Anchor capital

“The Anchor Group continued to grow its assets under advice and
management in the first quarter of 2016 in tough market conditions. The
total assets at 31 March 2016 were R44.4 billion. Assets under
management were up R10.1 billion (+45%) for the quarter, with just over
R8 billion coming from the acquisition of 47.5% of Capricorn Fund
Managers…The long term strategy of Anchor is to become a major player
in South African asset management, with an increasing focus on offshore
investment. This will be achieved by both organic and acquisitive growth.”
“The first quarter of 2016 saw a significant reversal in the key drivers of
equity market performance globally, with the theme flowing over to South
African equities. In 2015, the stocks which led the market were growth-
oriented, generally more highly rated companies of “quality.”... The first
quarter of 2016 saw a dramatic rotation away from “growth” stocks toward
beaten-down “value” stocks. Importantly, it is worth highlighting that much
of this “value” is not necessarily reflected in very low earnings multiples, but
rather the fact that many of these sectors and companies’ share prices
have underperformed due to poor fundamentals.”
Peter Armitage
CEO
Sean Ashton
CIO

Top investment
team and
process
Businesses built
to deal with
financial advisors
Access to fund
managers and
top
management
Entrepreneurial
result-driven
approach
Top performing
asset manager
Value-based,
transparent fee
model
Access to special
opportunities
1 2 3 4 5 6 7

Anchor is structurally equivalent to a large asset
manager:
• Size, skill and quality of team
• Governance and oversight
• Flagship fund has a 3 year track record
(Anchor BCI Equity Fund)
BUT
can deliver performance normally associated with a
boutique manager 100.00
110.00
120.00
130.00
140.00
150.00
160.00
170.00
180.00
190.00
200.00
210.00
BENCHMARK
FUND
THE ANCHOR BCI EQUITY FUND
PERFORMANCE SINCE INCEPTION
SOURCE: Morningstar; Anchor Capital
Past performance is not necessarily an indication of future performance.

>R40 BN
TOP EQUITY
PERFORMANCE
OVER 3 YEARS
20 ANALYSTS 14 CA’S
12 CFA’S
120 STAFF

Q1
Growth
(%)
Q1
Growth
(R’bn)
End Mar
2016
(R’bn)
End Dec
2015
(R’bn)
End Dec
2014
(R’bn)
Assets Under Management 45% 10.1 32.5 22.5 7.3
Assets Under Advice 2% 0.2 11.9 11.6 1.3
Total 30% 10.3 44.4 34.1 8.6
Assets Under Advice & Management – 1Q16
• Listed September 2014
• Offices in
Johannesburg Durban
Pretoria London
Cape Town Mauritius

Global strategy
(London)
Local asset
allocation
Analysts give
bottom-up view
Model portfolio
created
Personalised to
your fund
Fund manager
operates fund
• Global macro strategy, supplemented by bottom up research
• Collective input but single decision making responsibility - no management by committee
• Nimble and able to reposition quickly

CIO & Fund Manager
Sean Ashton leads a team of over 20
investment professionals
A dynamic investment process led by high quality,
experienced investment professionals
• Fully fledged team across all asset classes
• Fund managers take ultimate responsibility, with
input from the team
• Weekly formal investment process meetings
• Informal daily investment meetings
• Close proximity working environment facilitating
communication and decision making

Nolan Wapenaar
Head: Fixed Interest
Peter Armitage
Balanced
Glen Baker
Head: Alternatives
David Gibb
Offshore
Nick Dennis
Offshore
Peter Little
Offshore
Sean Ashton
CIO and manger of the
Anchor BCI Equity Fund
A full range of investment funds across asset classes
and geographies
Local Offshore
Unitised
• Equity funds
• Income funds
• Regulation 28 fund
• Flexible funds
• Property funds
• Feeder funds
Unitised
• Equity funds
• Income funds
• Flexible funds
Segregated mandates
• Equity
• Balanced
• Yield
• Property
Segregated mandates
• Equity
• Balanced
• Yield

