Sundaram Long Term Micro Cap Tax Advantage Fund Series IV: Summary

• A 10 year close ended Equity Linked Savings Scheme with 3 year lock-in

• Investment eligible for benefit under Sec 80c of Income Tax Act

• Investor can redeem at the end of 3 year lock-in period

• Fund invests in equities of companies that can be termed as micro-caps

• Micro caps are defined as companies ranked 301 and over by market capitalisation on the NSE

• As of August 2016, micro caps were those with a market capitalization of Rs 4,821 crore and lower

• Scheme opened for subscription on 27/09/2016 and will close on 20/03/2017

• Benchmark - Nifty Small Cap 100

• Fund Manager - S Krishnakumar

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Multiple Benefits: Wealth Creation & Tax Saving

Fiscal Incentives Stock Market

Save Income Tax Wealth Creation

Rs. 1.5 lakh deduction under Section

80C of the Income Tax Act, 1961

Not just an investment option for tax savings but for

wealth creation on a long term basis

Being an ELSS fund, it is better placed to pick

stocks with a long term outlook.

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+ Sundaram AMC’s proven in-house research capabilities in the Mid, Small and Microcap categories

Microcap Tax

Advantage

Under Invested, Under Researched segment offering potential for significant returns

Reasonable valuations under assumption of

revival in economic growth and improvement in

earnings.

Further easing of monetary conditions to favorably

impact Economy esp. Small & Microcap companies

Close ended nature of ELSS

enables taking a long term view

Strong Research Team experienced

in identifying ‘tomorrow’s winners’

Buy-and-Hold approach to enable alpha generation

during periods of strong economic expansion.

Why Micro Caps

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Many Mega Caps have started as Micro Caps

India, being a land of

entrepreneurs, provides

opportunities for young

people to build on their dreams

Market opportunity is small in the

starting phase and hence not

meaningful for larger players

Companies go through a

significant evolution process

(regulatory and otherwise)

which requires entrepreneurs

to be nimble footed

Over time, businesses

move from unorganized

to organized segment

(e.g., retail, multiplexes, fashion)

As these new business are

established and scaled up

meaningfully, they:

• Witness large expansion in sales and profit

• Enter the radar of institutional owners and price discovery happens

• Become valuable acquisition targets

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Category Mar-04 Mar-07 Mar-10 Mar-13 Mar-16

Largecap 8,642 21,084 37,642 39,843 55,755

Midcap 1,377 4,266 8,963 9,032 13,261

Smallcap 1,297 5,103 9,648 9,989 15,999

Microcap 466 2,960 5,903 5,291 9,786

Total Mcap 11,782 33,414 62,157 64,155 94,801

Share of Microcaps (%) 4.0 8.9 9.5 8.2 10.3

Widening Choice: Cap-curve Based Trends across NSE & BSE

* Mcap in Rs. Bn

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Source: In-house Computation

Mid and Small caps have created significant value across market cycles: Tend to outperform in upcycles

Begin End %Returns Begin End %Returns Begin End %Returns

Apr-03 Jan-08 Jan-08 Oct-13 Oct-13 Aug-16

BSE Sensex 3,168 20,873 559 20,873 21,165 1 21,165 28,123 33

BSE Midcap Index 950 9,817 933 9,817 6,107 -38 6,107 12,968 112

BSE Small Cap Index 885 13,516 1,427 13,516 5,896 -56 5,896 12,404 110

Source: Bloomberg, Sundaram Asset Management

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0

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Ap

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Jun

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8

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9

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Sensex Midcap Smallcap

Microcap Multi-Baggers across cycles

96

50 64

15

7

21

2

4

21

5

1

74

0

20

40

60

80

100

120

140

160

180

2013-2016 2008-2013 2003-2008

2x-5x 5x-7x 7x-10x >10x

Micro-caps have created significant value across market cycles

Opportunities to capture value is maximized during economic upturns - mix of large winners are noticeable as evidence of strength in economic expansion sets in

High potential for significant wealth creation as evidenced from the above

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Source: In-house Computation

