mirae asset india-china consumption fund an open ended equity oriented scheme

For professional investors only. Not for distribution to the public.

Mirae Asset India-China

Consumption FundAn open ended equity oriented scheme

NFO Opens on : 9th March, 2011

NFO Closes on: 23rd March, 2011

Scheme re-opens for continuous sale & repurchase on

or before 5th April, 2011.


The case for India-China consumer theme & sectors


Why India - China Consumer Theme?

Take advantage of the structural growth trend in both India and China, which will leads to the domestic consumption boom caused by improving economic condition.

Demographic profiles of these two countries points to long term opportunity in consumer related products ranging from FMCG and high-end products to indirect play on consumer products in healthcare, financial, and tourism.

By 2020 China GDP is forecast to be over US$12tn

and India at US$3.4tn

Source: CLSA Asia-Pacific Markets., 2010

Source: CLSA Asia-Pacific Markets, 2010

China & Indian population – Below 25 years as % of total

GD

P (trillio

n)

Percen

tage (%

)

Percen

tage (%

)


Rise of Asian Middle ClassThe case for Indo-China consumerThe case for Indo-China consumer

Just over 60% of the region’s middle class is in China, and 10% is in India

China will account for two-thirds of those entering the Asia ex-Japan middle class, growing its middle-class members to 600m, with India’s total reaching 140m.

India and China lead growth in the size of middle class and in discretionary spending within the region which drives consumerism

Source:CLSA, 2010

Middle-class population and spending CAGR, 2009-2014

Source:CLSA, 2010, CAGR – Compounded Annualised Growth rate

Percentage (%)


Large Populations & Rising IncomesThe case for Indo-China consumerThe case for Indo-China consumer

India & China have the largest populations in Asia and we expect their disposable incomes to grow at the fastest rates in the region.

For developing countries like India & China, higher incomes are the biggest driver of consumption growth

Disposable income per capita versus population growth, 2009

Source:CLSA, 2010

Population, disposable income growth versus middle-class growth

Population

(million)

Growth in disposable

income per capita (%)

Middle Class

Growth 2009-14

(%)

China 1328.0 10.4 11.1

India 1173.8 7.6 18.6

Indonesia 230.0 7.4 14.6

Thailand 64.7 7.4 8.1

Korea 48.7 5.7 0.3

Taiwan 23.0 5.7 0.3

Philipines 92.1 5.1 11.2

Singapore 4.7 4.9 1.0

Hong Kong 7.1 4.2 0.8

Malaysia 28.1 4.2 5.8

Source:CLSA, 2010

Po

pu

lation

(1000 Million)

Percen

tage (%

)


A look at their demographic profiles

In 2010, 945m Chinese (68% of population) are in the key consuming 15-59 age bracket.

In India, the corresponding figures are 725m or 63% of population.

Source: Statistical Outline of India; China Statistical Yearbook., 2010

China’s demographic profile - 2010 India’s demographic profile – 2010

Source: Asian Demographics, 2010

The case for Indo-China consumerThe case for Indo-China consumer

Ag

e Gro

up

Ag

e Gro

up

Population (million) Population (million)


Better economic prospects and living standards are key drivers for people to move to urban areas.

Source: United Nations and CLSA, Oct 10

Urbanization rates in China and India

Consumption Driver 4: UrbanizationConsumption Driver 4: Urbanization

Source: Morgan Stanley, Oct 10

Under-Urbanization n China and India

P

erce

nta

ge(

%)

Percentage(%)


Our Investment Proposition

India & China

Consumer Stocks

India & China

Consumer Stocks

A Combination of factors like Urbanization, Growth in Middle Class, Declining Dependency Ratio provide fillip to the Consumption J Curve in a wide range of consumption and related sectors in the long runA Combination of factors like Urbanization, Growth in Middle Class, Declining Dependency Ratio provide fillip to the Consumption J Curve in a wide range of consumption and related sectors in the long run

Urbanization

Rising Middle Class

Declining Dependency Ratio

GDP Per Capita Income Growth

Consumption J Curve

Auto

Consumer Non

Durables

Retail

Household Appliances

Media

Utilitities


Different Consumption & Consumption related sectors have out-performed broader indices at various points of time: Past Performance may or may not be sustained in the future

Key here is picking the right sector.

