Cromwell were added due to share weakness, with the overall exposure to property increasing from 8.20% to 9.22%. In terms of credit, exposure has been reduced to roughly 10% as the Trump rally has positively impacted credit spreads. Furthermore, the fund increased its gold exposure (2.04% of the portfolio) due to price weakness. 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Q Q Q Q Q Q Q Bonds Cash Commodities Property Equities Merger Arbitrage Other THE SHOPPING LIST BY GLACIER RESEARCH - Q4 - FEBRUARY

40 INVESTEC GLOBAL STRATEGIC MANAGED FEEDER Fund manager Phillip Saunders and Iain Cunningham No of quarters 6 Benchmark 60% MSCI AC World NR, 40% Citigroup World Government Bond Index Risk Description Aggressive Role of Benchmark Agnostic Inception Date 01 September 2003 Focus Relative to AC MSCI World Fund Size (Rm) R Philosophy Fundamentals, valuation and market behaviour Fee Description (retail class) Annual management fee Glacier Risk Rating 9.81 Total Investment Charge 2.52% The investment approach, whereby investment ideas are generated across a wide range of traditional and non-traditional assets and strategies, is one of the key differentiators. All opportunities are assessed on the team s three Compelling Forces, namely fundamentals, valuation and market price behaviour. Appropriate levels of diversification are attained by categorising assets and strategies into growth, defensive or uncorrelated categories based on their expected behaviour in order to ensure more robust portfolio construction. The sources of alpha are equity selection, bond selection, asset allocation, thematic positions and currency overlays. Philip Saunders, one of the co-managers, is also the head of Investec Asset Management s global asset allocation committee. The asset allocation is based on absolute value and relative value. The benchmark is not considered for asset allocation but it is utilised to define the risk budget. Saunders has managed multi-asset mandates since 1991 and has also run total return and inflation-relative portfolios since This fund has survived both bull and bear markets. The Investec Global Strategic Managed Feeder Fund is not a typical global balanced fund and provides investors with access to broadly diversified global multi-assets which include both traditional and nontraditional (alternative) investments private, unlisted equity, closedended funds and infrastructure. Both the asset allocation and currency decisions allow the Global Multi Asset team to express evolving strategic views, exploit tactical opportunities and to protect against market events. This fund also aims to provide equity-like returns with relatively lower volatility. The long-term strategic asset allocations are as follows: 30-75% in equity, 0-25% in cash and 15-70% in bonds. The tracking error to the reference benchmark is expected to range between 3% and 8%. Meanwhile, the fund has an outperformance target of 2% over a rolling three-year period relative to its benchmark (gross of fees). Despite the three-year outperformance target the portfolio managers encourage an even longer investment horizon of more than five years. This portfolio reduces the volatility when blended with a more equity-biased global balanced portfolio. The core global equity selection component is managed through Investec s 4Factor Global Core Equity Strategy comprising strategy, value, earnings and technical. The 4Factor Global Core Equity Strategy team looks for high quality stocks with attractive valuation, displaying improving operating performance and increasing investor attention. The Global Multi-Asset s thematic selection is an expansion of the investment opportunity set. Positions can include bonds, equities and alternative asset classes, which are held on a multi-year basis. The Global Multi- Asset team has an average of 24 investment professionals based in London and three based in Cape Town. The specialist teams can broadly be classified as equities, fixed income and alternative investments teams. The team is further divided into seven specialist research groups: Macro, Equities, Forex and Rates, Credit, Commodities, Property, Infrastructure and Private Equity and lastly, Alternative Risk Premia. Members of the respective specialist research groups are encouraged to attend other specialist group meetings. The Global Multi-Asset team is integrated while the open-plan setting ensures that individuals can leverage off each other while being able to conduct research in a specialist and focussed manner. The nine specialist portfolio managers have extensive and relevant industry experience, with 11 years as the minimum years of relevant experience (two