Transcript db.riskwaters.com

LOOKING FOR ALPHA?
UNEXPECTED OPPORTUNITIES IN NORTH AMERICA
17 October 2007
Tom Walker
Director,
Martin Currie Investment Management
1
NORTH AMERICA


How investors see it:

Underperforming

Slow growth

End of Era
How Martin Currie sees it:

40 great stocks
2
THE CASE FOR INVESTING IN EQUITIES
War in Iraq
2003
Asian Stock
Market Crisis
1997
Microsoft
launches
Windows 1985
Oil price $80
2007
First Gulf War
1990
Internet drives
Nasdaq to 5,000
2000
S&P 500 TR (IN)
Lehman U.S. Aggregate Bond TR (IN)
Past performance is not a guide to future returns. Source: Lipper Hindsight. Percentage growth total return, tax default, in USD.
3
INVESTORS JUST DON’T WANT TO KNOW
Returns for major world indices - five years to 30 September 2007
250
200
150
100
50
0
Se
p0
De 2
c0
M 2
ar
-0
Ju 3
nSe 0 3
p0
De 3
c0
M 3
ar
-0
Ju 4
n0
Se 4
p0
De 4
c0
M 4
ar
-0
Ju 5
n0
Se 5
p0
De 5
c0
M 5
ar
-0
Ju 6
n0
Se 6
pDe 06
c0
M 6
ar
-0
Ju 7
n0
Se 7
p07
-50
UK
Asia Pacific ex-Japan
Europe ex-UK
Japan
North America
World
Past performance is not a guide to future returns. Source: Lipper Hindsight. Bid to bid, total returns in Sterling on a cumulative basis to 30 September 2007.
4
PERCEPTION………
5
REALITY……
6
THE DOMINO EFFECT
7
THE DOLLAR
At top of 25 year range versus sterling
Spot exchange rate, US $ into Sterling
2.5
2.5
2
2
1.5
1.5
1
1
Source: Bank of England. As at 30 September 2007.
01/09/2006
01/09/2004
01/09/2002
01/09/2000
01/09/1998
01/09/1996
01/09/1994
01/09/1992
01/09/1990
01/09/1988
01/09/1986
01/09/1984
0.5
01/09/1982
0.5
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WHAT PRICE A BIG MAC ?
Is it actually sterling that is overvalued?
Cost and % under/over of a Big Mac
6
57%
US
21%
UK
-4%
19%
Euro Area
-6%
0%
Canada
-56%
-17%
Australia
2
-28%
-18%
Argentina
3
-46%
1
Source:Economist.com;Prudential Equity Group,LLC. As at 31 January 2007
Switzerland
Japan
India
0
China
USD
4
Brazil
5
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THE DEFICIT
US nominal goods and services exports and imports, Y/Y%
US Nominal Goods and Services Exports and Imports, Y/Y%
30
25
20
15
10
5
0
-5
Exports: Goods and Services
-10
Imports: Goods and Services
-15
-20
1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
Source Citigroup, August 2007
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INFLATION
Inflation is trending down
Core PCE Deflator
Source: Bear Sterns. As at 30 September 2007.
11
HOUSEHOLD DEBT
Still a lot of resets ahead of us
Monthly
Monthly Rate
Rate Resets
Resets ($bn)
($bn)
25
20
15
10
5
0
Mar- 07
Source: JP Morgan.
Jun-07
S ep- 07
Dec- 07
M ar-08
Jun- 08
S ep-08
Dec-08
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HOUSING (MONTHS OF INVENTORY)
Home sales will take time to recover
Source: National Association of Realtors.
13
…BUT DON’T UNDERESTIMATE THE US CONSUMER
US Household Net Worth (ex Real Estate)
Source: FRB Flow of Funds and Citi Investment Research – US Equity Strategy
14
EQUITIES LOOK CHEAP
Source: UBS US Equity Strategy
15
EARNINGS EXPECTATIONS REMAIN MODEST
Source: Thomson Financial / IBES.
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OUTLOOK FOR NORTH AMERICAN EQUITIES

North American economy is slowing but the global economy is increasingly resilient

