| Management Hsiu-Mei Ho, Senior Portfolio Manager of First State Investment is at helm of First State Asia Innovation and Technology Fund since April 2003. Prior to joining First State Investments, she worked for Citigroup Asset Management and Schroder Investment Management (Hong Kong). With an Honor B.A. in Economic of the National Taiwan University and more than ten years working experience in Taiwan, she has a relatively strong knowledge in Taiwan equity market. She obtained her MBA (major in Finance) from the University of California, Berkeley, USA. Investment Strategy First State Asia Innovation and Technology Fund primarily invests in information technology and manufacturing co mpanies with assets in, or revenues derived from investments in the countries of Asia-Pacific including Japan, New Zealand and Australia. Sectors include technology, telecommunications, manufacturing, biotechnology, healthcare and other emerging technological sectors. The Fund basically applies bottom up approach for stock selection. The Fund is looking for stocks trading at price-to-earning ratio ranged from 10 times to 15 times with convincing management quality. Stocks with dividend yield of 4 percent or more are preferred. Portfolio AnalysisFirst State Asia Innovation and Technology Fund basically applies bottom-up approach for stock selection. However, country allocation has played an important role in the fund's investment strategy as well. The Fund used to be a keen fan of Japanese stocks, as Japanese holdings accounted for 29.1 percent of its asset at December end 2004. However, the Fund had kept inching out of this territory and adding Taiwanese stocks throughout 2005, leaving no exposure to Japan currently. During 2005, the Fund had increased positions in Taiwan from 29.4 percent to more than 50 percent, more or less reflecting team's macro view. With Japanese stocks lackluster performance these years, the Fund's evacuation plan has been proven a successful one, helping the Fund to surpass other Asian tech funds since 2005. Besides, Hsiu-Mei Ho's expertise in Taiwan equity market could also help in this regard. Although the Fund has no exposure in Japan so far, the Fund management claims that good video game console producers with good prospects are potential targets. Recently, the Fund has increased South Korean and Chinese stocks at the cost of Taiwanese stocks. The Fund management's intentions are twofold: 1) Profit taking for Taiwanese stocks given their stretched valuations. As of July end in 2007, Taiwanese stocks including Catcher Technology, Mediatek, Powertech, Transcend Information, Faraday and Global Unichip are marked on the profit taking list; 2) Turning to more attractive investments, especially some Chinese and South Korean names, in terms of business models and prospects. This year the Fund has purchased Zhuzhou CSR Time Electric, Neo-Neon Holdings and Samsung Heavy Industries. It is interesting to note that the Fund usually has some portion of non-tech stocks. As of 31st December 2006, the Fund held some financial plays like China Merchant Bank (2.16%), Ping An Insurance (1.76%), Shinhan Financial Group (1.20%) and Mahindra & Mahindra Financial Services (1.50%), and material play like China Shenua Energy (1.61%). Given that Asian financial stocks, especially Chinese, and material stocks are big gainers in the latest bull-run, the fund's non-tech stocks contributed to its outperformance. In 1H07, the Fund sold out all Chinese financial plays, instead adding some other non-tech stocks like Indian's ICIC Bank (0.72%), and Hong Kong exporter Li & Fung (1.52%) into the portfolio. The Fund has stood at the top of Morningstar category for a long bout but its risk is not as sexy as its return, as the Fund's 3-year volatility as of August end is 19.45, which is also the highest of the category. | ||
