China will dominate the future global economy. Don’t get left behind….

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Never again get locked out from access to China’s treasures

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Introducing

The Greater China Fund

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Greater China Fund Contents
I. II. I. Fund Objective & Features Case for Greater China (China, Hong Kong & Taiwan) Greater China Fund Investment Strategy

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I) Fund Objectives & Features

Greater China Equity Fund Objective
The Fund aims to achieve

to long term capital growth • primarily through investment in a portfolio of equity securities with exposure to Greater China region: the People’s Republic of China, Hong
Kong & Taiwan.

• medium

It is a feeder

fund investing at least 95% of its NAV in the Schroder ISF Greater China (a Luxembourg-domiciled fund) which invests in equity
securities of People’s Republic of China, Hong Kong and Taiwan companies. The Fund will also maintain up to a maximum of 5% of its NAV in liquid assets.

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Schroder ISF Greater China: Fund Performance since Fund Inception (12/5/97 to 30/4/0
Schroder ISF Gtr China A Acc (OS) 77.9% MSCI Golden Dragon USD* (NX) 7.0%
190
90

175

75

160
P r i c e I n d e x e d

60

145

45

130

30

115

15

100

0

P e r c e n t C h a n g e

85

-15

70

-30

55

-45

40

-60

25 10
98
99
00
01
02
03
04
05
06
07

-75 -90

Source: S&P Micropal, USD, bid-to-bid, dividend re-Invested,

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Schroder ISF Greater China Fund Performance (as at 30/4/07)
Cumulative Performance (US$ Class)
Total Return (USD) Schroder ISF Greater China (Bid-to-Bid) MSCI Golden Dragon Index Outperformance Schroder ISF Greater China (Offer-to-bid) Annualised Return (USD) Schroder ISF Greater China (Bid-to-Bid) MSCI Golden Dragon Index Outperformance Schroder ISF Greater China (Offer-to-bid) 3m 3.4% 1.8% 1.6% -1.8% 3y 30.8% 17.8% 13.0% 28.6% 6m 25.7% 16.3% 9.4% 19.4% 5y 23.5% 11.3% 12.2% 22.2% 1y 32.5% 15.9% 16.6% 25.9% Since Inc 6.2% 0.9% 5.3% 5.7% 3y 123.7% 63.4% 60.3% 112.6%

5y Since In 186.6% 82.6% 71.1% 9.6% 115.5% 73.0% 172.5% 73.6%

Source: S&P Micropal, USD, bid-to-bid, dividend re-Invested,

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Standard & Poor’s Evaluation of Schroder ISF Greater China

Solid long-term track record over 3 & 5 Yr Pd against MSCI Golden S&P Fund Rating: AA Dragon Index & 4 Star Rating Portfolio of 60-100 stocks; Fund Mgr emphasizes management quality, valuation & industry backdrop Same Fund Mgr since 2002: Louisa Lo
Source: Schroders For Internal Use Only
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Award Winning Fund: Schroder ISF Greater China
The Edge-Lipper Singapore Fund Awards 2007
Best Fund over 5 Years - Equity Greater China

Standard & Poor’s 2006 Singapore Fund Awards
Winner of Equity China (Greater) (3 Year) Category Winner of Equity China (Greater) (5 Year) Category

The Edge-Lipper Singapore Funds Awards 2006
Best Fund over 5 Years – Equity Greater China

Standard & Poor’s 2005 Singapore Fund Awards
Winner of Equity China (Greater) (5 Year) Category

The Edge-Lipper Singapore Fund Awards 2004
Best Fund over 5 Years – Equity Greater China
Source: Schroders For Internal Use Only
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II) The Case for Greater China

Why Invest in Greater China Equities?
Greater China at a Glance

Strong economic growth + insulated from US economic slowdown The next wave of growth to come from “Urbanization” & Domestic consumption Reasonable valuation in regional context The case of investing in China is not over after Olympics Well-developed financial centre Highly efficient network of transport and communications International port should benefit as China rises Laggard growth play in 2007 & 2008 Telecom & technology sectors look favourable and continues to support growth Potential positive surprise on the political front
Source: Schroders For Internal Use Only
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China

• • •

Hong Kong

• • •

Taiwan

China

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The Case for Investing in Greater China: China (The future superpower house)
1.
i ii iii iv v vi vii

China
China has underperformed other major emerging markets Strong economic growth + insulated from US economic slowdown Domestic consumption boom driven by urbanization & rising middle income class Chinese exports are moving up the value-added chain Continued investment growth – check out the up & coming IPOs in 2007 Reasonable valuation in regional context Will China stop growing after 2008 Olympics? NO!

