SKANDIA GLOBAL FUNDS PLC - Fidelity Investments

Skandia Global Funds plc
Interim Report and Unaudited Financial Statements for the period ended 30 June 2012
SKANDIA ASIAN EQUITY FUND
INVESTMENT ADVISER’S REPORT FOR THE PERIOD ENDED 30 June 2012
Skandia Asian Equity Fund – MIR Investment Management (Pty) Limited
Below is a report from the investment adviser of the Skandia Asian Equity Fund for the first six months of 2012.
The Skandia Asian Equity Fund was launched on 7 March 2011 with a starting net asset value per share of USD 10.00.
Investment Adviser’s Commentary
The Skandia Asian Equity Fund underperformed its primary benchmark, the MSCI AC Pacific Free ex Japan Index, over
the first half of 2012. The fund returned +0.36% whilst the benchmark returned +5.05%.*
The Fund lagged its benchmark in the first quarter due to the underperformance in mid-cap and large-cap stocks. At the
country level, the relative outperformers were India, Taiwan and Hong Kong whereas the relative underperformers were
China, Korea and Australia. At the sector level, consumer discretionary and IT benefited performance, while financials and
telecoms detracted. At the stock level, the largest contributors to relative performance were overweights in Tata Motors,
Samsung Electronics, Sands China and Tata Steel. The sharp surge of the regional equity markets in the first two months of
the quarter surprised many and given the more defensive posture of the portfolio since last year, the Fund’s overweight
positions in telecoms and utilities detracted from performance. Nevertheless, the investment adviser has gradually increased
the beta of the portfolio since the beginning of this year, which should have a positive impact on the portfolio’s
performance should the region’s bull run in equity markets continue.
The portfolio underperformed its benchmark in the second quarter. Large-cap and mid-cap stocks were the worst
performers. At the country level, the best areas were Thailand and Malaysia whereas the relative underperformers were
China and Taiwan. At sector level, energy and telecoms were relatively beneficial, while industrials and financials
detracted from performance. At stock level, the biggest pluses were overweight positions in Westfield Group Australia (its
shares gained after the company embarked on its share buy-back programme); Guangzhou R&F Properties (it added to
performance as sentiment on the Chinese property sector improved after a recent interest rate cut and it benefited from
policy support for first-time home owners); Shin Corp (investors continued to treat Shin Corp as a ‘cheaper’ way to invest
in Advanced Info Services of Thailand, which is 40% owned by Shin Corp and looks poised to achieve big earnings this
year due to strong 3G take-up in the country); and Huaneng Power International (whose shares outperformed in June on the
back of lower fuel costs as coal prices declined by 11% during the month, Huaneng is one of the biggest beneficiaries of
lower coal prices, as it sources 72% of its coal requirements from the spot market).
Significant detractors from performance over the second quarter were overweight positions in China National Building
Material (whose shares weakened as cement prices continued to decline amidst weak demand); Tata Motors (whose stocks
fell after reporting disappointing earnings results); and Yangzijiang Shipbuilding Holdings (its shares declined due to
weakening new orders and a possible downside in margins). Financial stocks, particularly Chinese banks, also detracted
from performance during the second quarter. The limited exposure to expensive consumer staples names was another
detractor.
Source: MIR Investment Management (Pty) Limited, as at 29 June 2012.
* Performance figures refer to Class A 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 Asian Equity Fund will outperform this benchmark.
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