Source: Bloomberg; Data as of September 12, 2016; Computation: In-house

Sectors Weights

Industrial Manufacturing 10.9

Consumer Goods 10.7

Construction 8.5

Financial Services 8.0

Automobile 6.2

Services 5.5

Healthcare Services 4.9

Textiles 4.6

IT 4.1

Metals 4.0

Chemicals 3.8

Energy 3.5

Media & Entertainment 3.4

Fertilisers & Pesticides 3.1

Cement 2.2

Telecom 1.0

Paper 0.6

Others 15.1

Share in NSE Market Cap (%) 11.1%

Micro Cap sector profile

Total Universe is 894 stocks

The total market cap of micro cap stocks is

Rs 12.2 lakh crore

Microcaps are 11.1% of the total Universe of

NSE stocks

They are diversified among sectors

Microcap Sector Profile displays Cyclical Bias

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BUSINESS

Positioning, Pricing power, Profitability, Growth, Brand strength, Capital intensity, Complexity of Business

MANAGEMENT

Past track record, management bandwidth, corporate governance

FINANCIALS

Capital Allocation, Leverage, Cash Flow generation, Return on capital

Approach to Stock Selection

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India: Macro momentum is strong

FY2014 FY2017E

GDP growth (%) 6.0% 7.8%

CPI Inflation (%) 10.0% 5.9%

CAD (% of GDP) 1.7% 1.3%

Fiscal Deficit (% of GDP) 4.5% 3.5%

10-year yield (%) 8.8% 7.4%

Currency rank* 19/24 4/24

* The currency rank relates to Dec. ’13, ’14, ’15, ’16 (expected)

Source : Bloomberg

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• Private consumption as a % of GDP is now at its highest in the last decade

• This time around, growth in India would be consumption led

• We expect pick up in consumption following implementation of 7th pay commission

Nominal private consumption highest in the last decade

Source : CMIE, Sundaram Asset Management

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50

52

54

56

58

60

62

64

66

68

FY9

5

FY9

8

FY0

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4

FY0

7

FY1

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FY1

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FY1

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Nom. Pvt. Consumption (% GDP) Real GDP (%YoY, RHS)

Consumption indicators are seeing steady demand

12

2W sales growth (%YoY HMA)

Domestic passenger vehicle sales growth (%YoY HMA) Credit card o/s growth (%YoY HMA)

Personal loan growth (%YoY HMA)

Source : CMIE, Sundaram Asset Management

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Core sector growth offers good support

Source : CMIE, Sundaram Asset Management

Steel production (%YoY HMA)

Refinery production (%YoY HMA)

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IIP Ex-Capital goods (%YoY HMA)

-1

1

2

3

4

5

6A

pr-

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Au

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3

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-5

0

5

10

15

May

-13

Sep

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Jan

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May

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Sep

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Jan

-15

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Sep

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Jan

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May

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Sep

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-5

0

5

10

15

May

-13

Sep

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Jan

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May

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Sep

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Jan

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May

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Sep

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Jan

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May

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Sep

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India Manufacturing PMI

47

48

49

50

51

52

53

54

55

56

Jun

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Sep

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De

c-1

3

Mar

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Jun

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Sep

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c-1

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Mar

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Jun

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Sep

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De

c-1

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Mar

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Jun

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Sep

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50 level India

Source : Morgan Stanley, Sundaram Asset Management

Broad market seeing increasing free cash flows

Corporate India free cash flows (%YoY)

The broad market is clearly seeing a pick-up in free cash flow generation

-10%

-8%

-6%

-4%

-2%

0%

2%

4%

6%

FY0

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BSE 500 Ex Financials

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Soft commodity prices continue to remain corporate-positive

Indexed WPI movement of Input / Output baskets

Source : CMIE, Sundaram Asset Management

• The commodity price drop has brought about a significant drop in input prices (chart above)

• Commercial bank transmission of the RBI’s rate cuts would add further cushion

• As output prices remain relatively unchanged, this has been translating into margin expansion

86

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108

Dec-1

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Sep-1

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WPI Input price WPI Output price

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Change in guard a non-issue; expect rate cuts/better transmission

