The Next Fund Manager 2010: Golden Dragon Greater China Fund

THE NEXT FUND MANAGER 2010
GOLDEN DRAGON GREATER CHINA

FUND 20th March 2010
Overview GOLDEN DRAGON GREATER CHINA
FUND
1. Foundation
• Working Across Borders

• Common Goal
Shanghai World Financial Center

HT: 492m 2
FUND
2. Fund Introduction
• Investment Objective and Focus

• Investment Strategy and Approach
• Fund’s Original Investment Portfolio

HT: 492m 3
FUND
3. Market Outlook
(Greater China)
• Greater China: Trends and
Opportunities
• Exchange Rate
• FSM market ratings
• Sector Outlook

HT: 492m 4
FUND
4. Managers’ Report
• Views on New York Landfall
• Changes made to investment portfolio

HT: 492m 5
1. Foundation GOLDEN DRAGON GREATER CHINA
FUND
6
FUND
This is Ailin.
7
FUND
This is Hao Jie.
8
FUND
Both of them are currently interning in Shanghai.
9
FUND
And that leaves me here…..alone
I am Jiade.
10
FUND
Hao Jie and Ailin are

2,336 miles / 3,760 km
apart from Jiade….
11
FUND
But are tied by a common

passion and drive…as well
as Skype
12
2. Fund Intro GOLDEN DRAGON GREATER CHINA
FUND
Investment
Objective and
Focus
Fund’s Original Investment

Investment Strategy and
Portfolio Approach
13
FUND
Investment
Objective and
Focus

Portfolio Approach
14
FUND
2.1 Investment Objective and Focus

• To achieve mid-long term capital appreciation by investing at least 75% of its assets in a
portfolio of securities and equity funds containing securities that:
– Principally traded in Greater China;
– Derive at least 50% of revenues from Greater China, or

– At least 50% of their assets in Greater China.
• The Fund will also invest in fixed income funds for diversification
• Fund Charges: 6% Expense ratio: 1.8%
15
FUND
Investment
Objective and
Focus

Portfolio Approach
16
FUND
2.2 Investment Strategy & Approach

• The Fund’s strategy is:
– Focus on Greater China equity funds and securities that are likely to provide higher
returns
– Diversify into fixed income funds to reduce equity and focus risk
– Possess sufficient liquid assets to prepare and take advantage of markets’ uncertainties
and changes
– Balance between risks, returns, flexibility and investment horizons
17
18
Funds
• Qualitative (Geographical and Sector Allocation, Fund Risk) Selection
• Quantitative (Fund Charges, Sharpe Ratio, Fund Size, Expense Ratio, 3-yr annualized bid to bid return)
Diversify
Diversify
• Fixed Income Funds
• To take advanatge of market changes Liquidity
Liquidity
• Defensive Purposes
Costs
Costs
• Funds Charges, Securities Charges, Expense Ratio, Opportunity Costs
Relative
Relative
• Compare Markets, Mutual funds, Companies to alternatives Valuation
Valuation
Market
Market
• Economic & Political Trends Outlook
Outlook
• Current financial condition and future prospects (Sectors, Funds, Companies)
Golden Dragon Greater China Fund's Investment Approach
The Fund’s investment approach involves both top down and bottom up approaches. •
2.2 Investment Strategy & Approach
FUND
GOLDEN DRAGON GREATER CHINA 2. Fund Intro
FUND
Investment
Objective and
Focus

Portfolio Approach
19
FUND
2.3 Fund’s Original Investment Portfolio

Golden Dragon Greater China Fund's Asset Allocation
Cash
5%
Fixed Income Funds
20%
Greater China/China Equity Funds

60%
Greater China Securities
15%
20
FUND
2.3.1 Selection Criterion

• Qualitative and Quantitative selection criterion were used to identify the suitable funds
Selection Criteria – Qualitative
Investment
Geographical
Approach
Location
Market
Fund Risk
Sector
21
FUND
2.3.1 Selection Criterion

