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. Fund Objective & Features

II. Case for Greater China (China, Hong Kong & Taiwan)

I. Greater China Fund Investment Strategy

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I) Fund Objectives & Features
Greater China Equity Fund Objective
The Fund aims to achieve

• medium 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.

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 60
P
P
145 45 e
r
r
i 130 30 c
c
e
e 115 15 n
100 0 t
I
n
85 -15 C
d
h
e 70 -30 a
x
n
e 55 -45
g
d
40 -60 e

25 -75

10 -90
98 99 00 01 02 03 04 05 06 07

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) 3m 6m 1y 3y 5y Since In

Schroder ISF Greater China (Bid-to-Bid) 3.4% 25.7% 32.5% 123.7% 186.6% 82.6%
MSCI Golden Dragon Index 1.8% 16.3% 15.9% 63.4% 71.1% 9.6%
Outperformance 1.6% 9.4% 16.6% 60.3% 115.5% 73.0%
Schroder ISF Greater China (Offer-to-bid) -1.8% 19.4% 25.9% 112.6% 172.5% 73.6%

Annualised Return (USD) 3y 5y Since Inc

Schroder ISF Greater China (Bid-to-Bid) 30.8% 23.5% 6.2%
MSCI Golden Dragon Index 17.8% 11.3% 0.9%
Outperformance 13.0% 12.2% 5.3%
Schroder ISF Greater China (Offer-to-bid) 28.6% 22.2% 5.7%

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
Dragon Index S&P Fund Rating: AA
& 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
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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
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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” &
China Domestic consumption
• Reasonable valuation in regional context
• The case of investing in China is not over after Olympics
• Well-developed financial centre
Hong Kong • 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
Taiwan
to support growth
• Potential positive surprise on the political front
Source: Schroders

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China

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The Case for Investing in Greater China: China (The future superpower house)

1. China

i China has underperformed other major emerging markets

ii Strong economic growth + insulated from US economic slowdown

iii Domestic consumption boom driven by urbanization & rising middle income class

iv Chinese exports are moving up the value-added chain

v Continued investment growth – check out the up & coming IPOs in 2007

vi Reasonable valuation in regional context

vii 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 Performance of Greater China equity and
markets and Emerging Markets over the its component vs Asia ex Japan in 2006
% past 5 years (April 2002 to April 2007)
36
Calendar Year
32 China led the pack in 2006 return in 2006
China 78.1%
28
Hong Kong 36.3%
Taiwan 16.3%
24
Greater China 35.0%
20 Asia ex Japan 28.5%
India Brazil Russia China Emerging
Markets
Source: S&P Micropal, USD, bid-to-bid, dividend reinvested

¾ China equities have under-performed broad emerging markets equities during the
early equity rally during 2003-2005

¾ 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

¾ Economic fundamentals such as C/A,

manufacturing activities, FX reserves and retail
sales are strong fuelling higher economic growth
¾ 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
Increasing migration from
%
rual to urban areas million China’s urban population lags
45 550 behind other countries
500 Urban population as % of total population
40
450 110
35 100
China’s urbanization rate
400
is about 45% in 2005 vs
90
30 350 US’ 80%
80
300
25
70
250
20 60
200
50
15 150
1978 1982 1986 1990 1994 1998 2002 40

30
Urban population (rhs)
20
Ratio of urban population

Philippines

Hong Kong
Latin America
Pakistan
Thailand

Indonesia

Malaysia

Singapore
Vietnam

Europe
China

World
India

Japan

USA
Korea
Asia ex-Jpn
Africa
Source: NBS, Merrill Lynch, as at 31 December 2004

Result:
Increasing domestic consumption trend in China
Source: UN, CEIC, Merrill Lynch calculations, as at 31 December 20

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1iii) Domestic Consumption Boom Driven by Rising Middle Income Class
Urban dwellers enjoy Will Lead To
Rmb higher income
12,000 3.3
3.2
10,000
3.1
8,000 3.0
Urban dwellers spend more,
2.9
6,000 helping retail sales & GDP to grow
2.8 RMB bn
800
4,000 2.7
700
2.6
2,000 600
2.5
500
0 2.4
400
1992 1994 1996 1998 2000 2002 2004
300
Rural annual net income per capita (lhs)
200
Urban annual disposable income per capita(lhs) 100

Urban/rural income ratio (rhs) 0

1997 1999 2001 2003 2005

Source: CEIC Data, CLSA, as at 31 December 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 Exports of Hi-Tech
35 US$ m Products Surging
More China’s exports are coming 240,000
30 from higher margin businesses
210,000
25
which offer stronger growth
180,000
20 150,000

15 120,000

10 90,000

60,000
5
30,000
0
0
1994 1996 1998 2000 2002 2004 2006
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 High-Tech Exports
Te xtile s and Te xtile Artice s
Source: CEIC, ABN AMRO, as at 31 December 2005
Source: CEIC, Datastream (IMF Trade), ABN AMBO, as at 31 May 2006

