Reliance Asset Management (Malaysia) Sdn . Bhd. ( RAMMy )

Reliance Asset Management (Malaysia) Sdn. Bhd. (RAMMy)

Reliance Global Investment StrategyOctober 2011

Confidential Slide Confidential Slide 2

1. Who are RAMMy, Reliance Group, Investment Team?

2. How do we do our Shariah Compliance

3. What is our philosophy?

4. How do we invest?

5. Why a global Shariah strategy?

Outline


Net worth in excess of US$ 2 billion Market Capitalization of US$ 3.2 billion

Manages AUM worth US$ 23 billion Investment Manager for Reliance Mutual Funds

Wholly owned subsidiary of RCAM, India Capital Market Services License (CMSL) Regulated by The Securities Commission Malaysia

Reliance Capital limited (RCL)*

Reliance Capital Asset Management Limited (RCAM, India)**

Reliance Asset Management Malaysia Sdn Bhd – “RAMMy”

Net worth of US$ 19 billion Market Capitalization of US$ 18.3 billion

Reliance Group^

• ^Source: www.relianceadagroup.com, March 2011

• *Source: www.reliancecapital.co.in, June 2011• **Source: www.amfiindia.com, June 2011

“A new Islamic Asset Management business”

Who are We?

http://www.relianceadagroup.com/

http://www.reliancecapital.co.in/

http://www.amfiindia.com/


Ian Lancaster, ASIP MBAPreviously manager of the top performing Norwich Income Opportunities OEIC, and founder manager of the first UK specific Shariah Unit Trust. Distinction MBA Dissertation on quantitative investment, Imperial College London. 20 years investment experience with top institutions such as Axa Assurance, General Accident, Aviva.

Paul Bethell, CFA

Quantitative investment analyst with over 10 years experience. Previously Head of Quantitative strategy at Insinger De Beaufort.

Cheng Horng Wong

Distinction graduate of Cass business school. Honours graduate in Actuarial Science.

The Global Equity Investment Team comprises:

Who are We?


Investment universe drawn from the S&P Developed BMI Shariah Index.

Sector-Based Screens - Business activities related to the following are excluded, Advertising and Media (newspapers are allowed, sub-industries are analyzed individually), Alcohol, Financials, Gambling, Pork, Adult Entertainment, Tobacco and Trading of gold and silver as cash on deferred basis.

Accounting-Based Screens - Companies are examined for compliance in financial ratios, as certain ratios violate Shariah compliance measurements. Leverage Compliance – Debt / Market Value of Equity (36 month average) < 33 %; Cash Compliance – Accounts Receivables / Market value of Equity (36 month average)

< 49 %; (Cash + Interest bearing Securities) / Market value of Equity (36 month average) <33%;

Revenue Share from Non-Compliant Activities - (Non-Permissible Income other than Interest Income) / Revenue < 5%

Shariah Advisors – IBFIM.

How does Shariah compliance work?


Dividend Purification - The proportion of a company’s Haram profitability is calculated by S&P. Dividends, when received, are stripped of this Haram profitability and proceeds are channelled to charity.

Treatment of cash balances - The Fund deposits unutilised cash into an Islamic money market account as the first choice. If an Islamic account is not available, the monies will be deposited in a non-interest bearing account. The Fund cannot go overdrawn or use financial leverage.

8

How does Shariah compliance work?


Emotion interferes with the human decision making process.

Behavioural Biases are numerous and universal.

Pricing anomalies offer profit potential.

1) We believe that markets are not fully efficient

I’d better bank my

profit now...

I’ll hold on, the shares

should recover...

I’ve got a hunch

about this one...

Stock X is Hot, I’d

better get on board...

My 15-Year DCF model says BUY...Loss Aversion

Regret Aversion

OverconfidenceHerd Behaviour Trend Extrapolation

Overconfidence

Examples of common ‘Cognitive Errors’

What is our investment philosophy?


