The Next Fund Manager 2010

INVICTUS
Global
Emerging
Market Fund
Presented By:

Nelson Lim
Darryl Koh
Koh Yong Seng
 The Scenario
• Windstorm from Atlantic Ocean made a
landfall in New York

• Caused billions of dollars in damages and

brought businesses in New York to a standstill
 Agenda: The Preview

Fund Composition – The Overview

Reassuring Investors – The Effects

Adjusted Fund Portfolio – The Strategy

Investment – The Analysis

Opportunities

The Overview The Effects The Strategy The Analysis

 Invictus Global Emerging Markets Fund

Fund Composition

DWS Lion Fund

Fix Income
20%
30%
United GEMs
First State GEM Investments
Leaders 10%
55%
Equities Aberdeen Global
70% Opportunities
15%

The Overview The Effects The Strategy The Analysis

 Effects of Natural Disaster on
Financial Markets
• Past Similar Case: Hurricane Katrina(Aug 2005)
– Caused damages in excess of US$100 billion
– Devastated several US states and disrupted oil supply
Hurricane Katrina
Hurricane Katrina

• Effects of Hurricane Katrina on Financial Markets:

– Initial fall in stock prices
– Shortly after, Markets recovered and continued to rise
higher than before disaster

The Overview The Effects The Strategy The Analysis

 Effects of Natural Disaster on
Financial Markets
• Observed similar findings during Hurricane
Andrew (1992), Hurricane Hugo (1989) and
Investors
even during should be advised
September not to
11 Terrorist do
Attack
panic exit as this will result in selling at
an unfavourable price

The Overview The Effects The Strategy The Analysis

 How will our Fund be Affected
• Pre-dominantly invested in Emerging Markets

• Minimum exposure in US markets (≈3%)

• Negative impacts of US markets on our fund

should be minimal

The Overview The Effects The Strategy The Analysis

 How will our Fund be Affected
• However, we need to take a Cautious Approach!
– Economy is just recovering
– Fragile state
– Possibility of triggering another recession in US

The Overview The Effects The Strategy The Analysis

 Investment Opportunities During
a Natural Disaster

The Overview The Effects The Strategy The Analysis

 Implementing Changes to
Portfolio Composition

Maintaning •Moderately
Existing Aggressive
Strategy

Maintaining •Emerging
Key Revenue Markets
Driver

The Overview The Effects The Strategy The Analysis

 Moderately Aggressive Portfolio
Composition
United GEM
Investments, 10%
Fixed Income,
DWS Lion Fund, 30%
20% First State GEM,
45%

Global Aberdeen, Equity, 70%

10%

Construction, 5%
Material , 10%

The Overview The Effects The Strategy The Analysis

 Moderately Aggressive Portfolio
Composition
United GEM
Investments,
DWS Lion 10%
Fund, 20%

Increasing US Incurring Focus on High

Sovereign Additional Grade
Risk, Debt to Investmenet
especially finance Corporate
Eurozone reconstruction Bonds

The Overview The Effects The Strategy The Analysis

 Emerging Market as Key
Revenue Driver

Global
Markets, Emerging
45% Markets,
55%

The Overview The Effects The Strategy The Analysis

 Analysis of Investment
Opportunities

Construction,
5%
Material , 10%

The Overview The Effects The Strategy The Analysis

 URS Corporation

• Leading US federal government contractor

• Provides planning, design and program and
construction management services for
public buildings
• Strong fundamentals, with stable growth in
earnings
• Participated in the rebuilding work in the
aftermath of Hurricane Katrina

The Overview The Effects The Strategy The Analysis

 URS Corporation
•Annualized return of approximately 17%
between 2005 and 2007, compared to 10-yr
annualized return of 13%

The Overview The Effects The Strategy The Analysis

 ArcelorMittal

• World’s largest steel company

• 10% of world’s steel output in 2007
• 23% of steel sales to USA, 39% to EM
• Demand of steel, a key material for
construction, is expected to rise substantially
during the rebuilding stage of natural disaster
recovery

The Overview The Effects The Strategy The Analysis

 ArcelorMittal
• Annualized return of approximately 49%
between 2005 and 2007, compared to
10-yr annualized return of 10.7%