The US dollar is at a level which makes US companies highly competitive

Inflation is trending lower within Fed target range

Interest rate trends uncertain – avoid housebuilders and wary on banks

US equities remain attractive even though earnings growth is slowing
GDP growth compared
2005
2006
2007 (est)
2008 (est)
USA
3.2
2.9
2.0
2.4
Eurozone
1.5
2.9
2.6
2.2
Japan
1.9
2.2
2.3
2.1
UK
1.9
2.8
2.8
2.1
Source: Consensus Economics. As at 10 September 2007.
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WHY MARTIN CURRIE FOR
NORTH AMERICA?

North American fund fits our ‘Big Boutique’ business model:

Stock-picking approach

Focused portfolio – 40 stocks

Partnership between a proven product manager and an experienced
team of sector managers

Manager’s remuneration linked directly to performance

Distinctive investment process – combining numerical screening,
fundamental research and committed stock selection

Exceptional investment performance – including on a risk-adjusted basis

Stands out in a sector with few consistent performers

Positioned to take advantage of resurgence of large-caps
Tom Walker
Lead manager,
North America
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PERFORMANCE IN PERSPECTIVE
Discrete quarterly relative returns over 5 years

Consistent relative performance against peers

‘All-weather process’ outperforms in both up and down markets
Distribution of quartile rankings
over calendar quarters since May
2002
3.3
2.9
2.7
Appearances
2.2 2.1
2.0
1.8
1.7
1.4
1.3
1.0
0.8
0.8
0.6
0.5
12
57%
2nd quartile
3
14%
3rd quartile
3
14%
4th quartile
3
14%
-0.1
-0.3
-0.4
-1.1
-1.3
-1.5
1st quartile
-1.8
Bull and bear capture:
performance in calendar quarters
when market rose and fell
Periods
When market rose
When market fell
Outperformed
10/15
67%
5/6
83%
Past performance is not a guide to future returns. * From 30 April 2002. All returns are shown in sterling.
Source: Lipper Hindsight. Bid-bid basis with net income reinvested over discrete quarterly periods from 30 April 2002 to 30 September 2007.
Although Martin Currie complies with the GIPS standards, and each fund return is calculated using the recommended methodology, the method of calculation used in this
presentation falls outside the scope of the GIPS standards.
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PERFORMANCE IN PERSPECTIVE
Top-quartile ranking in peer group