We’re valuation-centric but are happy to
pay premium ratings for premium
businesses - where growth outlook,
return metrics and cash flows warrant
this
…and these concepts cannot
be separated
…and a lack thereof deserves a
discount
Entrepreneurial teams are serial
value creators and this often cannot
be captured easily in a
spreadsheet, e.g. Discovery
Concentrated index leads to investments
in mostly poor quality companies rather
than good businesses experiencing
temporary trouble
We don’t put ourselves in one
philosophical box…we’re
neither value or growth
specific investors

133-Jun-16 Anchor Capital
Systematic
Risk
Specific
Risk
 Analytics Path
- First step for Scenario
and Sensitivity
analysis
- Important piece for a
macro-based asset
allocation framework
- Crucial starting point
for a risk analysis/
monitoring tool  Analysis will focus on the
behavior SA Bonds and
Currency under defined
Global scenarios

• The US is growing at a diminishing
rate
• However, since Q4 2015, inflation has
been slowly rising
• Major risk is having the Fed rapidly
rising interest rates to curb inflation in
a no growth environment
Anchor Capital 153-Jun-16
-2
-1
0
1
2
3
4
5
Mar-13 Sep-13 Mar-14 Sep-14 Mar-15 Sep-15 Mar-16
USA Quarterly GDP
-0.5
0
0.5
1
1.5
2
2.5
USA Inflation
Data Source: Thomson Reuters
Inflation Build-up

 GDP = C + I + G + Net Exports
- C: Private Consumption
- I : Private Investments
- G: Government Expenditure
 Private investment has been relatively flat the
beginning of 2015 while Government
expenditure has been flat for the period
 Biggest drag to USA GDP has been the fall in
private consumption and net exports
163-Jun-16 Anchor Capital
0
0.5
1
1.5
2
Jan-13 Jul-13 Jan-14 Jul-14 Jan-15 Jul-15 Jan-16
USA YoY Private Consumption
2.3E+12
2.4E+12
2.5E+12
2.6E+12
2.7E+12
2.8E+12
2.9E+12
3E+12
USA Private Investment and Government Consumption
For the past 3-years
Government Expanditure Private Investments
-560
-540
-520
-500
-480
-460
-440
-420
USA Net EXPORTS
Still low

The US Economy: Labor Market
 US labor markets has tightened
significantly
 Falling unemployment, low energy
prices and rising hourly wages will
increase consumer purchasing power
 Increasing wage costs are not showing
up yet in overall inflation because of the
countervailing impact of oil prices and
import prices
 Thus, lower oil prices make it difficult to
judge when wage pressures will
become inflationary
 This adds to the upside inflation risk on
the US economy
0
2
4
6
8
10
12
9.8
10
10.2
10.4
10.6
10.8
Jan-11 Jul-11 Jan-12 Jul-12 Jan-13 Jul-13 Jan-14 Jul-14 Jan-15 Jul-15
US Unemployment Rate vs Real Hourly Wages
Real Hourly Wages US Unemployment Rate
0
0.2
0.4
0.6
0.8
1
US Employment Cost Index

 Decline in oil prices has exacerbated deflationary
pressures in the US
 Core CPI has been flat with a small up tick towards
the end of 2015
 The dollar appreciation relative to its trading partners
has lowered import costs
 Competitive pressure on US domestic firms to
reduce prices
 This further dampens the headline inflation
0
50
100
150
-4
-2
0
2
4
6
Mar-06
Sep-06
Mar-07
Sep-07
Mar-08
Sep-08
Mar-09
Sep-09
Mar-10
Sep-10
Mar-11
Sep-11
Mar-12
Sep-12
Mar-13
Sep-13
Mar-14
Sep-14
Mar-15
Sep-15
Effect of oil prices on US Inflation
Crude Oil Spot US Headline Inflation US Core Inflation
90
110
130
150
170
0
50
100
150
Feb-06
Aug-06
Feb-07
Aug-07
Feb-08
Aug-08
Feb-09
Aug-09
Feb-10
Aug-10
Feb-11
Aug-11
Feb-12
Aug-12
Feb-13
Aug-13
Feb-14
Aug-14
Feb-15
Aug-15
Feb-16
Impact of Oil Prices on US imports and TWI
Crude Spot US Trade Weighted Currency Index US Import Prices
95
100
105
110
115
120
125
Feb-06
Aug-06
Feb-07
Aug-07
Feb-08
Aug-08
Feb-09
Aug-09
Feb-10
Aug-10
Feb-11
Aug-11
Feb-12
Aug-12
Feb-13
Aug-13
Feb-14
Aug-14
Feb-15
Aug-15
US Import Price Index excluding Fuel