Why India - China consumer sectors?Why India - China consumer sectors?India - China consumer – a rising force

MSCI India Gross Index Performance (local) % - Best performing sectors marked in Orange

Calender Year BSE Sensex

MSCI India - Consumer Staples

MSCI India - Consumer

DiscretionaryMSCI India -

TelecomMSCI India -

UtilitiesMSCI India -

Financials2005 44.08 55.61 45.13 18.60 14.50 50.31 2006 47.88 12.50 40.75 54.51 3.97 48.15 2007 47.15 12.59 1.97 58.38 177.33 87.93 2008 (52.48) (8.79) (48.67) (67.23) (51.70) (61.69)2009 81.03 29.91 171.15 (24.44) 59.05 80.21 2010 17.43 30.33 29.92 (12.94) (9.24) 22.58

MSCI China Gross Index Performance (local) % - Best performing sectors marked in Orange

Calender Year MSCI China

MSCI China - Consumer Staples

MSCI China - Consumer

DiscretionaryMSCI China -

TelecomMSCI China -

UtilitiesMSCI China -

Financials2005 19.47 3.01 (7.36) 34.35 (2.75) 21.58 2006 83.43 91.21 42.29 82.04 54.63 139.77 2007 66.66 48.89 76.90 100.39 62.50 35.71 2008 (51.12) (39.85) (63.28) (43.37) (38.11) (44.93)2009 62.71 116.98 149.60 (0.37) 0.14 72.06 2010 5.10 2.84 (5.32) 11.73 (8.83) (0.55)

Source: Factset as on 31st Dec 10


Auto

India’s car sales lags China by 6 years. India & China have similar car sales p.a at a given per capita income (PCI) in PPP terms. Going by this trend, India’s car consumption could hit 10 mn p.a by FY 16E

China: J curve trajectory commenced in 2000 at USD 1000 PCI

India: J curve trajectory may commence in 2012 at USD 1200 PCI

Source: Enam Research & Bloomberg, Dec 10.

Source: Enam Research, Dec 10

(mn) units

1990 2000 2005 2009 1990-00 CAGR(%)

2000-05 CAGR(%)

2005-09 CAGR(%)

China 0.2 1.2 3.5 10.3 21 24 31India 0.2 0.7 1.1 1.9 14 11 14Indonesia 0.2 0.3 0.5 0.6 1 14 6Malaysia 0.2 0.3 0.4 0.4 6 6 1Thailand 0.3 0.1 0.2 0.2 -13 19 4Brazil N.A 1.2 1.7 3.1 0 8 16UK 2.0 2.3 2.4 2.0 2 1 -5Japan 4.3 4.9 5.3 4.3 1 2 -5US 8.6 17.3 17 10.4 7 0 -11Total 15.9 28.2 32.2 33.4 6 3 1

India & China Head Global Passenger Car Sales

PCI in PPP $

Year achieved Car sales

ChinaIndia

China India1500 1995 2000 0.53 0.692400 2000 2006 1.22 1.386000 2009 2016E 10.32 10.00

India & China: Direct relationship between Car sales and PCI

Why India - China consumer sectors?

PCI=$1000

The Tipping Point for Accelerated Car Sales across regions

Source: Enam Research, Dec 10

C

ar S

ales

Gro

wth

%

PCI=$1200

China

India

Per

Cap

ita In

com

e

Harisha

source..


Household Appliances

India’s Household appliances industry ( TV, washing machine, refrigerator & air conditioner ) stood at USD 5 bn in 2009

Chinese domestic demand of AC is 17x and washing machine is 11x that of India.

While India passenger car penetration lags by 6 years to China, for consumer durables it is around 12 years

Source: Enam Research, Crisil, NBSC, 2010

India 1995 & 2010 Penetration China 1995 & 2010 Penetration


2x

6x2.5x

5.5x

2.5x 18x2.3x

3x


Chindia’s GDP growth has improved in the past decade. However, per capital consumption of various consumer products in China and India is still significantly lower than in many developing economies due to the lower income levels.

The low penetration levels suggest high potential for growth in the consumer products space in the form of FMCG.