2015 RBI Repo. cuts and Base rate cuts (in pps)

• The RBI has cut Repo. rates by 175bps from the start of 2015

• Banks have only transmitted, on average, 65bps of this 175bps of delivered easing

• 2016/ early 2017 is set to witness the transmission of most of the rest

• In addition, the RBI could possibly ease by another 25bps, on a good monsoon and spatial distribution

Source : Bloomberg, Sundaram Asset Management

-1.6

-1.4

-1.2

-1

-0.8

-0.6

-0.4

-0.2

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SBI

BO

B

PN

B

ICIC

I

BO

I

CA

NB

HD

FC

UB

OI

AX

IS

IDB

I

CB

OI

STA

N

CIT

I

YES

IND

US

DB

RB

I

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India, growing in a slowing world; warming up for the next leg

• Every 10 years has seen India shift up on its CAGR without fail

• We are set to enter the next decade of a lift up in growth

Source : CMIE, Sundaram Asset Management

GDP 10 year CAGR %

2.5

4.5

5.3 6.2

7.6

-5

-3

-1

1

3

5

7

9

FY6

6

FY7

1

FY7

6

FY8

1

FY8

6

FY9

1

FY9

6

FY0

1

FY0

6

FY1

1

FY1

6

GDP growth %YoY 10 year CAGR

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Nifty-Ex financials show growth

Source : Motilal Oswal, Sundaram Asset Management

• Nifty Q1 PAT at 0.3% y/y has been impacted mostly by financials

• Nifty Ex-Financials stands much higher at 2.9% y/y

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Nifty PAT growth (% y/y)

-15

-10

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Jun

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Sep

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Sep

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Jun

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NIFTY Nifty Ex-Financials

Disclaimer

Past performance may or may not be sustained in the future

General Disclaimer: This documentis issued by Sundaram Asset Management; an investment manager registered with the Securities and Exchange Board of India in

India and is produced for information purposes only. It is not a prospectus, scheme information document, offer document, offer and sol icitation, to name a few, to buy

any securities or other investment. Information and opinion contained in this documentare published for the assistance of th e recipient only; they are not to be relied

upon as authoritative or taken as a substitution for exercise of judgmentby any recipient. They are subject to change withou t any notice and not intended to provide the

sole basis of any evaluation of the instrument discussed or offer to buy. It is neither a solicitation to sell nor shall it form the basis of or be relied upon in connection with

any contract or commitment whatsoever or be taken as investment advice. The information and opinions contained in this commu nication have been obtained from

sources that Sundaram Asset Managementbelieves to be reliable; no representation or warranty, express or implied, is made th at such information is accurate or

complete and it should not be relied upon as such. Sundaram Asset Managementneither guarantees its accuracyand/or completene ss nor does it guarantee to update

the in formation from time to time. This communication is for private circulation only and for the exclusive and confidentia l use of the intended recipient(s) only. Any other

distribution, use or reproduction of this communication in its entirety or any part thereof is unauthorized and strictly pro hibited. By accepting this documentyou agree to

be bound by the foregoing limitations. This communication is for general information only without regard to specific objecti ves, financial situations and needs of any

particular person who may receive it and Sundaram Asset Managementis not soliciting any action based on this document. Sunda ram Asset Managementin the

discharge of its functions, may use any of the data presented in this documentfor its decision -making purpose and is not bound to disclose the same. Copies of the

Statement of Additional Information, Scheme Information Documentand application form with key information memorandum may be obtained from the offices of

Sundaram Mutual offices and its authorized distributors or downloadedfrom www.sundarammutual.com For scheme specific risk factors, asset allocation, load structure,

fund facts and taxation aspects please refer scheme information documents available online and at branches/Investor Service Centres; also at

www.sundarammutual.com.

Statutory: Mutual Fund: Sundaram Mutual Fund is a trust under Indian Trusts Act, 1882 Sponsors. Liability for sponsors is limited to ₹ 1 lakh. Sponsors: Sundaram

Finance.

Investment Manager: Sundaram Asset Management Company. Trustee: Sundaram Trustee Company.

Mutual Fund Investments are subject to market risks, read all scheme related documents carefully

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