The Euro Zone Economy: GDP Components
 Euro Zone GDP components have all been on a gradual rise
 This implies that the observed GDP growth as been a result
of a combined positive contribution of the broad economic
components
 This provides a strength signal for the general economy
4.95E+11
5E+11
5.05E+11
5.1E+11
5.15E+11
5.2E+11
5.25E+11
Euro Zone Government Expanditure
6E+11
6.1E+11
6.2E+11
6.3E+11
6.4E+11
6.5E+11
6.6E+11
6.7E+11
Euro Zone Investments
1260
1280
1300
1320
1340
1360
1380
Euro Zone Private Consumption

 Analysis from the Philips Curve
- Relates an economies inflation to its
output gap
- At full employment, the model assumes
stable inflation
- Disequilibrium generates inflationary or
disinflationary pressures
 Euro area is still recovering from the 2008/2009
recessionary shock
 Still in the process of reducing the output gap
created in the 2008/2009
 Degree of underutilization might still be higher
relative to pre-recession period
 This provides some insight on the current
“dialectical” theme that underpins the Euro area
0
0.5
1
1.5
2
2.5
3
YoY Euro Zone Labor Costs
7
8
9
10
11
12
Jan-13 May-13 Sep-13 Jan-14 May-14 Sep-14 Jan-15 May-15 Sep-15 Jan-16
Euro Zone Unemployment

 Euro area has been experiencing strong
disinflationary pressures up to 2014
 Lack of demand has not been the ultimate cause
of disinflation
 Both low demand and low inflation are joint
manifestation of an underlying disequilibrium in
asset markets leading to the observed disinflation
-1
0
1
2
3
4
5
Euro Zone Inflation
0.8
1
1.2
1.4
1.6
1.8
2
Jan-13 Jul-13 Jan-14 Jul-14 Jan-15 Jul-15 Jan-16
Euro Zone Services Inflation
-10 -8 -6 -4 -2 0 2
Energy
Processed food, alcoho & tobacco
Non-energy industrial goods
Unprocessed food
Services
Contribution to the Euro Zone annual inflation (%)
Feb March
Disinflation Post
disinflationary
cycle

The Chinese Economy: GDP
 China growth rate has been on a downwards spiral since
late 2012
 The export led capital investment growth model that
underpins Chinese economy came under immense pressure
due to decline in exports as a percentage of GDP
 The strengthening of the Yuan that was fueled by the dollar
strength since 2012 left its export industry under pressure
6
6.5
7
7.5
8
8.5
Mar-12
May-12
Jul-12
Sep-12
Nov-12
Jan-13
Mar-13
May-13
Jul-13
Sep-13
Nov-13
Jan-14
Mar-14
May-14
Jul-14
Sep-14
Nov-14
Jan-15
Mar-15
May-15
Jul-15
Sep-15
Nov-15
Jan-16
Mar-16
China GDP Y/Y
20
22
24
26
28
Q1
2012
Q2
2012
Q3
2012
Q4
2012
Q1
2013
Q2
2013
Q3
2013
Q4
2013
Q1
2014
Q2
2014
Q3
2014
Q4
2014
Q1
2015
Q2
2015
Q3
2015
Q4
2015
Q1
2016
Q2
2016
China exports (%GDP)Data Source: Thomson Reuters
Cyclicality?
4
5
6
7
8
9
60
80
100
120
Yuan/Dollar vs US Trade Weighted Dollar
USA Trade Weighted Index Yuen/USD
Yuan
Disparity

