Transcript Document

Magna India Fund – the investment
opportunity
KC Reddy
Mannheim
February 2006
Introduction
KC Reddy – the Manager
Kommera Chakradhar (KC) Reddy – CFA
Previously with Thames River - UK
Credit Agricole – Hong Kong
Peregrine - India
MBA, Indian Institute of Management (associated with MIT’s Sloan
School)
10 years experience investing in India
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Specialists in Emerging Markets
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Introduction
KC Reddy - historic track record
1997*
1998
1999
2000**
The Himalaya
Fund
-13.50%
-11.06%
110.98%
21.34%
MSCI India
Index
-12.35%
-22.89%
84.67%
17.59%
Source: JP Morgan Fleming country fund research
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* End Oct 1997 - end Dec 1997
** End Dec 1999 – end March 2000
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Introduction
The Magna fund range
Magna Umbrella Fund plc
Magna
Turkey
€ 69.8m
Magna
Eastern
European
€ 399.1m
Magna
Russia
€ 61.7m
Magna
Greater
China
€ 30.5m
Magna
Latin
America
€ 45.0m
Magna
India
Magna
EMEA
€ 21.1m
€ 36.3m
Magna Global Emerging Markets
€ 212.7m
Comprehensive emerging markets offering
Charlemagne Capital
Specialists in Emerging Markets
Source: Charlemagne Capital – end December 2005
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India
Broad market opportunities

Convincing macroeconomic case

Diversified market: bottom-up opportunities

Our process aims to find these
Positive outlook
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India
Macroeconomic summary
Year to March
2004
2005e
2006e
Real GDP growth %
8.6
6.9
7.1
Inflation
5.5
6.5
3.9
General govt. debt (%
GDP)
65.9
57.3
55.1
Foreign debt (% GDP)
20.4
19.1
18.0
Central Bank net FX
reserves ($bn)
102.0
130.6
138.1
Improving economic fundamentals
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Source: CSFB – Sept 2005
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India
Reform-minded administration

UPA election win in 2004: Manmohan Singh (Prime Minister)
and P. Chidambaram (Finance Minister) both widely respected
reformers

Liberalisation of key areas (telecommunications, construction,
infrastructure…)

Improved relations with Pakistan
Improved political outlook
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India
Young population, vibrant economy
Working age population (% overall population)
75%
73%
71%
India
69%
67%
65%
63%
 Favourable demographics:
75% of population under 40
 Middle income and higher to rise from
18% of total to 41% 1995-2007
61%
59%
57%
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55%
Newly industrialised countries (Korea, Taiwan, HK, Singapore)
Source: UBS – Nov 2005
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South East Asia (Malaysia, Philippines, Thailand, Indonesia)
China
India
Favourable demographic & income trends
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India
The last great underleveraged economy
Consumer Loans Outstanding/GDP (% )
90%
80%
80%
75%
70%
60%
53%
50%
40%
34%
30%
17%
20%
10%
7%
0%
India
Thailand
Malaysia
Taiwan
US
Korea
A credit boom waiting to happen
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Source: Citigroup – Nov 2005
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India
A stock picker’s paradise
 Over 5,000 listed companies
 No industry group exceeds 20% of market cap
 Massive improvement in corporate balance sheets
Net debt to
equity (%)
FY96
FY98
FY00
FY02
FY04
FY06e
42.2
40.7
34.6
26.4
14.8
1.9
Broad market, good fundamentals
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Source: Citigroup – Nov 2005
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India
The investment process
The Market
IN
OUT
Charlemagne Capital Universe
Selected opportunity set
Company visits
Special situations
Liquidity test
IN
OUT
Portfolio
Focused
Low volatility
Based on client objectives
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Specialists in Emerging Markets
Aiming for superior risk-adjusted returns
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India
Qualitative screen checklist
Management
Shareholder / governance focus
Track record and strategy
Top line growth
Market leadership
Innovative products
Bottom line growth
Cost management
Consistent growth
Sufficient internally generated CF
Cash flow
Access to finance
Solvency risk
Balance sheet
Valuation (relative & absolute)
Price target
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Disciplined bottom-up research
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India
Magna India Fund: our top ideas
Stock name
Model weighting
Index weighting*
Load
Infosys Technologies
0.00%
13.80%
-13.80%
Satyam Computers
9.69%
3.80%
+5.89%
Tata Motors
7.86%
2.78%
+5.08%
Tanla Solutions
5.00%
0.00%
+5.00%
Housing Dev. Finance
0.00%
4.75%
-4.75%
Large loads = active management
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* MSCI India Index
Source: Charlemagne Capital / MSCI – 30 Dec 05
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India
Magna India Fund: active management
Sector Allocation 30 December 2005
Fund Wgt
25.00%
Index Wgt
e.g.
property
20.00%
15.00%
10.00%
5.00%
0.00%
Energy
Materials
Industrials Consumer
Health
Care
Financials Technology
Others
Large loads = active management
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* MSCI India Index
Source: Charlemagne Capital / MSCI – 30 December 2005
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India
Summary