Selection Criteria – Quantitative
Sharpe
Ratio
Total Fund
Fund Size
Charges
3 year bid to Expense

bid return Ratio
22
FUND
2.3.2 Greater China/China Equity Funds

• The Fund will allocate 60% of its assets to Greater China/China funds with a mid-long term
investment horizon.
Allocation of Greater China/China Funds
Fidelity
Gr China
SGD 1
mln First
State Reg
China
DWS China SGD 3
Eqty Fund
CL A mln
SGD 2 mln
23
FUND
2.3.2 Greater China Funds
FIRST STATE REG CHINA (SGD) FIDELITY GR CHINA (USD)
Total Returns of First State Reg China Comparison of potential funds’ Total
for the past 5 years Returns for past 3 years
Investment: Investment:
SGD 3mil SGD 1mil
Source: FSM Chart Centre

Source: First State Reg Fund FactSheet
• Alignment of investment objectives and market outlook

• High Sharpe ratios
• Low expense ratios 24
FUND
2.3.2 China Funds Analysis (Conclusion)
DWS CHINA EQTY FUND CL A SGD

Comparison of DWS China Eqty Fund CL DWS China’s Total Returns against
A’s Total Returns for past 3 years MSCI Golden Dragon Index
Source: DWS China Factsheet
Source: FSM Charts Centre
• Alignment of investment objectives and market outlook

• High Sharpe ratios
• Low expense ratios
25
• Consistently beaten the index over the past 3 years
FUND
2.3.3 Fixed Income Investment Funds
Allocation of Fixed Income Investment Funds
AIGIF
Spore
UnitedBonds
Global Fund
Emerging
SGD 0.2
Markets mln
Bonds
SGD 0.3
mln
Templeton
Global
Bonds
SGD 1.5
mln
26
FUND
2.3.3 Fixed Income Investment Funds (Global – Conclusion)
FTIF-Templeton Glb Bond A (MDIS) (SGD)

Comparison of Templeton Glb Bond A Comparison of Templeton Glb Bond A
(MDIS) for past 3 years (MDIS) for past 3 years
Source: FTIF-Templeton Glb Bond A(mdis) (SGD) Factsheet

• Well diversified
• Diversify Fund’s focus risk
• Consistently outperform peers 27
FUND
2.3.3 Fixed Income Investment Funds (Emerging Mkts - Conclusion)
United Global Emerging Markets Portfolios (SGD)

Comparison of United Glb Emerging Mkts Comparison of United Glb Emerging Mkts
Portfolios for past 3 years Portfolios for past 3 years
Source: United Glb Emerging Mkts Portfolios (SGD) Factsheet Factsheet
• Emerging markets have good potential for growth

• Consistently beaten its benchmark and peers
FUND
2.3.3 Fixed Income Investment Funds (Corporate Centric - Conclusion)
AIGIF SINGAPORE BOND FUND (SGD)
Comparison of Lion Global Bond for past 5 Comparison of AIG International Fund for
years past 5 years

Source: AIG International Funds Factsheet
• Capitalize on corporate bond fluctuations of bonds which are

likely garner better returns compared to government bonds
• Consistently outperformed its peers and has shown resilience
• Better Sharpe ratio and lower expense ratio among its peers 29
FUND
2.4 Stocks
HKSE Allocation TAIEX Allocation
Capital Goods Real Estate

15% 15% Non-tech & Others
20%
Oil & Gas Technology

15% Insurance Hardware 80%
HKSE 20% TAIEX
Consumer
Discretionary 15%
Financials
20%
30
FUND
2.4 Stocks
Possible Stocks Picks
Country Sectors (Overweight) Possible Stock Picks
Real Estate  Renhe Commercial Holdings
 Bank of Chin. China Construction Bank,

Financials
China Life
HKSE
Consumer Discretionary  Anta Sports, Bawang, Wuliangye
Oil & Gas  Sinopec
Capital Goods  Haier
 Hon Hai, Acer, Austek, AUO, Catcher

Technology
Technology Hardware
TAIEX
 ChinaTrust FHC
Non-tech & Others
31
FUND
Greater China/China Equity Funds

Fixed Income Funds
32
3. Market GOLDEN DRAGON GREATER CHINA
Outlook FUND
Greater China:
Trends and Opportunities
Exchange Rate
Sector Outlook
33
Outlook FUND
3.1 Greater China: Trends & Opportunities