The Chinese Economy: A Glance at GDP Components
 We currently have no conviction that China’s
growth model has been gravitating towards
consumption nor services driven
 China growth will still depend on its exports
particularly in response to global
infrastructure development which is showing
positive momentum
6.5
7
7.5
8
8.5
9
Q1
2013
Q2
2013
Q3
2013
Q4
2013
Q1
2014
Q2
2014
Q3
2014
Q4
2014
Q1
2015
Q2
2015
Q3
2015
Q4
2015
Q1
2016
Q2
2016
China Private Consumption (%GDP)
46
48
50
52
54
56
China Services Sector
34
36
38
40
42
44
46
Feb-13
Apr-13
Jun-13
Aug-13
Oct-13
Dec-13
Feb-14
Apr-14
Jun-14
Aug-14
Oct-14
Dec-14
Feb-15
Apr-15
Jun-15
Aug-15
Oct-15
Dec-15
Feb-16
Apr-16
iShare Global Infrastructure ETF
False Signals!Potential
Anchor

The Chinese Economy: Risk Factors
 Dialectical phenomenon driven by a theme of “Appearance vs Reality”
- China’s foreign reserves have fell drastically, but to what
level will this start to raise true alarm bells
- What are Chinese actual reserves together with their
dollar assets
 Banks - A ticking bomb that might not explode
- Loan creation by banks has been rising at the back on an
increasing number on non-performing loans
- The banking sector credit risk has been increasing
significantly since 2013
 Major risk is that under current conditions of concentrated risk, it would take
one default to drive the economy into a downwards spiral
2.8E+12
3E+12
3.2E+12
3.4E+12
3.6E+12
3.8E+12
4E+12
4.2E+12
China Foreign Reserves
0
0.2
0.4
0.6
0.8
1
1.2
China Commercial Bank Credit Risk
Indicator
0
5E+12
1E+13
1.5E+13
0
2000
4000
6000
8000
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
China Non-Performing Loans and New Loan Issues
China's Non-performing Loans China's New Loan Growth

Growth vs Real Exchange Rate
• Growth in SA has deteriorated
significantly
• The decline rate has increased between
2014 to 2016
• Growth for 2016 was revised down from
1.3 to 0.7
• Gross National income has been on a
decreasing trend since 2012
3-Jun-16 Anchor Capital 28
0
1
2
3
4
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
SA GDP Growth Rate
200
2200
4200
6200
8200
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Gross National Income
55
70
85
100
SA Real Effective Exchange Rate

Growing Sectors as a % of GDP
• Finance, Real Estate and Bus services has been the most
stable growth sector over the past
• Wholesale, retail and motor trade has shown an upward
cyclical growth trend
• General government has recently started ticking upwards
after a gradual decline from 1993 to 2009
• Overall, these sectors have been an anchor for SA growth
in recent years
0
5
10
15
20
25
May-93
May-94
May-95
May-96
May-97
May-98
May-99
May-00
May-01
May-02
May-03
May-04
May-05
May-06
May-07
May-08
May-09
May-10
May-11
May-12
May-13
May-14
May-15
GENERAL GOVERNMENT SERVICES
0
5
10
15
20
25
May-93
May-94
May-95
May-96
May-97
May-98
May-99
May-00
May-01
May-02
May-03
May-04
May-05
May-06
May-07
May-08
May-09
May-10
May-11
May-12
May-13
May-14
May-15
FINANCE,REAL ESTATE & BUS.SERVICES
12
12.5
13
13.5
14
14.5
15
15.5
May-93
May-94
May-95
May-96
May-97
May-98
May-99
May-00
May-01
May-02
May-03
May-04
May-05
May-06
May-07
May-08
May-09
May-10
May-11
May-12
May-13
May-14
May-15
WHOLESALE, RETAIL & MOTOR TRADE

