Sundaram Asset Management Portfolio Managers 1 Sundaram India Secular Opportunities Portfolio Product overview Investment Strategy Portfolio is designed for Investors seeking a secularly advantaged, concentrated, high-alpha approach to growth. Sundaram India Secular Opportunities Portfolio typically invests across cap curves targeting companies those exhibit secular growth characteristics, sustainable competitive advantages and reasonable valuations based on our analysis of fair value. Investment Objective The objective of the portfolio is to generate capital appreciation by investing in concentrated set of high conviction stocks. Investment Horizon 3 to 5 years Criteria for stock selection 5 quantitative factors and 2 qualitative factors are used for stock selection. The Quantative factors are – High return ratios: The higher the returns on equity and capital employed over weighted average cost of capital (WACC) the higher is the value addition by the company to its minority shareholders. Studies have indicated that company with superior return ratios outperform companies with poor or lower return ratios. Remark: Return ratios are averaged over a 5 year period to smoothen out lumpiness and volatility (if any). Minimum leverage: Investments will be made in those companies that can grow without leveraging the balance sheet. In a high interest rate environment like the present one, interest outgo will pinch bottom line and therefore shareholder wealth. Remark: Minimal debt for purpose of working capital is acceptable. Long term debt for the purpose of expansion, Greenfield etc is avoided. Criteria for stock selection Domestic business: Investments will only be done in companies that generate at least 80% of their business from India. Therefore, export oriented companies will be avoided and focus will be on domestic consumption story. Remark: The above filter will make the portfolio immune to currency risk, global slowdown etc. Capital light: Generally companies with very high fixed asset turnover ratios are preferred. Hence, asset heavy businesses are discarded and entry barriers in these cases are mostly due to the company’s brands and the space it operates in Remark: Most companies that pass this filter will generate sufficient cash flows to fund their capex without external borrowings. High operating leverage: Companies that are in a better position to absorb rise in raw material prices and companies that are able to easily cut its cost by increasing volumes are preferred especially in uncertain environments like the one we have at present Criteria for stock selection Qualitative factors: Identifying managements that have generally kept in mind and have acted in the interest of minority shareholders, do not frequent capital markets (for raising funds), have been rational in their decisions Strong brands and strong market position: Brand pull will enable companies to pass on higher raw material costs to consumers. Brand pull will also ensure that consumers continue to purchase the products with their reduced purchasing power in a high inflationary environment Product Specification Stock composition: 10 stocks Consumer Goods Financial Services Benchmark: S&P CNX 500 Automobile Investment Horizon – 3 to 5Years Textile Chemicals Portfolio Allocation Consumer Goods Financial Services Automobile Industrial Manufacturing Textiles Chemicals Cash Model portfolio & performance Top Holdings Page Industries Bosch CRISIL Pidilite Nestle 1 Month 3 Month 6 Month 1 Year 18 Months Sundaram Secular India Opportunities -1.3 1.6 21.6 29.0 43.0 Portfolio CNX 500 -1.5 -12.0 -14.0 -19.2 -5.2 Performance as on 30 Sep 2011; Returns are in % Returns on a period excess of 1yr are on a compounded annualized basis Past performance may or may not be sustained in Future Sundaram PMS MID CAP Theme Product overview Investment Strategy Sundaram Midcap Strategy is designed to invest • In strong, fundamentally sound businesses and visionary managements that have the potential to scale up in the next 3 to 5 years • Taking advantage of the structural changes the Indian economy offers • Try to identify stocks in the mid cap segment that have been overlooked by the markets • Suitable for investors who would like to invest with a long term view on wealth creation Investment Objective Maximum long-term capital appreciation with investments in mid cap companies that operate in niche and upcoming sectors that can provide uncorrelated returns compared to the market Investment Horizon 3 to 5 years Sundaram PMS - Midcap Portfolio Specs Asset Allocation Market capitalisation Range •Equity – 0 to 100% • Market cap of 51st Stock in NSE to a minimum market cap •Cash - 0 to 100% of Rs 100 cr Stocks in the Portfolio •20 to 30 Stocks •Not more than 10% of AUM to be invested in a particular stock Sector Allocation Sector weights allocated based on the current micro and macro factors Current Portfolio Specification Top Holdings Top Sectors Astral Financial Services Gujarat Gas Industrial Manufacturing Petronet LNG Energy YES bank Consumer goods BATA Automobile ING Vysa Stock composition: 24 stocks Lupin Benchmark: CNX Mid cap Page Industries Investment Horizon: 3 to 5Years AKZO Noble Risk Profile: Medium Dish TV 1 Month 3 Month 6 Month 1 Year Midcap Strategy -1.6 0.3 16.1 2.9 CNX Midcap -2.8 -11.0 -11.8 -22.6 Performance as on 30 Sep 2011; Returns are in % Returns on a period excess of 1yr are on a compounded annualized basis Past performance may or may not be sustained in Future Sundaram PMS MULTI CAP Theme Product overview Investment Strategy Sundaram Multicap Strategy is designed for investors • To invest in a combination of strong businesses with a potential for high growth and mature businesses that offer stability to the portfolio • Suitable for investors who would like to invest with a long term view on wealth creation Investment Objective Maximum long-term capital appreciation with minimum long-term risk to principal with a fair balance between growth, safety and returns Investment Horizon 3 to 5 years Sundaram PMS - Multicap Portfolio Specs Asset Allocation Market capitalisation criteria •Equity – 0 to 