1) Academic Research – A categorization of Biases

Memory Statistical Confidence Adjustment Presentation SituationHindsightFishhoff & Beth, 1975

Base RateTversky & Kahneman, 1974

CompletenessHogarth, 1987

Anchoring & AdjustmentBazerman, 1998

FramingHogarth, 1987

AttenuationRemus & Kottermann, 1986

ImaginabilityTversky & Kahneman, 1974

ChanceTversky & Kahneman, 1974

ControlLanger, 1975

ConservatismPeterson, Schneider & Miller, 1965

LinearRemus & Kottermann, 1986

ComplexityHogarth, 1987

RecallSage, 1981Hogarth, 1987

ConjunctionCohen et.al, 1972

ConfirmationBazerman, 1987Sage, 1981

ReferenceTversky & Kahneman, 1974

ModeMintzberg, 1973Vessey, 1984

EscalationBazerman, 1988Brockner et al, 1982

SearchBazerman, 1998

CorrelationBazerman, 1988

DesireSchwenk, 1988

RegressionBazerman, 1998

OrderRonen, 1973

HabitHogarth, 1987

SimilarityHogarth, 1987

SubsetTversky & Kahneman, 1983

OverconfidenceOskamp, 1965Keren, 1997

ScaleRicketts, 1990

InconsistencyBowman, 1963Hogarth, 1987

TestimonyHogarth, 1987Schwenk, 1998

SampleSage, 1981Tversky & Kahneman, 1974

SuccessSage, 1981Hogarth, 1987

RuleHogarth, 1987

Source: Arnott , 1998: “A Taxonomy of Decision Biases”



Systematic investment strategies avoid emotion and focus on the fundamentals.

Stock analysis ‘by numbers’ can be tailored to specific sectors and regions. Strategies can be designed to dynamically adapt to the macro-economic climate.

2) Systematic investors can overcome behavioural biases

Is the stock cheap or

expensive vs. Peers?

Are price trends & Earnings Revisions positive?

Is the balance sheet strong,

are shareholder returns high?

Momentum

Value Quality

Key ‘Fundamental’ questions, that can best be answered by a ‘Quantitative’ process.

Which of these is most

important right now?

Style/Timing



3) Systematic investment strategies do work…

For illustrative purposes only - Backtest using RAMMy multi-factor definitions on simulated Global Developed Shariah compliant universe, 50 stock portfolios, rebalanced monthly, returns shown net of transaction costs (120 bps ‘round trip’).

Source: Reliance Asset Management (Malaysia) Sdn Bhd, 7 Jan 2011

-

200

400

600

800

1,000

1,200

Global Shariah Value, Momentum, Profitability Portfolios

Benchmark Momentum Value Quality



4) …But they must adapt to the macro-economic climate

For illustrative purposes onlyInvestors will express a preference for different types of company (and therefore factors) as the macro-economic climate evolves.


-40%

-20%

0%

20%

40%

60%

80%

Global Shariah Portfolios 12m Rolling Relative Return

Momentum Value Quality



5) Systematic investment strategies do work…

For illustrative purposes only - Backtest using RAMMy multi-factor definitions on simulated Global Developed Shariah compliant universe, 50 stock portfolios, rebalanced monthly, returns shown net of transaction costs (120 bps ‘round trip’).


-200 400 600 800

1,000 1,200 1,400 1,600 1,800

Global Shariah Value, Momentum, Profitability Portfolios

Benchmark Momentum Value Quality Cognition



“Cognition” - A Dynamic Multi-Factor Model

Factor Analysis Dynamic Weighting

Portfolio Optimization

Qualitative Oversight

Factor Analysis identifies which fundamental factors are working best for each sector by economic region (Canada, US, UK, Continental Europe, Japan, Asia ex-Japan).

Dynamic Weights tilt the model towards the most effective investment ‘styles’.

Stock rankings are translated into portfolio allocations using optimization software, ensuring effective diversification across sectors and countries.

Qualitative oversight at every stage of the process to achieve optimal results.