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1i) China Has Underperformed other Major Emerging Markets
Performance of China equity vs other BRIC markets and Emerging Markets over the past 5 years (April 2002 to April 2007) Performance of Greater China equity and its component vs Asia ex Japan in 2006
Calendar Year return in 2006 78.1% 36.3% 16.3% 35.0% 28.5%

%

36 32 28 24 20 India Brazil Russia China Emerging Markets

China led the pack in 2006 China Hong Kong Taiwan Greater China Asia ex Japan

Source: S&P Micropal, USD, bid-to-bid, dividend reinvested

China equities have under-performed broad emerging markets equities during the early equity rally during 2003-2005 2006’s stellar equity performance was due to (i) successful “A” share market reform, (ii) strong liquidity inflows to RMB denominated assets, and (iii) strong macro economic fundamentals despite US economic slowdown.
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PUZZLE: Is China a Bubble or an Economy
Supported by Strong Fundamentals & Earnings?

1ii) Strong Economic Growth + Insulated from US Economic Slowdown
Economic fundamentals such as C/A, manufacturing activities, FX reserves and retail sales are strong fuelling higher economic growth

In addition, China’s growth is contributed mainly by domestic consumption, which insulates it from expected US/global economic slowdown

Source: Merrill Lynch, March 2007; JP Morgan, 5 March 2007

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1iii) Domestic Consumption Boom Driven by Urbanization
%

45 40 35 30 25 20 15

Increasing migration from million rual to urban areas

550 500 450 400 350 300 250 200 150

China’s urban population lags behind other countries
Urban population as % of total population 110 100 90 80 70 60 50 40 30 20 Philippines Latin America Hong Kong Thailand Pakistan Indonesia Malaysia Asia ex-Jpn Singapore
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China’s urbanization rate is about 45% in 2005 vs US’ 80%

1978 1982 1986 1990 1994 1998 2002

Urban population (rhs)

Vietnam

Europe

China

World

India

Japan

Ratio of urban population
Source: NBS, Merrill Lynch, as at 31 December 2004

USA

Result:
Increasing domestic consumption trend in China

Source: UN, CEIC, Merrill Lynch calculations, as at 31 December 20

Africa

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Korea

1iii) Domestic Consumption Boom Driven by Rising Middle Income Class
Rmb 12,000
10,000 8,000 6,000 4,000 2,000 0 1992 1994 1996 1998 2000 2002 2004 Rural annual net income per capita (lhs) Urban annual disposable income per capita(lhs) Urban/rural income ratio (rhs)
Source: CEIC Data, CLSA, as at 31 December 2005

Urban dwellers enjoy higher income

Will Lead To
3.3 3.2 3.1 3.0 2.9 2.8 2.7 2.6 2.5 2.4

Urban dwellers spend more, helping retail sales & GDP to grow
RMB bn 800
700 600 500 400 300 200 100 0
1997 1999 2001 2003 2005

Retail Sales Source: CEIC, ABN AMRO, Schroders estimates, as at 30 June 2006

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1iv) Chinese Exports are Moving Up the Value-Added Chain
% total exports

Breakdown of China’s exports
More China’s exports are coming from higher margin businesses which offer stronger growth
US$ m

35 30 25 20 15 10 5 0 1994

Exports of Hi-Tech Products Surging

240,000 210,000 180,000 150,000 120,000 90,000 60,000 30,000

1996

1998

2000

2002

2004

2006

0 2000 2001 2002 2003 2004 2005

Office M ach & Autom atic Data Proce s s ing M achine s Te le com & Sound Re cording Apparatus & Eq
Te xtile s and Te xtile Artice s

High-Tech Exports
Source: CEIC, ABN AMRO, as at 31 December 2005

Source: CEIC, Datastream (IMF Trade), ABN AMBO, as at 31 May 2006

This leads to higher margins, i.e. more profits + stronger competitive edge vs other countries i.e. more profits
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1v) Continued investment growth – check out the up & coming IPOs in 2007!
Issuer
China CITIC Bank China Everbright Bank China Heavy Duty Truck China Pacific Insurance China Shipyard Group Chongqing Machinery Datong Coal Five Stars Guangxi Agriculture Hunan Prince Dairy Jiatong Tyret Jinjiang Hotel Kunming Steel Ningbo Ports Pudong Development Bank Shandong Energy Shanghai Automotive Corp Shanghai Ports Shanxi Coking Shenzhen Energy Sinotrans Shipping Western Mining Xu Fu Ji

