1. The China Opportunity

2. CHINA
 Most great investments begin in discomfort.
– “The things most people feel good about – investments where the
underlying premise is widely accepted, the recent performance has
been positive and the outlook is rosy – are unlikely to be available
at bargain prices.
Rather, bargains are usually found among things that are controversial,
that people are pessimistic about, and that have been performing badly
of late.”

3. CHINA MARKET UPDATE
Wind Bloomberg
700
1700
2700
3700
4700
5700
6700
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Scary Bubble
Where we are now

4. CHINA MARKET UPDATE
0
1000
2000
3000
4000
5000
6000
7000
0
50
100
150
200
250
300
350
400
Earnings
Est Earning
Est Max
Est Min
CSI300 Index

5. CHINA MARKET UPDATE
Wind Bloomberg
0
0.2
0.4
0.6
0.8
1
1.2
1.4
1.6
1.8
0
1
2
3
4
5
6
7
8
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
China USA
Great Recession
Fear?
Risk Premium?

6. CHINA MARKET UPDATE
Bloomberg Estimates End if Mayt
0
5
10
15
20
25
30
35
40
45
2007 October Today
Top40 index
DAX index
MSCI World
S&P 500
FTSE 100
CSI 300 (China)

7. CHINA SECTOR UPDATE
Inet, Wind
0
5
10
15
20
25
30
35
China South Africa

8. 1960 AND MODERN CHINA
Born in 1960 Born in 2009
Life Expectancy 47 73
Per Capita consumption at birth $102 $1429
Per Capita consumption at Death $1129 $21400
Lifetime Consumption $16443 $632024 (38x)

9. CHINESE AND INDIAN CONSUMERS IN THE NEXT
DECADE
2010 Income Distribution 2020 income distribution
Number of Households
(Millions)
Share of households (%)
Number of Households
(Millions)
Share of households (%)
China
Upper 24 6 91 21
Middle 109 28 202 47
Lower 260 66 138 32
India
Upper 9 4 32 12
Middle 63 28 117 45
Lower 152 68 110 43
 Billionaire’s 1 in 2004, 115 today
 Movies total spend 17.6Billion RMB, up 40% a year compounded
since 2006, 7x the market size, 2013 3Q growth up another 36%
 Holiday makers, 20 Million in 2004, today 90 Million!
 Chinese entrepreneurs believe in a 10 x 10 strategy, 10x the size in
10 years

10. COMPANY SPOTLIGHTS
Wind
Haier
-
10
20
30
40
50
60
2007 Now
PE Ratio
0%
2%
4%
6%
8%
10%
12%
14%
16%
18%
20%
Earnings Growth Revenue Growth
Growth
-
5
10
15
20
25
30
35
40
2,007 2,008 2,009 2,010 2,011 2,012 2,013 2,014
ROE

11. COMPANY SPOTLIGHTS
Wind
Huayu
-
5
10
15
20
25
30
35
40
45
50
2007 Now
PE Ratio
0%
5%
10%
15%
20%
25%
30%
35%
40%
Earnings Growth Revenue Growth
Growth
(5.00)
-
5.00
10.00
15.00
20.00
25.00
2,007 2,008 2,009 2,010 2,011 2,012 2,013 2,014
ROE
Net Margin

12. COMPANY SPOTLIGHTS
MaoTai
-
20
40
60
80
100
120
2007 Now
PE Ratio
0.00%
5.00%
10.00%
15.00%
20.00%
25.00%
30.00%
Earnings Growth Revenue Growth
Growth
-
10
20
30
40
50
60
2,007 2,008 2,009 2,010 2,011 2,012 2,013 2,014
ROE
Net Margin

13. COMPANY SPOTLIGHTS
Pingan
-
10
20
30
40
50
60
2007 Now
PE Ratio
0.00%
5.00%
10.00%
15.00%
20.00%
25.00%
Earnings Growth Revenue Growth
Growth
-
5.00
10.00
15.00
20.00
25.00
2,007 2,008 2,009 2,010 2,011 2,012 2,013 2,014
ROE
Net Profit Margin

14. CHINA RISK MAP
Government
Directed
Lending
Commercial
Banks
Low Deposit
Rates
Private
Households
Shadow
Banking
Unlisted
SOEs /
Policy Banks
Private
SMMEs
Government
Tight Lending
Standards

15. GOVERNMENT
 Huge Reserves
 Low debt to GDP
 Good government balance sheets with very small deficits
 Avenue to further develop taxation in China
– Capital Gains
– Dividends
– Benefit restructuring
 Exports continue to be strong, although imports catching up

