Schroder AsiaPacific Fund — Strong returns from established Asia specialist

Schroder AsiaPacific Fund (LN: SDP)

Last close As at 19/07/2024

466.00

5.00 (1.08%)

Market capitalisation

GBP736m

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Schroder AsiaPacific Fund — Strong returns from established Asia specialist

Schroder AsiaPacific Fund (SDP) invests in markets across the Asia Pacific region (excluding Japan) with the aim of achieving capital growth. Managed by Matthew Dobbs since launch in 1995, the trust is the largest and among the most liquid in its peer group. It has produced top-quartile NAV total returns over one, three and five years, also beating its benchmark MSCI AC Asia ex-Japan index over one, three, five and 10 years in both NAV and share price terms. In spite of this, it trades at a wider discount than the peer group average. The manager focuses on companies with visible earnings growth, strong management, sustainable cash flows and valuation support. While sector and geographical weightings are an output of stock selection, there is a significant allocation towards Greater China and the information technology sector. Reflecting the growing level of dividends from Asian companies, SDP has a yield of just over 1%.

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Investment Companies

Schroder AsiaPacific Fund

Strong returns from established Asia specialist

Investment trusts

11 August 2017

Price

431.5p

Market cap

£723.1m

AUM

£821.7m

NAV*

477.8p

Discount to NAV

9.7%

NAV**

482.0p

Discount to NAV

10.5%

*Excluding income. **Including income. As at 9 August 2017.

Yield

1.1%

Ordinary shares in issue

167.6m

Code

SDP

Primary exchange

LSE

AIC sector

Asia Pacific – excluding Japan

Benchmark

MSCI AC Asia ex-Japan

Share price/discount performance

Three-year performance graph

52-week high/low

435.3p

324.0p

486.3p

369.2p

**Including income.

Gearing

Gross*

7.0%

Net*

4.9%

*As at 30 June 2017.

Analysts

Sarah Godfrey

+44 (0)20 3681 2519

Mel Jenner

+44 (0)20 3077 5720

Schroder AsiaPacific Fund is a research client of Edison Investment Research Limited

Schroder AsiaPacific Fund (SDP) invests in markets across the Asia Pacific region (excluding Japan) with the aim of achieving capital growth. Managed by Matthew Dobbs since launch in 1995, the trust is the largest and among the most liquid in its peer group. It has produced top-quartile NAV total returns over one, three and five years, also beating its benchmark MSCI AC Asia ex-Japan index over one, three, five and 10 years in both NAV and share price terms. In spite of this, it trades at a wider discount than the peer group average. The manager focuses on companies with visible earnings growth, strong management, sustainable cash flows and valuation support. While sector and geographical weightings are an output of stock selection, there is a significant allocation towards Greater China and the information technology sector. Reflecting the growing level of dividends from Asian companies, SDP has a yield of just over 1%.

12 months ending

Share price
(%)

NAV
(%)

MSCI AC Asia ex-Japan (%)

MSCI World
(%)

FTSE All-Share (%)

31/07/13

12.9

12.4

11.7

27.4

24.3

31/07/14

4.5

3.9

6.5

4.1

5.6

31/07/15

4.7

6.1

1.4

13.5

5.4

31/07/16

22.2

20.5

15.8

17.0

3.8

31/07/17

34.7

33.3

28.2

16.9

14.9

Source: Thomson Datastream. Note: All % on a total return basis in GBP.

Investment strategy: Four-step bottom-up process

As well as travelling frequently to the region to meet companies, SDP’s manager can draw on the extensive Asia-based analyst team at Schroders to help generate ideas for the portfolio. The investment process is based on four characteristics: knowledge (idea generation and company meetings), insight (fundamental and valuation analysis), discipline (constructing a portfolio of 70-90 stocks) and conviction (monitoring to ensure all holdings still deserve their position).

Market outlook: Asia cheaper, but not cheap

Global equity markets have performed strongly over the past year, particularly for UK-based investors who have benefited from sterling weakness. Asian markets are no exception but, although they remain at a valuation discount to the global index, forward P/E ratios are above the 10-year average, suggesting that investors could benefit from taking a more selective and valuation-aware approach to the region.

