greater china story

8/14/2019 greater china story

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The Greater China Story

9 April 2008


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Agenda

A) Fund Performance Update

B) Is Asia Decoupling from the US

C) ChinaD) Hong Kong

E) Taiwan

F) Investment Strategy


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Fund Performance


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High Potential Returns Comes with High Volatility

Source: Morningstar, MYR, bid-to-bid, net dividends re-invested, as at 31 March 2008

Past performance is not indicative of future performance. The value of units may go down as well as up.

Performance of the Schroder ISF Greater China Fund from 31 Dec 2004 to 31 Mar 2008

The Schroder ISF Greater China has generated strong returns since 2004

Schroder ISF Gtr China A Acc (OS) 78.79

70

85

100

115

130

145160

175

190

205

220

235

250

265

Pr ice I

ndexed

Per cent

Change

-30

-15

0

15

30

4560

75

90

105

120

135

150

165

Apr Jul Oct 06 Apr Jul Oct 07 Apr Jul Oct 08

Drawdownof 12%

Drawdown

of 12%

Drawdownof 8%

Drawdownof 16%

Drawdownof 30%


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Strong Performance Track Record Over the Past 5 Years

Source: Morningstar, MYR, bid-to-bid, net dividends re-invested, as at 31 March 2008Past performance is not indicative of future performance. The value of units may go down as well as up.

Performance of the Schroder ISF Greater China Fund from 31 Dec 2002 to 31 Mar 2008

Schroder ISF Gtr China A Acc (OS) 244.82

MSCI Golden Dragon USD* (NX) 121.76

50

100

150

200

250300

350

400

450

500

550

Pr ice

Indexed

Per cent

Change

-50

0

50

100

150200

250

300

350

400

450

04 05 06 07 08


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Is Asia Decoupling from the US?


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Asia Decoupling?

Asian leading indicators havediverged significantly vs. the G7

Source: Datastream, Morgan Stanley Research, October 2007; Note: Asia LEI includes China, India, Indonesia, Korea and TaiwanSource: Merrill Lynch estimates, November 2007

Whilst Asian exports remain heavily reliant on US and European demand, we are starting to see greater economic decoupling.

Strong Chinese, Indian and Middle Eastern growth does appear to be reducing Asias dependency on the USA.

Can Asia decouple if US consumption slows

Asian exports have so far decoupled from US demand

% YoY % YoY % YoY, 3mma

-6-4

-2

0

24

6

8

10

J a n - 8

6

J a n - 8

9

J a n - 9

2

J a n - 9

5

J a n - 9

8

J a n - 0

1

J a n - 0

4

J a n - 0

7-4

0

4

8

12

16

20

OECD G7 LEI Asia LEI (rhs)

-25

-15

-5

5

15

25

35

J a n - 9 8

J a n - 9 9

J a n - 0 0

J a n - 0 1

J a n - 0 2

J a n - 0 3

J a n - 0 4

J a n - 0 5

J a n - 0 6

J a n - 0 7

Exports to the US from Asia

Total Exports from Asia


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12

13

14

15

16

17

18

1920

98 99 00 01 02 03 04 05 06 07

USAsia ex JapanNew EU members including Russia and Turkey

Source: Eurostat to 31/12/06

%, 6 month moving average

Eurozone export share as a % of total exports

Asia Decoupling?Even Europe is now seeing sign of de-coupling


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China


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The Case for China Chinas GDP is to remain strong at 10.5% in 2008;

RMB is expected to appreciate by 12% against the USD over the next 12 months comparedto the previous forecast of 10%;

RMB appreciation of between 7% to 10% will translate in a straight bottom line earningsgrowth;

Corporate tax rate cut in China this year will boost earnings by another 6% to 7%;

At least 13% increase in earnings will come from the RMB appreciation and corporate taxcuts;

H-shares and red chips are expected to deliver returns up to 40% over the next 12 months.