How big will India’s FMCG market be in 2020?

Source: CLSA Asia Pacific Markets, 2010.

How big will China’s FMCG market be in 2020?

Source: CLSA Asia Pacific Markets., 2010

Consumer Non Durables


China market size 2005(US$m)

China market size 2020(US$m)

Per-capita consumption growth(% cagr)

Bath and shower products 1,073 2,439 5.0

Laundry care 2,786 7,304 6.0

Oral hygiene 1,596 6,358 9.0

Hair care 2,171 11,364 11.0

Color cosmetics 1,033 11,912 17.0

Skin care 3,584 60,401 20.0

Packaged food 55,786 381,657 13.0

Beer 11,850 54,150 10.0

Wine 2,734 46,073 20.0

Spirits 13,368 61,083 10.0

Indiamarket size 2005(US$m)

Indiamarket size 2020(US$m)

Per-capita consumption growth(% cagr)

Bath and shower products 1,374 4.670 7.0

Laundry care 1.540 6.018 8.0

Oral hygiene 554 3.736 12.0

Hair care 897 7.892 14.0

Color cosmetics 111 2,103 20.0

Skin care 355 6.729 20.0

Packaged food 9,795 98,181 15.0

Beer 1,086 7,322 12.0

Wine 33 1,164 25.0

Spirits 7,457 38,372 10.0


Summary China and India are one of the fastest growing regions in the world. (Source: IMF,2010)

Spending power set to rise as industrialization spurs greater urbanization. This fuels demand for higher margin branded consumer products.

We are already seeing more urban population growth in China and India

Expert stock picks can yield gains irrespective of consumer cycle.

From a macro perspective in the long term, China and India are expected to continue to see secular consumer boom.

India - China consumer – a rising force

Risks Consumer sector valuations look stretched. However recent correction in India & Chinese markets

could help correct this .

Policy tightening in India & China

Rising commodity prices coupled with limited pricing power creates downside risk on earnings.

Any re-emergence of Sovereign Default Risks could lead to decline in financial markets across the globe

Why India - China consumer sectors?Why India - China consumer sectors?


Mirae Asset India-China Consumption Fund

For professional investors only. Not for distribution to the public.15

Investment Objective The investment objective of the scheme is to generate long term capital appreciation through an actively managed portfolio investing in equity and equity related securities of companies that are likely to benefit either directly or indirectly from consumption led demand in India/China. The Scheme does not guarantee or assure any returns.

Fund Type An Open ended equity oriented scheme

Asset Allocation Indian Equities and Equity Related Securities of companies that are likely to benefit either directly or indirectly from consumption led demand - 65 - 90%

Chinese Equities and Equity Related Securities of companies that are likely to benefit either directly or indirectly from consumption led demand -10 - 35%

Money market instruments (including CBLO) / debt securities Instruments - 0 - 25%

Plans & Options The Scheme shall have Regular Plan and offers two options viz., Growth and Dividend. Dividend Plan will offer Payout & Reinvestment facility

Entry Load N.A. In accordance with SEBI circular no. SEBI/IMD/CIR No. 4/168230/09 dated June 30, 2009, no entry load will be charged by the Scheme to the investor. Similarly, no entry load will be charged with respect to applications for registrations under Systematic Investment Plan (SIP) / Systematic Transfer Plan (STP) accepted by the Mutual Fund with effect from August, 1, 2009. The upfront commission shall be paid by the investor directly to the distributor, based on his assessment of various factors including the service rendered by the distributor.

Exit load Regular Plan : 1% If redeemed within 1 year (365 days) from the date of allotment

SIP : 1% If redeemed within 1 year (365 days) from the date of allotment

NIL: If redeemed after 1 year (365 days) from the date of allotment

Management & Administration Fees Maximum of 1.25% (with varied slabs) – Management Fees

Total Recurring Expenses – Upto 2.50% with varied slabs (Inclusive of Management Fees)

Minimum Application Amount & Minimum Additional Application Amount

Investors can invest under the Scheme with a minimum investment of Rs.5,000/- and in multiples of Re. 1/- thereafter. Additional investments in an existing folio can be made for Rs.1,000/- and in multiples of Re.1/- thereafter.

