1

P/E (2018e) 21x ROE 21%

EV/EBIT (2018e) 15x ROIC 15%

EPS growth (2018e) 23% Market cap US$30bn

Net cash to equity 45% Number of holdings 18

Dividend yield 1% Top 10 holdings 77%

Cederberg Greater China Equity Fund Letter 31 May 2018

Performance Chart1

Net Returns in US$ Fund Index Peer group Percentile

Annualised

Since Fund inception 19% 12% 11% 99

5 years 20% 10% 10% 99

3 years 11% 6% 2% 98

2017 75% 44% 36% 99

2016 -7% 5% -5% 44

2015 6% -7% -5% 89

2014 3% 8% 3% 38

2013 42% 7% 10% 99

2012 9% 22% 18% 5

Not annualised

Year-to-date 10% 3% 1% 96

3 months 2% -1% -3% 89

1 month 8% 1% 1% 97

Performance Table1

Top 10 Holdings3

Strategy Long-only equity Auditor Deloitte

Domiciles Cayman, Delaware Custodian Standard Chartered

Fund assets US$388mn Administrator Charter Group

Firm assets US$630mn Cayman counsel Maples & Calder

Minimum US$100,000 US & UK counsel Schulte Roth & Zabel

Dealing Monthly Management fee 1.5%

Benchmark MSCI Golden Dragon

Index

Performance fee 20% of net alpha, with

6% abs. return trigger

Peer group Greater China Equity Phone UK +44 207 871 7228

China +86 13072171983

ISIN KYG2030A1004 Email info@cederbergcap.com

NAV 305.205 Inception 1 Jan 2012

Median Portfolio Characteristics5

Alibaba Ecommerce

Beijing Tong Ren Tang Traditional Chinese Medicine

JD.com Ecommerce

Kweichow Moutai Distillers

Midea Group Home appliances

Noah Asset management

Tencent Social network

Wuliangye Yibin Distillers

Yihai Condiments

YY Online streaming

Fund Key Features6

Fund Index

Beta 1.08 1

Volatility 21% 16%

Sharpe Ratio 0.93 0.75

Correlation 0.84 1

Past performance is not indicative of future results. Please see regulatory infor-

mation on page 4. Source: Bloomberg, Charter Group, Cederberg. 31 May 2018

Portfolio Positioning2

Risk Metrics4

80

120

160

200

240

280

320

Cederberg Greater China MSCI Golden Dragon

-4%

-3%

-2%

-1%

0%

1%

2%

3%

4%

5%

Bull months Bear months Average

Upside Capture vs. Downside Protection

MSCI Index

Cederberg

5%

5%

10%

39%

41%

Other Equity

Health Care

Niche Financials

Consumer Brands

Media & Internet

1%

22%

32%

45%

Singapore

A-shares

Hong Kong

United States

2

Cederberg Greater China Equity Fund Letter 31 May 2018

On the road

In May, 15 investors joined the Cederberg team for a tour around

China. In this letter, we provide a summary of our journey.

Day One: Shanghai

We visited some of Shanghai’s prime retail areas to see how

Western and Chinese brands present themselves, and how

offline and online retail are integrating. The highlight was a visit

to Starbuck’s Reserve Roastery, a 30,000 square foot coffee tem-

ple, the only one of its kind outside of Seattle. To see how Chi-

nese people – traditionally tea drinkers – are embracing Star-

bucks makes one want to buy the company’s shares on the spot.

This is happening despite the fact that a tall latte will set you back

$4.50 vs. $3 in the US. The company has 3,300 stores in China

and is planning to open 600 per year for the next several years

(compare this with India, where it has taken five years to open

100 stores). Management believes China could eventually sur-

pass the US to become its biggest market. How has Starbucks

been so successful? By catering to local tastes, by creating an

aspirational luxury brand, and by establishing a culture where

staff and customers are treated like family.

We also visited a JD/Elle fashion pop-up store, and saw how JD is

using facial recognition technology to help fashion brands by ana-

lysing who visits their stores, how they move through the store,

what they are browsing etc. This information can help brands to

improve their displays and their inventory management. We fin-

ished the day with dinner on the Bund, overlooking the famous

Pudong skyline.

Facial recognition at JD’s pop-up store. Source: Cederberg Capital

Day Two: Shanghai

A former marketing manager of Alibaba introduced us to the

concept of “new retail”: omni-channel, data-driven retail centred

on improving the customer experience. China is at the vanguard

of innovation in retail globally: integrating online and offline, lev-

eraging vast data sets to advertise and/or sell, the use of mobile

wallets, to name but a few. Cederberg’s holding Alibaba is lead-

ing the charge - with arguably the most comprehensive data set

of any company globally, it is in an enviable position. Later we

witnessed new retail in action when we visited an Alibaba Hema

store. Hema is part grocery store (it stocks fresh, imported items

based on nearby residents’ online shopping preferences), part

restaurant (chefs will prepare recently purchased goods for con-

sumption in the shop) and part e-tailer (goods ordered online or

offline will be delivered within a 3km radius in 30 minutes or

less). Since Alipay is the only accepted means of payment, even

octogenarians have been forced to use the app!

