investec global franchise fund - allan grayinvestec global franchise fund past performance is not a...

Allan Gray Offshore Fund Provider

Investec Global

Franchise Fund

October 2019

2 Confidential | Investec Asset Management

Sello LekalakalaLondon

Rob Forsyth#

Cape Town

Michael Hayward‡†

London

Clyde Rossouw*†

Cape Town

Abrie Pretorius‡†

New York

Elias Erickson†

New York

Paul VincentLondon

Global

Matt Evans†

London

Ben Needham†

London

Fred Kerr-SmileyLondon

Simon Brazier*†

London

Anna FarmbroughLondon

Quality investment team

The investment team is subject to change without prior notification. As at July 2019. For further information on investment team and investment process, please see the Important

Information section. *Co-Head of the Quality team. †Have portfolio management responsibilities on other strategies within Quality team. ‡Alternate Portfolio Manager on Global Franchise.

#Head of Research for the Quality team. ^From September 2019

Experienced, well-resourced, globally integrated, philosophically aligned

Global Investment

Infrastructure Support

Environmental, Social and

Governance | Dealing | Risk &

Performance | Implementation

Clyde Rossouw*†

Portfolio Manager – Global Franchise

Investment Specialists

● Philosophically aligned around Quality

● Global platform enables differentiated and broad perspectives

● Average industry experience 13 years, average tenure 6 years

● Co-investment in our own strategies

Product Specialists

Neil FinlayLondon

Joe ThomasLondon

Louis NiemandCape Town

Sumesh Chetty†

Cape Town

Duane Cable†^Cape Town

Darren JocumCape Town

Mendy ZhangLondon

Charlie Dutton†

Cape Town

EM focus

Yaser Surve†

Cape TownUK focus


3 main discussion points for today

Global growth is slowing because of trade wars, do I still allocate to

global equities?

Investec Global Franchise has performed very well, is it too late to invest

now?

What are the forward looking return expectations for Investec Global

Franchise?

1.

2.

3.


1980’s 1990’s 2000The

Future


Global growth is likely to be the biggest loser

Source: OECD March 2019

Earnings revisions being revised lower

OECD GDP growth projections


Increased market uncertainty

Source: Bloomberg as at 30 June 2019. For further information on indices please see Important Information section.

“It's tough to make predictions, especially about the future” - Yogi Berra

MSCI ACWI consensus EPS estimates

$15

$20

$25

$30

$35

$40

200

8

200

9

201

0

201

1

201

2

201

3

201

4

201

5

201

6

201

7

201

8

2010

2011 20122013 2014

2015 2016

2017

2018 2019

2020

Investec Global Franchise –

our investment approach to

mitigating risks in a slowing

global economy

1.


Our investment approach

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

Even if global growth slows what matters more to us are the company

fundamentals

● Hard-to-replicate enduring competitive advantages

● Dominant market positions in stable growing

industries

● Low sensitivity to the economic and market cycle

● Financially strong and capital light

● Highly cash generative with disciplined capital

allocation

What do we look for in companies?

Attributes of Franchise stocks:


We are prepared to look very different

The portfolio may change significantly over a short period of time. For further information on indices please see Important Information section. This is not a buy, sell or hold

recommendation for any particular security. Source: Investec Asset Management, FactSet, 31 July 19. Alphabet Inc Class A and C have been aggregated into a single holding.

* Active Share is a measure of the percentage of stockholdings in a manager’s portfolio that differs from the benchmark index.

What is not in the portfolio

Global Franchise

Top 10

% Overweight

vs. MSCI ACWI

MSCI ACWI

Top 10

S&P 500

Top 10

Visa 8.1 Microsoft Microsoft

Microsoft 4.7 Apple Apple

Verisign 6.1 Amazon.com Amazon.com

Moody’s 5.0 Alphabet Alphabet

Booking 4.4 Facebook Facebook

Nestlé 3.8 Johnson & Johnson Berkshire Hathaway

Johnson & Johnson 3.3 JPMorgan Chase Johnson & Johnson

Beiersdorf 3.7 Exxon Mobile JPMorgan Chase

Roche 3.3 Nestlé Exxon Mobile

Intuit 3.5 Visa Visa

High conviction, concentrated portfolio:

Currently

29stocksMSCI ACWI Top 50 Stocks

7 43

Active Share* vs MSCI ACWI

93%

Not

in Global

Franchise

IN

Global

Franchise

Not in Global Franchise


These businesses invest in order to stay

ahead

Source: FactSet, based on constituents of MSCI ACWI, as at 31 August 2018. For more information on indices, please see the important information section.