Sector
Financial Financial Automotive Financial Industrial Industrial Energy Retail Agriculture Food & Beverage Auto parts Hotel Steel Transportation Financial Energy Automotive Transportation Energy Energy Transportation Basic Material Retail

Size (US$m) Timing
2,000 1,000 500 1,000 600 300 300 100 300 200 400 300 200 300 1,000 300 2,000 750 1,000 500 550 400 100 2007 2007 2007 2007 2007 2007 2007 2007 2007 2007 2007 2007 2007 2007 2007 2007 2007 2007 2007 2007 2007 2007 2007

At least US$ 14 billion worth of exciting IPO in 2007

Strong IPO pipeline is positive for growth of market despite the impact on liquidity in the short term. Increasing access to capital and greater scrutiny of international investors will lead to better quality management.
Remarks: For illustration purposes only. It does not represent any recommendation to invest in the above-mentioned securities. *As at October 2006

Total

14,110

Source: Schroders For Internal Use Only
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1vi) Reasonable Valuation in Regional Context
CHINA
2006E Consumer Discretionary Consumer Staples Energy Financials Health Care Industrials Information Technology Materials Telecommunication Utilities
18.7 15.6 10.2 20.4 NA 14.8 15.8 12.0 18.5 14.5

INDIA
2006E
20.8 26.0 15.1 24.9 24.7 22.4 32.7 11.8 34.2 13.1

ASIA ex JAPAN
2007E
17.5 21.2 14.3 20.4 21.3 19.4 25.2 10.9 22.4 13.0

2007E
14.9 12.5 10.0 16.5 NA 15.2 16.4 11.3 16.2 12.7

2006E
17.6 19.7 10.9 16.2 24.3 16.2 17.4 10.5 15.1 13.7

2007E
14.2 17.4 10.6 15.1 21.5 15.6 14.2 9.8 14.3 12.8

MSCI Total

15.1

13.9

21.2

18.5

15.1

13.8

Source: IBES, as at 31 December 2006

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1vii) Will China Stop Growing after 2008 Olympics? NO!
Beijing expects to spend almost USD 40 billion on new stadiums, subways and a new airport terminal. This is more than 3x Athen’s estimated USD 12 billion infrastructure tab for the 2004 Olympics.

Shanghai World Expo 2010: China will also spend billions of USD on the World Expo 2010. 200 countries & organizations will participate this major event called “Economic Olympics”. It is likely to generate the largest number of visitors in the history of the world’s fairs (more than 70 million!)

All these key events will bring about dramatic change to airports, roads, water systems and other public work projects. We expect these massive projects will help China’s economy continue its double-digit growth for at least the next 4 years, not just in 2007 and 2008.
Source: Commerzbank, Schroders For Internal Use Only
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1vii) Will China Stop Growing after 2008 Olympics? NO!
Economy Size – 2005 (Index US = 100)
100

Economy Size – 2050 (Index US = 100)
100

Developed Markets Emerging Markets

Developed Markets Emerging Markets

a USA Jap

n

y man China Ger

a UK France Italy Spain anad India C

n y USAJapa a man Chin Ger

UK France

a p a in Italy S Canad

I ndi

a

Source: PriceWaterhouseCoopers

Economic wealth is shifting to countries like China & India
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1vii) Will China Stop Growing after 2008 Olympics? NO!
Learning from the Korea experience
% Change, from ’82 for KR, ’02 for CN

800 700 600 500 400 300 200 100 0 -100 1 13 25 37 49 61 73 85 97 109 121
Month

GNI/capita US$ 1975 to 1986 $602 to $2,643

KOSPI growth % * 150% 438%

1987 to 1994 $2,643 to $9,459

GNI/capita 2004 US$

China

$1,500

Kospi

HS China

MSCI China

Source: CEIC, Macquarie Research, as at 31 January 2007

China has a long way to go!
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Source: World Bank, World Development Indicators Database,as at 30 April 2006

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Hong Kong

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The Case for Investing in Greater China: Hong Kong (Riding on China)
2.
i ii iii iii

Hong Kong
Platform to raise capital for Chinese companies Hong Kong and China should be considered as one market as the close proximity will complement each other’s success Hong Kong is also the financial hub for North Asia which is the key beneficiary of the opening up of financial markets in Taiwan, China and South Korea Valuations still reasonableii

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Taiwan

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The Case for Investing in Greater China: Taiwan (The Laggard & Tech Play)
3.
i ii iii iv