Valuation: Discount broadly average

At 9 August 2017, SDP’s shares traded at a 10.5% discount to cum-income NAV. This was wider than the 12-month low of 8.7% seen in late July, as the share price lagged a rising NAV, narrower than the one-year average of 12.0% and broadly in line with three- and five-year averages. The board may buy back shares when the discount exceeds 10%, but prefers not to interfere with the natural liquidity of the shares. Although SDP is focused on capital growth, the portfolio does generate some income, substantially all of which is paid out as dividends. Based on the current share price, SDP yields 1.1%.

Exhibit 1: Trust at a glance

Investment objective and fund background

Recent developments

Schroder AsiaPacific Fund aims to achieve capital growth through investment primarily in the equity of companies located in the continent of Asia (excluding the Middle East and Japan), together with the Far Eastern countries bordering the Pacific Ocean, with the aim of achieving growth in excess of the MSCI All Countries Asia ex-Japan index in sterling terms over the longer term. Until 30 January 2011, the benchmark was the MSCI All Countries Far East ex-Japan index, but it was changed to an index that included India to reflect the growing importance of the Indian stock market.

22 June 2017: Half-year report for the six months ended 31 March. NAV TR +11.8% and share price TR +11.8% versus +10.4% for the benchmark MSCI AC Asia ex-Japan index (all in sterling). Management fee cut from 0.80-0.95% to 0.75-0.90%, effective from 1 April 2017.

6 March 2017: SDP chairman Nicholas Smith appointed as a non-executive director of Polarcus.

Forthcoming

Capital structure

Fund details

AGM

January 2018

Ongoing charges

1.1%

Group

Schroder Unit Trusts Ltd

Annual results

December 2017

Net gearing

4.9%

Manager

Matthew Dobbs

Year end

30 September

Annual mgmt fee

Tiered 0.75-0.90% (see page 7)

Address

31 Gresham Street,
London EC2V 7QA

Dividend paid

February

Performance fee

None

Launch date

November 1995

Trust life

Indefinite

Phone

020 7658 3206

Continuation vote

Five-yearly, next in 2021

Loan facilities

£50m revolving, £30m overdraft

Website

www.schroders.co.uk/its

Dividend policy and history (financial years)

Share buyback policy and history (financial years)

Dividends paid annually in February. While the trust is focused on capital growth, a dividend has been paid in 19 of the last 21 years.

SDP targets a discount below c 10%. Issuance in the chart below includes exercise of subscription shares.

Shareholder base (as at 4 July 2017)

Portfolio exposure by geography (adjusted for gearing, as at 30 June 2017)

Top 10 holdings (as at 30 June 2017)

NAV weight %

Company

Country

Sector

30 June 2017

30 June 2016*

Samsung Electronics

South Korea

Information technology

6.4

4.7

Alibaba Group Holding

China

Information technology

5.7

N/A

Tencent Holdings

China

Information technology

5.4

4.2

Taiwan Semiconductor Manufacturing

Taiwan

Information technology

5.3

7.5

AIA Group

Hong Kong

Financials

4.1

4.4

China Pacific Insurance Group

China

Financials

2.6

2.3

Hangzhou Hikvision Digital Technology

China

Information technology

2.5

N/A

HDFC Bank

India

Financials

2.4

N/A

Hon Hai Precision Industry

Taiwan

Information technology

2.4

N/A

Oversea China Banking

Singapore

Financials

2.3

N/A

Top 10 (% of NAV)

39.1

40.1

Total holdings

74

78

Source: Schroder AsiaPacific Fund, Edison Investment Research, Bloomberg, Morningstar. Note: *N/A where not in June 2016 top 10.

Market outlook: Selective approach may be advisable

As shown in Exhibit 2 below (left-hand chart), Asian equities have kept pace with the heavily US-dominated MSCI World index over the past 10 years, initially outperforming following the global financial crisis and recovering from the sharp falls seen in the period of heightened risk-aversion from mid-2015 to early 2016. Returns since mid-2016 have been boosted for UK investors by the weakness of sterling.

The right-hand chart shows average forward P/E valuations for the Datastream Asia ex-Japan, both in absolute terms and relative to the Datastream World index, over the same period. Asia ex-Japan valuations remain at a significant discount of c 15% to the average for the world index. However, this may indicate that Asian markets are simply less expensive than other markets, rather than being empirically cheap. Having risen modestly over the past year, the average forward P/E of 13.3x for the Asia ex-Japan index is 9% above the 10-year average, while the World index P/E of 15.7x is 20% above the 10-year average. While valuations have been supported by earnings growth in recent months, the risks at an aggregate level are arguably to the downside. In particular, the trend towards monetary policy normalisation could dent demand for equities, as returns on lower-risk assets begin to look more attractive. Against such a backdrop, investors may prefer a fund with a valuation-aware investment approach that focuses on not overpaying for growth.