portfolio managers) and 33 years as the maximum. Max King has retired from Investec Asset Management, thereby relinqishing his role as co-portfolio manager as at the end of June 2016, and Iain Cunningham has joined Saunders as co-portfolio manager from September Furthermore, the managers are highly experienced investment professionals, and Saunders has been managing this fund since Since 2010, the Investec Global Strategic Fund has captured less of the upside (low up-capture ratio) where the benchmark performance rose, but more of the downside during periods where the benchmark fell (high down-capture ratio). Moreover, the fund experienced major drawdowns in the second half of 2008, between , and in June 2016 with a drawdown of 11.49%. On a rolling 3-year basis, the fund has recently lagged its benchmark, failing to outperform, which is a concern. We will be monitoring this fund closely in this regard. Current Portfolio Positioning The fund outperformed its benchmark over the fourth quarter, but underperformed over the year ending 31 December 2016, returning -1.73% in ZAR (-1.19% in USD) and -8.34% in ZAR (3.87% in USD) respectively. The benchmark returned -2.67% in ZAR (-2.12% in USD) for the fourth quarter and -6.56% in ZAR (5.87% in USD) for the year ending 31 December For the quarter, the outperformance of the benchmark was the result of a number of positions that were focussed on US reflation. In equities, the fund s overweight position relative to its benchmark in Japanese stocks and US banks contributed positively to performance. In bonds, the fund s underweight in duration relative to its benchmark added to performance as global bond yields moved sharply higher after the US election. Moreover, the underperformance of this fund and the global multi-asset high equity category as a whole in ZAR terms is due to the rand strengthening against most major currencies, with the rand strengthening considerably against the US dollar (-11.46%), the euro (-14.01%), the pound sterling (-25.95%) and the Japanese yen (-8.79%) over the year ending 31 December The fund has the majority of its currency exposure to the US dollar (65%) and the euro (19%), followed by smaller exposures to the pound (6.9%) and the Japanese yen (6.6%). Over a more meaningful period of five years, the fund has underperformed its benchmark, returning 17.27% in ZAR (5.54% in USD) while its benchmark returned 17.71% in ZAR (5.94% in USD). The fund s asset allocation has changed over the quarter. Exposure to bonds has increased by 9.2%, from 31.3% to 40.5%, cash exposure has decreased by 9.3%, from 3.3% to -6% and equity exposure has decreased marginally, from 57.6% to 56.7%. Furthermore, the portfolio remains positioned for ongoing reflation in the US economy, with an overweight exposure to areas of the equity market that are more sensitive to an improvement in the US economy. 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Equity Bonds Alternatives Cash Property Forex Multi-Asset Commodities Local Equity Local cash Local Bonds THE SHOPPING LIST BY GLACIER RESEARCH - Q4 - FEBRUARY

41 WORLDWIDE - MULTI ASSET - FLEXIBLE Category Analyst: Thobela Mfeti These portfolios invest in a flexible combination of investments in the equity, bond, money, or property markets. The portfolios have complete or stipulated limited flexibility in their asset allocation both between and within asset classes, countries and regions. No minimum or maximum holding applies to South African or offshore investment. These portfolios are often aggressively managed with assets being shifted between the various markets and asset classes to reflect changing economic and market conditions to maximise total returns over the long term. Shopping List selection: Foord Flexible FoF Quartile Ranking As of Date: 31/12/2016 Top Quartile 2nd Quartile 3rd Quartile Bottom Quartile Foord Flexible FoF R YTD 1 year 2 Years 3 Years 5 Years 7 Years Maximum Drawdown: Monthly (ASISA) Wwide MA Flexible Risk-Reward: 5-Year Annualised Std Dev Foord Flexible FoF R (ASISA) Wwide MA Flexible s As of Date: 31/12/2016 Source Data: Total YTD 1 year 2 Years 3 years 5 years 7 Years Foord Flexible FoF R (ASISA) Wwide MA Flexible Risk Statistics Foord Flexible FoF R Std Dev Max Drawdown (monthly) Up Period Percent Down Sharpe Period Ratio Percent Foord Flexible FoF R (ASISA) Wwide MA Flexible (ASISA) Wwide MA Flexible Rolling 3-Year s Rolling Window: 3 Years 1 Month shift Foord Flexible FoF R (ASISA) Wwide MA Flexible THE SHOPPING LIST BY GLACIER RESEARCH - Q4 - FEBRUARY