Foreign Flows
• Foreigners were net buyers of SA
bonds during 2016
• Levels of net purchases for Jan
2016 look similar to those
observed in Jan 2015
• Foreign net purchases appears
to have been cyclical over the
past 4 years
-4000
-2000
0
2000
4000
6000
8000
Net Purchases of SA Bonds by Foreigners
Purchases Sales
-4000
0
4000
8000
12000
16000
20000
Feb-09
Aug-09
Feb-10
Aug-10
Feb-11
Aug-11
Feb-12
Aug-12
Feb-13
Aug-13
Feb-14
Aug-14
Feb-15
Aug-15
Feb-16
Cumulative Net Purchases of SA Bonds by
Foreigners

Fundamental Analysis: Relative to other EM Currencies
• The Rand remains one of the top
worst performing currency relative
to the dollar on our selected EM
currencies
• The rand has improved from
being the worst performing
currency last month to being the
second worst performer
0 10 20 30 40 50 60 70
INDONESIAN_RUPIAH
NORWEGIAN KRONER
Indian_Rpees
TURKISH_LIRA
THAI BAHT
PERUVIAN_NUEVO
CHILEAN_PESO
BRAZILIAN_REAL
MEXICAN_PESO
RUSSIAN_ROUBLE
SA_ZAR
ARGENTINE_PESOS
Annual Depreciation of selected EM
Currencies
3-Jun-16 Anchor Capital 31

What have we seen?
• Heightened market uncertainty
• Unconventional monetary policies assumed by major central
banks which have altered the investment landscape
• Since Q2 2014 5 central banks have embarked on negative
rates (Denmark, Euro Area, Japan, Sweden and
Switzerland)
• In Q1 2016, 14 central banks cut their interest rate
• Negative interest rates reduces the opportunity cost of holding
gold
• Given negative interest rates and increasing market
uncertainty, demand for gold increases
• More importantly, falling and negative rates are generally
linked to high gold prices, yet, rising rates are not necessary
linked to low gold prices
-1.50
-1.00
-0.50
0.00
0.50
1.00
1.50
2.00
2.50
3.00
3m 1y 2y 3y 5y 10y 30y
Nominal Yield Curves of various Advanced
Economies
USA UK France
Germany Japan Switzerland

Yield Curve Movements
• Yield Curves and Interest Rates
pushing further into negative territory
• Gold Price Implications
• Emerging Market implications
• Stabilization of oil price implications
-1
0
1
2
3m 1y 2y 3y 5y 10y 30y
Germany Yield Curve movement since 2012
2012 2014 2016
-1
0
1
2
3m 1y 2y 3y 5y 10y 30y
Japan Yield Curve movement since 2013
2013 2014 2015 2016

Fundamental Bond vs Actual SA Bond
• Our Fundamental model suggest that current
bond yields are over valued
• Spot valuation from the fundamental model
values SA 10-year yields at 10.06% while
actual yields are at 9.50%
• The fundamental valuation model has largely
been driven by rising credit spreads since
Sep 2015
0
3
6
9
12
15
Oct-08
Feb-09
Jun-09
Oct-09
Feb-10
Jun-10
Oct-10
Feb-11
Jun-11
Oct-11
Feb-12
Jun-12
Oct-12
Feb-13
Jun-13
Oct-13
Feb-14
Jun-14
Oct-14
Feb-15
Jun-15
Oct-15
Feb-16
Jun-16
SA 10yr Fundamental Bond
US 10yr Bond SA Sovereign Spread Inflation Differential SA 10yr Fair Value
Data
-6
-3
0
3
6
9
12
15
Oct-08 Oct-09 Oct-10 Oct-11 Oct-12 Oct-13 Oct-14 Oct-15 Oct-16
SA_10yr vs Fundamental 10yr
SA 10yr Fair Value Actual SA_10yr Implied RP
Model Spot : 10.06