Exhibit 2: Market performance and valuation

Asia ex-Japan versus world and UK equities (TR, in sterling)

Forward P/E for DS Asia ex Japan and relative to DS World

Source: Thomson Datastream, Edison Investment Research

Fund profile: Long-established Asia specialist

Schroder AsiaPacific Fund (SDP) has been managed since its launch in 1995 by Matthew Dobbs, a specialist Asia fund manager with Schroders for more than 30 years. The investment trust is managed for capital growth, with a broad investment remit covering Asia (excluding Japan) and the Far Eastern countries bordering the Pacific. It holds a relatively concentrated portfolio, diversified by country, industry and size, chosen on a bottom-up basis with input from Schroders’ large team of analysts based in the region. The investment process targets companies with visible earnings growth, good corporate governance and sustainable returns, trading at attractive valuations. Stock selection is unconstrained versus the MSCI AC Asia ex-Japan benchmark index, although no more than 15% of the portfolio may be invested in any one company, and SDP may not own more than 20% of the equity of any company. The manager is permitted to invest up to 5% of the portfolio in unlisted securities, and may use derivatives for efficient portfolio management. Gearing is permitted up to 20% of net assets (net gearing of 4.9% at end-June).

The fund manager: Matthew Dobbs

The manager’s view: Still value to be found in Asia

Dobbs argues that while stock valuations in Asia are no longer as compelling as they were during the correction seen in mid-2015, there is still value to be found in the region. Meanwhile, company earnings have been strong, with upward estimate revisions in 2016 and the first half of 2017. Economic indicators such as purchasing managers’ indices show a reasonably constructive outlook, although Dobbs says that this is largely reflected in the stock market. Against this backdrop, after a strong recovery in cyclical stocks in 2016, the manager has taken some profits, commenting that his approach is not to seek “growth at any price”.

From a macro perspective, Dobbs says India is still “the lion that hasn’t roared”, with limited progress made on Prime Minister Modi’s much-vaunted reform agenda and mixed views among market participants on the success of 2016’s demonetisation programme. While India is at an earlier stage of development than China in terms of credit growth, which could provide longer-term economic support, Dobbs says that he has taken profits as the stock market has become more expensive, although any correction could prompt a reassessment. Indonesia – like India, a beneficiary of a political ‘new broom’ in 2014 – looks interesting in the long term, the manager says, although the market has not reached a valuation level where he would be comfortable making a significant allocation.

Dobbs points out that paying dividends has become increasingly important to Asian companies. He says growth of cash flow is interesting, driven by businesses being disciplined in their capital expenditure. While SDP invests for capital growth, the manager favours companies with sufficient cash flows to support a dividend.

Asset allocation

Investment process: Disciplined, bottom-up approach

Fund manager Matthew Dobbs and alternate manager Richard Sennitt are based in London, but travel frequently to Asia to meet company managements face-to-face, and are in regular contact with a 36-strong analyst team spread across seven regional offices from Mumbai to Sydney. Between them the managers have been investing in Asia for more than half a century, and the analysts have an average of 15 years’ experience.

SDP’s investment process is based on four key characteristics: knowledge, insight, discipline and conviction.

Knowledge: investment ideas may be drawn from the managers’ own extensive experience, the analyst team in the region, global sector specialists in Schroders’ London office, sell-side research or the output of quantitative screens.

Insight: rigorous long-term fundamental analysis is undertaken on candidate stocks. The analysts build models forecasting the development of the balance sheet and cash flows over as long a period as possible, as well as assessing quality of management, corporate governance and sustainability. There is a focus on identifying positive long-term change rather than short-term catalysts. Each company is assigned a fair value target, and a rating based on the analyst’s level of conviction that the stock will outperform or underperform the market.

Discipline: portfolio construction is concentrated (70-90 stocks), valuation-driven, unconstrained by country or sector weights in the index, and risk-aware.

Conviction: only the team’s ‘best ideas’ are included in the portfolio. Ongoing analysis ensures that the investment case for all stocks held remains sound, and valuation versus fair value targets is constantly monitored. Stocks are generally sold when they reach their valuation target, with the manager rotating into better-value opportunities. Although targets are set on a three-year view, it is not uncommon for a stock to reach the estimated fair value sooner than this.