● Global Franchise has a large exposure to the sectors with the largest R&D spend

● In aggregate, Global Franchise companies vastly outspend the market as a whole

‒ For every $1 of sales, companies in the portfolio spend 4x as much on R&D and still generate far superior margins

and returns on capital

1,8%

6,6%

0,0%

1,0%

2,0%

3,0%

4,0%

5,0%

6,0%

7,0%

MSCI ACWI Global Franchise

R&

D a

s a

% o

f sale

s

3.7x

more

spending

Information Technology,

34%

Consumer Discretionary,

23%

Health Care, 20%

Industrials, 12%

Materials, 4%

Telecommunication Services, 2%

Consumer Staples, 2% Energy, 2%

Financials, 1%Utilities, 0%

Real Estate, 0%

Aggregate R&D spend by sector R&D as a % of sales


We are placing more research effort for ideas

emerging from the East

Source: R&D Magazine Survey 2018; World Bank; WIPO patent report: Statistics on Worldwide Patent activity as at January 2019

Made and invented in China

Patent applications by residentsShare of total global R&D spending


Our companies are truly global generators of

profits

The portfolio may change significantly over a short period of time.

Source: Investec Asset Management, FactSet. Geographic breakdown as at 31 July 2019. Right hand charts re-weighted excluding cash and cash equivalents, data as at 20 May 2019.

Estimated revenue exposures of the companies held, re-weighted excluding cash and equivalents.

What matters is where companies generate profits, not where they are

listed

By company domicile (geographic

allocation

By underlying revenue exposure

North America, 44.0%

Europe ex UK, 21.5%

UK, 3.2%

Asia Pacific ex Japan, 18.9%

Latin America, 5.2%

Japan, 3.2%

Middle East, 2.2%

Africa, 1.7%

North America, 61.0%

Europe ex UK, 18.2%

United Kingdom, 7.8%

Emerging Markets, 2.1%

Overseas, 3.1%

Cash, 7.8%


The benefit of our approach

Past performance is not a reliable indicator of future results, losses may be made. Source: Bloomberg, returns with dividends reinvested, 30 June 2019. This is not a buy, sell or hold

recommendation for any particular security. Time period shown chosen to illustrate the long-term effect of compounding. This chart is updated annually. For further information on indices

and specific portfolio names, please see the Important Information section.

Franchise stocks

have compounded

shareholder wealth

at superior rates of

return over the

long term

The power of compounding

37,969

30,589

20,758

8,210

0

5,000

10,000

15,000

20,000

25,000

30,000

35,000

40,000

1990 1995 2000 2005 2010 2015

Growth of $1,000 since 1990: select Franchise stocks vs. MSCI ACWI

Return p.a

Nestlé 13.6%

J&J 12.7%

Unilever 11.2%

MSCI ACWI 7.6%


16,0%

8,0%

-4,3%

7,7%

19,7%

5,4%

-13,2%

6,0%

-20%

-15%

-10%

-5%

0%

5%

10%

15%

20%

25%

63 monthsMSCI > 10%

27 months0% < MSCI < 10%

44 monthsMSCI < 0%

134 rolling 12 monthstotal

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

Our track record shows we perform well in

sideways and down markets

Past performance is not a reliable indicator of future results, losses may be made. Source: Investec Asset Management, 31 July 2019. Performance is net of fees (NAV based, including

ongoing charges, excluding initial charges), gross income reinvested, in USD. If the share class currency differs from the investor's home currency, returns may increase or decrease as a

result of currency fluctuations. Rolling 12 month periods since inception: 30 April 2007. For further information on indices, please see the Important Information section.

Average rolling 12 month performance

Strong markets Moderate markets Falling markets All periods

Investec Global Franchise

has performed very well,

is it too late to invest now?

2.


1 year 3 years p.a. 5 years p.a. 10 years p.a. Since Inception p.a.*

Investec Global Franchise I Acc 8.2% 11.4% 9.5% 11.4% 7.9%

MSCI AC World NR** -0.3% 9.2% 5.5% 8.6% 4.3%

Active return 8.5% 2.2% 4.0% 2.8% 3.6%

Quartile ranking 1 1 1 1 1

Investec Global Franchise Fund

Past performance is not a reliable indicator of future results, losses may be made. Source: Morningstar, 31 August 2019. Performance is net of fees (NAV based, including ongoing

charges, excluding initial charges), gross income reinvested, in USD. If the share class currency differs from the investor’s home currency, returns may increase or decrease as a result of

currency fluctuations. *Inception date: 10 April 2007. The performance is based on the OEIC Investec Global Select Equity Fund from 10 April 2007 which merged into the Luxembourg-

domiciled Investec Global Franchise Fund on 4 July 2009. **Comparison index: At inception = MSCI World NR; Current since 1 October 2011 = MSCI AC World NR. Highest and lowest

returns achieved during a rolling 12 month period since inception: Feb-10: 55.4% and Feb-09: -38.6%. For further information on indices, please see the important information section.

