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India Opportunity – The way ahead Wealth Creation from Indian Equities

ASK Investment Managers

October 2014

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Introduction 3

Investment Philosophy, Process and Themes 5

Portfolio Construction 13

Risk Management 14

Investment Team 15

Investment Offerings 18

Performance Snapshot 21

India Opportunity 23

Contents

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ASK Wealth Advisors

Since 2007

ASK Property Investment

Advisors Since 2009

Financial Planning &

Wealth Advisory

Introduction: ASK Group

Real Estate Advisory

ASK Investment Managers Since 1994

Discretionary

money management in Indian equities

ASK GROUP

ASK Pravi Since 2011

Private Equity Advisory

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Introduction : ASK Investment Managers

Leading private money management firm in India Singular focus on managing money in Indian equities – ‘long only’ style

Long term investors

‘Bottom-up’ fundamentals driven, value-based stock picking Disciplined research and investment process

Experienced team of 3 portfolio managers and 6 investment professionals headed by a CIO

Purely discretionary money management Clients include family offices, pension funds, private clients across the globe

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1) Capital Preservation

2) Capital Appreciation over a period of time

Key Investment Objectives

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• Greater certainty of earnings Vs mere quantum of earnings growth

• Superior and consistent quality of earnings Vs mere quantum of earnings growth

• High quality at a reasonable price Vs inferior quality at arithmetically “cheap” price.

Overarching Investment Philosophy and Principles

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• Price the value rather than valuing the price

• Buy “growth” businesses at “value” prices

• Disciplined investing into outstanding businesses

• Seek compounding opportunities

Investment Approach

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Value Creating Traits that we seek in our investments…

• Material Size of Opportunity

• Superior Management Quality

• Strong Earnings Growth – A Compounding Machine

• Superior Quality of Business

• Favorable Value

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Key Investment Attributes

Size of the Opportunity

• Size of pond Vs. size of fish

• Dominance

• Resilience

• Liquidity

Quality of Business

• High quality of business (Superior RoCE)

• Strong moat. Impregnability.

• Sustainability

• Key pivot of strong wealth creation

Earnings Growth

• Quantum

• Consistency

• Durability

• Predating (Early Vs Later)

• Compounding power

Value

• Favorable Price-Value Gap

• Margin of Safety

Four key investment attributes

In addition to the above, good management quality is a given constant

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Investment Themes and Concepts

Dominant Theme

Strategic Value Size of the

Opportunity Quality of Business

Size of the Opportunity

Quality of Business

Earnings Growth Value Growth Strategy

Life Strategy

Indian Entrepreneur

Strategy

Earnings Growth Value Size of the

Opportunity Quality of Business

Earnings Growth Value Size of the

Opportunity Quality of Business

Other Key Themes

Earnings Growth

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India Select*

* > Five best ideas from each of the four concepts, making total of 20 stocks in portfolio

> Portfolio to represent an eclectic mix of size, growth, quality and value; to achieve optimal balance

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Investment Filters

Investment Criteria Growth Strategy Life Strategy Indian

Entrepreneur Strategy

Strategic

Size of the Opportunity Typically Top 200

businesses Top 200 businesses Top 500 businesses Top 500 businesses

Quality of Business (Targeted Min. ROCE)

15% 35% 25% 20%

Growth (Targeted Min. CAGR Earnings

15% 12 to 15% 25% 20%

Value (Targeted Min. Price-Value Gap)

15% 15% 25% 40%

Others (Desired) PBT > INR 2 billion Dividend payout :

35% + PBT > INR 1 billion

Disclaimer: The process for setting up Investment filters is meant to help filter out inappropriate securities , which do not pre-qualify the desired/targeted criteria set for internal stock selection purpose. ASK is not making an implied or actual promise to any applicant that all the Investments in the respective funds would qualify the above desired/targeted filters all the time .The Investment team would carry its own due diligence to satisfy itself that the Investment criteria for particular fund has been met .

