1. Presentation to:
9 November 2012
A truffle is a scarce, valuable and highly sought-after, edible fungus. Truffles grow underground
and are notoriously difficult to find. Searching for truffles is carried out with specially trained
pigs called Truffle Hogs.

2. Agenda
1. Introduction
2. The Seven Deadly Sins
3. Truffle Insights
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3. Truffle
• Founded by:
• Louis van der Merwe (ex CEO: RMB Asset Management)
• Hannes van der Westhuyzen (ex Head: Global Trading,
Nedbank Capital)
• Charles Booth (ex CIO: RMB Asset Management)
• Licensed in March 2009 (FSP no 36584: Categories I, II
and IIA); Section 13B approved
• Building a quality boutique to manage co-investor
assets
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4. The Truffle message
• Values:
 Alignment
 Fairness
• Value:
 Maximising benefit by delivering sustainable alpha over
time
 Minimising costs by offering a competitive fee
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5. Performance: Truffle General Equity1
(period ending 31 October 2012)
21.6%
20% 18.6%
15.4%
15%
11.8%
11.4%
9.8%
10%
5%
3.0% 3.6%
0%
12-months *Annualised since inception Annualised Std Dev
Truffle General Equity Alsi Outperformance
1 aftermanagement fees
*Since 1 Jan 2011
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6. Performance: Truffle Flexible1
(period ending 31 October 2012)
25%
22.9%
20% 18.6%
15%
12.1% ALSI
10.8% 11.5% 11.0%
10%
7.1%
6.2%
5%
1.0%
0%
12-months *Annualised since inception Annualised Std Dev
Truffle Flexible CPI+5% Outperformance
1 after
management fees
*Since 1 Jan 2011
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7. Performance: Truffle Balanced1
(period ending 31 October 2012)
20.5%
20%
15%
10.8% ALSI
9.7% 9.6%
10%
6.1%
5%
1.0%
0%
*Annualised since inception Annualised Std Dev
Truffle Balanced CPI+4% Outperformance
1 after
management fees
*Since 1 Nov 2011
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8. The Seven Deadly Sins
Source: Behavioural Investing
James Montier (2007)
Other sources:
The Warren Buffet Way
Fooled by Randomness
Triumph of the Optimists
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9. Forecasting (Pride)
• A test:
• Answer the following questions, by
• giving a range for each answer
• that you believe has a 90% probability of
being correct
• Example...
Source: Behavioural investing, James Montier
Test: Russo & Schoemaker (1989)
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10. Forecasting (Pride)
i. Martin Luther King’s age at death
ii. Length of the Nile River (km)
iii. No of countries that are members of OPEC
iv. No of books in the Old Testament
v. Diameter of the moon (km)
vi. Weight of an empty Boeing 747 (kg)
vii. Year in which Wolfgang Amadeus Mozart was born
viii. Gestation period of Asian elephant (days)
ix. Air distance from London to Tokyo (km)
x. Deepest (known) point in the ocean (m)
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11. Forecasting (Pride)
i. 39 years
ii. 6,738 km
iii. 13 countries
iv. 39 books
v. 3,476 km
vi. 176,901 kg
vii. 1756
viii. 645 days
ix. 9590 km
x. 11,033 m
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12. Forecasting (Pride)
Russo & Schoemaker results:
• Sample = 1000
• < 1% got >9 answers correct!!
 Forecasting is difficult to CONSISTENTLY get
right
 We can easily deceive ourselves
 Truffle: Bottom-up, fundamental research
with minimal macro views
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13. Illusion of Knowledge (Gluttony)
• Belief: the more information I have the more knowledge I
have
• Belief: I need to know more than everybody else to
outperform
• More information may increase our confidence rather than
our accuracy (Pride)
• Truffle: Focus on long term normalised
fundamentals (cut out short term noise) and
keeps the process simple
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14. Meeting companies (Lust)
• Lust after information (previous point)
• The truth: we’re lousy at spotting liars
 Enron, Worldcom, Madoff, Tannenbaum…………
… Lance Armstrong
• Truffle: can add benefit outside of Top40, but we
believe in talking to competitors, suppliers and
clients as well as management
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15. Thinking you can outsmart everyone
else (Envy)
• Belief: now that I understand X, I can outsmart
everyone else
• I don’t have to outrun the lion….
• Truffle: our experience tells us we are not
smarter than everyone else. It is not what you
DO know that gets you, it what you DON’T know!
• Our risk and construction process limits our
active positions
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16. Short time horizons (Greed)
• I want to double my money, NOW!
• Short time horizon and overtrading
• Must manage expectations
• Truffle: it is time IN the market, not TIMING the
market.
• It takes time for fundamentals to normalise
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17. Short time horizons (Greed)
Earnings vs Price over Long Term
10000
1000 BIL Price
BIL
Earnings
100
10
Jan-80 Jan-82 Jan-84 Jan-86 Jan-88 Jan-90 Jan-92 Jan-94 Jan-96 Jan-98 Jan-00 Jan-02 Jan-04 Jan-06 Jan-08 Jan-10 Jan-12 Jan-14 Jan-16 Jan-18
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18. Believing everything you read (Sloth)
• We all love a story, but do your homework!
• We have a tendency to obey figures of authority
• Test: do intrinsic values correlate with
movement in share price?