We stand out in a sector with few consistent performers

1st of 57 funds in the sector over the past 5 years

The only fund ranked top decile in the sector over 1, 2, 3, 4 and 5 years

Highly-rated
1 year
2 years
3 years
4 years
5 years
Manager’s
tenure*
Martin Currie North American Fund
13.6
19.7
45.6
49.4
76.7
26.9
Sector average
7.6
9.7
26.7
28.8
46.1
5.2
MSCI North America
8.6
13.8
33.3
39.7
66.3
17.1
1
1
1
1
1
1
Cumulative performance
Quartile ranking
**
Past performance is not a guide to future returns. Returns are in sterling and net of fees.
Source: Lipper Hindsight. Bid-bid basis with net income reinvested over period shown. * From 30 April 2002 to 28 September 2007.**Source & Copyright: CITYWIRE.
Managers are rated by Citywire for their three year risk adjusted performance for the period 30/09/2004 - 30/09/2007.
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NORTH AMERICAN PORTFOLIOS
An experienced and well-resourced team
Product managers
Risk management
Performance
analytics group
(Team of 13)
Dealing
Tom Walker
Lead-manager,
North America
David Forsyth
Co-manager,
North America
Dan Gardner
Head of risk management
(Team of 10)
Sector manager team
Chris Butler
Duncan Goodwin
Ken Hughes
Donald Barlow
Rachel Nimmo
Len Riddell
Paul Sloane
Head of sector managers,
materials
Energy
Industrials
Utilities
Healthcare
Financials
Financials
Jamie Mariani
Jane Coull
Luca Fasan
Rahul Sharma
Toby McCullagh
Elaine Morrison
Bruce MacDonald
Technology, media and
telecommunications
Technology, media and
telecommunications
Technology, media and
telecommunications
Consumer
Consumer
Consumer
Infrastructure
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PORTFOLIO CHARACTERISTICS
Relative stock and sector weightings
Sector weightings %
Martin
Currie
%
Index
weight
%
Active
weight
%
1. Gildan Activewear
2.9
-
+2.9
2. Cisco Systems
4.0
1.3
+2.7
3. MEMC Electronic Materials
2.7
0.1
+2.6
Telecommunication services
4. Mirant
2.6
0.1
+2.5
Energy
5. Anadarko Petroleum
2.7
0.2
+2.5
Top five positive positions
Information technology
Utilities
Materials
-0.3
Martin
Currie
%
Index
weight
%
Active
weight
%
1. Exxon Mobil
-
3.5
(3.5)
2. Microsoft
-
1.7
(1.7)
3. Citigroup
-
1.5
(1.5)
4. Procter & Gamble
-
1.5
(1.5)
5. Chevron
-
1.3
(1.3)
Top five negative positions
5.6
-0.5
-3.2
-4.0
-4.9
Source: Martin Currie. As at 30 September 2007. Index: MSCI North America.
This information does not constitute investment advice, nor is it an offer or invitation to subscribe for shares in any of the stocks.
1.7
1.6
1.3
0.4
Industrials
Consumer discretionary
Consumer staples
Healthcare
Financials
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CORNING
3 0
2 8
2 6
2 4
2 2
2 0
1 8
1 6
1 4
1 2
1 0
8
2 0 0 4
2 0 0 5
2 0 0 6
2 0 0 7
Corning
Corning relative to S&P 500 Composite Index

Global leader in glass technology

Flat screen television sales still growing strongly

Under appreciated fibre optic, diesel emission control and polysilicon businesses
Source:Thomson Datastream as at 1 October 2007.
Past performance is not a guide to future returns. This information does not constitute investment advice, nor is it an offer or invitation to subscribe for shares in the stock.
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GILDAN ACTIVEWEAR
4 0
3 5
3 0
2 5
2 0
1 5
1 0
5
2 0 0 4
2 0 0 5
2 0 0 6
2 0 0 7
Gildan Activewear
Gildan Activewear relative to S&P 500/TSX Composite Index

Leader in volume T-shirt production, also socks and underwear

Make ‘em cheap – but in Central America, not China

Quality company, conservatively managed and under researched
Source:Thomson Datastream as at 1 October 2007.
Past performance is not a guide to future returns. This information does not constitute investment advice, nor is it an offer or invitation to subscribe for shares in the stock.
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CVS
4 0
3 5
3 0
2 5
2 0
1 5
2 0 0 4
2 0 0 5
2 0 0 6
2 0 0 7
CVS
Price relative to S&P 500 Composite Index

Leading food and drug retailer – 100% domestic US sales

Beneficiary of growth in use of low cost generic drugs

Experienced acquirer and integrator of businesses
Source:Thomson Datastream as at 1 October 2007.
Past performance is not a guide to future returns. This information does not constitute investment advice, nor is it an offer or invitation to subscribe for shares in the stock.
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CANADIAN PACIFIC RAILWAY
4 0
3 5
3 0
2 5
2 0
1 5
2 0 0 4
2 0 0 5
2 0 0 6
2 0 0 7
Canadian Pacific Railway
Canadian Pacific Railway relative to S&P 500/TSX Composite Index

Domestic assets – but China, et al, are the engine of growth

Strong trends in operating efficiency
 Attractive
valuations ….. and Warren Buffet thinks so too !
Source:Thomson Datastream as at 1 October 2007.
Past performance is not a guide to future returns. This information does not constitute investment advice, nor is it an offer or invitation to subscribe for shares in the stock.
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SUMMARY
Alpha is alive and well in North America

Alpha is in companies – not politics and macro economics

North American companies are selectively the best in the world

Our investments are quoted in North America, a dynamic and growing environment….