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• Disciplined adherence to investment philosophy / process

• Strong in-house proprietary research

• Team bandwidth and experience

• Strong relationships and industry interfaces

• Comprehensive understanding of Indian businesses and industries

• Comprehension of long term secular nature of India opportunity

Investment Edges

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Portfolio Construction

• Investment universe of nearly 200 companies

• Detailed evaluation of the character of business and valuation of each firm

• Optimal aggregation of about 20 stocks, to construct a stable and consistent portfolio, to generate superior returns over time

• Adequate sector diversification

• Model portfolios for all strategies

• “Portfolio Psychographics” - proprietary portfolio review tool

• Strict buy discipline: Focus on margin of safety, pre-defined levels for each strategy/concept

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Risk Management

• Integrated risk management and review mechanism throughout the investment process

• Disciplined Buy and Sell mechanism

• Discipline of buying businesses with reasonable margin of safety

• High discount factor (of 15%) for cash flows in our financial models builds conservatism in value estimation

• 6-8 interactions per year with the management team of every portfolio company

• Individual stock cap at 10%

• Risk Manager is responsible for monitoring and supervising the risk of the portfolio and implementing the risk management framework

• Regular and ongoing monitoring and reporting

• Independence of Risk Management Function – reports to Group CFO & Head Compliance

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Bharat Shah – Executive Director – ASK Group • Internationally renowned with over two decades of capital markets experience

• Prior to joining ASK, was CIO at Birla MF, one of India’s largest Mutual Fund houses managing nearly USD 1.65 bn

• Built ASK Investment Managers into one of India’s largest providers of discretionary PMS services, managing close to USD 525 mn.

• Significant domestic and international recognition for investment performance

Prateek Agrawal – Business Head & CIO – ASK Investment Managers • Has 20 years of experience in capital markets with SBI Capital Markets as Head of Research (10yrs) , and Head of

Equity with ABN Amro and Bharti Axa AMCs (3.5yrs each)

• In SBI Capital Markets besides heading research he was part of team that handled VSNL privatization for the government and handled Hindustan Zinc for Vedanta group. On the advisory side he was actively involved in the power sector and in the oil and gas space.

• At ABN AMRO MF, he was head of equity and managed nearly INR 1200 cr of equity domestically and advised offshore assets worth USD700 mn and delivered stellar performance. He then helped set up the equity business at Bharti Axa IM in the post Lehman period.

• He joined ASK Investment Managers as CIO in April 2011

Biography

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Gaurav Misra – Senior Portfolio Manager • Over 18 years of experience in Investment Research and Portfolio Management

• Manages Growth and Life strategies

• Includes 10 years of experience in Private Equity and sell side research. Has been with ASKIM for over 8 years and worked with IL&FS group prior to that

• Is an MBA from IIM Lucknow and BA Economics (Hons) from St. Stephen’s College, Delhi

Sumit Jain – Portfolio Manager • 8 years of experience with ASK Investment Managers

• Manages Indian Entrepreneur Portfolio strategy

• Also engaged in research of business within ASKIM universe, identifying new investment opportunities and tracking their performance at regular intervals

Sudhir Kedia – Associate Portfolio Manager • Started career with ASK and has over 8 years of experience in Investment Research and Portfolio Management

• Research exposure in diverse sectors like FMCG, Auto & Auto Ancillary, Cement, Media, Infrastructure, Real Estate, etc.

• Strong academic background and a qualified CA (ICAI), CMA (ICWAI) and PGPEB (MBA) and B.Com(H) from Calcutta University

Biography

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Investment Options - Offshore

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India Emerging Opportunities Fund (IEOF)

• Launched in 2003

• Regulated by FSC, Mauritius and SEBI, India

• FII - Rogers Asset Management Ltd. , Mauritius

• Investment Advisor - ASK Investment Managers Pvt. Ltd.

• Administrator - Deutsche International Trust Corporation (Mauritius) Ltd.