The Overview The Effects The Strategy The Analysis

 • Largest
Share price
steelisproducer
highly correlated
in China,to3rdworld
largest
steel
in
the world
price
• High
An increase
growthinpotential
demandgiven
for steel
the will
likelihood
raise the
on
price of steel
increase in demand of steel caused by disaster
Share Price Chart for
Baosteel (2005-2009)

The Overview The Effects The Strategy The Analysis

 Projected Fund Performance
Invictus Global Emerging Markets Fund
Proportion Returns Std Dev
Security 10-yr Annualize Projected
First State GEM Leaders SGD
United Baosteel, 0.45 Annualized
11.25% d Return 2-yr
5.30
GEM,
Aberdeen Global Opportunities 5%
Return between Annualized
10%
SGD First0.10 2.49% 2005-07 Return
4.84
DWS
United GEMs Investments SGD State
0.10 6.84% 2.04
Lion GEM, URS 13.0% 17% 17%
Fund,DWS Lion Fund 45%0.20 Corp. 2.70% 0.46
20%Arcelor Mittal
0.05 49% 27.40
URS Corporation Arcelor 10.7% 49% 49%
0.05 Mittal 17% 6.92
Baosteel Group
Aberdeen, Arcelor0.05 11.1% 13.02
URS Bao 3.9% N/A 11.1%*
10%Expected Returns Mittal,
Corp, 5% 5% steel10.39% (7.79%)
Std Dev
5.532 (3.937)
Coefficient of Variation * approximated using rise in steel price from 2005-07
0.53 (0.51)

The Overview The Effects The Strategy The Analysis

 Looking Forward
PROPOSED STRATEGY IMPLEMENTATION
Current 2011 2012 Onwards
MAIN STRATEGY

• Divest into US • Capitalize and reap the • Re-Analyse Market

disaster recovery profits of projected Conditions
industries growth in disaster
• Explore
recovery companies
• Balance of portfolio opportunities
Allocation
• Consistent with
Objectives

BACKUP STRATEGIES

• US market becomes too volatile

• Re-allocate portfolio by pulling out of USA
• Possible use of gold fund as hedging tool
Overview Challenges Implications Measures Evaluation
 INVICTUS
Global Emerging Market Fund
“today’s investment for tomorrow’s growth”

Slides:
Fund Composition
Effects on Capital Market
Effects on the Fund
Investment Opportunities
Implementing Changes
Moderately Aggressive Portfolio First State Peer Comparison/ Additional Info
Key Revenue Driver
Analysis of Opportunities
URS Corp
Arcelor Mittal
Baosteel
Projected Fund Performance
Looking Forward
Appendix
Additional Fund Information:
Client Profile
First State GEM Leaders Fund
Aberdeen Global Opportunities Fund
United GEMs Investments Fund
DWS Lion Bond Fund
United Gold and General Fund
Original Fund Overview
B.Strategy 1 – Bearish EM Outlook
B.Strategy 2 – Bearish Equities
Aberdeen Peer Comparison/ Additional Info
United GEMs Peer Comparison/ Add Info
DWS Lion Bond Peer Comparison/ Additional Info
United Gold & General Fund Additional Info
New Assets Information:
Analysis on URS Corporation
Analysis on Arcelor Mittal
Analysis on Baosteel
 Client Profile
• Moderately aggressive investors

• Mid to long-term investment horizon

• Willing to withstand short-term fluctuations

 •Diversification
Main Strategy
•Cushion downside
risk
•More emphasis on Fixed Income
global bond funds Funds
(30%)
Equities Commodity
Funds Funds
(70%) (Backup)

Invictus
•Mid to Long Term Global •Hedging purpose
Capital Appreciation Emerging •Times of highly
•Main driver of return Market Fund volatile market
•Key focus on Emerging conditions
Markets
 First State GEM
Leaders
• Consistently outperforming the emerging
market
• 5-yr annualized returns of 11.25%
• Low volatility with standard deviation of 5.3%

Performance of First State GEM Leaders Fund Versus MSCI Emerging Markets Index
 First State GEM
Leaders
• Strong emphasis on Asia – region of high
growth
• Heavily focused on defense industries –
creating stable growth
• Uptrend shift, consistently support by 100-day
and 200-day moving average since mid-July 2009
• Highest returns (2.49%) with least volatility
(4.84%) among peers
• Investments in developed countries
• Primary allocations in financials, energy and IT
• Well poised to capture effects of economic
recovery
 United GEMs
Investments
• Stable growth even in times of volatile market
conditions
• Highest annualized returns per unit risk taken
• Impressive excess return (alpha) of 0.35