Taiwan
Laggard growth play in 2007 & 2008 Telecom & technology sectors look favorable and continues to support growth Growing private equity interest in Taiwan Potential positive surprise on the political front

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3i) Laggard Growth Play for 2007 & 2008
Taiwan’s economic growth has lagged behind rest of Asia. It is starting to play catch up with up to 5.5% expected GDP growth in 2008

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3ii) Telecom & Tech Sectors Look Favourable and Continues to Support Growth
Capex Discipline Likely to Boost Tech ROE in 2006
20,000 15,000 10,000
(x)

Relative P/B Also Near Bottom of Historical Range

4

3.5 3.0 2.5 2.0

0

6

2 5,000

10 Year average = 1.5x

8 0 -5,000 1998199920002001 20022003200420052006
Capex/sales NJA Tech FCF(rhs) NJA Tech ROE Source: CEIC, IBES, Credit Suisse

1.5 1.0 0.5 1996

4

0

Current P/B = 1.1x
1998 2000 2002 2004

2006

PB: IT relative to Asia-Pacific ex-Japan
Source: MSCI, Credit Suisse

Tech companies in Asia in general are enjoying rising earnings and cash flow due to higher sales and better capex management. With valuations at the low end of historic ranges, we continue to find the sector attractive and funds retain an overweight position.
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3ii) Telecom & Tech Sectors Look Favourable: Taiwan is Tech Centric
Industry Mainstays
A. Semiconductor manufacturing B. DRAM (memory chips), personal computer, C. Handphone component, D. Liquid Crystal Display (LCD) panel players

Industry Drivers
A. Microsoft Vista Launch B. Game Consoles: Nintendo, PS3, X-Box C. Outsourcing Trend for Semiconductors & Handphone components D. LCD winning market share from Plasma

Manufacturing mostly in low cost China Enabling Taiwan to concentrate on Tech Innovation & Research
Source: CIMB-Principal For Internal Use Only
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3iii) Growing Private Equity Interest in Taiwan
Taiwan’s leading technologies, competitive manufacturing abilities as well as low interest rate environment is attracting overseas investors This implies Taiwanese companies are attractively valued + stocks are in high demand

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3iv) Potential Positive Surprise on the Political Front
Presidential Elections in March 2008
President Chen under pressure on alleged corruption charges Nationalist party more willing to deal with Beijing unlike incumbent Democratic Progressive Party Catalyst for change in gov’t leading to potential improvement in China relations

Stock market will do well if cross-strait relations improve Market P/E is 13x FY07
Source: CIMB-Principal For Internal Use Only
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Investors’ Dream: Growth at the Right Price

Strong Growth at the Right Price
Strong expected growth in 2007 Valuation is not expensive

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Diversification Benefits: Low Correlations Between the 3 Greater China Markets
Correlations between the China, Hong Kong and Taiwan over the past 10 years (April 1997 to April 2007)
MSCI China MSCI Hong Kong MSCI Taiwan 0.60 0.57
Source: S&P Micropal, USD, bid-to-bid, dividend reinvested. Period: 30 April 1997 to 30 April 2007

MSCI Taiwan 0.60

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INVESTMENT PROCESS & STRATEGY

Investment Process
• Quantitative & qualitative screening

1. Screen Stock Universe

• 700 company meetings p.a. in Hong Kong, China and Taiwan • Strategic Assessment • Research Coverage List of 165 stocks • Classification Superior, Positive Transition, Negative Transition, Inferior

2. Shareholder Return

• Research by Fund Managers and Analysts

3. Valuation & Stock Grading

Management Quality Competitive Advantage Earnings Sustainability Valuation • Analysts’ Fair Value Targets & 1 to 4 Stock Grades
Source: Schroders For Internal Use Only
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Investment Process
4. Stock Selection
• Position size relative to benchmark: Shareholder Return Analyst Fair Value Target & Grade Contribution to Risk • Position size relative to benchmark: Bottom-up Positioning Macroeconomic Variables Industry-specific Variables Contribution to Risk • 50 to 80 stocks held • Client guideline compliance • PRISM risk analysis
Source: Schroders For Internal Use Only
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5. Sector & Country Overlay

6. Model Portfolio

Company Analysis: Proprietary Fundamental Research

Source: Schroders For Internal Use Only
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Greater China Fund Sell Discipline
Stock positions will be reviewed with a view to a sale when:

Company is trading at or above top of analyst’s assessment of its fair value target A more attractive investment opportunity is identified There is a change to management strategy A major sale of assets or divisions has occurred Unexpected structural change to an industry in which the company is involved