• Auditors - Ernst & Young

• Bankers - Deutsche Bank, Mauritius

• Custodians - Deutsche Bank, India

• Tax efficient structure for investing in Indian markets

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India Emerging Opportunities Fund (IEOF)

NAV FUNDS

Growth

SEGREGATED ACCOUNTS

# Only select classes are shown here

IEOF - Investment Offerings

Indian Entrepreneur Fund

SHARE CLASSES#

India Select

Strategic Life Fund

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INDIA OPPORTUNITY

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Indian Economy – Size and Diversity • In current dollars terms, the GDP stands at US$ 1.9tn.

• In purchasing power parity terms, India is the third largest economy at US$ 4.5tn

• Holy trinity of key bulwarks: Consumption, Savings and Investments

• Consumption accounting for 57% of GDP, Savings at 31% and Investments also at 29%

• GDP is well-balanced across Services (56% of GDP), Manufacturing and Industry (29%)

and Agriculture (15%)

• Largely domestic economy (82% of GDP), making it more resilient to external shocks

• Rising middle class

• Robust banking sector and well-developed capital markets

• Strong capital efficiency of corporate sector

• Private capital accounted for over 85% of incremental capital formation in the last few

years; the trend reversed in FY12-13

• Favorable demographics

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Global Developments

• Structural issues continue to plague the Western world …

• … Even as US economic indicators have shown improvement

• In China, the new dispensation is targeting a more balanced approach to growth. Transition

could be stressful

• While a lot of geo political tensions are continually emerging, we do not expect a blow out

• Emerging Markets have stabilized but given the complex nature of the global financial system,

greater volatility cannot be ruled out

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India Update - A Game Changing Outcome

• General Elections give a decisive verdict for a stable government after a gap of thirty years. It is early

days for the new government but a good beginning has been made

• Negative sentiments have been reversed. S & P has revised India outlook to “stable” from “negative”

• Major expectation from policy making – “Less Government More Governance”

• Elevated levels of inflation and interest rates, low rates of growth and fiscal deficit remain areas of

challenge

• Current account deficit has been controlled and the INR remains range bound

So far

• Thrust on getting fiscal discipline in order

• Renewed focus on investments / FDI Vs doles

• Greater emphasis on manufacturing and agriculture

• Focus on speed and clearing of stuck projects

• Efforts in infrastructure, roads, railways and water management

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India – Outlook

Parameters Trends and Outlook

Inflation Has peaked out

Oil Current drop helpful; Outlook steady

Interest Rate Continues to be high; First cuts expected in the next fiscal

Earnings Growth outlook is bottoming out; FY16 expected to be better than FY15

Valuation Slightly below Long-Term average

Capex Cycle Revival will take time; Stuck capacities being revived first and fresh capex

thereafter

Sentiments Are very good

Rupee (Hopefully) should be range bound

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Road Ahead

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• GDP growth rate to expand from 4.5% in FY 14 to around 8% by FY 19

• The long-term GDP to Corporate Profit multiple has been 2.5 to 4 times

• This, therefore, should translate into 5-year CAGR earnings growth of 12 – 30%

• Let us assume a more modest range of 15 – 20%

The Road Ahead

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• Average Corporate Return on Capital Employed for FY 05 stood at 24% and has now fallen to 17%

• It is expected to climb back to 23% – 24% by FY 19

• Rising capital efficiency typically implies, and results into, expanding valuations

• Valuations for FY 15 are at 15.5 times (below 10-year average)

The Road Ahead

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• Twin effects of rising corporate profits and improved valuations will imply healthy investment

returns over a long period of time

• Even if we don’t assume rising valuations, investment returns should at least match CAGR of

profits of 15 – 20%

• In sum, economy and markets are moving from a vicious cycle of past five years to a virtuous

cycle

The Road Ahead

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• Over last 25 years, Indian markets have never experienced a real bull market

• Previous cycles of 1987 – 89, 1991 – 92 and 2000 – 01 have all been shallow, narrow, of a short

duration or inadequately supported by fundamentals

• Even the rise of 2004 – 07, a relatively superior cycle, lost fundamental legs from 2006 onwards

