Global Emerging

Markets Equity

BCI Global Investment Conference Pieter Koekemoer

20 May 2015

1

Same long-term valuation driven investment philosophy as we have used in SA past 21

years

Typically 50-60 stock clean slate portfolio from dilute universe of ± 3,000 stocks

• More worried about errors of commission than omission

Portfolio construction driven by valuations with some internal constraints

• EM<25%; Each country <40%; Russia < 15%; Each Stock / Industry / Theme <10%)

Key risk metric is permanent loss of capital

Our approach

3.8% 3.5%

2.3%

3.9%

5.9%

8.9% 8.8% 9.1% 8.4%

6.8%

5.0%

7.4% 7.6% 7.9%

5.9% 5.1%

4.8%

5.5%

-10.0%

-5.0%

0.0%

5.0%

10.0%

15.0%

Jun/1

1

Jul/11

Aug/1

1

Sep/1

1

Oct/11

No

v/1

1

De

c/1

1

Jan/1

2

Feb

/12

Ma

r/12

Apr/

12

Ma

y/1

2

Jun/1

2

Jul/12

Aug/1

2

Sep/1

2

Oct/12

No

v/1

2

De

c/1

2

Jan/1

3

Feb

/13

Ma

r/13

Apr/

13

Ma

y/1

3

Jun/1

3

Jul/13

Aug/1

3

Sep/1

3

Oct/13

No

v/1

3

De

c/1

3

Jan/1

4

Feb

/14

Ma

r/14

Apr/

14

Ma

y/1

4

Jun/1

4

Jul/14

Aug/1

4

Sep/1

4

Oct/14

No

v/1

4

De

c/1

4

Jan/1

5

Feb

/15

Ma

r/15

Apr/

15

3 year alpha 5 year alpha

Longer-term alpha (rolling 3 & 5 year alpha p.a.)

2

3

Performance vs. peer group (66 funds) Coronation GEM Fund (UCITS)

Since the fund inception (6.7 years - annualised)

Note: to 9 April 2015

Source: Bloomberg (net returns)

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NAME Country % PF

Kroton Educacional SA Brazil 6.1%

Porsche Automobil Holding SE Germany 5.4%

Tata Motors Ltd India 5.1%

Magnit PAO Russia 5.0%

Brilliance China Automotive Holdings Ltd China 4.3%

X5 Retail Group NV Russia 3.9%

BB Seguridade Participacoes SA Brazil 3.8%

Baidu Inc China 3.5%

Itausa Investimentos Itau SA Brazil 3.3%

Naspers Ltd South Africa 3.1%

Total 43.4%

Coronation Global Emerging Markets Fund Top 10 holdings

as at 31 March 2015

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Brazilian Real vs. USD 1 year

2.21

3.29

48% depreciation

6% appreciation

Source: Bloomberg

Holdings Industry % of fund % of Brazil exposure Q4 2014 results

Kroton Education 6.1% 21.6% Sales +29%, EBIT +49%

BB Seguridade Insurance 3.8% 13.5% Sales +37%, PBT +42%

Itausa Investimentos Banking 3.4% 12.0% Sales +15%, PBT +34%

Cia Hering Clothing Retail (cash) 3.1% 11.0% Sales +2%, EBIT -5%

Estacio Education 3.0% 10.6% Sales +38%, EBIT +59%

Pao de Acucar Food Retail 2.5% 8.9% Sales +16%, EBIT +21%

Marisa Clothing Retail 1.8% 6.4% Sales +1%, EBIT +42%

BR Malls Shopping Mall owner 1.7% 6.1% Sales +8%, EBIT +6%

Arcos Dorados Fast Food 1.4% 5.0% Sales +10%, EBIT -2%

Odontoprev Dental Health Insurance 1.0% 3.5% Sales +4%, EBIT +10%

Multiplus Loyalty cards (Airlines) 0.4% 1.4% Sales +17%, net income +27%

TOTAL 28.2% 100.0%

Industry exposure summary % of fund % of Brazil exposure

Education 9.1% 32.2%

Clothing Retail 4.9% 17.4% 11% of the 17% in cash retail

Food Retail & Fast Food 3.9% 13.8%

Insurance 3.8% 13.5%

Banking 3.4% 12.0%

Brazil holdings breakdown

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7

Russian Rouble vs. USD 1 year

35.7

95% depreciation

70.0

35% appreciation

Source: Bloomberg

Holdings Industry % of fund % of Russian exposure Q4 2014 results

Magnit Food Retail 5.0% 40% Sales +36%, EBIT +23% (Jan/Feb sales +34%)