Portfolio turnover has fallen in recent years, from 66% in FY12 to an average of 39.2% in the three years to FY16, implying a holding period of just over three years.

Current portfolio positioning

At 30 June 2017, SDP had 74 holdings, a slight decrease on 78 a year earlier and modestly higher than the 66-stock average for the peer group. The top 10 holdings made up 39.1% of the portfolio. Greater China (China, Hong Kong and Taiwan) is the dominant geographical weight at 58.8% of the portfolio (see Exhibit 1), although within this, Hong Kong is the only overweight position versus the MSCI AC Asia ex-Japan benchmark. SDP’s manager stresses that portfolio construction is bottom-up and that geographical and sector weights are an output of stock selection. However, macro factors do have a bearing on industry-level fundamentals, which in turn affect the operating environment for individual companies. Against a broadly positive economic backdrop, Dobbs comments that the portfolio is positioned quite pro-cyclically, with overweight positions in sectors such as information technology and consumer discretionary, and underweights in defensive areas like consumer staples and utilities (Exhibit 4). The underweight to financials has been reduced (to 6.5pp at 31 March versus 12.1pp at 31 October 2016), as a result of selective investments in inexpensively valued banks, funded mainly by an increase in gearing.

Exhibit 3: Top 10 active over/underweights at 31 March 2017

Overweight

Active vs index (% pts)

Underweight

Active vs index (% pts)

Jardine Strategic

2.4

China Construction Bank

(1.8)

Taiwan Semiconductor Mfr

2.1

China Mobile

(1.8)

China Pacific Insurance

2.1

Bank of China

(1.0)

Fortune Real Estate

1.9

Housing Development Finance

(0.9)

Hyundai Motor

1.8

CK Hutchison

(0.9)

Alibaba Group

1.8

HK Exchanges & Clearing

(0.8)

Swire Properties

1.7

Ping An Insurance

(0.8)

Kerry Properties

1.7

Infosys

(0.8)

Gujarat Pipavav Port

1.7

Baidu

(0.8)

LG Chem

1.7

Reliance Industries

(0.7)

Source: Schroder AsiaPacific Fund, Edison Investment Research

The high weighting to information technology in both absolute and relative terms is informed by investment themes relating to disruption and new business models in the region. Dobbs points out lower landline penetration in the region, for example, has led to Asian consumers embracing mobile phones much more readily than those in the West, which in turn feeds into more open attitudes to tech-enabled business areas such as e-commerce, which is disrupting traditional retail business models.

Exhibit 4: Sector allocations 31 March 2017 (%, unless shown)

Portfolio end-March 2017

MSCI AC Asia ex-Japan index weight

Active weight vs index (% pts)

Trust weight/index weight (x)

Information technology

37.4

28.4

9.0

1.3

Financials

17.1

23.6

(6.5)

0.7

Consumer discretionary

12.5

9.6

2.9

1.3

Real estate

8.8

5.9

2.9

1.5

Industrials

8.7

8.0

0.7

1.1

Telecommunications

6.6

5.2

1.4

1.3

Materials

6.3

4.7

1.6

1.3

Energy

3.4

4.4

(1.0)

0.8

Healthcare

2.6

2.2

0.4

1.2

Consumer staples

0.7

4.6

(3.9)

0.2

Utilities

0.0

3.4

(3.4)

0.0

Cash

(4.0)

0.0

(4.0)

N/A

100.0

100.0

0.0

Source: Schroder AsiaPacific Fund, Edison Investment Research.

Performance: Outperforming over short and long term

Exhibit 5: Investment trust performance to 31 July 2017

Price, NAV and benchmark total return performance, one-year rebased

Price, NAV and benchmark total return performance (%)

Source: Thomson Datastream, Edison Investment Research. Note: Three, five and 10-year performance figures annualised.

