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April 2007
Presented by
VII. Appendix
• Disclosure
2
I. Our Parentage - Overview
3
American International Group, Inc. (AIG) Overview
AIG’s unrivaled ability to combine local expertise with global networking capabilities creates unique
opportunities for our more than 65 million customers worldwide.
1 Fortune 500 is an annual ranking of America’s largest corporations published from the April 17, 2006 issue.
Data as of 31 December 2006 unless specified otherwise.
4
AIG Global Investment Group
General LifeInsurance
Life Insurance&& Asset Financial
Insurance RetirementServices
Retirement Services Management Services
AIG Global Investment Group comprises a group of international companies which provide investment advice and market asset management products and services to clients around the world.
Services and products are provided by one or more investment management subsidiaries of American International Group, Inc. (AIG).
5
AIG Global Investment Group’s Overview
6
Global Perspective - Strategically Located Around the World
More than 1,900 employees with over 450 investment professionals investing from 44 asset
management offices located worldwide enable us to understand and meet our clients’ needs.
7
AIG in India
Launching
three new businesses
AIG Systems Solutions
(AIGSS) Incorporated
Joint Venture with 2007
American International AIG entered India Tata Group
Underwriters through its Private Equity 2002
business
+ Asset Management
(AIU) operated in India
until the General Insurance
Company
2001
Sector was nationalized – AIGSS is the offshore
+ Real Estate
in 1973
1997 – Tata AIG Life Insurance development center + Consumer Finance
Company Limited for AIG Group
Companies
1945 – Peak commitment
– Tata AIG General
– Over 500
Insurance Company
in India was to the Limited professionals
tune of USD 450 mn
– AIU acted as – It serves Insurance,
agents of Hanover Financial Services
Insurance Co. and and Retirement
New Hampshire Solutions business
Insurance Co. domains
– It had offices in
Mumbai, Kolkata
and New Delhi
AIG brings in $ 50 mn in capital into India to enable 100% ownership of its AMC business.
Employee strength for AIG businesses in India including joint ventures is estimated
to touch 6800 by end of 2007 from existing 4400.
8
Value Proposition in India – Replicating AIGGIG’s Global Standards
9
II. AIGGIG’s Equity Capability
10
AIGGIG Global Emerging Markets Equity Composite Performance
33
27
21
1 Year (%) 3 Years (%pa) 5 Years (%pa)
AIGEMG 35.9 (35) 34.1 (20) 31.2 (23)
MSEMFDTR 32.2 30.5 26.6
Dec-31-2006 Alpha Beta R-Squared Sharpe Standard Deviation Tracking Error Information Ratio
1 Source: Mercer. This information is presented as supplemental data to the AIGGIG Global Emerging Markets Equity Composite presentation.
Reflects the preliminary gross performance of the AIGGIG Global Emerging Markets Equity Composite in U.S. dollars. Portfolio statistics are presented for the three year period ending
31 December 2006. The inception date of the Composite is 1 January 1996. The benchmark for the Composite is the MSCI Emerging Markets Daily Total Return Net Index from 1
January 1999 to date; and the MSCI Emerging Markets Monthly Total Return Gross Index from 1 January 1996 to 31 December 1998. Performance for periods of less than a year is
not annualized. Past performance in not indicative of future results.
11
Equity Philosophy
+ Over time, neither growth nor value investment styles will dominate the returns of the other.
+ Good companies in which to invest can be found across the universe of growth through value.
+ Metrics used to evaluate opportunities will vary based on the company’s stage of development.
+ A combination of quantitative and qualitative analysis, specific to each stock category, should be
AIG Global Investment Group’s competitive advantage stems from our global access to skilled
teams of investment professionals and our ability to uncover attractive investment opportunities
12
Equity Philosophy ... (Contd.)
1
Excess Return vs. Market Benchmark
30%
10%
-10%
-30%
Dec 1997 Sep 2000 Jun 2003 Mar 2006
Over time, neither growth nor value investment styles will dominate the returns of the other.
13
Investment Process Overview
. Portfolio Monitoring:
> Target price, earnings revision alerts
> Periodic review
> Timely follow-up research
14
Emphasis on Four Different Categories of Stock
Stock categorization examples as of 31 December 2006. For illustrative purposes only. We are not soliciting or recommending any action based on this material.