How do we invest?


For illustrative purposes only; Source: Standard & Poor’s, Reliance Asset Management (Malaysia) Sdn Bhd, 7 Jan 2011Corporate office : Suite 5-7, Level 5, Wisma UOA II, 21 Jalan Pinang, Kuala Lumpur 50450, Malaysia

Latest Style Components

12-Month Style Trend

Current Style Allocation

Style Allocation History

Valuation Actual Relative Weight12m Forward P/E 14.1 74% 27%Historic P/E 15.2 88% 0%12m Forward Dividend Yield 2.6% 82% 7%Historic EV/EBITDA 8.9 66% 9%EV / Sales 2.4 19% 22%Cash Flow /EV 8.6% 64% 14%Price / Book 4.8 21% 21%

100%

Growth Actual Relative WeightEPS Growth 3 Years -19.3% 60% 0%BVPS Growth 3 Years 10.0% 50% 20%Wtd Earnings Momentum 1 -0.7% 27% 40%Wtd Earnings Momentum 2 -1.4% 25% 40%

100%

Momentum Actual Relative WeightPrice Momentum (RAMMy) 26.0% 14% 36%Price Momentum (3 months) -0.5% 6% 0%Price Momentum (6 months) 9.3% 11% 2%Price Momentum (12 months) 4.4% 15% 46%Price Momentum (18 months) 43.6% 34% 16%

100%

Profitability Actual Relative WeightReturn on Equity 33% 94% 46%Cash Return on Equity 40% 85% 0%Return on Invested Capital 24% 93% 23%Gross Margin 49% 89% 32%

100%

Volatility Actual Relative WeightPrice Volatility 31% 47% 100%

Piotroski Actual Relative ActualPiotroski 6.0 70% 100%

57%

21%13%

99%

70%

47%

0%

20%

40%

60%

80%

100%

Perc

entil

e Ra

nk

-20%-10%

0%10%20%30%

% W

gt -E

qual

Wgt

Profitability41%

Growth 24%

Value17%

Piotroski12%

Volatility6%

Momentum0%

0%

25%

50%

75%

100%

Jan-10 Mar-10 May-10 Jul-10 Sep-10 Nov-10

Rela

tive

% R

ank

Cognition Value GrowthMomentum Profitability PiotroskiVolatility

0% 20% 40% 60%

Value %

Growth %

Momentum %

Profitability %

Piotroski %

Volatility %

Jan-10 Sep-10 Dec-10

3M CO COMUnited States , Industrials Index MCap ($m) 61,692 83%

How do we invest?


Portfolio Construction

Currency exposures ± 1% against benchmark (CAN, USD, GBP, EURO, JPY) Stock exposures ≤ 1.5% against benchmark GICS Sectors ± 15% (relative) Tracking Error limit <6%

Turnover Target ≤ 20% per month (Buys + Sells)

Monthly rebalancing (Monday following 3rd Friday of each month)

Benchmark is the S&P Developed BMI Shariah Index

How do we invest?


Current Portfolio (as at 30 Sept 2011) for illustrative purposes only

Top 10 Portfolio Holdings

102 stocks

Benchmark is the S&P Developed BMI Shariah Index

Source: Reliance Asset Management (Malaysia) Sdn Bhd, 30 Sept 2011

How do we invest?

Security % Country SectorChevron Corp 2.8% United States EnergyNestle Sa Reg 2.8% Switzerland Consumer StaplesAstrazeneca Plc 2.1% United Kingdom Health CareConocophillips 1.9% United States EnergyEli Lilly + Co 1.8% United States Health CareBristol Myers Squibb Co 1.8% United States Health CareEmc Corp/Mass 1.7% United States Information TechnologyIntuit Inc 1.6% United States Information TechnologyDollar Tree Inc 1.6% United States Consumer DiscretionaryNihon Kohden Corp 1.5% Japan Health CareTotal 19.5%Total Number of Holdings 102

Source : Reliance Asset Management (M) Sdn BhdDated as at 30 Sep 2011




Current Portfolio (as at 30 Sept 2011) for illustrative purposes only

Sector Weights Region Weights

Source: Reliance Asset Management (Malaysia) Sdn Bhd, 30 Sept 2011

How do we invest?