As shown in Exhibit 5 (left-hand chart), SDP has opened up a clear performance lead over the MSCI AC Asia ex-Japan index so far in 2017. This feeds through into NAV and share price total return outperformance of the index over almost all the periods shown in the right-hand chart. Performance has also been positive versus the UK domestic market and the universe of developed markets globally over almost all periods (Exhibit 6). SDP’s manager says stock selection, rather than country allocation, has been the biggest contributor to the recent outperformance, with a reasonably even spread of strongly performing companies across Hong Kong, Korea, India and China, and to a lesser extent Taiwan and Thailand. Dobbs comments that this has been achieved amid a value/cyclical recovery without having to compromise on SDP’s principal focus on quality growth companies with good management and strong cash flows. As shown in Exhibit 7, NAV outperformance of the benchmark has followed a reasonably steady path over the past five years, with periods of noticeable underperformance having been both isolated and short-lived.

Exhibit 6: Share price and NAV total return performance, relative to indices (%)

 

One month

Three months

Six months

One year

Three years

Five years

10 years

Price relative to MSCI AC Asia ex-Japan

1.7

3.0

6.0

5.0

14.5

13.6

30.2

NAV relative to MSCI AC Asia ex-Japan

(1.0)

(0.4)

1.6

4.0

13.2

11.2

24.1

Price relative to MSCI World

4.6

9.6

16.8

15.1

11.0

(1.2)

24.9

NAV relative to MSCI World

1.9

6.0

11.9

14.0

9.7

(3.4)

19.0

Price relative to FTSE All-Share

4.3

9.6

15.1

17.2

37.1

23.3

68.7

NAV relative to FTSE All-Share

1.6

6.0

10.3

16.0

35.6

20.6

60.8

Source: Thomson Datastream, Edison Investment Research. Note: Data to end-July 2017. Geometric calculation.

Exhibit 7: NAV TR performance relative to MSCI AC Asia ex-Japan over five years (%)

Source: Thomson Datastream, Edison Investment Research

Discount: Broadly stable but wider than peers

SDP’s discount has been broadly stable in a range of 10-14% over the past two years, narrowing to a 12-month low of 8.7% at 28 July 2017 before widening again to 10.5% on 9 August. The trust may buy back shares if the discount exceeds 10%, although use of this power has been relatively limited. SDP’s discount is above the average of its peer group in spite of its improved performance record, holding out the possibility of further narrowing if the recent improvement is maintained.

Exhibit 8: Share price premium/discount to NAV (including income) over three years (%)

Source: Thomson Datastream, Edison Investment Research

Capital structure and fees

Structured as a conventional investment trust, SDP has one class of share, with 167.6m ordinary shares in issue at 9 August 2017. Up to 14.99% may be repurchased each year to manage a discount, and in the past 12 months, 290,000 shares have been bought back at a cost of £1.0m. A continuation vote is scheduled to take place every five years, with the next due at the 2021 AGM. Borrowing is available through a £50m multi-currency revolving credit facility and a £30m overdraft, with £53.2m drawn at end-H117 versus £22.9m at the 30 September 2016 year-end. This represents 7.0% of net assets at 31 July 2017, compared with a maximum permitted gearing level of 20%.

SDP has recently adjusted its fee structure. Previously, Schroder Investment Management received a tiered annual management fee starting at 0.95% on the first £100m of assets, then 0.90% on the next £200m, 0.85% on the next £100m and 0.80% on assets above £400m. With effect from 1 April 2017, the fee on the first £300m of assets will be 0.90%, falling to 0.80% between £300m and £600m and 0.75% above £600m. This should have the effect of reducing ongoing charges from the current level of 1.1%, although as the change is effective from the halfway point of the current financial year, its full impact will not be seen until FY18. There is no performance fee.

Dividend policy and record

SDP invests for capital growth rather than income, and has no specific commitments to pay a dividend. This gives it the flexibility to invest in faster-growing, smaller companies that may have lower payout ratios than more mature companies. Dividends have, however, been paid in 19 out of 21 years and have tended to be at a level largely commensurate with net income. SDP’s dividend has grown at a compound annual rate of 11.6% over the last five years and the trust has a dividend yield of 1.1% based on the 9 August share price. For H117, net revenue per share was 0.83p, more than twice the level of H116. However, given that the vast majority of revenues (75% of gross and 92% of net in FY16) arise in the second half of the year, it is arguably too early to make any predictions as to the magnitude of any potential increase in SDP’s FY17 dividend.