….but many are global operators thriving in the global market place
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PRODUCT AND RISK MANAGERS
Tom Walker
Director
Product manager for global and North America portfolios
Professional qualifications: CA
Investment experience: 19 years
Tom spent six years with Edinburgh Fund Managers. Initially covering the UK and other European markets, he went on to specialise in Asia (ex Japan) and
became head of that team in 1991. Tom moved to Hong Kong in 1993 with Baring Asset Management (Asia). Focusing on Greater China, he managed the
Greater China Fund Inc and Baring’s Hong Kong Fund. He joined Martin Currie as head of the Pacific Basin team in 1996, and moved to head the North
America team in 1998. He is the lead manager of the Martin Currie North American Fund and the Martin Currie Portfolio Investment Trust.
David Forsyth
Investment manager, North American equities
Professional qualifications: CA, ASIP
Investment experience : 8 years
David began his career with Ernst & Young, qualifying as a chartered accountant. He then moved to Scottish Life in 1999, where he worked as an analyst
covering Asian markets. In April 2001 he joined Abbey National Asset Managers’ US desk as an investment manager. David joined Martin Currie in 2005 to
enhance our expertise in North American equities. He is co-manager of our North American Fund.
Dan Gardner
Director of risk management
Investment experience: 17 years
After three years with William Mercer as a trainee actuary, Dan moved in 1993 to Commercial Union Investment Management (now Morley Fund
Management). There he was promoted to assistant director in 1997, and to head of performance and risk analysis in 1998. At Commercial Union he
introduced new performance measurement systems and a framework for controlling portfolio risk. He joined Martin Currie in 2001 as head of risk
management, and developed risk measurement infrastructure for long-only and total return funds. He ensures that effective risk management is integrated
into the investment process and that levels of risk are consistent with clients’ performance objectives. Dan works closely with the product managers,
advising on both portfolio construction and quantitative investment techniques.
October 2007
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SECTOR RESEARCH TEAM
Chris Butler
Director
Head of sector managers; Sector manager, materials
Professional qualifications: ASIP
Experience: 18 years
Chris joined Martin Currie in 1989. A specialist in basic materials, he has combined research with portfolio management roles across a range of markets
including continental Europe, the UK, emerging markets and North America. From 1996 to 2000, Chris was responsible for Martin Currie’s investments in
emerging Europe, the Middle East and Africa (EMEA). When we created our sector manager team in 2001, Chris assumed responsibility for the materials
sector. He was appointed head of the team in June 2005. Chris has been a co-manager of the first of our sector products – the Martin Currie Global
Resources Absolute Return Fund - since its launch in October 2003. He also co-manages the long-only Martin Currie Global Resources Fund (Sicav),
launched in December 2005.
Duncan Goodwin
Director
Sector manager, energy
Professional qualifications: CIMA
Experience: 13 years
Duncan Goodwin joined Martin Currie in 2005 from Merrill Lynch, where he was a director of equity research for oil and gas stocks. His team was ranked
no.1 in Institutional Investor's 2005 survey of global energy sell-side analysts. Prior to that, he was an analyst at Lehman Brothers, working in their
European energy research team. Previously, he worked in business planning with Shell UK. Duncan is a sector manager in our global resources team
with responsibility for researching and recommending stocks in the energy sector. He is the lead manager of the Martin Currie Energy Absolute Return
Fund and the long-only Martin Currie Global Resources Fund (Sicav). He co-manages the Martin Currie Global Resources Absolute Return Fund with
Chris Butler.
Donald Barlow
Sector manager, utilities
Professional qualifications: ASIP, MSI
Experience: 8 years
After training as an investment manager at Tilney Investment Management, Donald joined Edinburgh Fund Managers in 1999. In 2001 he moved to
National Australia Group, where he worked as an investment analyst. Donald joined Martin Currie in 2003, initially working on our UK Growth and Income
team, and became a member of our sector manager team in 2004. He researches and recommends utilities stocks and is a fluent French speaker.
October 2007
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SECTOR RESEARCH TEAM
Ken Hughes
Director
Sector manager, industrials
Professional qualifications: CFA
Experience: 14 years
Ken joined Credit Lyonnais in 1993 as a graduate trainee. In 1998 he was promoted to equity analyst, latterly for Credit Lyonnais Securities in Paris,