Benchmark MSCI India Consumption Index (65%) + MSCI China Consumption Index (35%) (with quarterly rebalancing) (Price in INR).

Fund Features

For professional investors only. Not for distribution to the public.16

Fund Investment Universe

Mirae Asset India – China

Consumption Fund

The fund seeks to invest in a basket of Consumer Stocks benefiting either directly or indirectly from consumption led demand in India/China

An illustrative list of these sectors include Consumer Discretionary, Consumer Staples, Autos, Realty, Healthcare, Education, Media & Entertainment, Banks & Financial Services, Telecom, Transportation, Food and Tourism & Hospitality but not limited to the specified ones


Rs 10000 invested on 31st Dec 2005 is today worth

Rs 21091 (MSCI India Consumption Index (65%) + MSCI China Consumption Index (35%)) Rs 19502 (BSE Sensex) On a CAGR basis, the customised Consumption Index has returned 15.79% ; whereas the

BSE Sensex has returned 14.02% over this time frame. (CAGR – Compounded Annualised Growth Rate)Rs 21091

Source: Factset & ACEMF as on 31st Jan 11.

Performance at a glance..

Rs 19502

Am

ou

nt

Inve

sted

(R

s)


Fund Investment Strategy

18

Quality over Quantity

• Our investment strategy focuses on companies with the following characteristics:

Attractive ValuationAttractive Valuation

Atrractive relative valuation with the consideration of liquidity and volatilityAtrractive relative valuation with the consideration of liquidity and volatility

Derived through our bottom-up approach to stock picking Derived through our bottom-up approach to stock picking

Benefit from macroeconomic, industry and sectoral trendsBenefit from macroeconomic, industry and sectoral trends

Reliable ManagementReliable Management

Capable and accountable management who care for shareholders’ valuesCapable and accountable management who care for shareholders’ values

Corporate Goverance NormsCorporate Goverance Norms

Managements with good corporate governance track recordManagements with good corporate governance track record


Fund Manager(s)

Mr. Gopal Agrawal – Head of Equity & Dy. CIOMr. Gopal Agrawal is responsible for spearheading the equity investment management initiatives for the India operations. Mr. Agrawal is instrumental in developing investment philosophies for the domestic equity funds and building key investor relationship for the organization. Schemes being co-managed by Mr Surana are Mirae Asset India Opportunities Fund, Mirae Asset Global Commodity Stocks Fund, Mirae Asset China Advantage Fund and Mirae Asset Emerging Bluechip Fund. Aged 36, Mr. Agarwal is a Chemical Engineer by qualification and graduated from MBM at VGSOM, IIT Kharagpur. He has a rich work experience of over 13 years, out which 7 years has been with the Indian fund management industry.

19

Mr. Neelesh Surana – Senior Fund Manager (Equity)Mr. Surana has professional experience of more than 10 years and is responsible for Portfolio construction & monitoring. Prior to this assignment, Neelesh was associated with ASK Investment Managers Pvt Ltd where he was responsible for tracking sectors like Metals, FMCG and Pharma. Schemes being co-managed by Mr Surana are Mirae Asset India Opportunities Fund, Mirae Asset Global Commodity Stocks Fund, Mirae Asset China Advantage Fund and Mirae Asset Emerging Bluechip Fund. Aged 40, Mr. Surana is a Mechanical Engineer by qualification and has done his Masters in Business Administration (Finance).

Mr. Basavraj Shetty – Fund Manager (Overseas Investments) Mr. Shetty has 7.5 years experience in Equity Research Analysis role and is responsible for Investment Analysis, Advisory & Fund Management. His last assignment was with Centrum Broking Pvt. Ltd., as an Equity Research Analyst. Prior to that, he was with J P Morgan India Pvt. Ltd as an Investment Banking – Associate. Mr. Shetty has also worked with Middle East Brokerage Company, Oman & First Global Stock Broking Pvt. Ltd. as an equity research analyst. Aged 36, Mr. Shetty is a B. Tech by qualification and has done his Masters in Business Administration (Finance).


Mirae Asset: The Group

20

Building on principlesMirae Asset Financial Group is an independent financial organization engaged in many fields of finance

which include asset management, investment banking, and life insurance. range of services and products. Based on our full range of services and products, we aim to become a true leader in the world’s capital market through the jurisdiction in which we always operate: by “Building on principles”.