Source: Bloomberg, Reliance Asset Management (Malaysia) Sdn Bhd, 27 Sept 2011

How are we performing?NAV Performance (as at 27 Sept 2011)

for illustrative purposes only


Source: Bloomberg, Reliance Asset Management (Malaysia) Sdn Bhd, 27 Sept 2011

How are we performing? for illustrative purposes only


Source: Lipper, Top 20/41 Shariah Funds (including Index Trackers) ,13 Sept 2011

How are we performing? for illustrative purposes only


Source: Bloomberg, RAMMy, Performance attribution is gross of management fees and transaction costs and using closing (not execution) prices , Data as at: 3 Oct 2011

How are we performing?Excess Returns have been generated from Good Stock Selection

for illustrative purposes only

WSF RGSGF has added value in all Sectors before costs.

Negative cash attribution due to fund launch during rising market.

‘Currency’ and ‘Allocation’ effects minimal at the portfolio level.

‘Selection’ effect has therefore been the dominant driver of excess returns.


Source: Standard & Poor’s Data as at 30 Sept 2011

Since inception in Nov 2007 to Sept 2011, the S&P Developed BMI Shariah Total Return USD Index has outperformed it’s conventional counterpart by 8.9%.

Shariah vs. Conventional Total Returns Shariah - Conventional Sector Weights

Why a global Shariah strategy?


The performance of Shariah and Conventional indices has been similar over the long-run. Valuations also remain supportive for both equity families.

Source: Standard & Poor’s, Reliance Asset Management (Malaysia) Sdn Bhd, Data as at: 30 Sept 2011

Why a global Shariah strategy?... Why Not?

Dec-90

Aug-91

Mar-92

Oct-92

May-93

Dec-93

Jul-9

4

Feb-95

Sep-95

Apr-96

Nov-96

Jun-9

7

Jan-9

8

Aug-98

Mar-99

Oct-99

May-00

Dec-00

Jul-0

1

Feb-02

Sep-02

Apr-03

Nov-03

Jun-0

4

Jan-0

5

Aug-05

Mar-06

Oct-06

May-07

Dec-07

Jul-0

8

Feb-09

Sep-09

40

140

240

340

440

540

640

Conventional Shariah

ActualSimulated


12 year strategy backtest performance

Global Developed S&P Shariah compliant universe (simulated prior to Nov 2007), rebalanced monthly, returns shown net of transaction costs (50 bps ‘round trip’).

Compound Annual Return of 15.8%, Annualised Relative Outperformance of 11.3%

-60%

-40%

-20%

0%

20%

40%

60%

1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

Portfolio Benchmark

Source: Reliance Asset Management (Malaysia) Sdn Bhd, Data to end Aug 2010

0102030405060708090

100

Benchmark Portfolio

Why a global Shariah strategy?for illustrative purposes only


Markets are not efficient - systematic strategies can (and do) outperform.

Factor models must by dynamic and reflect both local and sector trends.

RAMMy investment team apply experience of fundamental techniques in a disciplined manner.

Cognition is a transparent investment process.

Simulation of the Global Shariah Strategy generated Compound Annual Returns of 17.9% and annualised relative outperformance of 11.5%*

Source: Reliance Asset Management (Malaysia) Sdn Bhd, 31 Aug 2010

Summary


Disclaimer StatementThese are some of the major risks of investments a potential investor should consider carefully and the Global Investment Strategy is not intended as a complete investment programme. The risks described below are not exhaustive.