Performance of United Global Emerging Markets versus MSCI World Index and MSCI Asia EX Japan
 United GEMs
Investments
• Significant interests in Brazil and Russia,
complementing First State GEM Leaders
• Focused on government bonds and corporate
bonds from defense industries, providing stability
Asset Allocation - by Country Asset Allocation - by Industry

Brazil Energy
3.00%
13.13% 5.38% Indonesia 9.68% 11.14% 5.01% Financials
7.94%
Mexico
41.88% Government
7.85% Philippines
10.58% Russia Government Agency

USA 57.74%
16.42% Special Purpose
Others Entity
4.76% Utilities
• Resistant to market fluctuations
• Stable growth of 2.70% (annualized)
• 2X Sharpe ratio of competing funds at 0.11

Performance of DWS Lion Fund versus MSCI World Index and MSCI Asia EX Japan
• Mainly in developed Asian countries which are
less affected by recent economic crisis
• Comprising of corporate bonds from key
sectors such as banking and transportation
Asset Allocation - by Country Asset Allocation - by Industry

5.23% 11.16% Banks

Singapore
26.34% Real Estate
South Korea 37.24%
8.61% Transport
USA
10.79% Finance
64.21% Hong Kong
18.40% Electronic
Others
Others
10.29%
3.75%
3.98%
• Used as a hedging tool given negative
correlation with the global market
• Cumulative return of 88.25%, 6.16% YTD
Annualised Standard Sharpe
Fund Current NAV
Return Deviation Ratio
United Gold & General Fund 15.57% 10.10 0.10 1.861
• Over 70% investments in gold and precious
metals  good hedging instrument
• Used as backup strategy to hedge against
downside risk of a possible W-shaped recovery
 Original Fund Overview
Invictus Global Emerging Markets Fund
Proportion Returns Std Dev
First State GEM Leaders
SGD
0.55 11.25% 5.30
Aberdeen Global
Opportunities SGD
0.15 2.49% 4.84
United GEMs Investments
SGD
0.1 6.84% 2.04
DWS Lion Fund
0.2 2.70% 0.46
United Gold & General Fund
0 15.57% 10.10
Expected Returns
7.79
Std Dev
3.937
Coefficient of Variation
0.51
 Backup Strategy 1
Bearish Expectations on Emerging Markets
Backup Strategy + Gold Options

10% Std
Proportion Returns
20% Dev
First State GEM Leaders 0.2 11.25% 5.30
SGD
20% Aberdeen Global 0.4 2.49% 4.84
Opportunities SGD

United GEMs Investments 0.1 6.84% 2.04

SGD
DWS Lion Fund 0.2 2.70% 0.46
10% United Gold & General 0.1 15.57% 10.10

40% Fund
Expected Returns 6.03
Std Dev 4.302
Coefficient of Variation 0.71
 Backup Strategy 2
Bearish Expectations on Equities Market
Backup Strategy + Gold Options

10% Proportion Returns Std Dev

20% First State GEM Leaders
0.2 11.25% 5.3
SGD
Aberdeen Global
Opportunities SGD
0.2 2.49% 4.84

United GEMs Investments

30% 0.2 6.84% 2.04
SGD

20% DWS Lion Fund 0.3 2.70% 0.46

United Gold & General
Fund 0.1 15.57% 10.1

Expected Returns 6.48

20% Std Dev 3.584
Coefficient of Variation 0.55
First State GEM – Peer Comparison
 First State GEM – Peer Comparison
Current
Annualise Standard Sharpe
Fund Alpha Beta NAV (caa
d Return Deviation Ratio
03/02/10)
First State GEM
11.25% 5.3 0.23 0.69 0.13 1.86
Leaders SGD

Aberdeen Global
4.33% 7.36 0.28 0.84 0.03 1.57
Emerging Markets

RIC Emerging
Markets Equity J 10% 7.47 -0.1 1.02 0.09 41.58
Acc

Schroder Emerging
9.58% 6.94 -0.07 0.94 0.08 1.43
Markets
First State GEM Additional Information
Aberdeen Global – Peer Comparison
 Aberdeen Global – Peer Comparison
Current
Annualised Standard Sharpe NAV
Fund Alpha Beta
Return Deviation Ratio (caa
03/02/10)