There is no assurance that any security shown is held in a portfolio.
15
Platform for Fundamental Research – Evaluation Criteria
EXCEPTIONAL • Business ideas likely to be successful • Facts emerge leading us to doubt success
• Growth can be financed • Financing in doubt
• Reasonable valuation if company succeeds • Valuation unreasonable
HIGH STABLE • Growth rate accelerating • Growth rate decelerating leading to negative
earnings revision trend
• Consensus too pessimistic on growth rate • Profitability falling implying deterioration in
capacity for future growth
• Valuation modest relative to history and peers • Valuation getting far away from historical trends
and peer groups
HIGH CYCLICAL • Underlying growth trend improves • Long-term outlook seen deteriorating
• Cyclical outlook favorable • Cyclical outlook deteriorating
• Positive earnings revisions • Negative earnings revisions
• Valuation modest relative cyclically • Valuation expensive relative to position in cycle
adjusted growth trend
MATURE
Turn-around • Confidence that turn-around is happening • Fully valued on realization of potential
• Valuation attractive if turn-around materializes • Doubtful of turn-around being on track
Cyclical • Valuation attractive relative cyclically • Fully valued on cyclically normalized earnings
normalized earnings
• Positive assessment of cyclical position • Doubts on cyclical outlook
Defensive • Fundamentally sound • Fundamentals deteriorating
• Valuation attractive relative to own history and peers • Fully valued relative to own history and peers
16
Platform for Fundamental Research – Evaluation Criteria ... (Contd.)
17
Equity Platform for Investment Communication – The EPIC model
+ 10 Year Historical data of companies & latest analyst estimates available online.
+ Analysts continuously populate and update EPIC with their forecasts on multiple variables to reach a
consensus.
+ The Global Asset Allocation Committee (GAAC) and equity portfolio managers use the information in
EPIC to gain a comprehensive understanding of the companies.
+ The system allows the equity teams around the globe to function as a cohesive unit and “speak the
same language”.
18
Evaluation Report
Illustration Only
For illustrative purposes only. We are not soliciting or recommending any action based on this material.
19
Evaluation Report ... (Contd.)
Illustration Only
For illustrative purposes only. We are not soliciting or recommending any action based on this material.
20
Company Visit Log
Illustration Only
For illustrative purposes only. We are not soliciting or recommending any action based on this material.
21
The EPIC Advantage
+ Ensures analysis of all companies in a common EPIC format, enabling easy comparisons across
markets.
+ EPIC format ensures that analysts do a comprehensive review of the company fundamentals.
+ Enables analysts to perform a “Reality Check” by comparing their own estimates with sell side
analysts.
+ Immediate sharing of “Relevant Information”. Enables automatic peer group review and
feedback.
+ Ensures Fund Manager Discipline as no company can be bought if not covered in EPIC.
+ EPIC keeps a record of all investment rationales, analyst updates and company visits for easy
review.
22
Examples of how EPIC and Brainpools benefit investment decisions
Illustration No 1
n Sesa Goa
Our Latin American counterpart who tracks the iron ore exporters came to the conclusion that iron ore shortage will
result in prices going up globally. One of the major iron ore importers is China. India started gaining market share in
China because of its close proximity and excess iron ore reserves in India.
Brainpool was organized to discuss this aspect. And we gave the only listed play Sesa Goa as a potential beneficiary.
The stock was then bought (~Rs 400) in late 2004 and by early 2005 a 71.5% hike in prices happened globally. Sesa Goa
by then had more than doubled to Rs 900. (Current price is ~ Rs1700)
Illustration No 2
Lipitor (Cardiovascular) is the biggest drug sold globally. Ranbaxy had challenged the patent and Pfizer was defending it.
We exchanged mails with our US Pharma analyst who was tracking Pfizer and he gave us a feel of how they were
perceiving the trial.
A similar case was also evaluated (Dr Reddy vs Eli Lilly and the drug was Zyprexa) and AIG had investments in Eli Lilly.
23
Examples of how EPIC and Brainpools benefit investment decisions… (Contd.)
Illustration No 3
In Mid 2005 Shanghai Electric Group Company, a power equipment maker in China was doing its IPO
We were consulted on how it stacks vis a vis BHEL. Since we had no idea about China we did some joint research and concluded
that the business models were different and were not comparable.