• Truffle: >95% of our research is our own
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19. Group-based decisions (Wrath)
• Group decisions are better than individual
decisions?
• Belief: in a group we offset each others’ biases
• Truffle: common valuation philosophy, but
individual responsibilities
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20. Truffle insights
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21. Truffle insights
The value of an equity is a function of:
• Normalised earnings
• Normalised yield relative
• Market yield
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22. Truffle insights
10000
All Share Index Earnings Indexed to 1993=100
1000
100
Dec-92 Jan-95 Jan-97 Jan-99 Jan-01 Jan-03 Jan-05 Jan-07 Jan-09 Jan-11 Jan-13
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23. Truffle insights
10000
INDEX EARNINGS Indexed to 1993=100
All Share Index Resource Index
1000
100
Dec-92 Jan-95 Jan-97 Jan-99 Jan-01 Jan-03 Jan-05 Jan-07 Jan-09 Jan-11 Jan-13
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24. Truffle insights
INDEX EARNINGS Indexed to 1993=100
10000
Consumer Services Resource Index
1000
100
Dec-92 Jan-95 Jan-97 Jan-99 Jan-01 Jan-03 Jan-05 Jan-07 Jan-09 Jan-11 Jan-13
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25. Truffle insights
What can we conclude:
• Resource earnings have not underperformed
the ALSI
• Resource earnings have not underperformed
the more defensive sectors (consumer services)
• Defensive sectors also exhibit cyclicality in
earnings
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26. Truffle insights
INDEX EARNINGS Indexed to 1993=100
10000
Consumer Services Resource Index
Consumer Services Normalised Earnings Normalised Resource Earnings
1000
100
Dec-92 Jan-95 Jan-97 Jan-99 Jan-01 Jan-03 Jan-05 Jan-07 Jan-09 Jan-11 Jan-13
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27. Truffle insights
Truffle Investment Process:
• We do not extrapolate to establish normalised
earnings
• We compare historic vs projected ROE
• Detailed financial modelling
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28. Truffle insights
Earnings Yield vs Index Value
13% Resources 100000
Earnings Yield Index Value
11%
9%
10000
7%
5%
3% 1000
Jan-93 Jan-95 Jan-97 Jan-99 Jan-01 Jan-03 Jan-05 Jan-07 Jan-09 Jan-11 Jan-13
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29. Truffle insights
Normalised Earnings Yield vs Index Value
15% Resources 100000
Normalised Earnings Yield
13%
Index Value
11%
9% 10000
7%
5%
3% 1000
Jan-93 Jan-95 Jan-97 Jan-99 Jan-01 Jan-03 Jan-05 Jan-07 Jan-09 Jan-11 Jan-13
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30. Truffle insights
Earnings Yield vs Index Value
13% Consumer Services 100000
Earnings Yield Index Value
11%
9%
10000
7%
5%
3% 1000
Jan-93 Jan-95 Jan-97 Jan-99 Jan-01 Jan-03 Jan-05 Jan-07 Jan-09 Jan-11 Jan-13
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31. Truffle insights
Normalised Earnings Yield vs Index Value
Consumer Services 100000
9%
7%
10000
5%
Normalised Earnings Yield Index Value
3% 1000
Jan-93 Jan-95 Jan-97 Jan-99 Jan-01 Jan-03 Jan-05 Jan-07 Jan-09 Jan-11 Jan-13
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32. Truffle insights
Normalised Yield Relative
4.0 Resources vs Consumer Services 4.0
Normalised Yield Relative Price Relative
3.5 3.5
3.0 3.0
2.5 2.5
2.0 2.0
1.5 1.5
1.0 1.0
0.5 0.5
0.0 0.0
Dec-92 Jan-95 Jan-97 Jan-99 Jan-01 Jan-03 Jan-05 Jan-07 Jan-09 Jan-11 Jan-13
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33. Conclusion
• Sector ratings do change over a 3 – 5 year
period
• The relative attractiveness of resources
(cyclicals) vs consumer services (defensives) has
never been as extreme since 1997
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34. Thank you
-The Truffle Hogs

35. Truffle Asset Management is a registered Financial Services Provider (FSP Number: 36484). Registered for Categories I, II and
IIA.
This document does not constitute an offer or solicitation to any person in any jurisdiction in which such offer or solicitation is
not authorised or to any person to whom it would be unlawful to make such offer or solicitation, and is only intended for the
use by the original recipient/addressee. If further distributed by the recipient, the recipient will be responsible to ensure that
such distribution does not breach any local investment legislation or regulation.
Prospective investors should inform themselves and take appropriate advice as to any applicable legal requirements and any
applicable taxation and exchange control regulations in the countries of their citizenship, residence or domicile which might
be relevant to the subscription, purchase, holding, exchange, redemption or disposal of any investments.
Opinions expressed are current opinions as of the date appearing in this material only. The information is confidential and
intended solely for the use of Truffle’s client’s and prospective clients, and other specific addressee’s. It is not to be
reproduced or distributed to any other person except to the client's professional advisers. This document is not for
distribution in the United States.
While information obtained is from sources we believe to be up to date and reliable, Truffle does not guarantee the accuracy
or completeness thereof. Truffle does not accept any liability for inaccurate or incomplete information contained, or for the
correctness of any opinions expressed.
Past performance is not an indication of future performance
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