Performance

193.6

127.5

-50%

0%

50%

100%

150%

200%

250%

Aug-09 Aug-11 Aug-13 Aug-15 Aug-17 Aug-19

Investec Global Franchise I AccMSCI AC World NR**

Cumulative performance in USDAnnual performance in USD36.8

6.8 8.4

15.816.4

4.4 9.2

0.9

24.9

-3.6

30.0

11.8

-5.9

16.122.8

4.2

-2.4

7.9

24.0

-9.4

-20%

-10%

0%

10%

20%

30%

40%

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

Investec Global Franchise I AccMSCI AC World NR**


Despite the strong performance, valuations

still remain attractive


Source: FactSet, Investec Asset Management, 31 August 2019. The above reflects the portfolio characteristics reweighted excluding cash and cash equivalents.

* Comparative index has changed to MSCI AC World Index from 1 October 2011. FCF Yield calculation excludes companies classified in the Banks Industry Group according to GICS.

For further information on indices, please see the Important Information section.

August 2018 August 2019

Investec Global Franchise Fund Benchmark*


Our returns are driven by earnings growth, not

re-rating

Source: Investec Asset Management to 31 December 2018, 5 year period ending December 2018

5 year return breakdown for Investec Global Franchise Fund and MSCI ACWI

11,2%

2,4%

0,8%

-0,3%

1,6%

2,6%

-0,5%

-2%

0%

2%

4%

6%

8%

10%

12%

14%

16%

Global Franchise MSCI ACWI Index

EPS Growth Re-rating Dividends FX

13.1%

4.8%


Consumer staples is now less than 30% of

your fund


Source: Investec Asset Management, FactSet, 31 July 2019.

Sector breakdown since inceptionSector breakdown

Information Technology,

35.5%

Consumer Staples, 23.8%

Health Care, 10.9%

Financials, 13.6%

Communication Services, 1.8%

Consumer Discretionary,

5.3%

Industrials, 1.3% Cash,

7.8%

0%

10%

20%

30%

40%

50%

60%

70%

80%

Apr-

07

Apr-

08

Apr-

09

Apr-

10

Apr-

11

Apr-

12

Apr-

13

Apr-

14

Apr-

15

Apr-

16

Apr-

17

Apr-

18

Apr-

19

Information Technology Consumer Staples

Health Care Communication Services

Consumer Discretionary Financials

Industrials


We remain active and continue to make

changes to your fund

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

Source: Investec Asset Management, July 2019. This is not a buy, sell or hold recommendation for any particular security. For further information on specific portfolio names, please see

the Important information section.

12 month portfolio activity highlights

Buys

ASML (add)

Booking Holdings (add)

Charles Schwab (add)

Beiersdorf (add)

Visa (add)

Philip Morris International (add)

Sells

GlaxoSmithKline (exit)

Japan Tobacco (exit)

PayPal (exit)


Savings gap, disintermediation of credit

Fintech and Payments

Internet of Things, Artificial Intelligence

Travel disruption and consolidation

Cloud and Cybersecurity

Longevity and Healthcare

Beauty and personal care

Themes that excite us in your fund

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

Source: FactSet, based on constituents of MSCI ACWI, as at 31 December 2018. For more information on indices, please see the important information section

Portfolio themes supporting enduring business models

Our forward looking

return expectations for

Investec Global Franchise

3.


Top 10 offshore equities as a % of offshore Weight

FCF

Yield ROIC

FCF

conversion

5-yr av.

Visa (Visa) 9.1% 3.1% 21.5% 112.6%

Microsoft (Windows 10, Office365, Skype, Xbox One, Surface) 7.0% 3.7% 21.1% 136.5%

Verisign (.com, .net) 6.2% 2.9% 153.3% 141.5%

Moody's (Moody's Investors Service, Moody's Analytics) 5.6% 3.7% 26.7% 114.4%

Booking (Booking.com, Kayak.com, Rentalcars.com) 5.3% 5.8% 25.3% 139.0%

Nestlé (Gerber, Nescafé, Maggi, Nespresso, Purina) 4.6% 3.9% 13.8% 109.1%

Philip Morris International (Marlboro, L&M, Benson & Hedges) 3.9% 5.7% 60.4% 101.8%

Intuit (QuickBooks, TurboTax, ProConnect) 3.9% 3.0% 44.0% 158.4%

Johnson & Johnson (Sudafed, Listerine, Calpol, Clean & Clear) 3.8% 5.6% 20.7% 127.1%

Beiersdorf (Nivea, Elastoplast, La Prairie, tesa) 3.6% 2.6% 14.5% 86.6%

Total as a % of offshore 53.0% 4.0% 40.1% 122.7%


This is not a buy, sell or hold recommendation for any particular security. The portfolio may change significantly over a short period of time.

Source: FactSet, 31 July 2019. Financial metrics are based on blended forward and trailing financial data according to individual constituent company fiscal year ends.