In late 2006 when the first UMPP projects were awarded it appeared as if BHEL was very uncompetitive against Chinese
equipment suppliers. Given the background information, we concluded that the market is mistaken and we added to our existing
large position in BHEL.
Now others on the street have after 3 months concluded exactly the same thing and the stock has recouped most of its losses and
has outperformed the market by 13% YTD.
Other Examples
n Palm oil, an important ingredient to make soaps, is imported from Malaysia. Our Malaysian colleagues tracking Palm oil
companies helped us to understand the cost pressure Indian companies like HLL would face.
n India has turned into an importer of coal and this information is beneficial to our regional colleagues as countries like
Indonesia, Australia and Africa are exporters of coal.
n Today India can import cement free of any taxes and this has a very huge impact. Using EPIC we can study companies in the
region whether exports can happen from there or not.
24
Investment Awards - Equities
AIG Japan Small Companies “Y” UCITS Fund AIG Japan Small Companies Fund plc
n Standard & Poor’s UK Fund Awards 2007- Awarded 1st place in the n Standard & Poor’s Investment Fund Awards – Taiwan (2006, 2004)
Smaller Companies Japan Sector over One Year (out of 25 funds) – Smaller Companies Japan in 3, 5, 10 years
AIG Global Emerging Markets “Y” UCITS Fund n Lipper Fund Award – Taiwan (2006, 2005) – Equity Japan Small
n Standard & Poor’s UK Fund Awards 2007- Awarded 1st place in the and Mid Caps in 3 years
Equity Global Emerging Mkts Sector over Five Years (out of 47 n Standard & Poor’s Investment Fund Awards – Taiwan (2005) –
funds) Smaller Companies Japan in 3, 5, 10 years
AIG Asia Balanced Fund n Lipper/ Banque de Luxembourg Wort Fund Award (2005)- Japan
n Lipper Funds Award Hong Kong (2006) – Mixed Asset USD Small and Mid Caps in 3,5,10 years
Aggressive in 3, 5 years AIG Europe Small Companies Fund plc
AIG International Funds – Acorns of Asia Balanced Fund n Lipper Fund Award – Taiwan (2005) – Equity Europe Small and Mid
n The Edge/Lipper Singapore Unit Trust Fund Awards (2006, 2004) – Caps in 3 years
Mixed Asset Singapore Dollar Balanced in 3 years n SCMP/Standard & Poor’s Fund Manager of the Year Awards (2003)
n The Edge/Lipper Singapore Unit Trust Fund Awards (2003) – Mixed –Smaller Companies Europe in 5 years
Asset Asia Pacific in 1 year AIG Latin America Fund plc
AIG International Funds – Japan Large Cap Equity Fund n South China Morning Post Fund Manager of the Year Award (2004)
n Benchmark/Lipper Fund of the Year Awards (2003) – Equity Japan –Equity Latin America in 3 years
in 3 years AIG South East Asia Fund plc
AIG International Funds – Singapore Equity n AsianInvestor Achievement Awards (2003) – Asia ex-Japan Equity
n AsianInvestor Achievement Awards (2006) – 10 year risk-adjusted Risk Adjusted Performance in 5 years
performance
AIG Small Cap Canadian Equity
n API Assessed Performance Money Manager Award (2003) – API
Canadian Small Cap Universe- Pooled in 1 year
25
III. India Outlook
26
BSE SENSEX Earnings
50% 70%
60% Ex-Energy
40% Ex-Financials
33% 34% 50%
28%27%
30% 24% 40%
20% 30%
20% 16%
10% 13% 20%
10% 6% Ex-Materials
4% 10%
0% 0%
-1% All Sectors
-1% -10%
-10%
-20%
Mar-01
Mar-02
Mar-03
Mar-04
Mar-05
Mar-06
Dec-00
Jun-01
Sep-01
Dec-01
Jun-02
Sep-02
Dec-02
Jun-03
Sep-03
Dec-03
Jun-04
Sep-04
Dec-04
Jun-05
Sep-05
Dec-05