100% • Market cap of Minimum Rs 100 cr •Cash - 0 to 100% Stocks in the Portfolio •20 to 30 stocks • Not more than 10% of AUM to be invested in a particular stock Sector Allocation Sector weights allocated based on the current micro and macro factors Current Portfolio Specification Top Holdings Top Sectors Page Industries Financial Services Asian Paints Consumer Goods CRISIL Industrial Manufacturing HDFC Textiles HDFC Bank IT Glaxosmithkline Consumer Stock composition: 22 stocks AXIS Bank Benchmark: CNX Nifty AKZO Noble Investment Horizon: 3 to 5Years Infosys Risk Profile: Low Astral Polytech 6 1 Month 3 Month 1 Year 18 Months 2 Year 3Year Month Multicap Strategy 0.0 -3.9 3.0 -11.0 2.0 3.7 7.7 Nifty -1.2 -12.5 -15.3 -18.0 -3.9 -1.4 8.0 Performance as on 30 sEP 2011; Returns are in % Returns on a period excess of 1yr are on a compounded annualized basis Past performance may or may not be sustained in Future Sundaram PMS SMALL CAP Theme Product overview Investment Strategy Sundaram Smallcap Strategy is designed for investors • To invest small business with visionary management who have the potential to scale up and grow exponentially over a 3 to 5 year period • The fund will seek to invest in stocks to seek appreciation primarily due to earnings growth only • P/E re rating (if any) would be incidental in nature and may add to returns once the company grows in size and moves up the market curve Investment Objective Company will be chosen on the basis of their ability to grow at least 1.5x the nominal GDP growth, high return ratios, zero or minimal leverage and strong management Investment Horizon 3 to 5 years Sundaram PMS – Small cap Portfolio Specs Asset Allocation Market capitalisation criteria •Equity – 0 to 50% • Market cap of 100th Stock in NSE to a minimum market cap of Rs 100 cr •Cash - 50 to 100% Stocks in the Portfolio •10 stocks • Not more than 10% of AUM to be invested in a particular stock Sector Allocation Sector weights allocated based on the current micro and macro factors Current Portfolio Specification Top Sectors Automobile Consumer Goods Top Holdings Fertiliser and Pesticides Astral Polytech Pharma Insectides Industrial Manufacturing Berger Paints V Guard Stock composition: 11 stocks Shilpa Medicare Benchmark: BSE 500 Investment Horizon: 3 to 5Years Risk Profile: High 1 Month 3 Month 6 Month 1 Year 18 Months Smallcap Strategy -0.3 -4.5 -0.3 -10.8 -0.2 BSE 500 -1.6 -12.1 -14.1 -20.0 -5.2 Performance as on 30 Sep 2011; Returns are in % Returns on a period excess of 1yr are on a compounded annualized basis Past performance may or may not be sustained in Future Disclaimer General Disclaimer: This document is issued by Sundaram Asset Management Portfolio Managers registered with the Securities and Exchange Board of India in India. This document is produced for information purposes only. It does not constitute a prospectus or offer document or an offer or solicitation to buy any securities or other investment. Information and opinion contained in this document are published for the assistance of the recipient only; they are not to be relied upon as authoritative or taken as a substitution for exercise of judgment by any recipient. They are subject to change without any notice and not intended to provide the sole basis of any evaluation of the instrument discussed or offer to buy. It is neither a solicitation to sell nor shall it form the basis of or be relied upon in connection with any contract or commitment whatsoever or be taken as investment advice. The information and opinions contained in this communication have been obtained from sources that Sundaram Asset Management Portfolio Managers believes to be reliable; no representation or warranty, express or implied, is made that such information is accurate or complete and it should not be relied upon as such. Sundaram Asset Management Portfolio Managers neither guarantees its accuracy and/or completeness nor does it guarantee to update the information from time to time. This communication is for private circulation only and for the exclusive and confidential use of the intended recipient(s) only. Any other distribution, use or reproduction of this communication in its entirety or any part thereof is unauthorized and strictly prohibited. By accepting this document you agree to be bound by the foregoing limitations. This communication is for general information only without regard to specific objectives, financial situations and needs of any particular person who may receive it and Sundaram Asset Management Portfolio Managers is not soliciting any action based on this document. In the discharge of its functions, Sundaram Asset Management may use any of the data presented in this document for its decision-making purpose and is not bound to disclose the same. Copies of the Disclosure Document may be obtained from the offices of Sundaram AMC Ltd. and its authorized distributors or downloaded from www.sundarammutual.com. For details about the Portfolio Management Services and performance, please refer the Disclosure Document available online and at the offices of the AMC. Securities investments are subject to market risks and there is no assurance or guarantee that the objectives of the portfolios will be achieved. As with any securities investment, the value of the portfolio can go up or down depending on the factors and forces affecting the capital markets. Past performance of the portfolio Manager may not be indicative of the performance in the future. Sundaram Asset Management Company is not responsible or liable for losses resulting form the operations of the portfolios. The value of the portfolios offered in this document may be affected by changes in the general market conditions, factors and forces affecting capital markets in particular, level of interest rates, various market related factors and trading volumes, settlement periods and transfer procedures. The liquidity of the portfolio investments are inherently restricted by trading volumes in the securities in which it invests. Investors in the portfolios are not being offered any guaranteed returns.
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