Peer group comparison

There are 15 trusts in the AIC Asia Pacific ex-Japan sector, including two with a focus on smaller companies and three that have a specific income remit. Exhibit 9 shows data on all 15 trusts, but we have highlighted the five that we see as most directly comparable to SDP. SDP is the largest trust in the sector and has a solid medium-term performance record, ranking third for NAV total returns over one and three years, and fourth over five years. Over 10 years it ranks sixth and is still ahead of the weighted average return. In spite of this, the discount to NAV is wider than average. Ongoing charges are average and there is no performance fee. Gearing is broadly in line with the generally low level for the peer group. SDP’s dividend yield is below the whole-sector average but is only marginally lower than the 1.3% weighted average with the three income funds excluded.

Exhibit 9: AIC Asia Pacific ex-Japan peer group as at 31 July 2017*

% unless stated

Market cap £m

NAV TR
1 year

NAV TR
3 year

NAV TR
5 year

NAV TR 10 year

Ongoing charge

Perf.
fee

Discount (cum-fair)

Net
gearing

Dividend yield (%)

Schroder Asia Pacific

727.3

32.8

71.9

106.1

190.5

1.1

No

(9.0)

105

1.1

Aberdeen Asian Income

392.0

17.2

30.9

52.4

202.2

1.2

No

(7.1)

106

4.5

Aberdeen Asian Smaller

369.7

14.5

30.9

75.1

293.4

1.8

No

(14.0)

110

1.0

Aberdeen New Dawn

263.8

26.6

39.3

62.0

164.1

1.1

No

(13.2)

109

1.8

Edinburgh Dragon

670.3

21.6

42.8

62.5

175.0

1.1

No

(11.6)

107

0.9

Fidelity Asian Values

260.5

17.8

65.3

122.1

184.3

1.3

No

(5.8)

99

1.2

Henderson Far East Income

449.5

17.5

40.7

71.5

137.1

1.2

No

2.4

102

5.4

Invesco Asia

231.9

30.4

67.3

126.3

211.4

1.0

No

(11.7)

97

1.6

JPMorgan Asian

321.8

36.9

73.6

108.5

108.8

0.8

No

(7.9)

100

3.8

Martin Currie Asia Unconstrained

140.3

25.4

50.1

69.8

74.5

1.1

No

(11.5)

102

2.0

Pacific Assets

306.6

12.8

51.0

98.2

106.2

1.3

No

(0.8)

100

1.0

Pacific Horizon

155.2

39.0

58.9

94.6

107.9

1.1

No

(7.8)

108

0.1

Schroder Asian Total Return

244.7

28.0

74.8

103.6

137.3

1.0

Yes

(1.5)

106

1.4

Schroder Oriental Income

621.4

17.2

51.3

97.1

210.3

0.9

Yes

1.3

107

3.5

Scottish Oriental Smaller Cos

323.5

18.9

43.7

97.9

282.4

1.0

Yes

(10.7)

100

1.1

Weighted average

23.0

52.1

88.3

181.8

1.1

(6.8)

104

2.1

SDP rank in sector

1

3

3

4

6

9

9

8

10

Source: Morningstar, Edison Investment Research. Note: *Performance data as at 27 July 2017. TR=total return. Net gearing is total assets less cash and equivalents as a percentage of net assets (100 = ungeared).

The board

SDP has five non-executive directors, all of whom are independent of the manager. Chairman (since January 2016) Nicholas Smith has served on the board since 2010. Anthony Fenn (who will retire at the 2018 AGM) was appointed in 2005, Rosemary Morgan in 2012, James Williams in 2014 and Keith Craig in 2015. All the directors have lived and worked in Asia.

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Copyright 2017 Edison Investment Research Limited. All rights reserved. This report has been commissioned by Schroder AsiaPacific Fund and prepared and issued by Edison for publication globally. All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable; however we do not guarantee the accuracy or completeness of this report. Opinions contained in this report represent those of the research department of Edison at the time of publication. The securities described in the Investment Research may not be eligible for sale in all jurisdictions or to certain categories of investors. This research is issued in Australia by Edison Aus and any access to it, is intended only for "wholesale clients" within the meaning of the Australian Corporations Act. The Investment Research is distributed in the United States by Edison US to major US institutional investors only. 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The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. This document is provided for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research. Edison has a restrictive policy relating to personal dealing. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report. Edison or its affiliates may perform services or solicit business from any of the companies mentioned in this report. The value of securities mentioned in this report can fall as well as rise and are subject to large and sudden swings. In addition it may be difficult or not possible to buy, sell or obtain accurate information about the value of securities mentioned in this report. Past performance is not necessarily a guide to future performance. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (ie without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision. To the maximum extent permitted by law, Edison, its affiliates and contractors, and their respective directors, officers and employees will not be liable for any loss or damage arising as a result of reliance being placed on any of the information contained in this report and do not guarantee the returns on investments in the products discussed in this publication. FTSE International Limited (“FTSE”) © FTSE 2017. “FTSE®” is a trade mark of the London Stock Exchange Group companies and is used by FTSE International Limited under license. All rights in the FTSE indices and/or FTSE ratings vest in FTSE and/or its licensors. Neither FTSE nor its licensors accept any liability for any errors or omissions in the FTSE indices and/or FTSE ratings or underlying data. No further distribution of FTSE Data is permitted without FTSE’s express written consent.