India – a market for stock pickers

Our process seeks these opportunities

Magna India Fund – our best ideas
Good outlook for this changing market
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The Disclaimer
This document is issued by Charlemagne Capital (UK) Limited which is authorised and regulated by the Financial Services Authority
(“FSA”). Magna Umbrella Fund plc is an open ended investment company authorised by the Financial Regulator as a UCITS,
recognised by the FSA under section 264 of the Financial Services and Markets Act 2000 for marketing to persons in the UK,
registered for public distribution in Germany and Luxembourg, authorised for public distribution in Austria, registered by the Autoriteit
Financiële Markten in The Netherlands and authorised for public offering and solicitation in and from Switzerland by the Swiss Federal
Banking Commission (the Fund is not subject to supervisions by the Swiss Federal Banking Commission or other Swiss public
authority). This document must not be relied on for the purposes of making any investment decisions. Before investing in any fund(s)
recipients who are not professional investors should contact their independent financial adviser and should read all documents relating
to the particular fund(s) such as any report and accounts and offering memorandum/prospectus, which specifies the particular risks
associated with the fund(s), together with any specific restrictions applying and the basis of dealing. The value of any investments and
any income generated may go down as well as up and is not guaranteed. Past performance will not necessarily be repeated.
Changes in rates of exchange may have an adverse effect on the value, price or income of an investment. There are additional risks
associated with investments (made directly or through investment vehicles which invest) in emerging or developing markets. The
information in this document does not constitute investment, tax, legal or other advice and is not a recommendation or an offer to sell
nor a solicitation of an offer to buy shares in the fund(s), which may only be made on the basis of the fund’s prospectus/ offering
memorandum which can be obtained from the address below. An investor in the United Kingdom who enters into an investment
agreement to acquire an interest in the fund will not have the right to cancel the agreement under any cancellation rules made by the
FSA. Charlemagne Capital (UK) Limited reasonably believes that the information contained herein is accurate as at the date of
publication but no warranty or guarantee (express or implied) is given as to accuracy or completeness. The information and any
opinions expressed herein may change at any time. This document and shares in the fund shall not be distributed, offered or sold in
any jurisdiction in which such distribution, offer or sale would be unlawful and until the requirements of such jurisdiction have been
satisfied. The purchase of shares in the fund constitutes a high risk investment and investors may lose a substantial portion or even all
of the money they invest in the fund.
Issued by Charlemagne Capital (UK) Limited - Authorised and Regulated by the FSA.
Charlemagne Capital (UK) Limited
39 St. James‘s Street
London SW1A 1JD
United Kingdom
Tel: + 44 (0)20 7518 2100
Fax: + 44 (0)20 7518 2198/9
www.charlemagnecapital.com
[email protected]
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