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-4%

-2%

0%

2%

4%

6%

8%

10%

12%

14%

16%

96 97 98 99 00 01 02 03 04 05 06 07E

Domestic Demand Net Exports

Chinas Growth is Not Dependent on Exports Anymore

Net contribution to real GDP growth

Source: CEIC, UBS estimates, August 2007

Growth Domestic Demand is Driving ConsumptionEconomic fundamentals such as manufacturing activities, FX reserves and retail sales are strong, fuelling higheeconomic growthIn addition, Chinas growth is contributed mainly by domestic consumption , which insulates it from expectedUS/global economic slowdown


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2007 GDP 2008 GDP FiscalDeficit/GDP

(%oya) (%oya)

Baseline scenario of 20% export growth 11.4 10.5 1.1%

If export growth slows to 10% (scenario 1) 10.1 9.3 1.1%

If export growth slows to 5% (scenario 2) 9.5 8.7 1.1%

If government spending increases by 40% under scenario 1 11.3 10.5 1.5%

If government spending increases by 100% under scenario 2 11.6 10.7 2.2%

Chinas Growth is Not Dependent on Exports AnymoreA slowdown in exports has limited impact on Chinese GDP

Source: JP Morgan November 2007


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10

15

20

25

30

35

2000 2001 2002 2003 2004 2005 2006 2007F 2008F

China is in Strong Fiscal PositionChinas strong fiscal position will enable it to spend its way through any difficultperiods thereby reducing downside risks

Government debt/GDP

%

Source: CEIC, Credit Suisse estimates

Forecast


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6

8

10

12

14

16

18

Jan-01 Sep-01 May-02 Jan-03 Sep-03 May-04 Jan-05 Sep-05 May-06 Jan-07 Sep-07

Retail sales (% yoy, 3-mth mov av.)

China Has The Ability to Continue SpendingStrong Consumption Spurred By The Rising Middle Income Class in China

Strong Growth in Retail Sales

% yoy

Source: CEIC, Credit Suisse

0

200

400

600800

1,000

1,200

1,400

1,6001,800

2,000

Brazil China India Russia B RICs G6 USA

2005 2025

GS BRIC Model ProjectionsSource: Goldman Sachs, Dreaming with BRIC: the Path to 2050 (Oct 2003)

Number of people earning above $3,000 p.a.


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0

200

400

600

1900 1920 1940 1960 1980 2000

U.S. (1900 - 2000) China (1989 - 2005)

Rebased to beginning period = 100

Source: BCA Research, 2007

Car ownership (per 1,000 persons)

Middle income class can afford to spend more It is estimated that car ownership in China will exceed the US within 20 years

Source: Goldman Sachs as at Sep 2006

0

100

200

300

400

500

2000 5 10 15 20 25 30 35 40 50

China United States

Million

29

55

Per 100 peoplein 2040

Forecasts of car ownership

Strong domestic consumption fuelled by rising middle income classChina Has The Ability to Continue Spending


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10

11

12

13

14

15

16

17

18

Mar-02 Mar-03 Mar-04 Mar-05 Mar-06 Mar-07

Chinas industrial enterprises profit has been rising gradually and the improving corporate profit trend is set tocontinue in 2007

Pre-tax profit margin has been sustaining a high levels and rising. The tax cut staring in 2008 should further boostROE and profit margins

0%

1%

2%

3%

4%

5%

6%

7%

8%

Dec-99 Feb-01 Apr-02 Jun-03 Aug-04 Oct-05 Dec-060%

2%

4%

6%

8%

10%

12%

14%

16%

18%

20%

Pre-tax Margin, 3m avg (LHS) ROE (RHS)

Industrial enterprises profit

Source: CEIC, Thomson Datastream, JPMorgan

MSCI China ROE

Source: CEIC, Thomson Datastream, JPMorgan

Industrial enterprises profit is improvingChinas Tax Cut Good Sign for Increase in Corporate Earnings


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2.0 0.46.4

31.8

15.2 15.2

6.6

79.1

0

10

20

30

40

50

60

70

80

90

Brazil Russia India China1994 2005

China Has Strong Economic fundamentals

Source: World Bank, World Development Indicators Database April 2007

FDI net inflows (Balance of Payments, currentUS$ bns)

FX Reserves (US$ bns)

38.8

4.020.8

52.969.3

181.3

145

0

20

40

6080

100

120

140

160180

200

Brazil Russia India China1994 2005

795.1

China is well positioned to maintain its growth


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0

2000

4000

60008000

10000

12000

14000

16000

18000

1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022 2024

China Japan Korea India

Chinas Growth is Only in the Early Stages

Source: Alan Heston, Robert Summers and Bettina Aten, Penn World Table Version 6.2. Morgan Stanley Research Estimates for China and India for 2004-06* 2000 calendar year prices