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

295 Madison Avenue, 18th Floor

10017, New York

US

Sydney +61 (0)2 8249 8342

Level 12, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

295 Madison Avenue, 18th Floor

10017, New York

US

Sydney +61 (0)2 8249 8342

Level 12, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Edison is an investment research and advisory company, with offices in North America, Europe, the Middle East and AsiaPac. The heart of Edison is our world-renowned equity research platform and deep multi-sector expertise. At Edison Investment Research, our research is widely read by international investors, advisers and stakeholders. Edison Advisors leverages our core research platform to provide differentiated services including investor relations and strategic consulting. Edison is authorised and regulated by the Financial Conduct Authority (Financial Conduct Authority). Edison Investment Research (NZ) Limited (Edison NZ) is the New Zealand subsidiary of Edison. Edison NZ is registered on the New Zealand Financial Service Providers Register (FSP number 247505) and is registered to provide wholesale and/or generic financial adviser services only. Edison Investment Research Inc (Edison US) is the US subsidiary of Edison and is regulated by the Securities and Exchange Commission. Edison Investment Research Limited (Edison Aus) [46085869] is the Australian subsidiary of Edison and is not regulated by the Australian Securities and Investment Commission. Edison Germany is a branch entity of Edison Investment Research Limited [4794244]. www.edisongroup.com

DISCLAIMER
Copyright 2017 Edison Investment Research Limited. All rights reserved. This report has been commissioned by Schroder AsiaPacific Fund and prepared and issued by Edison for publication globally. All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable; however we do not guarantee the accuracy or completeness of this report. Opinions contained in this report represent those of the research department of Edison at the time of publication. The securities described in the Investment Research may not be eligible for sale in all jurisdictions or to certain categories of investors. This research is issued in Australia by Edison Aus and any access to it, is intended only for "wholesale clients" within the meaning of the Australian Corporations Act. The Investment Research is distributed in the United States by Edison US to major US institutional investors only. Edison US is registered as an investment adviser with the Securities and Exchange Commission. Edison US relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. As such, Edison does not offer or provide personalised advice. We publish information about companies in which we believe our readers may be interested and this information reflects our sincere opinions. The information that we provide or that is derived from our website is not intended to be, and should not be construed in any manner whatsoever as, personalised advice. Also, our website and the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. This document is provided for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research. Edison has a restrictive policy relating to personal dealing. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report. Edison or its affiliates may perform services or solicit business from any of the companies mentioned in this report. The value of securities mentioned in this report can fall as well as rise and are subject to large and sudden swings. In addition it may be difficult or not possible to buy, sell or obtain accurate information about the value of securities mentioned in this report. Past performance is not necessarily a guide to future performance. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (ie without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision. To the maximum extent permitted by law, Edison, its affiliates and contractors, and their respective directors, officers and employees will not be liable for any loss or damage arising as a result of reliance being placed on any of the information contained in this report and do not guarantee the returns on investments in the products discussed in this publication. FTSE International Limited (“FTSE”) © FTSE 2017. “FTSE®” is a trade mark of the London Stock Exchange Group companies and is used by FTSE International Limited under license. All rights in the FTSE indices and/or FTSE ratings vest in FTSE and/or its licensors. Neither FTSE nor its licensors accept any liability for any errors or omissions in the FTSE indices and/or FTSE ratings or underlying data. No further distribution of FTSE Data is permitted without FTSE’s express written consent.

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

295 Madison Avenue, 18th Floor

10017, New York

US

Sydney +61 (0)2 8249 8342

Level 12, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

295 Madison Avenue, 18th Floor

10017, New York

US

Sydney +61 (0)2 8249 8342

Level 12, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

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