where he focussed on analysing companies in the metals, mining, paper and industrial gases sectors. He joined Martin Currie in 2004 to research and
recommend stocks in the industrials sector. Ken is fluent in French and became a CFA charterholder in 2004.
Rahul Sharma
Director
Sector manager, consumer
Professional qualifications: MBA
Experience: 13 years
Rahul was an equity research analyst for Alliance Capital Management in Singapore, and was portfolio manager for the Asian portion of Alliance’s
Emerging Markets funds. In 1998 he moved to Citigroup Asset Management in London, where he led their eight-strong global consumer research team.
Rahul joined Martin Currie in 2005 as our sector manager for the consumer sector.
Jamie Mariani
Sector manager, technology, media and telecoms
Professional qualifications : CFA Level 1
Experience : 10 years
Jamie began his career with Dresdner Kleinwort Benson, initially working in UK sales, before becoming a telecoms analyst. He was then appointed by
ABN AMRO to analyse the European mobile telecoms sector. He broadened his coverage to include fixed line networks and was promoted to director of
ABN AMRO’s telecoms team in 2003. Jamie joined Martin Currie in 2005 as a global sector manager with responsibility for researching and
recommending telecoms stocks.
Len Riddell
Sector manager, banks
Professional qualifications: CA
Experience: 10 years
Len began his career in 1996 in the banking division of PricewaterhouseCoopers in London. Prior to joining Martin Currie, he analysed European banks
for Merrill Lynch analysed Irish financials for Goodbody Stockbrokers in Dublin. Len joined Martin Currie in 2004 as a sector manager, researching and
recommends global financial stocks. He is the co-manager of Martin Currie Absolute Return Funds – Global Financials (launched June 2006).
October 2007
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SECTOR RESEARCH TEAM
Paul Sloane
Sector manager, insurance and diversified financials
Professional qualifications: CA, ASIP
Experience: 12 years
Paul started his career in 1993 as a trainee chartered accountant at Standard Life. In 1997 he joined Standard Life Investments as an investment analyst.
Following short contracts with Royal Bank of Scotland and National Australia Bank, he joined Deutsche Bank in 2001 and was responsible for specialist
sales in the pan-European insurance sector. Paul joined Martin Currie in 2003 as a sector manager. He researches and recommends global insurance
and diversified financials stocks. He is also the co-manager of Martin Currie Absolute Return Funds – Global Financials (launched June 2006).
Rachel Nimmo
Sector manager, healthcare
Professional qualifications: CA
Experience: 10 years
Before joining Martin Currie, Rachel spent four years as an accountant with Ernst & Young. She joined Martin Currie in 2000, initially working for our North
America team and then on our Asia desk. She then moved to our sector manager team, where she researches and recommends stocks across the global
healthcare sector.
Jane Coull
Sector manager, technology, media and telecoms
Professional qualifications: ASIP
Experience: 14 years
Jane started her investment career at General Accident in 1993. She worked on their UK desk for two years before moving to cover Japanese equities. In
1997 she moved to Aegon Asset Management, where she had responsibility for Asian markets. Following a reorganisation of Aegon’s investment floor,
which saw it moving to a sector focus, she became a manager and analyst for the technology sector. Jane joined Martin Currie in 2004 to research and
recommend technology stocks.
Elaine Morrison
Sector manager, consumer staples
Professional qualifications: MBA, CFA level 1
Experience: 6 years
Elaine joined Martin Currie in 2003 after completing an MBA. She previously worked for Aon Group, where she focussed on advising global consumer
companies regarding their operations in Russia and the former Soviet Union. She spent six months managing Aon’s representative office in Kazakhstan.
Elaine is a sector manager, analysing stocks in the consumer sector. She is fluent in Russian and French.
October 2007
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SECTOR RESEARCH TEAM
Toby McCullagh
Sector manager, consumer staples
Professional qualifications: CA
Experience: 7 years
Toby began his investment career with Cazenove, where he researched US equities. He then joined SG Cowen, where he specialised in European stocks.
Prior to joining Martin Currie, Toby spent five years at Bear Stearns International as associate director of European equities research. He is a chartered
accountant.
Luca Fasan
Sector manager, technology, media and telecoms
Experience: 8 years
Luca began his career at Citibank, before moving to Telecom Italia where he worked as a financial analyst. In 2000, he joined San Paolo IMI Investment
