It’s Time to Look East...Huayu Auto Systems 0.4 Minth Group 0.3 Guangzhou Kingmed Diagnostics Group 0.3 Venustech Group 0.2 Beijing Thunisoft 0.2 Chime Biologics 0.1 BitAuto 0.1

It’s Time to Look East

Ewan Markson-Brown

G2

Pacific Horizon PowerPoint 16x9

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1

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not a guide to future returns.

This is a marketing communication and should not be considered as

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and conditions can change rapidly and as such the views expressed

should not be taken as statements of fact nor should reliance be placed on

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in their prices may be greater.

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It’s time to look east

- Outlook – look east

- What have we been doing?

- How do we add value?

2


Asia ex Japan – An inflection point?

3

- First in first out

- Most effective response

- Financially sound

VS.


What have we been doing?

4

- Tech adoption accelerating = concentration of winners

- Adding to quality cyclicals

- Energy and commodities

- India vs. ASEAN (Vietnam our largest overweight)


But what about China?

5

© G

L A

rch

ive

/ A

lam

yS

tock P

ho

to

“China is a sleeping giant.

Let her sleep, for when she

wakes she will shake the

world.”

Napoleon Bonaparte


China

6

R&D Expenditure ($bn)

0

100

200

300

400

500

600

700

800

2000 2003 2006 2009 2012 2015 2018 2021

China EU US

Source: UBS.

HOW DO WE MAKE MONEY IN ASIA?

7


Growth2

8

-40

-20

0

20

40

60

80

100

120

1 (high) 2 3 4 5 (low)

Me

dia

n T

ota

l R

etu

rn %

Earnings Growth Quintile

Source: Baillie Gifford & Co and Factset.

Median 5-year USD returns from Asia ex Japan stocks as at the end of December of each year between 1994 and 2019 and with a market capitalisation

larger than time-adjusted USD 1bn.


Looking for Fat Tails

Asia ex Japan Stocks – Range of EPS, 3 year CAGR

9

Source: Factset, Eikon content from Refinitiv, MSCI and FTSE. US dollars.

Based on Asia ex Japan stocks in MSCI AC Pacific ex Japan Index or FTSE Pacific ex Japan Index.

The market consistently fails to recognise or price correctly the likelihood of extreme outcomes

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

20%

Fre

qu

en

cy

Range of EPS 3-Year Compound Annual Growth Rate (%)

3-Year Estimates as 31 December 2019 Rolling 3-year Periods 31 December 1997 - 31 December 2019


Investment Philosophy

10


Pace: SEA Limited

Size of Southeast Asia Internet Economy ($bn)

11

$32B

$100B

$300B

2015 2019 2025

Source:Google & Temasek / Bain, e-Conomy SEA 2019


What are the Opportunities?

12

‒ Broadening out of the portfolio

+ ASEAN/Vietnam

+ China A shares

+ Commodities and Energy


Portfolio – Consistent Growth and Quality Bias

13

June 2020

36.2

8.7

31.1

1.2

10.5 10.5

15.3

2.5

0

5

10

15

20

25

30

35

40

ForecastEarnings Growth

%

Return on Equity%

Price/EarningsRatio (X)

Yield%

Pacific Horizon MSCI AC Asia ex Japan

June 2015

14.4

17.516.4

1.4

9.7

12.2 12.2

2.8

0

5

10

15

20

25

ForecastEarnings Growth

%

Return on Equity%

Price/EarningsRatio (X)

Yield%

Pacific Horizon MSCI AC Asia ex Japan

Source: UBS, Baillie Gifford & Co and MSCI. Sterling.

12 month forward estimates.

Conclusion:

- Look east

- G2


Portfolio

15

-11.3

-4.6

-4.2

-2.6

0.1

0.6

1.2

4.0

4.4

5.3

5.9

-12 -10 -8 -6 -4 -2 0 2 4 6 8

Financials (8.0)

Consumer Staples (0.8)

Real Estate (0.7)

Utilities (0.0)

Industrials (5.9)

Energy (3.9)

Consumer Discretionary (18.9)

Materials (7.8)

Communications Services (18.1)

Information Technology (24.3)

Health Care (10.5)

%

Source: Baillie Gifford & Co and MSCI. Pacific Horizon, as at 30 June 2020.

Excludes cash. Relative to MSCI AC Asia ex Japan. Absolute positions in brackets.

Relative Sector Positions Top and Bottom Five Relative Industry Positions

-7.3

-5.3

-4.9

-3.5

-3.1

3.1

6.9

7.1

7.3

11.9

-10 -5 0 5 10 15

Banks (3.3)

Technology Hardware,Storage & Peripherals (0.6)

Interactive Media & Services (4.1)

Real EstateManagement & Development (0.7)

Insurance (2.3)

Textiles, Apparel & Luxury Goods (3.9)

Metals & Mining (7.8)

Biotechnology (8.1)

Software (7.6)

Entertainment (13.3)

%


Portfolio

16

Holding Portfolio (%)

90 Holdings

Source: Baillie Gifford & Co and MSCI.

Pacific Horizon, as at 30 April 2020.