• The China market has recently corrected, following market worries on higher inflation and
policy tightening measures to cool down its domestic economy and speculative activity in
property.
• These measures will be beneficial in the long term
Return of China’s Inflation Inflation Risks due to monetary growth
Source: CEIC and CIMB-GK estimates Source: CEIC and CIMB-GK estimates
34
Outlook FUND

• Outlook of monetary policy of China
– Chinese monetary conditions still easy – heralding more tightening
35
Outlook FUND

• Recent correction in Greater China Markets has made the markets more attractive again
Comparisons of Indexes

12M forward PER
MSCI China 12.6
MSCI World 14.2
MSCI Far east ex Japan 12.4
36
Outlook FUND

• With improvement in global demand, consumer and business confidence, there is a gradual
broadening of China’s growth
• This is similar in Taiwan and Hong Kong, where exports had increased by 40% and 9.2% y/y
in December 2009.
December’s Trade Recovery Rebound in Industrial Production
Source: CEIC and CIMB-GK estimates

Source: CEIC and CIMB-GK estimates 37
Outlook FUND

• Increase in Private industrial investment
Yoy growth of FAI within domestic enterprises
38
Outlook FUND

• Domestic demand is expected to contribute in the coming two years as demand in advanced
economies may remain subdued.
• Forecast for Greater China is relatively higher than other markets, reflecting the positive
outlook and attractiveness.
Global Economic Outlook
Real GDP Growth (%)

Markets
2008 2009 2010E 2011E
China 9.0 8.3 9.3 8.3
Hong Kong 2.4 -3.2 4.6 3.7
Taiwan 0.7 -3.5 4.2 4.6
US 0.4 -2.5 2.5 1.4
UK 0.6 -4.7 0.7 0.8
Source: Euromonitor, 3 Feb 2010 39
Outlook FUND

• Europe’s PIGS (Portugal, Ireland, Greece and Spain)
– Refers to troubled and heavily-indebted countries of Europe
– 2010 European sovereign debt crisis, lack of confidence in Euro and its countries
– Raise concerns and create instability in the region

– More risk
• United Kingdom
– The UK government spent £85.5bn last year on bailing out the banks. Now, Chancellor
Alistair Darling is predicting a record £178bn of borrowing in the current fiscal year
– Many economists have raised concerns that the UK could have its credit rating cut

Outlook FUND

• United States
– High employment rate of 10.7% as for Feb 2010
– High Budget Deficit
– Lots of economic uncertainties and instability

• Japan
– Growth is less positive than China, economy in deflationary state

Outlook FUND
3.2 Exchange Rate

• RMB/USD is expected to remain stable at 6.8 until mid-2010 before exports have shown
consistent recovery.
• HKD is linked to the USD and is dependent on the Fed’s policy, which is not expected to
make any drastic changes in the near term.
• For the TWD, the central bank is unlikely to favour a stronger exchange rate due to economic
weakness and building deflationary pressures.
42
Outlook FUND
3.3 FSM Market Ratings

• Positive outlook on the Greater China and the estimated PE ratios generally fare better than
other markets
FSM Market Ratings Forecasted P/E
Star PE Ratio
Markets 3 year view
Ratings 2010E 2011E
China 4.5 Very Attractive China (HSCI) 12.4X 10.6X
Hong Kong 4.5 Very Attractive Hong Kong (HSI) 12.7X 10.3X
Taiwan 4 Very Attractive Taiwan (Taiwan weighted) 17.2X 14.3X
Singapore 4 Very Attractive
India 3.5 Attractive
Thailand 3.5 Attractive Source: Fundsupermart, 28 Jan 2010
Malaysia 3.5 Attractive
Source: Fundsupermart, 28 Jan 2010
43
44 Reuters, UBS,
Bloomberg, Reuters,
Source: Bloomberg, CIMB
UBS, CIMB
Source:
Taiwan
• Technology Hardware
• Non-Tech & others
• Real Estate China
• Insurance
• Financials Hong Kong
• Consumer Discretionary
• Oil & Gas
• Capital Goods
3.4 Sector Outlook
FUND
Outlook
GOLDEN DRAGON GREATER CHINA
3. Market
4. Manager’s GOLDEN DRAGON GREATER CHINA
Report FUND
Staying Firm in the face of Adversity
45
Report FUND
4.1 Impact of NY Landfall