42 FOORD FLEXIBLE FOF Fund manager Dave Foord No of quarters 12 Benchmark CPI+5% Risk Description Aggressive Role of Benchmark Agnostic Inception Date 01 April 2008 Focus Absolute Fund Size (Rm) R Philosophy Top-down, bottom-up, valuation driven approach Fee Description (retail class) Annual management fee with a performance fee Glacier Risk Rating 8.52 Total Investment Charge 1.37% The portfolio is an unconstrained fund which reflects Foord Asset Management s best investment views over all asset classes, domestic and foreign. Three Foord funds make up the Flexible FoF. The Foord International Fund and Foord Global Equity Fund deliver the offshore exposure while the Foord Absolute Fund is a local institutional fund that is only utilised to balance the overall portfolio of the Flexible FoF. The Foord International Feeder Fund has been closed for new investments, effective from 1 February The fund s strategic effective asset allocation, as determined by the CIO and the investment team, has been changed with commodities up 2% to 3%, SA property up 1% to 2%, and SA bonds down to 0% from 1%. Money market allocation dropped from 14% to 10%, while SA equities and foreign assets remain at 20% and 65% respectively. The team aims to keep costs low, avoiding excess turnover, but works on an uncapped performance fee basis. Foord s asset allocation style is top-down and bottom-up portfolio construction, with a growth at reasonable prices approach. Dave Foord s style of managing money is key to the success of the asset management house, looking for earnings visibility and growth. There are currently two investment teams in Foord Asset Management. The local team has 13 professionals, of which four also conduct international research. There are nine members in the offshore team, which is based in Singapore (the second biggest mutual fund industry in the world). The house has an extremely strong research team, with analysts from all over the world. The worldwide, unconstrained nature of the fund does mean that it is highly volatile at times due to its ability to invest 100% in any single asset class. The Flexible FoF would be ideal for discretionary investors who do not need to comply with the Regulation 28 limits. The fund has an absolute focus and has proven itself to be one of the best performing funds in the Worldwide Multi-Asset Flexible category whilst being able to protect capital extremely well over longer periods. The fund has mostly outperformed its absolute return benchmark over a rolling three year period, whilst being able to remain far less volatile than its peers. Over the shorter term, up to 1 year, this fund struggles to outperform its benchmark. It has delivered better risk-adjusted returns than most peers over most periods and has also displayed better drawdowns than many of its peers over these periods. The fund has consistently remained within the first and second quartile of performance, with an exception of shorter term performance. As we look over longer periods, the fund s outperformance of the benchmark and peer group average becomes larger and larger. 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Current Portfolio Positioning The fund delivered -2.1% over the quarter, significantly underperforming its benchmark which returned 1.9%, and also underperforming its peer group average return of -1.4%. The fund s offshore equity exposure was increased over the quarter by 0.70% to 49.5%, while foreign cash was decreased from 11.2% to 10.4%. Offshore allocation remained the largest holding at 61.5%, marginally lower compared to 61.7% in the previous quarter and the target of 62%. SA equity was increased by 3.6% to 21.6% in Q3, and subsequently reduced to 16.8% in Q4 - compared to a 22% target. This fund sold out of SA government bonds from a 3.2% position. SA listed property was also marginally increased to 2.2%. The portfolio retains its relatively conservative positioning with global equities remaining the preferred asset class, while higher cash holdings give the portfolio manager higher liquidity for more optionality. Total allocation to equity has been declining, moving from 70.4% in the previous quarter to 66.3% in Q4. Cash has been increased, especially on the local side. Total cash exposure is currently 27.8%, up from 20.2% in Q3. Local cash increased from 9% to 17.4% while foreign cash decreased from 11.20% to 10.4%. Local cash is significantly over the reduced strategic target of 10%. Foreign Equity Foreign Property Foreign Corp Debt Foreign Gov Bonds Foreign Commodities Foreign Cash SA Equity SA Property SA Corp Debt SA Gov Bonds SA Commodities SA Cash THE SHOPPING LIST BY GLACIER RESEARCH - Q4 - FEBRUARY

43 FUNDS SUITED FOR SPECIALIST ASSET CLASS BUILDING BLOCK PORTFOLIO CONSTRUCTION THE SHOPPING LIST BY GLACIER RESEARCH - Q4 - FEBRUARY