Source: Schroders For Internal Use Only
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Summary: The Schroder Advantage

Combining Superior Resources & Tools with a strong Client Focus to Deliver Sustained Outperformance
Source: Schroders For Internal Use Only
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Investment Theme in 2007: Favor Defensive & Value Stocks:
Expect momentum’s out-performance over value to end in 2007
Momentum outperformance close to 2 SD – Reversal is likely
2.0 1.5 1.0 0.5 0.0 -0.5 -1.0 -1.5 -2.0 Dec-94 Dec-96 Dec-98 Dec-00 Dec-02 Dec-04 SD Value vs Momentum Value Momentum Outperforms

Many Asian markets in our view have moved to the last stages of a bull market where hot money is chasing momentum and speculative stories, and fundamentals are increasingly ‘forgotten.’ This situation could continue for some time (probably as long as “goldilocks” remains in vogue) however we would view further rises from here in Asia as chance to profits.
Source: Citigroup Investment Research
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Our Key Investment Themes for 2007
1) Theme: Insurance (China)
- Strong potential for organic growth - China Life Insurance + Ping An

2) Theme: Telecom (Taiwan + China)
- Defensiveness in nature + high dividend yielding play - China Mobile + China Telecom + Taiwan Mobile

3) Theme: Financial Services (Hong Kong)
- Expect banks in Hong Kong to benefit from the property boom & growing affluence => Growth of the wealth management business - Bank of China Hong Kong + Hong Kong Stock Exchange

4) Theme: Shipbuilding/repair (Singapore and China)
- Ride on the growth of regional transportation business between China and North Asia. Industry is monopolistic in nature. - Cosco Corp Singapore (one of the major ship-repair companies) + Guangzhou Shipyard
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Schroder ISF Greater China Sector/Country Allocation (as at 31/3/07)

By Country

By Sector

By Share Class

Others 10% Singapore 2%

Cash 7%
Energy 4%

Others 4%

Cash 7%

Financials 25%
27%

2%

4% 17% Hong Kong Red Chips H Shares 15% Other China Equities B Shares Exposure to A shares Taiwan

China 43% Hong Kong 18%

Co nsumer Staples 4% Co nsumer Discretio nary 6% Teleco mmuni catio n services 1 4%

I.T. 20%

5% 5% 5% 20%

Singapore

Taiw an 27%

Industrials 1 6%

Source: Schroders For Internal Use Only
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Schroder ISF Greater China Top 10 Holdings (as at 31/3/07)
Holding China Mobile (Hong Kong) Ltd TSMC Ltd China Life Insurance Co Ltd Hon Hai Precision Industry Cathay Financial Holding Co Ltd China Telecom Corp Ltd BOC Hong Kong Holdings Ltd Cheung Kong Holdings Cosco Corp Singapore Ltd AAC Acoustic Technology Country China Taiwan China Taiwan Taiwan China Hong Kong Hong Kong Singapore China Sector Telecommunication Technology Financials Technology Financials Telecommunication Financials Industrials Industrials Technology % NAV 7.2 5.8 4.4 3.6 3.4 3.3 2.9 2.1 1.8 1.7

Source: Schroders For Internal Use Only
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Definition of terms
H Shares: Companies incorporated n mainland China and are listed on the Hong Kong Stock Exchange Red Chips: Companies incorporated and listed in Hong Kong with controlling Chinese shareholders A Shares: Companies incorporated in mainland China and traded in the mainland Ashare markets. Prices of A shares and quoted in RMB and currently only mainlanders and selected foreign institutional investors are allowed to trade A shares B Shares: Companies incorporated in mainland China and traded in the mainland Bshare markets (Shanghai and Shenzhen). B shares are quoted in foreign currencies.

Source: Schroders For Internal Use Only
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FUND FEES & INFORMATION

Fees & Investment
Annual Management Fee Trustee Fee Application Fee

Minimum investment of

RM1,000

1.8%

0.08%

5.5%

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Disclaimer
This document is provided to you for information purposes only and it may not be reproduced, distributed or published by any recipient for any other purpose. It should not be construed as an offer or a solicitation of an offer to purchase or subscribe. The information contained herein has been derived from sources believed to be reliable and is current as at the date of publication. No representation or warranty is made nor is there acceptance of any responsibility or liability made as to the accuracy, completeness or correctness of the information contained herein. Expressions of opinion contained herein are subject to change without notice. Persons wishing to rely upon this information should consult directly with the source of information or obtain professional advice.

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THANK YOU

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