– Billions of dollars in damage
– Property values decimated

– Business Interrupted
– Major ports and traffics affected

– Minimal Loss of lives
What is the IMPACT to the Fund?
46
Report FUND
4.2 New York State

• New York's gross state product in 2007 was $1.1 trillion
• Major agricultural producer, leading centre for financial
institutions
• 5 largest export markets: Canada, UK, Switzerland, Israel
and Hong Kong
47
Report FUND
4.3 Fund’s Strategy

• Remains focus on Greater China region
• No drastic changes to the asset allocation despite the potential opportunities and threats that
arose from this disaster
• Investors should rest assured that our Fund remains Greater China centric and focus rather
than becoming a speculative fund that make drastic changes to Fund upon any market
movements
– Remains a tool for investors to diversify their portfolio
– Maintain Stability and Clarity in our Fund’s Strategy

• Slight Changes will be made to capitalize on this event
48
Report FUND
4.4 Market Outlook

• New York is indeed a major state in the USA. While the loss of lives and damage to property and
infrastructure is regretted, it may not be too major an event to create a major negative event for the
rest of the world.
• Stock Markets
– Look at Case studies of Hurricane Katrina and 1989 San Francisco Earthquake
• Despite of a short dip in stocks markets following a natural disaster, but the stocks quickly recover
over the next couple of days as markets eventually realize that impact is not as significant as first
thought
• Markets tend to over react, good time for bargain hunting
– Investors should know that they should stay put and not sell down on our Fund as
recovery is not long in coming. In fact, selling off in the initial days is likely to be at their
disadvantage
49
Report FUND
4.4 Market Outlook

• Case Study 1: Hurricane Katrina, 26 th August 2009 & 29th August 2009
Nasdaq Hang Seng

2155 15300
2145 15200
15100
2135 15000
14900
2125 14800
14700
2115 14600
2105 05 05 05 05 05 05 05 05 05 05
20 20 20 20 20 20 20 20 20 20
9/ 9/ 8/ 8/ 8/ 8/ 8/ 8/ 8/ 8/
/0 /0 /0 /0 /0 /0 /0 /0 /0 /0
02 01 31 30 29 26 25 24 23 22
SSE iShares MSCI Taiwan Index

1200
(EWT)
1180
1160 10.6
1140 10.2
1120 9.8
50
Report FUND
4.4 Market Outlook

• Case Study 2: 1989 San Francisco Earthquake
NASDAQ COMPOSITE INDEX HANG SENG INDEX

485 2850
2800
475 2750
465 2700
2650
455 2600
445 2550
2500
2450
Report FUND
4.4 Market Outlook

• Financial Industries
– Interruption to NYSE may affect trading for a while but backup facilities that will allow
some form of recovery in the trading
– NY is not the only financial hub in the US
– Major banks in NY would definitely have backup facilities elsewhere in the US and some
disaster recovery plans
Report FUND
4.4 Market Outlook

• Ports and Airports
– Can be disruptive but goods and international business can be routed to other states
(Boston & Penn) in the meantime
– This will also put markets to rest that the US can cope with a temporary disruption in NY
Report FUND
4.4 Market Outlook

• Infrastructure
– Expect a temporary surge in infrastructure rebuilding in New York, creating growth in the
medium-long term
– Chinese Construction Companies
• Sounds attractive but…
• Unlikely they will have any part in reconstructing NY

• Chinese companies may be cheaper but the strong desire to use US domestic
companies (which will help US employment too) will overrule the cost
• No intention to go into China Construction companies
Report FUND
4.4 Market Outlook

• Given the scenario, it is likely that there would have been warning signs
– If we had forecasted this landfall,
• We will decrease stocks from 15% to 5%, and increase cash from 5% to 15%
• Take the chance to bargain hunt when the markets overreact (2-5 days after the event)
• Good opportunity to get into the market at lower prices (good from a mid-long investment
horizon)
– If the event was not predicted,