¾ 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 Sector Size (US$m) Timing
China CITIC Bank Financial 2,000 2007 At least US$ 14 billion
China Everbright Bank Financial 1,000 2007 worth of exciting IPO in
China Heavy Duty Truck
China Pacific Insurance
Automotive
Financial
500
1,000
2007
2007
2007
China Shipyard Group Industrial 600 2007
Chongqing Machinery Industrial 300 2007
Datong Coal Energy 300 2007
Five Stars Retail 100 2007
¾ Strong IPO pipeline is
Guangxi Agriculture Agriculture 300 2007 positive for growth of market
Hunan Prince Dairy Food & Beverage 200 2007
Jiatong Tyret Auto parts 400 2007
despite the impact on
Jinjiang Hotel Hotel 300 2007 liquidity in the short term.
Kunming Steel Steel 200 2007
Ningbo Ports Transportation 300 2007
Pudong Development Bank Financial 1,000 2007 ¾ Increasing access to
Shandong Energy Energy 300 2007
Shanghai Automotive Corp Automotive 2,000 2007
capital and greater scrutiny
Shanghai Ports Transportation 750 2007 of international investors will
Shanxi Coking Energy 1,000 2007
Shenzhen Energy Energy 500 2007
lead to better quality
Sinotrans Shipping Transportation 550 2007 management.
Western Mining Basic Material 400 2007
Remarks: For illustration purposes only. It does not
Xu Fu Ji Retail 100 2007
represent any recommendation to invest in the
above-mentioned securities.
Total 14,110
*As at October 2006
Source: Schroders

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1vi) Reasonable Valuation in Regional Context
CHINA INDIA ASIA ex JAPAN
2006E 2007E 2006E 2007E 2006E 2007E

Consumer Discretionary 18.7 14.9 20.8 17.5 17.6 14.2

Consumer Staples 15.6 12.5 26.0 21.2 19.7 17.4

Energy 10.2 10.0 15.1 14.3 10.9 10.6

Financials 20.4 16.5 24.9 20.4 16.2 15.1

Health Care NA NA 24.7 21.3 24.3 21.5

Industrials 14.8 15.2 22.4 19.4 16.2 15.6

Information Technology 15.8 16.4 32.7 25.2 17.4 14.2

Materials 12.0 11.3 11.8 10.9 10.5 9.8

Telecommunication 18.5 16.2 34.2 22.4 15.1 14.3

Utilities 14.5 12.7 13.1 13.0 13.7 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!

¾Beijing 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.

¾Shanghai 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!)

¾All 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

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1vii) Will China Stop Growing after 2008 Olympics? NO!
Economy Size – 2005 Economy Size – 2050
(Index US = 100) (Index US = 100)

100 100
Developed Markets Developed Markets

Emerging Markets Emerging Markets

n n
USA Jap
a y USAJapa y a p a in a
man China a
UK France Italy Spain anad India man Chin UK France Italy S Canad I ndi
a
Ger C Ger

Source: PriceWaterhouseCoopers

Economic wealth is shifting to countries like China & India

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 1vii) Will China Stop Growing after 2008 Olympics? NO!

¾Learning from the Korea experience

% Change, from ’82 for KR, ’02 for CN
800

700 KOSPI
GNI/capita US$
growth % *
600

500 1975 to 1986 $602 to $2,643 150%

400 1987 to 1994 $2,643 to $9,459 438%

300

200
GNI/capita 2004
100 US$

0
China $1,500
-100
1 13 25 37 49 61 73 85 97 109 121
Month

Kospi HS China MSCI China China has a long

Source: CEIC, Macquarie Research, as at 31 January 2007
way to go!
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. Hong Kong

i Platform to raise capital for Chinese companies

ii Hong Kong and China should be considered as one market as the close proximity will
complement each other’s success

iii 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

iii 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. Taiwan

i Laggard growth play in 2007 & 2008

ii Telecom & technology sectors look favorable and continues to support growth

iii Growing private equity interest in Taiwan

iv Potential positive surprise on the political front

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3i) Laggard Growth Play for 2007 & 2008

¾ Taiwan’seconomic 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 Relative P/B Also Near Bottom of
Boost Tech ROE in 2006 (x) Historical Range
4 20,000 3.5

0 3.0
15,000

6 2.5
10,000
2 2.0 10 Year average =
5,000 1.5x
8 1.5

0
4 1.0

0 -5,000 Current P/B = 1.1x

0.5
1998199920002001 20022003200420052006
1996 1998 2000 2002 2004 2006
NJA Tech FCF(rhs) Capex/sales PB: IT relative to Asia-Pacific ex-Japan
NJA Tech ROE
Source: CEIC, IBES, Credit Suisse Source: MSCI, Credit Suisse

¾ Tech companies in Asia in general are enjoying rising earnings and cash flow due to
higher sales and better capex management.
¾ 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 Industry Drivers

A. Semiconductor A. Microsoft Vista Launch

manufacturing B. Game Consoles: Nintendo,
B. DRAM (memory chips), PS3, X-Box
personal computer, C. Outsourcing Trend for
C. Handphone component, Semiconductors &
D. Liquid Crystal Display Handphone components
(LCD) panel players D. LCD winning market share
from Plasma

