1. Why Foreign Investors are Smarter than Indian Investors? Samir Arora Helios Capital Management December 2010

2. What is your horizon? Source: Bloomberg 2

3. 3 What is your horizon? * from 01/01/1993

4. 4 FII MutualInsurance FlowsFund Flows Flows 1994 to 19999.1 20001.5-0.2 20012.7-1.0 20020.7-0.6 20036.70.1 20048.8-0.2 200511.03.0 20068.03.5 200717.81.7 2008-12.83.5*13.6 200917.6-1.27.0 2010YTD28.9-6.31.5 Total:90.92.3 * 1.9 billion in January 2008 Indian Investors: Where the H... are you?

5. 5 Households Balance Sheet As of March 2009 US$bn % Share Physical Assets108451.2% (including gold, property & household investments in small business) Financial Assets131662.1% Currency1356.4% Deposits60028.3% Contractual savings37817.8% Claims on the Govt.1235.8% Equities803.8% Financial Liabilities-281-13.3% Trade Debt40.2% Financial Liabilities-285-13.4% Net Financial Assets103548.8% Total Assets2118100.0% Source: RBI, Morgan Stanley Research

6. FIIs systematically underweight India due to flawed Index 6

7. India has a much more attractive universe Sectoral distribution of various EM countries 7

8. Market Cap Growth Decomposition As % ofMarketImplied Global capCapEPSValuationFXnew (20 years)CAGR(real)issuance Australia2%3.8%2.1%1.0%0.0%0.7% Brazil3%7.2%4.5%0.3%1.0%1.3% China28%11.5%6.8%0.0%2.3%2.0% France3%5.7%2.2%2.6%0.0%0.9% Germany2%4.1%1.3%2.5%0.0%0.3% Hong Kong1%5.0%3.5%0.7%0.6%0.1% India5%9.2%6.4%-0.4%1.9%1.1% Italy1%6.0%1.1%4.4%0.0%0.4% Japan3%2.1%0.5%1.5%0.0%0.1% Korea2%5.5%3.0%1.3%0.7%0.5% Mexico1%7.3%4.3%-0.1%1.0%2.0% Russia4%10.2%3.6%2.4%1.6%2.2% Singapore1%4.1%3.0%0.3%0.3%0.4% Spain1%3.2%0.6%2.3%0.0%0.3% Switzerland1%2.8%1.8%0.8%0.0%0.1% Taiwan1%5.0%3.0%0.5%0.7%0.7% United Kingdom3%3.7%2.2%1.3%0.0%0.2% USA23%4.6%3.0%1.3%0.0%0.2% India: 3 rd biggest market in the world by 2030 Source: Goldman Sachs Global ECS Report, Sep 2010 India’s seductive growth prospects 8

9. 9 Demographics alone may contribute about 4% of annual GDP growth India is likely to provide the largest increase to global labor force – estimated an additional 110 m by 2020 Key trends driving the labor force are: urbanization, more women, large increase in the 30-49 age group. Age structure is favorable to flows into equities and bonds, and less favorable to bank deposits Spending on services such as healthcare and education may increase 5-fold Manufacturing sector has the potential to create the necessary jobs due to various factors Indians are missing their own story Demographics: Powerful winds to take India higher Source: Goldman Sachs, Global Economics Paper No: 201, July 2010

10. Indian Market: More up than down SENSEX RETURN (%) Positive Years: 21 (66%) Negative Years: 11 (34%) 2011 YTD 12 2003-12200820 2002-4200716 2001-28200516201081 1999-4199816200674 1997019963200483 1995-1419909200034199466 1988-221984161991501992267 2009-381987-11198226198544198979 1993-471983-3198029198135198662 Year% % % % % -30 to -60-30 to 00 to 3030 to 60>60 Percentage Total Return Range Note: Return is FY Ending. 10

11. 11 Investment Strategy: Invest in “Non Zero Sum, under penetrated” themes “NON ZERO SUM” THEME 1: “NEW” For Private Sector / Compete With Government Of India  India has allowed privatization of sectors w/o privatizing its incumbent government owned companies  Allows private sector companies to win at the cost of government owned companies due to better manpower, product, customer experience, technology, etc  Major Sectors: Infrastructure, Financials (Banking, Insurance), Healthcare, Education “NON ZERO SUM” THEME 2: Factor Cost Advantage  Capitalize on India’s “Global competitiveness”  In these sectors, Indian companies do not yet compete with each other  Major sectors: IT, IT Services, Contract Research, Auto Ancillaries, Apparel Mfr. “NON ZERO SUM” THEME 3: Demographic / Lifestyle Changes  Invest in fast growth “New for India” secular themes  Major sectors: Air conditioning, Wealth Management and Financial Products (incl Stock Exchanges), Mortgage, Retail, Tourism, Cable/Satellite TV, Leisure, Vocational Education, Gaming, Liquor, Branded goods.

12. 12 Mutual Fund Performance Total ReturnAnnualized Return Aug 03 - Sep 09 Inception - 31 st Jul 03* Fund BSE 200 360% 344% 972% 37% FundBSE 200 28.1%27.4% 38.2%4.3% Total4827% 507%33.5%14.3% * Samir Arora was the Manager of the Fund from inception in March 1996 to July 2003 * Alliance Capital sold its Funds to Birla Sun Life Mutual Fund in 2005