PPP GDP / capita trajectories post US$2,000 level*

Very Strong Growth Expected Over the Next 10 to 15 years

ChinasGrowth


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Inflation hits another high, supportive for the stock market

Negative real interest rate and rising inflation

Source: CEIC Data, CLSA Asia-Pacific Markets

Chinas inflation is running too fast. That pushes real deposit rate down and causes deposits to flow into stockmarkets and real assets e.g. property.

There are inflationary risks associated with the Chinese economy but we expect more significant tighteningmeasures to address this concern post the National Party Congress this October.

0

5

10

15

20

Jan-06 Apr-06 Jul-06 Oct-06 Jan-07 Apr-07 Jul-07 Oct-07

1 Year Deposits Rate (%) CPI (%yoy) CPI Food (%yoy) PPI %YoY

%

Chinas Authorities to Remain Focussed in Tackling Inflation


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-4

-2

0

2

4

6

8

01 02 03 04 05 06 07

Nornimal 1 yr deposit rate (% pa) Real 1 yr deposit rate (% pa, after 5% int. rate tax)


Real interest rates

Source: PBoC, Credit Suisse

Despite the latest round of rate hikes, real interest rates remain in negative territory.

This is supportive for both consumption, property and the stock market over the longer term.

However, in the near future we expect the authorities to remain focused on the inflationary risks with more tightening tocome.

Real interest rates remain in negative territory


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%

Source: PBOC, NBS, BNP ParibasSource: PBOC; BNP Paribas

Growth of M1 and M2 and GDP nominalgrowth

RRR and overall reserve ratio

% yoy

The government has raised reserve requirement ratio (RRR) to 15% and applies a tighter loan quota to the banking system

6

8

10

12

14

16

18

20

2224

M a r - 0

0

M a r - 0

1

M a r - 0

2

M a r - 0

3

M a r - 0

4

M a r - 0

5

M a r - 0

6

M a r - 0

7

M1 growthM2 growth

Nominal GDP growth

4

6

8

10

12

14

16

D e c - 9

9

J u n - 0 1

D e c - 0

2

J u n - 0 4

D e c - 0

5

J u n - 0 7

RRR Banking system reserve ratio


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Hong Kong


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0.4

0.6

0.8

1.0

1.2

1.4

1.6

1.8

2.0

Jan-81 Jan-84 Jan-87 Jan-90 Jan-93 Jan-96 Jan-99 Jan-02 Jan-05

Hong Kong is Experiencing Record Levels of Excess LiquidityChinas growth, RMB revaluation has drawn funds to Hong Kong

Record levels of excess liquidity

X

Source: CEIC, JP Morgan

Hong Kongs banking sector loan/deposit ratio at record lows.

Corporate and consumers are not geared up.

Potential to re-leverage, unlike many western economies.

Avg=1.17x


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-8

-6

-4

-2

0

24

6

8

10

98 99 00 01 02 03 04 05 06 07

HK CPI 3M Deposit Rates (RHS)

Negative real rates% yoy

-30

-20

-10

0

10

20

30

40

J a n - 9

8

J a n - 9

9

J a n - 0

0

J a n - 0

1

J a n - 0

2

J a n - 0

3

J a n - 0

4

J a n - 0

5

J a n - 0

6

J a n - 0

7

Hong Kong retail sales in value%

First time in a decade

Recent acceleration

Hong KongStrong signs of growth With the HKD /USD peg in place, Hong Kong is running a negative real interest rate environment, perfect ingredientsfor asset reflation.

With record low unemployment rate and decent wage growth, domestic consumption remains robust.