Emerging Market Experts

21

One of the world’s largest investors in emerging market equitiesWe have been recognized as one the leaders in emerging market equities via various publications and

surveys. In IPE’s (Investments Pensions Europe) “Investing in Emerging Market Equities” Survey, Mirae Asset marked no.1 (2008) and no.2 (2009, 2010) in terms of size of assets invested into emerging market equities.


Disclaimer

Statutory Details: Trustee: Mirae Asset Trustee Company Private Limited; Investment Manager: Mirae Asset Global Investments (India) Private Limited (AMC); Sponsor: Mirae Asset Global Investments Company Limited.Mirae Asset India-China Consumption Fund (An Open ended Equity Oriented Scheme) - Investment Objective : The investment objective of the scheme is to generate long term capital appreciation through an actively managed portfolio investing in equity and equity related securities of companies that are likely to benefit either directly or indirectly from consumption led demand in India/China. The Scheme does not guarantee or assure any returns. Load Structure: Entry Load: Nil. In terms of SEBI circular no. SEBI/IMD/CIR No.4/ 168230/09 dated June 30, 2009, no entry load will be charged by the Scheme to the investor effective August 1, 2009. Upfront commission shall be paid directly by the investor to the AMFI registered Distributors based on the investors' assessment of various factors including the service rendered by the distributor. Exit Load: Redemption within 1 year (365 days) from the date of allotment (Including SIP/STP/SWP) - 1.00%. Redemption after 1 year (365 days) from the date of allotment - NIL. Asset Allocation: (1) Indian Equities and Equity Related Securities of companies that are likely to benefit either directly or indirectly from consumption led demand: 65%-90% (2) Chinese Equities and Equity Related Securities of companies that are likely to benefit either directly or indirectly from consumption led demand: 0%-35%; Money market instruments / debt securities Instruments and/or units of debt/liquid schemes of domestic Mutual Funds : 0%-25%.Terms of Issue: The units are available at the face value of Rs.10/- per unit during the New Fund Offer Period. The AMC will calculate and disclose the first NAV not later than 10 days from the closure of New Fund Offer Period. Subsequently, the NAV will be calculated at the close of every working day and shall be published in two daily newspapers and on the AMC/AMFI website. Risk Factors: Mutual fund investments are subject to market risks and there is no assurance or guarantee that the objectives of the scheme will be achieved. As with any investment in securities, the Net Asset Value (NAV) of the units issued under the Schemes can go up or down depending on the factors and forces affecting the capital markets. Investments in mutual funds are prone to risks of fluctuation in NAVs, uncertainty of dividend distributions etc. Past performance of the Sponsor / AMC / Mutual Fund / Trustee does not guarantee the future performance of the Schemes of Mirae Asset Mutual Fund. The sponsors are not liable or responsible for any loss resulting from the operation of the fund beyond the initial contribution made by them of an aggregate amount of Rupees One Lakh towards setting up of the fund. The Scheme should have a minimum of 20 investors and no single investor should account for more than 25% of the corpus of such scheme/plan(s). In case of non-fulfillment with either of the above two conditions in a three months time period or the end of succeeding calendar quarter, whichever is earlier, from the close of the New Fund Offer (NFO) or on an ongoing basis for each calendar quarter, the schemes /plans shall follow the necessary guidelines as prescribed by SEBI in this regard. Mirae Asset India-China Consumption Fund is only the name of the scheme and does not in any manner indicate either the quality of the scheme or its future prospects or returns. Investors in the scheme are not being offered any guaranteed / indicative/ assured returns. Please see "Risk Factors", "Scheme Specific Risk Factors and Special Consideration" and "Right to limit redemptions" in the Scheme Information Document (SID). Please read the Scheme Information Document (SID) & Statement of Additional Information (SAI) carefully before investing. A copy of SAI / SID/ Key Information Memorandum cum Application form will be available at AMC offices/AMC web-site www.miraeassetmf.co.in / Investor Service Centre / Distributors on request.

mirae asset india-china consumption fund an open ended equity oriented scheme

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