• The decade ahead will witness the first, real, secular, compounding, transformational rise of

Indian equity markets

• Misallocation or under-allocation to equities, now, will result in serious real cost extracted from

the wealth

The Road Ahead

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Correlation of Indian markets with GDP

Correlation of GDP growth vis-à-vis Corporate Earnings growth, Market Cap growth and rerating of Indian markets

Please refer to the next slide for notes

Year Real GDP

Growth (%) Index = 100

Nominal GDP Growth (%)

Index = 100 PAT Growth

(%) Index = 100

M.Cap Growth (%)

Index = 100 M.Cap /

GDP

Mar-04 8.1 108 12.2 112 44.3 144 99.3 199 46%

Mar-05 7.0 116 17.1 131 37.6 199 47.7 295 58%

Mar-06 9.5 127 14.1 150 21.3 241 68.5 496 86%

Mar-07 9.6 139 16.6 175 44.1 347 23.0 610 91%

Mar-08 9.3 152 15.9 203 26.9 440 36.0 830 107%

Mar-09 6.7 162 15.7 235 -18.5 359 -35.6 534 59%

Mar-10 8.6 176 15.2 270 36.9 491 97.7 1056 102%

Mar-11 9.3 192 19.0 321 17.3 576 9.7 1158 94%

Mar-12 6.2 204 15.0 369 -5.8 543 -16.7 965 68%

Mar-13 5.0 214 13.3 418 -1.6 534 5.5 1018 63%

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Correlation between GDP growth and Corporate earnings

• Over last 10 years, real GDP more than doubled while Corporate net profits have risen more than five times

• Real GDP growth and Corporate earnings have shown a close correlation of about 3 times

Re-rating of Indian markets

• Over time, Indian markets have witnessed steady rerating in response to structural improvements

• Market cap to GDP ratio of only 63% (March 2013) shows undervaluation

Correlation between GDP growth and Market cap growth

• Over last 10 years, the nominal GDP has quadrupled while market cap has risen more than ten fold

• Nominal GDP growth rate and Market cap growth has shown a strong correlation of 2 – 3 times

Correlation of Indian markets with GDP

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Returns from Global Markets (% CAGR) (as on 30 June ’14)

Markets 20 years 10 years 5 years 1 year

India 10 18 12 31

China 8 4 -7 3

Australia 5 4 6 13

USA 8 5 15 13

UK 4 4 10 8

Japan -2 2 9 11

Brazil N.A. 10 1 12

Russia N.A. 9 7 7

MSCI EM Index 4 9 7 12

Source: Bloomberg Note: Returns are in local currency of respective countries

Long-Term Returns of India vs. Global Markets

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Fair Valuations are supported by long term view

Forward PE of Sensex around 10-year average…

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RISK FACTORS: Equities as an asset class carry a higher risk in comparison to debt. While risk cannot be totally eliminated, it can be mitigated through a well-designed investment strategy. The ASK Investment Managers Portfolios seek to mitigate risk and deliver superior returns through research-based investing. However, this objective may not be fully achieved due to various reasons such as unfavorable market movements, misjudgment by portfolio manager, adverse political or economic developments etc.

DISCLAIMER: Any information contained in this material shall not be deemed to constitute an advice, an offer to sell/purchase or as an invitation or solicitation to do for security of any entity and further ASK Investment Managers Private Limited (ASKIM) and its employees/directors shall not be liable for any loss, damage, liability whatsoever for any direct or indirect loss arising from the use of this information. Recipients of this information should exercise due care and caution and read the offer document (if necessary obtaining the advice of finance/other professionals) prior to taking any decision on the basis of this information.

ASK Investment Managers Private Limited has not independently verified all the information and opinions given in this material. Accordingly, no representative or warranty, express or implied, is made as to the accuracy, completeness or fairness of the information and opinions contained in this material.

Disclaimer

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Thank You