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Source: HK SAR Government Rating & Valuation Department, CitiAffordability: mortgage cost / monthly incomeSource: JPMorgan

Mass residential prices since1995

0

50

100

150

200

250

J a n - 9

3

J a n - 9

5

J a n - 9

7

J a n - 9

9

J a n - 0

1

J a n - 0

3

J a n - 0

5

J a n - 0

7

Class A Residential Class B ResidentialClass C Residential Class D ResidentialClass E Residential

Luxury pricesabove previous 97 peak

More value at lower end

Another 100bp drop inmortgage rates likely in 2008

0

20

40

60

80

100

120

140

160

1 9 9 0

1 9 9 3

1 9 9 6

1 9 9 9

2 0 0 2

2 0 0 5

More affordable

Hong KongResidential property prices and affordability ratio

2 0 0 7 E

Prices of the luxuriousresidential properties havealready reached last peak levelin 1997. The mass market isnow playing catch up.

Affordability generally is stillreasonable for the massmarket.


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Grade A office rents Grade A office supply

0

1000

2000

3000

4000

5000

6000

7000

8000

1997 2000 2003 2006 2009E

Core Non-core

000 sq.ft.net

Source: Rating & Valuation Department, Savills Research & Consultancy

1997 to 2006 avg take-up

2.2 million sq.ft. p.a.

1997 to 2011avg supply

2.0 million sq.ft. p.a.

0

20

4060

80

100

120

140160

180

200

1992 1996 2000 2004 2008E

Overall: 0 to+5%

Hong KongOffice space very tight New space let very fast

Q1/1992=100

We prefer the property investors in Hong Kong.

Grade A office supply remains limited. The new supply in 2008 is mostly absorbed while office rents stay firm.


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aiwan


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0

100

200

300

400

500

600

700

Dec

02

Mar

03

Jun

03

Sep

03

Dec

03

Mar

04

Jun

04

Sep

04

Dec

04

Mar

05

Jun

05

Sep

05

Dec

05

Mar

06

Jun

06

Sep

06

Dec

06

Mar

07

Jun

07

Sep

07

Dec

07

MSCI Taiwan MSCI AC Asia ex Japan MSCI KoreaMSCI Singapore MSCI India MSCI Hong KongMSCI China

urce: Bloomberg, USD currency as of 31 Mar 2008

-7.5+207.1MSCI Singapore

-19.2+176.6MSCI HongKong

-14.1+227.7MSCI Korea

-14.2+231.9MSCI AC Asiaex Japan

-23.7+487.8MSCI China

-27.0+593.3MSCI India

MSCI Taiwan

Index YTD 2008*2003 to 2007

+5.3+92.7

Index

Date

* YTD as of 31 Mar 2008

Taiwan : Underperformer in 2003 2007Loomed by politics


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hy Taiwan is attractive in 2008

Global electronics demand remains a key to Taiwans economic growth

Cheap Valuation! Cheap Currency!

Comparison of GDP, inflation, deficits, jobs and note rates worldwide


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Global electronics demand remains a key to Taiwanseconomic growth

Source: Government Information office, Republic of China (Taiwan)

Taiwan was the worlds 16 th-largest exportingnation in 2006, with exports valued at US$224billion, representing a yoy growth of 12.9%.

The top categories of exports were: electronicproducts, optical instruments, iron and steel andarticles thereof, machinery and electricalequipment, each of which registered more thanUS$10 billion in export value .

Industrial product accounted for 99% of allproducts, which has growth for 5 consecutiveyears with an increased of 15.3% in 2006.

In 2006, Taiwan's total foreign trade registered a12% growth to reach US$426.72 billion. With

exports far outweighing imports, Taiwanrecorded its 3 rd highest annual trade surplussince 1991 at US$21.32 billion, representing a34.8% growth in 2006.


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Global electronics demand remains a key to Taiwanseconomic growth

%oya, 3mma,

Source: CEIC, JPMorgan Research, as at December 2007

Export order growth Industrial production growth

%oya, 3mma,

Exports, especially electronicsexports have continued to play animportant role in Taiwans GDPgrowth. One of the biggest risk

factors for Taiwan remains a slowdown in global electronics demand.

Overseas shipments account for about half of the GDP have beenthe major driver of the economysexpansion as Chinese demandcompensates from the USslowdown. Exports rose 18.5% asof Feb 2008 as shipments to Chinaincreased

-20

-10

0

10

20

30

Jan-00

Aug-01

Mar-03

Oct-04

May-06

Dec-07

-40

-20

0

20

40

60Overall IP Electronics

-40

-20

0

20

40

60

Jan-00

Aug-01

Mar-03

Oct-04

May-06

Dec-07

Tech

Overall


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100

105

110

115

120

125

130

135

1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008

TWD Curncy SGD Curncy

Cheap Valuation! Cheap Currency!