Jun-06
Sep-06
Dec-06
-20%
-17%
F1994
F1995
F1996
F1997
F1998
F1999
F2000
F2001
F2002
F2003
F2004
F2005
F2006
F2007E
F2008E
27
India Fundamentals
2.0 22%
20%
India
EM Fixed asset turn (LS) 20%
1.8
15%
18%
1.6
10% 16%
1.4
14%
5% Asia Pac
ex-Japan World
1.2 ROE (RS) 12%
0%
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
1.0 10%
F1995
F1996
F1997
F1998
F1999
F2000
F2001
F2002
F2003
F2004
F2005
F2006
Source: Morgan Stanley Research
28
India Overheating? Not as Hot as 1999
12%
Commercial Banks' Asset Yield
Curve (Spread over 1-Yr Bank F1999
10%
Deposit Rate)
8%
F2003
6%
Jan-07
4% F2004
2% Oct-05
0%
-2%
Average Mortgage Corporate Car Loan Truck loan Two-
10-year rates Loans* rates rates wheeler
bond yield financing
rates
29
SENSEX Valuations at last close 13,500
30
A Regional Comparison on Valuation and…
China
India
Malaysia
Singapore
Indonesia
Taiwan
Hong Kong
Philippines
South Korea
Thailand
2 4 6 8 10 12 14 16 18
31
Earnings Growth
40.0%
Low 35%
35.0% 33%
estimate 32%
30.0% at 13%
25.0% 21%
19%
20.0% 16%
15% 14%
15.0% 11%
13%
10.0% 7% 8% 8%
6% 7%
4% 3% 4%
5.0% 2%
0.0%
-5.0% -4%
-10.0%
India*
China
Indonesia
Singapore
Philippines
Hong Kong
Thailand
Malaysia
South Korea
Taiwan
* - FY07, FY08 CY06F CY07F
32
India has FII inflows in the region but domestic inflows remain small
(Rs bn)
30,000 113.16
120.00 108.66
25,000
100.00
20,000
80.00 70.03
15,000 62.31
10,000 60.00
5,000 40.00
26.12
21.47
0 20.00 14.32 13.61
6.17 -0.68 7.80
India Indo Korea PhilippinesTaiwan Thailand -12.55 -4.47
(5,000)
0.00
(10,000) Feb- Mar- Apr- May- Jun- Jul- Aug- Sep- Oct- Nov- Dec- Jan- Feb-
-20.00 06 06 06 06 06 06 06 06 06 06 06 07 07
(15,000)
Though India has attracted FII Inflows, they remain modest & Domestic Inflows remain poor.
33
India’s stable growth makes it an attractive investment destination
+ World’s fourth largest economy on PPP-adjusted India’s GDP Growth Over Next Two Decades
GDP basis
3000
GDP ($ billions) 3000
+ Average GDP Growth of 6% over the last decade
8%
2000
+ Growth driven by domestic market
8% 1400 6%
1000 2100
+ Growth projected at 8% till 2020
6% 1150
650
+ Growth projected at 5+% over next 4 decades 0
India’s growth has become less dependent on unpredictable factors like monsoons and agriculture,
and more dependent on competitive advantage of skilled workforce
34
IV. Liquidity to Drive Markets
35
India GDP – the 12th largest in the world today/ PPP 4th Largest
36
India does not feature in MSCI World Index
Market Cap. (US$ bn) Weight (%) Market Cap. (US$ bn) Weight (%)
37
India’s weight though increased in recent times is still low
Source: MSCI
38
Foreign Flows to India
Internal Increase in
FII Sectoral company limits Increase in FII allocation
Caps on foreign Free Float to Indian
ownership equities
+ Relaxation in Foreign + Indian companies can + MSCI uses Free Float to + Net FII Flows to GEM
Investment Limits across pass Special Resolution to determine the country funds in 2006: US$ 22.4
sectors increase internal FII limits weightages bn.
from 24% + India does not feature in + Net FII Flows to India in
MSCI World Index
+ Some of the companies 2006: US$ 8 bn.
that have increased FII + India accounts for a mere
Limit by passing a Special 6.8% in MSCI Emerging
Market Index
Resolution
+ Balrampur Chini Mills Ltd. –
From 40% to 60%
+ PTC India - From 24% to 40%
+ Aftek Infosys Ltd – From 30
per cent to 40 per cent
+ Hero Honda Motors From
24% to 40 per cent.