16. PRIVATE HOUSEHOLDS
 Housing is a store of wealth
 Huge deposits for housing
 EXTREMELY low debt levels
– Still not used to debt
– Consumption very low
 20% of residential housing un-occupied
– A 30% drop in prices will result in around 11% of these houses to be
underwater
– A 30% drop in prices in occupied housing will only result in 2% of these
homes to be underwater
– High level of deposit
 Rules and regulation against speculation

17. HOUSE PRICE GROWTH
Y-o-Y change
-5%
0%
5%
10%
15%
20%
25%
01/07/2005
01/10/2005
01/01/2006
01/04/2006
01/07/2006
01/10/2006
01/01/2007
01/04/2007
01/07/2007
01/10/2007
01/01/2008
01/04/2008
01/07/2008
01/10/2008
01/01/2009
01/04/2009
01/07/2009
01/10/2009
01/01/2010
01/04/2010
01/07/2010
01/10/2010
01/01/2011
01/04/2011
01/07/2011
01/10/2011
01/01/2012
01/04/2012
01/07/2012
01/10/2012
01/01/2013
01/04/2013
01/07/2013
01/10/2013
01/01/2014
01/04/2014
Tier1 Cities (CNSB) 70 Cities (CNSB)

18. SMMES
 Very difficult to get access to credit
– Get expensive credit through shadow banking signal
 Shadow banking actually works like a real bank / corporate bond
market
– Depositors get higher yield with higher risk
– SMMEs get access to credit although expensive credit
 Trusts make up only 7-10% of GDP
 HSBC research that 90% of products issued by trusts are issued by
companies with huge financial backing and profitability, will have no
problems in making investors whole
 In general trust credit spreads are around 5%, which implies a
default rate of around 33% over 5 years for investors to still be better
off invested in them, current default rates are tiny around 1%

19. UNLISTED SOES
 Listed SOEs have some of the lowest debt levels across all
companies
– Makes sense as the privatisation / listing process started with the ones
that was best managed
 Unlisted SOE
– GOD HELP THEM…
– Restructuring
– Government bail out
– Local access
 Government reform plans shows that those with polluting, excess
capacity and low productivity will be allowed to default and close
– Myth that Government do not fire people
– Civil service reforms in early 1990s resulted in around 50 million people
losing jobs before rehired in more efficient industry

20. FINANCIAL STABILITY REPORT
2014
 The Chinese Central Bank ran a stress test on the banks using the
following scenario:
– 4% GDP growth
– Top 3 clients of each bank renege on their contracts
– 30% default in developers
– 15% default in private residential
– Interest rate spread lowers by 100bps
– Bad loans rises to 15%

21. CONCLUSION
 Very Cheap
 Risky, growth slows down, new consumption model, reforms
– In the price already?
 Good Diversification
 Long term picture more stable

22. Equity Process

23. CHINA BALANCED FUND
Equity Factor Allocation
Arbitrage, 6%
Behavioural,
19%
Quality, 19% Historical
Earnings, 28%
Forecasted
Earnings, 28%
Value, 56%
Factor Allocation

24. FACTOR PERFORMANCE
Month Since Inception
Value Behavioural Quality Value Behavioural Quality
2013-04-23 -0.08% 1.52% 1.97% -0.08% 1.52% 1.97%
2013-05-27 -3.22% 0.65% 1.69% -3.30% 2.19% 3.70%
2013-06-26 0.65% -1.64% 2.79% -2.67% 0.51% 6.59%
2013-07-25 -0.56% -1.92% -0.14% -3.21% -1.41% 6.44%
2013-08-23 1.30% 2.58% -1.50% -1.96% 1.13% 4.85%
2013-09-18 0.53% 2.05% -4.50% -1.43% 3.20% 0.13%
2013-10-29 0.63% 1.09% -1.87% -0.81% 4.32% -1.74%
2013-11-27 0.73% 1.26% -2.14% -0.09% 5.64% -3.84%
2013-12-27 0.39% 1.96% 2.36% 0.30% 7.71% -1.58%
2014-01-28 -0.02% 0.15% 0.11% 0.28% 7.87% -1.47%
2014-02-26 0.38% 5.62% -1.04% 0.66% 13.94% -2.49%
2014-03-26 1.70% 4.02% 0.91% 2.37% 18.52% -1.61%
2014-04-24 0.20% -3.21% -0.60% 2.57% 14.71% -2.19%
2014-05-27 0.45% -0.38% -0.34% 3.04% 14.28% -2.53%