Source: Government Information office, Republic of China (Taiwan)

Historical PE has been flat, showing the lower PE in the Asian region. PE ratio start pickingup beginning of 2008

Taiwan dollar has advanced 5.8% this year

against the US dollar, making exports moreexpensive on global markets.

Overseas shipments account for about half of the gross domestic product have been themajor driver of the economys expansion asChinese demand compensates from the USslowdown.

We are optimism on the better growth of themarkets after the presidential election.

Taiwan dollar traded at NT$30.665 as of 10Mar 2008.

MSCI Taiwan Index PE RatioPERatio

Taiwan Dollar vs Singapore Dollar

Source: Bloomberg

CurrencyIndex

0

20

40

60

80

100

Jan 03 Jul 03 Jan 04 Jul 04 Jan 05 Jul 05 Jan 06 Jul 06 Jan 07 Jul 07 Jan 08

Average = 23x

18.1x

U S D

S t r o

n g e r


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CountryGDP

YOY%

Consumer Prices YOY%

FederalBudget% GDP

CurrentAccount% GDP

JoblessRate

10-Year Note

Nominal

10-Year NoteReal

US 2.5% 4.3% -3.6% -6.4% 4.9% 3.9% -0.5%

Euro Region 2.3% 3.2% -2.0% 0.0% 7.2% 4.0% 0.8%Japan 2.0% 0.7% -5.2% 3.6% 3.8% 1.5% 0.8%

Asia

China 11.2% 7.1% -1.3% 7.2% 4.0% 7.8% (5-yr)

Hong Kong 6.2% 3.2% 1.0% 11.4% 3.4% 3.2% 0.0%India 8.9% 5.5% -4.2% -1.5% n/a 7.7% 2.2%Indonesia 6.3% 7.4% n/a 0.3% 9.8% 8.0% (3-mo)Malaysia 6.7% 2.3% n/a 15.2% 3.1% 3.7% 1.4%

Singapore 5.4% 6.6% 6.0% 28.5% 1.6% 2.4% -4.2%South Korea 5.5% 3.9% 2.1% 2.1% 3.0% 5.3% 1.4%Taiwan 6.4% 3.0% -2.4% 4.7% 3.8% 2.4% -0.6%

Source: Bloomberg as at 25 Feb 2008

Comparison of GDP, inflation, deficits, jobs and note ratesworldwide

Strong growth + Benign Inflation + Current Account surplus + negative Real Rate


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Improving Corporate Fundamentals

Local investor participation remains low

Companies have become more shareholder friendly

Technology sector

Bottom valuation of technology stocks

Global credit woes have a minimal impact on the financial sector

Stable but dull industry outlook compensated by high dividends


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Companies have become more shareholder friendly

urce: Citigroup Investment Research, as at May 07

Cash dividends Share buybacks

The Taiwanese companies havebecome more shareholder friendly. In general, we have seenbetter capex discipline, increasecash dividend payout and lower employee stock dividend payoutsin the past few years. Manycompanies have also consideredcapital reduction (telecomcompanies) and share buybackprograms (e.g. TSMC).

0%

10%

20%

30%

40%

50%

60%

70%

80%

1 9 9 9

2 0 0 0

2 0 0 1

2 0 0 2

2 0 0 3

2 0 0 4

2 0 0 5

2 0 0 6

2 0 0 7

0%

1%

2%

3%

4%

5%

Payout ratio Dividend yield (RHS)

0

10,000

20,000

30,000

40,000

2 0 0 0

2 0 0 1

2 0 0 2

2 0 0 3

2 0 0 4

2 0 0 5

2 0 0 6

2 0 0 7

0.00%

0.10%

0.20%


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Technology sector

Apart from LCD panels and DRAMindustries, most of the technologycompanies have shown better capexdiscipline in this cycle which shouldboost RoE.

We are positive on the market

leaders where RoEs have beenincreasing.