+ Reliance Industries From
24% to 49%
Source: UBS, SEBI
39
Indian GDP comparative to world majors: Goldman Sachs report
INDIA TARGETED TO OVERTAKE THE GDPs OF FRANCE AND UK IN LESS THAN TEN YEARS
Source: The BRICs Report – Goldman Sachs
40
India warrants a higher share in world indices
Weight age in
MSCI World Index
Italy: 1.80% France:4.78% UK: 11.11% Germany: 3.61% Japan: 11.29% US: 48.43% India: ??%
2005 2010 2015 2020 2025 2030 2035 2040 2045 2050
41
India’s significant re-rating signals a departure from earlier trends
12% 1.2%
15% 1.5% India's share in Asia Pac Mkt Cap (LHS)
10% 1.0%
1985
1987
1989
1991
1993
1995
1997
1999
2001
2003
2005
1983
1985
1987
1989
1991
1993
1995
1997
1999
2001
2003
2005
Source: Morgan Stanley Research
42
Domestic Equity Flows
+ With more and more young people getting into the investing class, the risk appetite will surely increase
+ India’s FY07 Est. GDP is at Rs 37,40,000 crores, avg. household savings out of this is 23%. i.e Rs 8,60,200 crores.
+ Of this an estimated 4-5% flows into Shares and Debentures, i.e. Rs. 43,010 crores.
43
V. AIG India Equity Fund
An open ended equity scheme
44
Key Drivers for Investment Strategy: The India Story
45
AIG India Equity Fund - Investment Strategy
+ The Scheme would follow an actively managed approach allowing it the flexibility to pursue
+ It will have no biases towards any particular style, sector or market cap.
+ It will continuously look across the value and growth spectrum to keep a balance in the portfolio so as
46
AIG India Equity Fund
Investment Objective
The investment objective of the Scheme is to generate long-term capital appreciation from a diversified
portfolio of predominantly equity and equity-related securities including equity derivatives.
Benchmark Index
BSE 100
47
VI. Investment Team
48
Investment Team
49
Investment Team ...(Contd.)
Deepak Joshi, Senior Manager - Dealing, Equities Ruchi Malhotra, Equities Analyst
Previous Assignments:
. Analyst - JP Morgan Services India Private Limited
(Dec 2004- Feb 2007)
. Management Trainee - UTI Bank (Jun 2004 - Dec
2004)
50
VII. Appendix
Disclosure Statement
51
i. Disclosure
52
ii. Disclosure ...(Contd.)
Readership: This document is intended solely for the addressee(s). Its content may be legally privileged and/or confidential.
Opinions: Any opinions expressed in this document may be subject to change without notice. We are not soliciting or recommending any action based on this material.
Risk Warning: Past performance is not indicative of future results. Our investment management services relate to a variety of investments, each of which can fluctuate in
value. The value of portfolios we manage may fall as well as rise, and the investor may not get back the full amount originally invested. The investment risks vary between
different types of instruments. For example, for investments involving exposure to a currency other than that in which the portfolio is denominated, changes in the rate of
exchange may cause the value of investments, and consequently the value of the portfolio, to go up or down. In the case of a higher volatility portfolio the loss on realization or
cancellation may be very high (including total loss of investment), as the value of such an investment may fall suddenly and substantially. In making an investment decision,
prospective investors must rely on their own examination of the merits and risks involved. AIG Global Investment Group (AIGGIG) comprises a group of international
companies which provide investment advice and market asset management products and services to clients around the world.
AIG Global Investment Group and AIGGIG are registered service marks of American International Group, Inc.
Unless otherwise noted, all information contained herein is sourced with AIG and/or AIG Global Investment Group internal data.
The content included herein has been shared with various in-house departments within the member companies of AIGGIG and/or AIG Private Bank Ltd., in the ordinary
course of completion. All AIGGIG member companies comply with the confidentiality requirements of their respective jurisdictions.
Parts of this presentation may be based on information received from sources we consider reliable. We do not represent that all of this information is accurate or complete,
however, and it may not be relied upon as such.
AIG Global Investment Corp. (Switzerland) Ltd. is a wholly owned subsidiary of AIG Private Bank Ltd.
AIG Global Investment Corp. (Europe) Ltd. is authorized and regulated by the Financial Services Authority.
AIG Global Real Estate Investment (Europe) Ltd. is an Appointed Representative of AIG Global Investment Corp. (Europe) Ltd.
Services and products are provided by one or more investment management subsidiaries of American International Group, Inc. (“AIG”).
53
Thank You
54
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