©2016 Morningstar, Inc. All rights reserved.

Victoria Reuvers

Director, Senior Portfolio Manager

Morningstar Investment Management South Africa

Investing Nirvana or Slippery Banana

Investment Management group

A Global Organization with Local Experience

Our organization brings together local investment management experience and global resources to deliver long-term investment results to clients and end-investors around the world.

Assets under management andadvisement worldwide

Investment professionals

Country offices

3029

45

Philosophy

Our Investment Principles

Long-run Stock Returns are Driven by Fundamentals

0

2

4

6

8

10

12

14

1880 1890 1900 1910 1920 1930 1940 1950 1960 1970 1980 1990 2000 2010

Inflation 2.1%

Total Payout Yield4.9%

Growth 1.6%

Total Return 9% C

umul

ativ

e R

etur

ns (%

)

Fundamental Return 8.8%

Source: Morningstar Investment Management. For Illustrative purposes only.

U.S. Large Cap Stock Return 1871-2015

What drives asset prices?

Decomposition of 10-Year US Equity Market Return (1871 – 2014)

Source: Morningstar, Shiller, Boudoukh et al (2007), Skinner et al (2013)

-15,0%

-10,0%

-5,0%

0,0%

5,0%

10,0%

15,0%

20,0%

1891 1898 1905 1912 1919 1926 1933 1940 1947 1954 1961 1968 1975 1982 1989 1996 2003 2010

Total Payout Yield

Total Payout Growth

Change in Valuation

French elections

European debt sustainability

Trump policy changes

South China Sea tension

Terror-related incidents

UK current account deficit strain

Immigration crisis

Central bank policy

Italian banking liquidity

U.S. and China trade negotiations

Hard-Brexit implementation

Commodity prices falling

Ageing population & structural stagnation

Chinese slowdown

creating a global recession

Trade agreement negotiations

Currency devaluation

We don’t play the guessing game

– Challenge 1: Predict the event

– Challenge 2: Predict the human reaction to that event

Sidestep predictions, focus on fundamentals

So what do we know...Investors have poured money into index funds

Source: Morningstar Direct Asset Flows. Includes open-end funds and ETFs. © 2017 Morningstar. All Rights Reserved.

The shift from active to passive investing has been accelerating during the past few years, reaching an extreme recently. Vanguard’s flows were positive and the rest of the fund

industry’s were negative in the past two years. In 2016, Vanguard attracted $277 billion, setting a record for an annual flow to a single fund family, while the other companies

combined saw $114 billion fly out the door.

US Large Cap Equities are looking expensive by any metric

Source: Morningstar Direct Asset Flows. Includes open-end funds and ETFs. © 2017 Morningstar. All Rights Reserved.

CAPE Ratio

US Large Cap Equities are looking expensive by any metric

Source: Morningstar Direct Asset Flows. Includes open-end funds and ETFs. © 2017 Morningstar. All Rights Reserved.

Price/Book Ratio

We know that market optimism is high

Source: Bloomberg 31 March 2017

Asset Class Convictions

Note: References to specific asset classes should not be viewed as a recommendation to buy or sell. Allocation is subject to change at any time without notice. Source: Morningstar Investment Management

• Emerging Markets • European Financials• Pound Sterling

High Conviction

Low Conviction

• US Equities• US/Euro/UK Treasuries• Real Estate

Morningstar BCI Global Equity FOF

Source Morningstar as at 30 April 2017

Equity Style

Morningstar BCI Global Equity FoF

Dodge and Cox U.S. Stock Fund 12.4

Vanguard Emerging Markets Stock Index Fund 12.0

Artemis U.S. Select Fund 11.6

Man GLG Japan CoreAlpha Equity Fund 10.4

Jupiter European Opportunities Fund 8.5

Invesco Pan European Structured Equity Fund 8.4

Fidelity US Dollar Currency Fund 7.4

JPM U.S. Equity Fund 6.6

Investec Asian Equity Fund 5.3

JOHCM Continental European Fund 4.8

Veritas Asian Fund 4.7

Legg Mason Royce US Small Cap Opportunity Fund 4.1

Morant Wright Sakura Fund 3.8

Underlying Holdings

Stock Sectors

Morningstar BCI Global Equity FOF

Developed/Emerging Split

World regions

Source Morningstar as at 30 April 2017

$ Performance since inception: 1 June 2016 – 30 April 2017

MSCI World: 14.6%

ASISA Global

Equity Sector:12.4%

Morningstar BCI Global Equity 17.6%

Source Morningstar as at 30 April 2017

Morningstar Differentiation

gPrinciple-driven

gLow cost

gTransparent

gGlobal Capability with Local Perspective

Risk Warnings

17

This commentary does not constitute investment, legal, tax or other advice and is supplied for information purposes only. Past performance is not a guide to future returns. The value of investments may go down as well as up and

an investor may not get back the amount invested. Reference to any specific security is not a recommendation to buy or sell that security. The information, data, analyses, and opinions presented herein are provided as of the date

written and are subject to change without notice. Every effort has been made to ensure the accuracy of the information provided, but Morningstar Investment Management South Africa (Pty) Ltd makes no warranty, express or

implied regarding such information. The information presented herein will be deemed to be superseded by any subsequent versions of this commentary. Except as otherwise required by law, Morningstar Investment Management

South Africa (Pty) Ltd shall not be responsible for any trading decisions, damages or losses resulting from, or related to, the information, data, analyses or opinions or their use.

[This document may contain certain forward-looking statements. We use words such as “expects”, “anticipates”, “believes”, “estimates”, “forecasts”, and similar expressions to identify forward-looking statements. Such forward-

looking statements involve known and unknown risks, uncertainties and other factors which may cause the actual results to differ materially and/or substantially from any future results, performance or achievements expressed or

implied by those projected in the forward-looking statements for any reason.]

The Morningstar Investment Management group comprises Morningstar Inc.’s registered entities worldwide, including South Africa. Morningstar Investment Management South Africa (Pty) Ltd is an authorised financial services

provider (FSP 45679) and is the entity providing the advisory/discretionary management services. + t: (0)21 446 8300 + e: www.morningstar.co.za + 2nd Floor, Clock Tower Office Suites, V&A Waterfront, Cape Town, 8001, South

Africa ©2017 Morningstar. All Rights Reserved. The Morningstar name and logo are registered trademarks of Morningstar, Inc. This document includes proprietary materials of Morningstar. Reproduction, transcription, or other

use, by any means, in whole or in part, without the prior written consent of Morningstar is prohibited. Morningstar Investment Management South Africa is a subsidiary of Morningstar, Inc. All data sourced from Morningstar

Direct as at 30/04/2017 unless stated otherwise.