SKANDIA GLOBAL FUNDS PLC - Fidelity Investments

Skandia Global Funds plc
Annual Report and Audited Financial Statements for the year ended 31 December 2011
SKANDIA GREATER CHINA EQUITY FUND
INVESTMENT ADVISER’S REPORT FOR THE YEAR ENDED 31 December 2011
Skandia Greater China Equity Fund – First State Investment Management (UK) Limited
Below is a report from the Investment Adviser of the Skandia Greater China Equity Fund for 2011.
The Skandia Greater China Equity Fund was launched on 5 May 1998 with a starting Net Asset Value per share of USD 10.00.
Investment Adviser’s Commentary
The Skandia Greater China Equity Fund outperformed its benchmark, the MSCI Golden Dragon Net Return Index, for the year
2011. The fund returned -11.23%, compared to the benchmark which returned -18.67%.*
During the first quarter, Taiwanese technology stocks Delta Electronics and Compal Electronics underperformed. Delta lagged on
concerns about the impact of rising raw material prices on margins and Compal was weak on worries about margin pressure and
lacklustre notebook demand. Hengan International (China: Consumer Staples) underperformed on worries about the impact of the
rising pulp price on margins.
Key positive contributors over the quarter included oil stock CNOOC (China), which rose with the oil price, and China Telecom.
The latter gained on the announcement that it intends to purchase its parent‟s network by 2012 which should lower leasing costs.
Cheung Kong (Hong Kong: Financials) benefited from strong performance by Hutchison Whampoa.
The Investment Adviser did not establish any new positions over the quarter. They sold ASM Pacific and Kingboard Chemicals on
valuation concerns following periods of strong performance. They also sold China Mobile as it disappointed the market on
announcing higher capital expenditure and no increase in the dividend.
During the second quarter of 2011, Jardine Matheson (Singapore: Financials) outperformed as it benefited from strong earnings
momentum and a supportive PE valuation, and Yantai Changyu (Consumer Staples) gained as it announced strong results.
On the negative side, China Oilfield Services (Energy) declined with the oil price and Cheung Kong (Hong Kong: Financials)
retreated as transactions fell sharply and the government introduced more measures to curb property prices.
Key activity over the quarter included the purchase of AU Optronics (Taiwan: Information Technology), a well regarded TFT-LCD
maker trading at a substantial discount to book. In addition, the Investment Adviser reduced exposure to some defensive companies
where valuations were looking full.
The Skandia Greater China Equity Fund outperformed its primary benchmark, the MSCI Golden Dragon Index, over the third
quarter of 2011. Hotai Motors of Taiwan outperformed as auto sales remained firm and the company gained market share.
Chunghwa Telecom of Taiwan and Hong Kong consumer staples company Sun Art Retail both outperformed, benefiting from their
defensive characteristics, which attracted cautious investors to their shares. On a less positive note, Cheung Kong underperformed
on concerns about the outlook for the Hong Kong property market and in the energy sector CNOOC of China fell in tandem with
declining oil prices. Taiwan‟s Delta Electronics had a weak quarter as it faced increasing competition in power supply.
In the fourth quarter the Fund outperformed its benchmark index. The holdings in China Merchants Bank and China Oilfield
Services outperformed as they both bounced back after periods of weakness. China Resources Power gained as the government
raised electricity tariffs. On the negative side, a holding in China Telecom underperformed on profit-taking and concerns over a
monopoly investigation into broadband connections, while China Mengniu lagged on a quality issue associated with one of its milk
products. Simplo Technology underperformed on weak quarterly results and concerns that it was losing market share to another
Taiwanese battery-pack maker.
Source: First State Investment Management (UK) Limited and Skandia Investment Group, as at 31 December 2011.
* Performance figures refer to Class A1 shares and are sourced from Morningstar. Calculation basis: bid to bid, net of fees, gross
income reinvested in fund base currency (US Dollars).
References to benchmarks are for illustrative purposes only and are not intended to imply a performance objective. There is no
guarantee that the Skandia Greater China Equity Fund will outperform this benchmark.
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