Management in Milan, where he worked successively as a risk and performance analyst, a global technology analyst and a portfolio manager specializing
in technology stocks. After managing the San Paolo High Tech Fund for two and a half years, Luca joined Martin Currie in 2007 as our sector manager for
technology, media and telecoms.
Bruce MacDonald
Sector manager, Infrastructure
Bruce has 15 years' experience as a sell-side analyst in engineering, aerospace and business services. He was a MD at Deutsche Bank, and more
recently with Teather & Greenwood.
October 2007
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REGULATORY INFORMATION
Martin Currie Investment Management Limited (MCIM) has issued and approved this presentation in its capacity as investment adviser. MCIM is referred to throughout as ‘Martin
Currie’. MCIM is authorised and regulated by the Financial Services Authority and is a member of the Investment Management Association. Registered in Scotland (no 66107),
registered address Saltire Court, 20 Castle Terrace, Edinburgh, EH1 2ES.
The presentation may not be distributed to third parties and is intended only for the attendee. The presentation does not form the basis of, nor should it be relied upon in connection
with, any subsequent contract or agreement. It does not constitute, and may not be used for the purpose of, an offer or invitation to subscribe for or otherwise acquire shares in any of
the products mentioned.
The information contained in this presenter has been compiled with considerable care to ensure its accuracy. But no representation or warranty, express or implied, is made to its
accuracy or completeness. Martin Currie has procured any research or analysis contained in this presentation for its own use. It is provided to you only incidentally, and any opinions
expressed are subject to change without notice.
Martin Currie Investment Funds (MCIF) Martin Currie North American Fund (the fund) is a subfund of an Open-ended investment company (Oeic). The fund is referred to throughout
as the North American Fund. Martin Currie Unit Trusts Limited is the Authorised Corporate Director for the Oeic, and is an affiliate of MCIM. It is also authorised and regulated by the
Financial Services Authority. MCIM is the investment adviser to the fund. In the exceptional event that an Oeic subfund’s liabilities exceed its net assets, the Oeic structure allows for
these liabilities to be allocated across other subfunds in the Oeic. Investment in the fund can only be made in accordance with the terms and conditions outlined in the Simplified
Prospectus or Key features document available at the time of investing.
Past performance is not a guide to future returns. Markets and currency movements may cause the value of investments and income from them to fall as well as rise and you may get
back less than you invested when you decide to sell your investments. There can be no assurance that you will receive comparable performance returns, or that investments will
reflect the performance of the stock examples, contained in this presenter. Movements in foreign exchange rates may have a separate effect, unfavourable as well as favourable, on
the gain or loss otherwise experienced on an investment.
Funds which invest in one country carry a higher degree of risk than those with portfolios diversified across a number of markets.
Investment in the securities of smaller and unquoted companies can involve greater risk than is customarily associated with investment in larger, more established, companies. In
particular, smaller companies often have limited product lines, markets or financial resources and their management may be dependent on a smaller number of key individuals. In
addition, the market for stock in smaller companies is often less liquid than that for stock in larger companies, bringing with it potential difficulties in acquiring, valuing and disposing of
such stock. Proper information for determining their value, or the risks to which they are exposed, may not be available.
Investment in derivative instruments, including futures, options or contracts for differences, carries a high risk of loss, the markets in these investments being very volatile. A relatively
small adverse market movement may result not only in the loss of the original investment but also in unquantifiable further loss exceeding any margin deposited. Warrants often
involve a high degree of gearing so that a relatively small movement in the price of the security to which the warrant relates may result in a disproportionately large movement,
unfavourable as well as favourable, in the price of the warrant.
Performance information - with the exception of any figures calculated on a fund's net asset value, which fall outside the scope of the GIPS standards, all performance information
calculated by Martin Currie complies with the GIPS standards.
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