Cash: 1.2%.


Korea Zinc Company 1.5

Genexine 1.2

Enzychem Lifesciences 1.2

Bioneer 1.1

NCsoft 1.0

SK Hynix 0.9

Samsung Electronics 0.8

Cowell Fashion 0.6

Flitto 0.6

ST Pharm 0.5

iNtRON Biotechnology 0.5

S-Fuelcell 0.4

Doosan Bobcat 0.4

HanAll Biopharma 0.3

LG Innotek 0.3


China 35.2

Alibaba 4.4

JD.com 4.3

Li Ning 3.7

Kingdee International Software 2.9

Tencent 2.4

Ping An Insurance 2.3

Zai Lab 2.1

CNOOC 1.7

Ping An Bank 1.5

Meituan Dianping 1.5

HUYA 1.1

Geely Automobile 0.9

CIMC Vehicle 0.8

Brilliance China Automotive 0.8

Precision Tsugami 0.7

Oriental Metals, Holdings Co 0.7

Chinasoft International 0.6

Ningbo Peacebird Fashion 0.6

LONGi Green Energy Technology 0.5

Huayu Auto Systems 0.4

Minth Group 0.3

Guangzhou Kingmed Diagnostics Group 0.3

Venustech Group 0.2

Beijing Thunisoft 0.2

Chime Biologics 0.1

BitAuto 0.1

South Korea 20.7

Samsung SDI 3.4

L&C BIO 2.2

Douzone Bizon Co 2.0

Koh Young Technology 1.9

Geographical location overweight relative to MSCI AC Asia ex Japan.

Geographical location underweight relative to MSCI AC Asia ex Japan.

Hong Kong 2.2

Hypebeast 0.9

Johnson Electric 0.7

Techtronic Industries 0.6

Philippines 0.5

Ayala Corp 0.5

Philtown Properties 0.0

Mongolia 0.2

Petro Matad 0.2

India 7.2

Zomato 1.7

Info Edge 1.5

ICICI Bank 1.0

ICICI Lombard 0.8

AU Small Finance Bank 0.8

ICICI Prudential Life Insurance 0.5

India Capital Growth Fund 0.3

Future Lifestyle Fashions 0.3

Mahindra CIE Automotive 0.2

Quess Corp 0.1

Vietnam 7.0

Dragon Capital Vietnam Enterprise Investments 2.1

HD Bank 1.1

Military Commercial Joint Bank 0.9

Vingroup 0.9

Hoa Phat Group 0.7

Saigon Securities 0.4

Vinh Hoan 0.3

Binh Minh Plastics 0.3

Yeah1 Group 0.3

Indonesia 4.6

PT Vale Indonesia Tbk 1.2

Nickel Mines 1.2

Aneka Tambang 0.8

Merdeka Copper Gold 0.7

Bank Rakyat Indonesia 0.5

Bank Danamon Indonesia Tbk, PT 0.3

Taiwan 10.7

Accton Technology 3.4

Mediatek 1.8

Genius Electronic Optical 0.9

Chunghwa Precision Test Tech 0.9

Bizlink 0.8

Kingpak Technology 0.7

AirTac International Group 0.6

TCI Co 0.6

TSMC 0.5

SDI Corporation 0.3

TTY Biopharm 0.2

JHL Biotech 0.0

Singapore 10.5

SEA Limited 9.2

Jadestone Energy 1.3



Performance

17

1 Year

(%)

3 Years

(% p.a.)

5 Years

(% p.a.)

10 Years

(% p.a.)

Share Price (%) 46.0 21.9 19.9 13.2

Net Asset Value (Cum Fair) (%) 38.4 16.0 16.7 11.6

Comparative Index* (%) 5.0 5.7 9.9 8.5

Annualised Performance to 30 June 2020

Source: Morningstar and MSCI. Total return in sterling. Pacific Horizon annualised returns for periods ended 30 June 2020.

*On 1 August 2011 the Trust changed its comparative index from the MSCI AC Far East ex Japan index (in sterling terms) to the MSCI AC Asia ex

Japan Index (in sterling terms). For the purposes of the above table, the comparative indices for their respective periods have been chain-linked to form

a single comparative index.


Annual Discrete Performance

18

30/06/15 –

30/06/16

(%)

30/06/16 –

30/06/17

(%)

30/06/17 –

30/06/18

(%)

30/06/18 –

30/06/19

(%)

30/06/19 –

30/06/20

(%)

Share Price (%) -3.4 41.7 36.1 -8.9 46.0

Net Asset Value (Cum Fair) (%) -0.6 39.5 20.3 -6.3 38.4

Comparative Index (%) 3.9 30.8 8.4 3.6 5.0

Source: Morningstar and MSCI, total return in sterling.

Comparative Index: MSCI AC Asia ex Japan.

Annual Discrete Performance


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19

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Documents

It’s Time to Look East...Huayu Auto Systems 0.4 Minth Group 0.3 Guangzhou Kingmed Diagnostics Group 0.3 Venustech Group 0.2 Beijing Thunisoft 0.2 Chime Biologics 0.1 BitAuto 0.1