Investment risk (price may go down as well as up); Stock specific risk (irregular fluctuation of value of a stock may affect the portfolio); Sector risk (like business cycle dynamics, key sector earning's driver trend, consumer demand change, government policies or regulatory changes); Country risk (change in country's economic fundamentals, social and political stability, law and regulations, foreign investment policies); Currency risk (gains/losses arising from movement of foreign currencies against portfolio's base currency); Liquidity risk (ease/difficulty a security can be sold at or near its fair value depending on volume traded in the market); Risk of Shariah non-compliance (securities subject to re-designation as Shariah non-compliant securities which may affect the portfolio value)

Conflicts of interest: -

i) Management - Fund Manager provides management services to other clients. The investment strategies employed for other investment funds could conflict with the strategies employed in managing Global Investment Strategy portfolio. This may affect the prices and availability of the investments in which the Global Investment Strategy portfolio invests. RAMMy has policies in place where participation in investment opportunities will be allocated on an equitable basis, taking into account such factors as the relative amounts of capital available for new investments, relative exposure to short-term market trends, and the respective investment policies of the Global Investment Strategy portfolio and other investment portfolios.

ii) RAMMy, Custodian, Administrator, Shariah Advisor - RAMMy, its officers, employees or associates, and the Custodian, Administrator and the Shariah Advisor may from time to time provide services to, or be involved with, other investment portfolios established by parties other than RAMMy which may have similar objectives to those of the Global Investment Strategy portfolio. As such, it is possible that any of them may, in the course of business, have potential conflicts of interest with the Global Investment Strategy portfolio.

However, the Custodian, Administrator and Shariah Advisor will, at all times, uphold its obligation to act in the best interests of the Global Investment Strategy portfolio and RAMMy will ensure that all such potential conflicts of interest are resolved fairly and in the interests of investors/clients. In addition, any of the service providers (including RAMMy) may deal, as principal or agent, with Global Investment Strategy portfolio, provided that such dealings are on normal commercial terms negotiated on an arm's length basis.


Disclaimer StatementThis presentation has been prepared by Reliance Asset Management (Malaysia) Sdn Bhd (“RAMMy”) and is solely for information only. It may not be copied, published, circulated, reproduced or distributed in whole or part to any person without the prior written consent of RAMMy. In preparing this presentation, RAMMy has relied upon and assumed the accuracy and completeness of all information available from public sources or which was otherwise reviewed by RAMMy. Accordingly, whilst we have taken all reasonable care to ensure that the information contained in this presentation is not untrue or misleading at the time of publication, we cannot guarantee its accuracy or completeness and make no representation or warranty (whether express or implied) and accept no responsibility or liability for its accuracy or completeness. You should not act on the information contained in this presentation without first independently verifying its contents.

Any opinion, management forecast or estimate contained in this presentation is based on information available as at the date of this presentation and reflects prevailing conditions and our views as of the date of this presentation, all of which are subject to change at any time without notice. Such opinions, forecasts and estimates as well as the information contained herein relating to the historical performance of various indices is for information only and is not indicative of the future or likely performance of an investment portfolio and should not be construed as such. RAMMy and its related and affiliated corporations together with their respective directors and officers may have or may take positions in the investments mentioned in this presentation and may also perform or seek to perform broking and other investment services for the corporations whose securities are mentioned in this presentation as well as other parties. This presentation is not an offer or solicitation by anyone in any jurisdictions or to any person to whom or to which it is unlawful to make such an offer or solicitation.

The historical performances presented in the slides are not indicative of the future or likely performance of an investment portfolio and should not be construed as being indicative of or otherwise used as a proxy for future or likely performance of the investment portfolio. The price of units and distributions payable, if any, may go down as well as up.

Thank youReliance Asset Management (Malaysia) Sdn. Bhd.Suite 5 – 7, Level 5, Wisma UOA II21 Jalan Pinang50450 Kuala LumpurMalaysia+60 12 953 1300www.relianceadag.com www.reliancecapital.co.in

http://www.relianceadag.com/

Reliance Asset Management (Malaysia) Sdn . Bhd. ( RAMMy )

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