SKANDIA GLOBAL FUNDS PLC - Fidelity Investments

Skandia Global Funds plc
Annual Report and Audited Financial Statements for the year ended 31 December 2011
SKANDIA PACIFIC EQUITY FUND
INVESTMENT ADVISER’S REPORT FOR THE YEAR ENDED 31 December 2011
Skandia Pacific Equity Fund – First State Investment Management (UK) Limited
Below is a report from the Investment Adviser of the Skandia Pacific Equity Fund for 2011.
The Skandia Pacific Equity Fund was launched on 13 September 2000 with a starting Net Asset Value per share of USD 1.00.
Investment Adviser’s Commentary
The Skandia Pacific Equity Fund outperformed its benchmark, the MSCI AC Asia Pacific Free ex. Japan. The fund returned -1.27%,
while the benchmark index returned -5.72%.*
During the first quarter, the Taiwanese technology company Delta Electronics contributed to the underperformance. It lagged on
concerns about the impact of rising raw material prices on margins. In South Korea, Shinsegae (Consumer Staples) declined on the
announcement of weaker-than-expected full year results. In Hong Kong, Swire Pacific (Financials) declined on profit taking which
was sparked by concerns that interest rates will rise soon, making property a less attractive investment.
On the positive side, QR National (Australia: Industrials) rose over the quarter on positive first half results that improved market
confidence in management. This also boosted the share price of Cheung Kong (Hong Kong: Financials). China Telecom rose on the
announcement of plans to purchase its parent‟s network by 2012, which should result in lower leasing costs.
Over the quarter, the Investment Adviser bought Quanta Computer (Taiwan: Information & Technology), a leading assembler of
consumer electronic products with a strong track record. They also purchased Worleyparsons (Australia), a well managed provider of
engineering, procurement and construction management services with an emphasis on hydrocarbon projects, and MTR Corp
(Industrials), a stable cash-generating franchise.
The Investment Adviser sold Swire Pacific (Hong Kong: Financials) on worries about renewed attempts to list the property division.
They also sold Woodside Petroleum (Australia: Energy) following strong gains on the back of rising global energy prices, and Oil
Search (Papua New Guinea: Energy) on valuation concerns.
During the second quarter, performance was helped by Hindustan Unilever (India: Consumer Staples), which gained on
improvements to its competitive position, and Taiwan Semiconductor (Information Technology), which rebounded after a weak first
quarter. China Telecom climbed as its mobile business performed well.
Less positively, Cheung Kong (Hong Kong: Financials) weighed on returns due to fears over rising interest rates while Samsung
Electronics (Information Technology) fell on concerns about the outlook for demand in the IT space. CNOOC (Energy: Hong Kong)
retreated with the oil price.
Over the quarter, the fund took new positions in E-Mart (South Korea: Consumer Staples), a strong Korean discount store franchise,
following its spin-off from Shinsegae. The fund also purchased Tata Power (India: Utilities), a company with a high level of
management integrity and promising growth, and Mahindra & Mahindra (India: Consumer Discretionary), a well managed
conglomerate trading on attractive valuations given the earnings outlook. Meanwhile, Westfield Group (Australia: Financials) was
sold to reduce the fund‟s property exposure.
In the third quarter, the Skandia Pacific Equity Fund outperformed its primary benchmark, the MSCI AC Asia Pacific Free ex Japan
Index, recording a total net return of -14.2%, while the benchmark index experienced a fall of 20.6% for the period.* Hong Kong &
China Gas benefited the fund, as its defensive qualities proved a big attraction for cautious investors who were drawn to well run and
defensive franchises and India‟s Mahindra & Mahindra conglomerate outperformed due to its ongoing strong sales performance. In
South Korea, IT group NHN rose on optimism about its growth prospects, while E-Mart of China gained following its spin-off from
Shinsegae, as investors had a positive view of the prospects for its supermarket business.Stocks that disappointed included Newcrest
Mining of Australia, which declined as gold prices retrenched and Hong Kong financial group Cheung Kong lagged on concerns
about the prospects for the territory‟s property market. While DBS Group of Singapore was hurt by the poor performance of the
global banking sector on worries about the Eurozone sovereign debt crisis. Shares in energy group CNOOC of China declined as oil
prices retreated.
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