Source: CEIC, IBES, Credit SuisseSource: MSCI, Credit Suisse

Capex discipline likely to boosttech RoE

Relative P/B also near bottom of historical range

(x)

0.0

5.0

10.0

15.0

20.0

25.0

2 0 0 0

2 0 0 1

2 0 0 2

2 0 0 3

2 0 0 4

2 0 0 5

2 0 0 6

2 0 0 7

2 0 0 8

-5,000

0

5,000

10,000

15,000

20,000

NJA Tech FCF (rhs) NJA Tech ROECapex/Sales

(%) (US$mn)

0.8

1.2

1.6

2.0

2.4

2.8

3.2

3.6

Jun 96 Jun 98 Jun 00 Jun 02 Jun 04 Jun 06 Jun 08


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Bottom valuation of technology stocks

SPIL TSMC

-20%

-10%

0%

10%

20%

30%

40%

1 Q 9 2

1 Q 9 4

1 Q 9 6

1 Q 9 8

1 Q 0 0

1 Q 0 2

1 Q 0 4

1 Q 0 6

1 Q 0 8 E

1

2

3

4

5

6

P/BV (RHS)SPIL ROESPIL OP margin

ource: Schroders, as at December 2007or illustrative purpose only, it does not represent any recommendation to invest or divest in the above-mentioned securities.lease refer to the forecast risk warning in the Important Information slide at the end of the presentation.

Trading close to trough P/B ratio,valuation has become attractiveamongst many blue chip technologystocks. Most have experiencedbetter supply discipline and havestronger financial standings.

Decent dividend yield of 5-8%should provide downside protection.

0%

10%

20%

30%

40%

50%

2 Q 9 4

2 Q 9 6

2 Q 9 8

2 Q 0 0

2 Q 0 2

2 Q 0 4

2 Q 0 6

2 Q 0 8 E

0

2

4

6

8

10

P/BV (RHS)TSMC ROETSMC OP margin


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Global credit woes have a minimal impact on the financialsector

(0.3)(2.3)0.30.4-0.4Chang Hwa

(0.2)(2.3)0.20.20.2-Taishin

(0.2)(1.4)0.20.20.00.2First

-

0.1

-

0.9

-

2.1

0.2

3.7

(NT$bn)

Other foreign,10% loss

0.1

0.6

1.3

3.5

7.0

7.6

4.6

12.6

(NT$bn)

Total pretaxloss

0.1

0.5

1.0

2.6

5.3

5.7

3.4

9.4

(NT$bn)

Total net lossCompany Higher risk,80% loss08 net profit

impact08 equity

impact

(NT$bn) (%) (%)

Shin Kong 8.9 (64.8) (8.4)

SinoPac 4.4 (35.8) (3.6)

Cathay 5.5 (15.0) (2.2)

Mega 7.0 (22.4) (2.2)

Fubon 2.6 (15.0) (1.5)

Chinatrust 1.3 (5.8) (0.8)

E.Sun 0.5 (9.3) (0.7)

Yuanta 0.1 (0.5) (0.1)

Asia financial companies generallyhave limited exposure to thesubprime related asset backsecurities. Japanese andTaiwanese insurance companiescould have a bit more exposuredue to their need for yield pick up.However, even assumingaggressive provisions, the impactto Cathay financial and theTaiwanese banks are still minimal.

Source: Companies, CLSA Asia-Pacific Markets , as at December 2007Notes: 80% losses assumed for higher risk investments; 10% for other foreign corporate exposureFor illustrative purpose only, it does not represent any recommendation to invest or divest in the above-mentioned securities.


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Stable but dull industry outlook compensated by highdividends

Taiwan Mobile cash dividendprogression

NT$m Payout ratio (%)

For illustrative purpose only, it does not represent any recommendation to invest or to disinvest in the above-mentioned securities.Source: Schroders

FET cash dividend progression

NT$mPayout ratio (%)

The Taiwanese cellular market isrelatively stable, and EBITDAmargins have been stable as pricecompetition eases.

Whilst the revenue outlook is notexciting, strong cash flows and an

80% payout ratio mean TaiwanMobile and Far East Tone offer attractive dividend yields of around8-11%. Capital reduction movesfurther increase total shareholder returns.