25. ALPHA DISTRIBUTION
0
100
200
300
400
500
600
700
800
900
Alpha Distribution

26. EQUITY CARVE-OUT ALPHA
-2.00%
-1.00%
0.00%
1.00%
2.00%
3.00%
4.00%
5.00%
6.00%
Cumulative Alpha

27. MAY PORTFOLIO
Fin, 35%
Mat,
7%
Ind, 13%
Util, 4%
Tel, 0%
IT, 5%
Eng, 5%
Con Dis,
11%
Con Stap,
7%
HC, 8%Sectors
-4.09%
-0.86%
-1.41%
0.86%
-0.45%
0.71%
-0.12%
-1.05%
-0.29%
1.62%
-5.0%
-4.0%
-3.0%
-2.0%
-1.0%
0.0%
1.0%
2.0%
Fin Mat Ind Util Tel IT Eng Con
Dis
Con
Stap
HC
Sector Under/Overweight
0.0% 1.0% 2.0% 3.0% 4.0% 5.0%
Great Wall Motor Co Ltd
Huadian Power International…
Hong Yuan Securities Co Ltd
Qingdao Haier Co Ltd
Bank of Beijing Co Ltd
Dashang Group Co Ltd
Anhui Gujing Distillery Co Ltd
Avic Capital Co Ltd
Xiamen C & D Inc
Changjiang Securities Co Ltd
Huaxia Bank Co Ltd
Top 10 Over Weight
-3.0% -2.0% -1.0% 0.0% 1.0% 2.0% 3.0%
Industrial Bank Co Ltd
China Merchants Bank Co Ltd
Ping An Insurance Group Co of…
Gree Electric Appliances Inc
Haitong Securities Co Ltd
CITIC Securities Co Ltd
China Everbright Bank Co Ltd
China Pacific Insurance Group Co…
Anhui Conch Cement Co Ltd
Kweichow Moutai Co Ltd
Top 10 Under Weight

28. FUND TILL END OF MAY
Prescient
2014 YTD Since Inception
Fund Gross of Fees in USD -7.38% -10.76%
CSI300 Total Return in USD -9.97% -14.32%
China CPI+3 in USD -0.71% 5.47%
-7.38%
-10.76%
-9.97%
-14.32%
-0.71%
5.47%
-20.00%
-15.00%
-10.00%
-5.00%
0.00%
5.00%
10.00%
Fund Performance
Fund Gross of Fees in USD CSI300 Total Return in USD China CPI+3 in USD

29. FUND AVAILABILITY
 UCITS regulated fund in Ireland
 Feeder fund structure in South Africa

30. China Debt Fund
Opportunity

31. CHINA CONSERVATIVE FUND
 As of Wednesday the 17th June
– CNYZAR exchange rate is 1.62 ZAR per CNY
– CNYZAR 1 year forward rate is 1.73 ZAR per CNY
– Start with 100 rands buy CNY at 1.62 at the same time sell CNY forward
at 1.73 for 1 year ahead
– 100 / 1.62 = 61.66 CNY
– We earn 4.3% in CNY = 64.31 CNY
– We sell CNY back to ZAR at 1.73
– 111.07 ZAR
– We make 11.07% in 1 year
 This has no currency risk, assets invested in money market
instruments in China
– No duration risk
Arbitrage

32. CHINA CONSERVATIVE FUND
 The biggest opportunity in China ATM comes from the mispricing of
the forwards
Arbitrage
-2%
-1%
0%
1%
2%
3%
4%
5%
6%
7%
8%
9%
23-Aug-09
23-Oct-09
23-Dec-09
23-Feb-10
23-Apr-10
23-Jun-10
23-Aug-10
23-Oct-10
23-Dec-10
23-Feb-11
23-Apr-11
23-Jun-11
23-Aug-11
23-Oct-11
23-Dec-11
23-Feb-12
23-Apr-12
23-Jun-12
23-Aug-12
23-Oct-12
23-Dec-12
23-Feb-13
23-Apr-13
23-Jun-13
23-Aug-13
23-Oct-13
23-Dec-13
23-Feb-14
23-Apr-14
EUR assets CNY assets

33. CHINA CONSERVATIVE FUND
Potential Fund Asset Allocation
CSI Short Term Bond Index (1 year) Portfolio
Weighting Return Weighting Return
0 - 3 months 21% 4.2% 25% 4.7%
3 - 6 months 30% 4.3% 25% 4.3%
6 - 12 months 49% 4.6% 50% 5.2%
Weighted Return 4.4% 4.7%

34. CHINA CONSERVATIVE FUND
Arbitrage

35. CHINA CONSERVATIVE FUND
Arbitrage

36. CHINA CONSERVATIVE FUND
 Fixed income fund with less than 2 year maturity
– Average 1 year
– Maximise yield
– Avoid defaults
– Building block
 3 classes
– CNY
– USD
– ZAR
– Segregated
 Official benchmark
– Chinese CPI
– Chosen also because China lacks a proper short term fixed income
benchmark

37. Thank you
Regulatory Information
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presentation is available from Prescient upon request.
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