Aberdeen Global
2.49% 4.84 0.30 1.06 0.01 0.80
Opportunities SGD

United International
-1.73% 4.33 -0.07 0.98 -0.07 1.59
Growth Fund

Henderson Global
1.97% 5.38 0.11 0.93 0.00 1.32
Technology

Schroder Global
1.09% 4.97 0.09 0.91 -0.02 1.76
Smaller Companies
Aberdeen Global – Additional
Information
United GEMs – Peer Comparison
 United GEMs – Peer Comparison

Annualized Standard Alpha Beta Sharpe Current

Return Deviation Ratio NAV
Fund (caa
03/02/10)

United GEMs 6.84% 2.04 0.35 0.29 0.21 1.42

Investments SGD
4.20% 3.99 0.04 0.95 0.05 1.00
Fidelity Emerging
Market Debt A SGD

Schroder Emerging 3.15% 1.65 0.12 0.2 0.11 0.91

Market Bond
United GEMs – Additional Information
DWS Lion Bond – Peer Comparison
DWS Lion Bond – Peer Comparison
Annualized Standard Alpha Beta Sharpe Current
Return Deviation Ratio NAV
Fund
(caa
03/02/10)
DWS Lion Bond 2.70% 0.46 0.05 0.07 0.11 1.48
SGD
1.03% 1.72 (0.06) 0.85 (0.05) 1.20
Legg Mason
Global Bond
Trust

LionGlobal Bond 1.98% 1.1 0.06 0.08 0.05 1.56

A SGD
DWS Lion Bond – Additional
Information
 United Gold & General Fund – Peer
Comparison
Cumulative Performance by %

Fund 1m 3m 6m 1y 2y 3y 5y SI

United Gold & -10.39 -2.52 2.43 32.12 -9.96 17.90 106.13 88.25
General Fund

Equity Sector -7.79 1.96 10.23 36.18 -- 5.60 78.61 --

Gold&Prec Metals

FTSE AW/Mining -11.91 -0.41 4.54 60.58 -24.56 14.14 98.50 --

TR
Cust Benchm UOB -10.88 -1.84 2.43 28.32 -13.91 13.43 76.00 --
United Gold &
General Fund
SIBOR SGD 3 0.04 0.13 0.25 0.52 1.81 4.57 10.71 --
Months
 United Gold & General Fund – Peer
Comparison
Calendar Year Performance by %

Name 2005 2006 2007 2008 2009 YTD

United Gold & General 51.84 15.15 29.02 -30.84 32.12 6.16
Fund
Equity Sector Gold&Prec 58.30 6.84 23.82 -37.37 36.18 --
Metals

FTSE AW/Mining TR 66.36 4.80 45.60 -52.47 67.80 -10.08

Cust Benchm UOB United 64.11 -5.46 31.76 -32.91 28.32 -10.88
Gold & General Fund

SIBOR SGD 3 Months 2.30 3.49 2.71 1.29 0.52 0.05

United Gold & General Fund –
Additional Information
Effects of Hurricane Hugo and Camille
on Financial Markets
• Markets move upwards subsequent to the
occurrence of the natural disasters
Correlation between US and EM equity
markets
• Past financial market trends have shown slight
positive co-relation between US equities and
Emerging Markets equities

MSCI Emerging Markets Index

S&P 500
Dow Jones
 Analysis of URS Corp
• Average increase of 15% in EPS for the past 5
years
• Healthy financial leverage, D/E ratio of 17%
• Operating income at approx. 5% of revenue,
increasing over the past 5 years.
• Revenue from Federal sector (energy and
construction) increased by 67% over past year
• Key Competitors: Fluor & Jacobs Engineering
• Key Competitive Advantage: Relationship with
Government
 Analysis of Arcelor Mittal
• Showing signs of recovery
from the economic crisis
• Improved EDITBA and CF
from Operations in 2009
• Improved leverage with a
USD13.7 billion reduction
in debt since the
economic crisis
• Key Competitors: Ternium,
US Steel Corp.
• Outperformed during
Hurricane Relief
 Analysis of Baosteel
• Low financial leverage, D/E Ratio approx. 10%
• CF from operating activities take up 50% of
net CF of the year in 2009
• Good growth potential with heavy
investments in research and development
• Key Competitors: Angang Steel, Wuhan Iron
and Steel