X5 Retail Food Retail 4.0% 33% Sales +21%, EBIT +25% (Jan/Feb sales +26%)

Mail.ru Internet 1.9% 15% Sales +10%, EBIT +10%

Yandex Internet 0.5% 4% Sales +21%, EBIT +14% (1Q 2015 sales +15%)

Sberbank Banking 0.5% 4% Sales +21%, Net income -45%

Lenta Food Retail 0.5% 4% Sales +32%, EBIT +33% (YTD 2015 sales +40%)

TOTAL 12.3% 100%

Industry exposure summary % of fund % of Russian exposure

Food Retail 9.4% 77%

Internet 2.4% 19%

Banking 0.5% 4%

Russia holdings breakdown

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Education is a sector we would typically like: high barriers to entry, good cash generation

(fees received up front) and multi year secular growth drivers (societal uplift)

#1 Low enrolment rate in tertiary education

Brazilian Private Education

33% target

Tertiary education almost

non-existent outside the

wealthy

Government target not very

aggressive

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#2 High incentive to enrol: Very high return on investment from tertiary studies (2x-4x

increase in income after graduating)

• Second highest income increase amongst OECD and partner countries surveyed

• Short payback period makes upfront investment very worthwhile for students

Brazilian Private Education

Powerful incentive to study further given uptick in lifetime earning potential

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#3 Significant capacity constraints in government universities

• Can only accommodate 25% of annual school graduates in public universities

• Quality of K12 education very poor => government concentrating additional spending there

• Public universities cannot collect fees => significant drain of government resources

• Costs government 5x more per student compared to what it costs the private sector to provide the

same service!

#4 Lots of government support for the sector

• Income tax exemptions on undergraduate fees in return for scholarships (PROUNI)

• Attractive student financing with deferred repayment (FIES – recently revised but still very attractive

for students)

Brazilian Private Education

DL centres exclusively private sector run

Private sector has taken 90% of new campus students over this

period

Sector has sold off significantly in response to Brazilian government budgetary constraints

w.r.t student loans

• Affects 35%-50% of on-campus undergraduate students in the listed segment

• But this is <25% of total tertiary students for listed players and <12% of private sector enrolment

Lots of room for organic growth

• Top player (Kroton) still <13% market share despite significant organic and acquisitive growth in

recent years

Financially weak competitors with strong regional brands are being acquired

Average tuitions going up as they offer higher level courses

Margins below normal, still large scale benefits to be reaped over time

High quality, shareholder friendly management teams

Short term concerns overriding the long term

• Kroton on 11.4x forward earnings (6.1% of fund)

• Estacio on 10.9x forward earnings (3.0% of fund)

Brazilian Private Education

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GEM car company holdings:

Financial metrics Operating metrics *

% of fund PE 1 yr fwd Div yield Operating margin

(LFY)

Return on earnings

(ave 3 yrs)

Porsche Automobil* 5.4% 7.6x 2.6% 6.3% 11.8%

Tata Motor* 5.1% 8.5x 0.4% 10.2% 35.4%

Brilliance China Automotive* 4.3% 9.8x 1.3% 15.6% 30.8%

14.8%

The case for luxury car companies

* Operating metrics are for the underlying operating subsidiary where appropriate

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™

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The content of this presentation and any information provided may be of a general nature and may not be based on any analysis of the investment

objectives, financial situation or particular needs of the client. (as defined in the Financial Advisory Intermediary Services Act) As a result, there may be

limitations as to the appropriateness of any information given. It is therefore recommended that the client first obtain the appropriate legal, tax, investment

or other professional advice and formulate an appropriate investment strategy that would suit the risk profile of the client prior to acting upon such

information and to consider whether any recommendation is appropriate considering the client’s own objectives and particular needs.

Any opinions, statements and any information made, whether written, oral or implied are expressed in good faith.

Disclaimer

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Thank you