• We will instead concentrate on making fund allocation in the bond funds
Report FUND
4.5 Bonds Fund Allocation

• The more defensive bond funds are expected to appreciate in value while the emerging bond
funds will be hit as some flee to safety
• If we were aware of the event, we will move the bonds to the more defensive ones earlier and
reallocate again a week after the event to maximize our returns
• More defensive bond funds are FTIF-Templeton Global Bond, which contain the global
government bonds
• Fund Changes
– Reduce allocation in United Global Emerging Markets Bonds SGD 0.3 mln and allocate
to FTIF-Templeton Global Bond
Report FUND
4.5 Cash
• We are maintaining a cash allocation of 5% with the view of investing in undervalued stocks
and defensive bond funds
– Use of dollar cost averaging to buy undervalued with huge potential to bring down our
cost per share and maximise returns
– Taking a conservative approach, having a pile of cash would allows the Fund to take
more defensive measures to protect the Fund’s value in case of the situation turn for the
worse
FUND
Fund’s Original Allocation Fund’s Current Allocation
Greater China/China Greater China/China

Equity Funds Equity Funds
Fixed Income Funds Fixed Income Funds
58
Conclusion GOLDEN DRAGON GREATER CHINA
FUND
Q&A
59
FUND
2.3 Risk Profile Analysis

• The Fund is subjected to the following risks:
Golden Dragon Greater China Fund's Risk Profile
RISK PROFILE
Risk of Non-
Foreign Market Sector
Investing in Market Risk Diversification
Securities Risk Risk
Greater China Risk
60

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THE NEXT FUND MANAGER 2010

GOLDEN DRAGON GREATER CHINA

• Working Across Borders

Shanghai World Financial Center

• Investment Objective and Focus

Shanghai World Financial Center

Shanghai World Financial Center

Shanghai World Financial Center

This is Hao Jie.

Both of them are currently interning in Shanghai.

And that leaves me here…..alone

Hao Jie and Ailin are

But are tied by a common

Fund’s Original Investment

Fund’s Original Investment

2.1 Investment Objective and Focus

– Derive at least 50% of revenues from Greater China, or

Fund’s Original Investment

2.2 Investment Strategy & Approach

Fund’s Original Investment

2.3 Fund’s Original Investment Portfolio

Greater China/China Equity Funds

2.3.1 Selection Criterion

Selection Criteria – Qualitative

2.3.1 Selection Criterion

3 year bid to Expense

2.3.2 Greater China/China Equity Funds

2.3.2 Greater China Funds

FIRST STATE REG CHINA (SGD) FIDELITY GR CHINA (USD)

Source: FSM Chart Centre

• Alignment of investment objectives and market outlook

2.3.2 China Funds Analysis (Conclusion)

DWS CHINA EQTY FUND CL A SGD

Source: DWS China Factsheet

Source: FSM Charts Centre

• Alignment of investment objectives and market outlook

2.3.3 Fixed Income Investment Funds

Allocation of Fixed Income Investment Funds

2.3.3 Fixed Income Investment Funds (Global – Conclusion)

FTIF-Templeton Glb Bond A (MDIS) (SGD)

Source: FTIF-Templeton Glb Bond A(mdis) (SGD) Factsheet

2.3.3 Fixed Income Investment Funds (Emerging Mkts - Conclusion)

United Global Emerging Markets Portfolios (SGD)

Source: FSM Charts Centre

Source: United Glb Emerging Mkts Portfolios (SGD) Factsheet Factsheet

• Emerging markets have good potential for growth

2.3.3 Fixed Income Investment Funds (Corporate Centric - Conclusion)

AIGIF SINGAPORE BOND FUND (SGD)

Source: FSM Charts Centre

• Capitalize on corporate bond fluctuations of bonds which are

Capital Goods Real Estate

Oil & Gas Technology

Country Sectors (Overweight) Possible Stock Picks

Real Estate  Renhe Commercial Holdings

 Bank of Chin. China Construction Bank,

Consumer Discretionary  Anta Sports, Bawang, Wuliangye

Oil & Gas  Sinopec