Manufacturing mostly in
low cost China
Æ Enabling Taiwan to
concentrate on Tech
Innovation & Research

Source: CIMB-Principal

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3iii) Growing Private Equity Interest in Taiwan

¾ Taiwan’s leading technologies, competitive manufacturing abilities as well as

low interest rate environment is attracting overseas investors
¾ 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 Catalyst for change

under pressure on in gov’t leading to
alleged corruption potential
charges improvement in
China relations
Nationalist party more willing
to deal with Beijing unlike
incumbent Democratic
Progressive Party

Stock market will do well if cross-strait relations improve

Market P/E is 13x FY07

Source: CIMB-Principal

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Investors’ Dream: Growth at the Right Price
Strong Growth at the Right Price

Strong expected Valuation is not

growth in 2007 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 Taiwan

MSCI Hong Kong 0.60 0.60

MSCI Taiwan 0.57

Source: S&P Micropal, USD, bid-to-bid, dividend reinvested. Period: 30 April 1997 to 30 April 2007

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INVESTMENT PROCESS & STRATEGY
Investment Process
• Quantitative & qualitative screening

1. Screen Stock • 700 company meetings p.a. in Hong Kong, China and Taiwan
Universe • Strategic Assessment
• Research Coverage List of 165 stocks

• Classification
2. Shareholder ¾ Superior, Positive Transition, Negative Transition, Inferior
Return

• Research by Fund Managers and Analysts

¾ Management Quality
3. Valuation & ¾ Competitive Advantage
Stock Grading
¾ Earnings Sustainability
¾ Valuation
• Analysts’ Fair Value Targets & 1 to 4 Stock Grades
Source: Schroders

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Investment Process
• Position size relative to benchmark:
4. Stock ¾ Shareholder Return
Selection
¾ Analyst Fair Value Target & Grade
¾ Contribution to Risk

• Position size relative to benchmark:

5. Sector & ¾ Bottom-up Positioning
Country Overlay
¾ Macroeconomic Variables
¾ Industry-specific Variables
¾ Contribution to Risk

• 50 to 80 stocks held
6. Model
• Client guideline compliance
Portfolio
• PRISM risk analysis
Source: Schroders

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Company Analysis: Proprietary Fundamental Research

Source: Schroders

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 Greater China Fund Sell Discipline

Stock positions will be reviewed with a view to a sale when:

¾ Company is trading at or above top of analyst’s assessment of its fair value target

¾ A more attractive investment opportunity is identified

¾ There is a change to management strategy

¾ A major sale of assets or divisions has occurred

¾ Unexpected structural change to an industry in which the company is involved

Source: Schroders

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Summary: The Schroder Advantage

Combining Superior Resources & Tools with a strong Client Focus to

Deliver Sustained Outperformance
Source: Schroders

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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

SD Value vs Momentum Momentum

2.0
Outperforms
1.5
Value
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

¾ 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.’
¾ 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

Cash Others
Others Cash
7% 4%
10% 7% 2% 4%
Energy Financials 17%
Singapore 4% 25% Hong Kong
2% Co nsumer Red Chips
27%
China Staples H Shares

43% 4% Other China

15%
Equities
Hong Kong Co nsumer B Shares

18% Discretio nary Exposure to A

6% I.T. shares
5% Taiwan
20%
Teleco mmuni 5% Singapore
20%
catio n 5%

Taiw an services Industrials

14% 16%
27%

Source: Schroders

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Schroder ISF Greater China Top 10 Holdings (as at 31/3/07)

Holding Country Sector % NAV

China Mobile (Hong Kong) Ltd China Telecommunication 7.2
TSMC Ltd Taiwan Technology 5.8
China Life Insurance Co Ltd China Financials 4.4
Hon Hai Precision Industry Taiwan Technology 3.6
Cathay Financial Holding Co Ltd Taiwan Financials 3.4
China Telecom Corp Ltd China Telecommunication 3.3
BOC Hong Kong Holdings Ltd Hong Kong Financials 2.9
Cheung Kong Holdings Hong Kong Industrials 2.1
Cosco Corp Singapore Ltd Singapore Industrials 1.8
AAC Acoustic Technology China Technology 1.7

Source: Schroders

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 Definition of terms

¾ H Shares: Companies incorporated n mainland China and are listed on the Hong Kong
Stock Exchange

¾ Red Chips: Companies incorporated and listed in Hong Kong with controlling Chinese
shareholders

¾ A Shares: Companies incorporated in mainland China and traded in the mainland A-

share markets. Prices of A shares and quoted in RMB and currently only mainlanders
and selected foreign institutional investors are allowed to trade A shares

¾ B Shares: Companies incorporated in mainland China and traded in the mainland B-

share markets (Shanghai and Shenzhen). B shares are quoted in foreign currencies.

Source: Schroders

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FUND FEES & INFORMATION
Fees & Investment

Annual
Minimum investment of 1.8% Management
RM1,000 Fee

Trustee
0.08% Fee

Application
5.5% Fee

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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