Z-Score Bond Valuation
• SA Bonds have change
direction and are becoming
more attractive
• The 10yr bond appears to be
have moved more than the 5-
year bond
-3.5
-2.0
-0.5
1.0
2.5
4.0
5.5
SA_5yr Z-Score
Cheap
Rich
-3.5
-2.0
-0.5
1.0
2.5
4.0
5.5
SA_10yr Z-Score
Rich
Cheap

Rate Hiking Probabilities
• SA FRA’s are pricing in a strong
probability of a hike in July, possibly
more than 25bp
• The US FRA’s on the other hand are
currently pricing in a 70% probability of a
hike in the June meeting
0
20
40
60
80
100
ProbabilityofRateHikes
Probabilities of Rate Hikes at MPC Meetings
Implied by 3 month FRA's
1st Hike 2nd Hike 3rd Hike 4th Hike
0
20
40
60
80
100
Jun-16 Jul-16 Sep-16 Nov-16 Dec-16
Probabilities of Rate Hikes at FOMC Meetings
Implied by US 3M FRA's
1st Hike 2nd Hike Data Source: Thomson Reuters

Fixed Income Attractiveness Increasing
History never repeats . . . but it rhymes

© 2009-2015 Anchor Capital (Pty) Ltd. | An authorised Financial Services Provider Reg No # 2009/002925/07 | FSP No # 39834
© 2009-2015 Anchor Capital (Pty) Ltd. | An authorised Financial Services Provider Reg No
# 2009/002925/07 | FSP No # 39834
This report and its contents are confidential, privileged and only for the information of the intended
recipient. Anchor Capital (Pty) Ltd makes no representations or warranties in respect of this report or its
content and will not be liable for any loss or damage of any nature arising from this report, the content
thereof, your reliance thereon its unauthorised use or any electronic viruses associated therewith. This
report is proprietary to Anchor Capital (Pty) Ltd and you may not copy or distribute the report without
the prior written consent of the authors.
Boutique Collective Investments (RF) (Pty) Ltd (“BCI”) is a registered Manager of the Boutique
Collective Investments Scheme, approved in terms of the Collective Investments Schemes Control Act,
No 45 of 2002 and is a full member of the Association for Savings and Investment SA. Collective
Investment Schemes in securities are generally medium to long term investments. The value of
participatory interests may go up or down and past performance is not necessarily an indication of
future performance. The Manager does not guarantee the capital or the return of a portfolio. Collective
Investments are traded at ruling prices and can engage in borrowing and scrip lending. A schedule of
fees, charges and maximum commissions is available on request. BCI reserves the right to close and
reopen certain portfolios from time to time in order to manage them more efficiently. Additional
information, including application forms, annual or quarterly reports can be obtained from BCI, free of
charge. Performance fees are calculated and accrued on a daily basis based upon the daily
outperformance, in excess of the benchmark, multiplied by the share rate and paid over to the manager
monthly. Performance figures quoted are from Morningstar, as at the date of this document for a lump
sum investment, using NAV-NAV with income reinvested and do not take any upfront manager’s charge
into account. Income distributions are declared on the ex-dividend date. Actual investment performance
will differ based on the initial fees charge applicable, the actual investment date, the date of
reinvestment and dividend withholding tax. Investments in foreign securities may include additional risks
such as potential constraints on liquidity and repatriation of funds, macroeconomic risk, political risk,
foreign exchange risk, tax risk, settlement risk as well as potential limitations on the availability of
market information. Boutique Collective Investments (RF) Pty Ltd retains full legal responsibility for the
third party named portfolio. Although reasonable steps have been taken to ensure the validity and
accuracy of the information in this document, BCI does not accept any responsibility for any claim,
damages, loss or expense, however it arises, out of or in connection with the information in this
document, whether by a client, investor or intermediary. This document should not be seen as an offer
to purchase any specific product and is not to be construed as advice or guidance in any form
whatsoever. Investors are encouraged to obtain independent professional investment and taxation
advice before investing with or in any of BCI/the Manager’s products.

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