Note: Capital return/share = NT$2.4; dividend yield as of Feb4, 2008 is 7.8%

Note: Capital return/share = NT$1.9; dividend yield as of Feb4, 2008 is 10.9%

0

5,000

10,000

15,000

2 0 0 1

2 0 0 2

2 0 0 3

2 0 0 4

2 0 0 5

2 0 0 6

2 0 0 7

0%

20%

40%

60%

80%

100%

120%

Normal Dividend (NT$m) Payout

0

5,000

10,000

15,000

2 0 0 1

2 0 0 2

2 0 0 3

2 0 0 4

2 0 0 5

2 0 0 6

2 0 0 7 E

0%

10%

20%

30%40%

50%

60%

70%

80%90%

100%

Normal Dividend (NT$m) Payout (%)


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Investment strategy


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Country Weighting Focus

Hong Kong Underweight Overweight property investors which benefit from rising rentals in the office and retailsectors

Underweight property developers due to deteriorating return on capital and stretchedvaluation

Focus on companies with high dividend yield and strong cash flow

Underweight utilities due to lacklustre growth prospects and rich valuation

China Overweight Overweight insurance, infrastructure and selected consumer/industrial companies

Neutral on telecom sector but overweight China Mobile

Underweight cyclical commodity stocks on concerns of overcapacity

Overweight oil stocks on high oil price

Look to take profit on further strength

Taiwan Underweight Overweight electronics sector on attractive valuation and escalated outsourcing trend toAsia

Overweight telecom stock on attractive dividend yield

Underweight financials rising NPL and lack of M&A activity

Investment strategy


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Greater China investment strategy and sector As at 29 February 2008

Sector loads Sector weightings(%) (%)

Source: Schroders

Asset allocation

17%

22%

20%3%

25%

2%

0%

12%

1%

SingaporeHong Kong

H shares

Red chips

B shares

China stocks

Exposure to A shares

Taiwan

Cash

-1.1

-0.1

0.6

-0.1

-3.1

1.2

-3.1

1.9

0.4

0.9

2.4

Financials

Information Technology

communication Services

Industrials

Energy

Consumer Discretionary

Materials

Consumer Staples

Utitilies

Health Care

Cash

30.6

19.1

11.8

11.2

9.0

7.7

5.1

2.8

0.5

0.4

1.9


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mportant NotesTHIS DOCUMENT AND THE INFORMATION CONTAINED HEREIN IS STRICTLY FOR INTERNAL DISTRIBUTIONWITHIN CIMB AND ITS APPROVED DISTRIBUTORS FOR THE PURPOSES OF IN-HOUSE TRAINING FOR THEMARKETING OF THE CIMB-PRINCIPAL GREATER CHINA FUND.

The information and opinions contained in this document have been obtained from Schroders from sources they consider to be reliable. However this information has not been checked or verified by Schroders and are provided as a guide only,without any regard to the specific investment objective, financial situation and the particular needs of any specific personwho may receive this document. Any person who may receive this document is not to rely on the information containedherein, and should to seek the advice of a financial advisor before purchasing units of any fund, or in the event hechooses not to seek advice from a financial advisor, he must make his own investigations and must satisfy himself as tothe accuracy and completeness of information, and suitability of investments for his investment purposes, needs or requirements.

Past performance and any forecast are not necessarily indicative of the future or likely performance of any fund. Pastperformance of a manager is not necessarily indicative of its future performance. The value of units in a fund, and theincome accruing to the units, if any, from the fund, may fall as well as rise.

This document and its contents are not intended to constitute an offer for sale, prospectus, invitation to subscribe for or purchase or otherwise acquire any of the instruments referred to herein. For the avoidance of doubt, there is no intention

to create a legal contract. Neither Schroders nor any of its officers or employees have any authority to give anyrepresentations or warranty whatsoever and no responsibility is accepted by any of them in relation to the information inthis document and accordingly Schroders shall not be liable for any loss or damages or expense of any kind whatsoever or howsoever arising from the person's use of the information contained in this document. Schroders, their directors andemployees may have positions in and may effect transactions in securities mentioned in this document.Schroder Investment Management (Singapore) Ltd65 Chulia Street, #46-00, OCBC CentreTelephone: 1800 534 4288 Fax: +65 6536 6626 Registration No.: 199201080H

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