For further information on specific portfolio names, please see the Important Information section.

An attractive mix of Value and Growth

A concentrated portfolio



Past performance is not a reliable indicator of future results, losses may be made.

Sources: Investec Asset Management and FactSet, 31 July 2019. Re-weighted excluding cash and equivalents showing metrics of the constituent companies, since inception. Based on a

pooled vehicle within the strategy and is not available at the composite level. * FCF CAGR means compound annual growth rate of free cashflow.

Our business are not indebted and are growing at an attractive rate

What is important to us…

Low debtAttractive growth rates

-1x

0x

1x

2x

3x

4x

5x

6x

Apr 07 Apr 08 Apr 09 Apr 10 Apr 11 Apr 12 Apr 13 Apr 14 Apr 15 Apr 16 Apr 17 Apr 18 Apr 19

Investec Global Franchise portfolio constituents

MSCI ACWI**

0%

2%

4%

6%

8%

10%

12%

14%

16%

Apr 07 Apr 08 Apr 09 Apr 10 Apr 11 Apr 12 Apr 13 Apr 14 Apr 15 Apr 16 Apr 17 Apr 18 Apr 19

Investec Global Franchise portfolio constituents 7yr FCF CAGR*


3 main conclusion points for today

Global growth is slowing, do I still allocate to global equities?

Investec Global Franchise has performed very well, is it too late to invest

now?

What are the forward looking return expectations for Investec Global

Franchise?

1.

2.

3.

Thank you

www.investecassetmanagement.com


Disclaimer

All information and opinions provided are of a general nature and are not intended to address the circumstances of any particular individual or entity. We are not acting and do not purport

to act in any way as an advisor or in a fiduciary capacity. No one should act upon such information or opinion without appropriate professional advice after a thorough examination of a

particular situation. This is not a recommendation to buy, sell or hold any particular security.

The value of this investment, and any income generated from it, can go down as well as up and will be affected by changes in interest rates, exchange rates, general market conditions and

other political, social and economic developments, as well as by specific matters relating to the assets in which it invests. The Fund’s investment objective will not necessarily be achieved

and there is no guarantee that these investments will make profits; losses may be made. This Fund may not be appropriate for investors who plan to withdraw their money within the short

to medium term. Performance shown is that of the Fund and individual investor’s performance may differ as a result of initial fees, actual investment date, date of any subsequent

reinvestment and any dividend withholding tax. All the information contained in this communication is believed to be reliable but may be inaccurate or incomplete. Any opinions stated are

honestly held but are not guaranteed and should not be relied upon. This is not a buy, sell or hold recommendation for any particular security. It is not an invitation to make an investment

nor does it constitute an offer for sale. Before making an investment, please read the Prospectus and Key Investor Information Document, which sets out the fund specific risks and is

available from Investec Asset Management. The portfolio may change significantly over a short period of time. The Fund is traded at the ruling price and can engage in borrowing and scrip

lending and may be closed in order to be managed in accordance with the mandate. The fund may borrow up to 10% of its market value to bridge insufficient liquidity. The Fund is a sub-

fund of the Investec Global Strategy Fund, which is a UCITS organised as a Société d’Investissement à Capital Variable under the law of Luxembourg. For further information on the Fund

including application forms and a schedule of fees and commissions, please contact Investec Asset Management. Fund prices and English language copies of the Prospectus, Report &

Accounts and Articles of Incorporation and local language copies of the Key Investor Information Documents may be obtained from our website and free of charge from the following

country specific contacts: Luxembourg – Investec Global Strategy Fund, 49 avenue J.F. Kennedy, L-1855 Luxembourg. In South Africa, Investec Asset Management is an authorised

financial services provider. The sub-funds offered for public sale in South Africa are approved under the South African Collective Investment Schemes Control Act.

Investment Team: There is no assurance that the persons referenced herein will continue to be involved with investing for this Fund, or that other persons not identified herein will become

involved with investing assets for the Manager or assets of the Fund at any time without notice.

Investment Process: Any description or information regarding investment process or strategies is provided for illustrative purposes only, may not be fully indicative of any present or future

investments and may be changed at the discretion of the manager without notice. References to specific investments, strategies or investment vehicles are for illustrative purposes only

and should not be relied upon as a recommendation to purchase or sell such investments or to engage in any particular strategy. Portfolio data is expected to change and there is no

assurance that the actual portfolio will remain as described herein. There is no assurance that the investments presented will be available in the future at the levels presented, with the

same characteristics or be available at all. Past performance is no guarantee of future results and has no bearing upon the ability of Manager to construct the illustrative portfolio and

implement its investment strategy or investment objective.

In the event that specific funds are mentioned please refer to the relevant minimum disclosure document in order to obtain all the necessary information in regard to that fund.

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