Fishing for lunch at Hema. Source: Cederberg Capital

Next up was a meeting with private wealth and asset manager

Noah’s finance director and chief talent officer to assess how the

company attracts, trains and retains top talent. Noah’s stringent

risk management and compliance culture means employees can

sleep better at night, knowing they’re selling the right products

to the right people. The industry offers a multi-decade growth

opportunity from a low base, both with respects to domestic as

well as international investments (96% of Chinese high net worth

individuals’ investible assets are domestically held, though this is

rapidly changing). As a best-in-class operator with a strong pri-

vate equity & venture capital business and a broad international

footprint, Noah is well-placed to capture this growth.

Day Three: Zhengzhou

Zhengzhou is a third tier city – comparable to Omaha in the US or

Newcastle in the UK – yet it boasts a population of 10mn people.

Our first visit was to Yutong Bus, the largest manufacturer of mid

- and large-sized buses in the world. Today, 35% of the c. 70,000

buses they sell annually are electrified, though that figure is

steadily rising. The company believes that within a few years,

selling new energy buses will be more profitable than selling tra-

ditional ones, even without any government subsidies.

3

Cederberg Greater China Equity Fund Letter 31 May 2018

That was followed by a visit to condiment brand Yihai’s factory.

Its growth potential remains huge due to the strength of its

brand vs. point-of-sales penetration of 50%, and due to sister

company Haidilao’s growth plans - this year it is adding 200

stores to a base of 300. A visit to one of its Zhengzhou restau-

rants confirmed business is booming.

Day Four: Guangdong Province

Our first meeting was with Midea, the world’s largest manufac-

turer of home and kitchen appliances. One would expect this to

be a tough business, yet Midea is highly profitable due to its

wonderful brand, distribution system and culture, which reminds

one of McKinsey or Goldman Sachs. Automation is evident on the

factory floor, yet there is scope for further productivity gains,

especially in assembly - its recent acquisition of German robotics

business Kuka will no doubt play a role in this.

We also met with the CFO of private school operator Bright

Scholar Education and visited two of their schools. Bright Scholar

is China’s largest operator of international and bilingual private

schools, with 35,000 students across 62 schools. Last year, 90%

of the students from their Guangdong International School were

accepted into the Top 50 universities in the world. No wonder

Chinese parents are willing to pay more than RMB 150,000

(USD23,500) per year to send their kids there. Bright Scholar is

well-placed to acquire sites for new schools due to its relation-

ship with Country Garden, China’s largest property developer,

which has over 1,000 projects across China.

Day Five: Guangdong Province

We met with the CFO of YY, the live broadcasting social network

with 80mn users. YY continues to go from strength to strength,

both its core business as well as Huya, the e-sports broadcasting

business it started several years ago. Interestingly, our visit coin-

cided with Huya’s IPO - it has since gained over 200%!

The group at YY’s Guangzhou HQ. Source: Cederberg Capital

Afterwards, we visited the plant of Foshan Haitian Flavouring Co,

the largest manufacturer of soy sauce in the world. The massive

site is highly automated and boasts stringent hygiene standards.

Foshan Haitian’s excellence isn’t restricted to manufacturing: its

high-quality products sell at a premium and its distribution sys-

tem is one of the best we’ve come across. While its current valu-

ation lacks a margin of safety, we hope we’ll get a chance to own

this fine company one day.

Conclusion

The purpose of the trip was to demystify China for our investors,

to help them assess the investment opportunity set especially as

it pertains to the Chinese consumer, and to familiarise them with

Cederberg’s approach. From Cederberg’s point of view, we

gained immensely valuable insights from 15 fresh pairs of eyes

scrutinising our holdings. Given the trip’s success, we may well

do something similar in 2019 - watch this space!

If you have any questions or comments, we would love to hear

from you.

Warm regards,

4

Regulatory information and risk warning

This document is issued for information only by Cederberg Capital Limited (the “Firm” or “Cederberg”). The Firm is authorised and regulated by the Financial Conduct

Authority (registration number 775092). It does not constitute an offer by the Firm to enter into any contract/agreement nor is it a solicitation to buy or sell any invest-

ment. Nothing in this document should be deemed to constitute the provision of financial, investment or other professional advice in any way. The contents of this docu-

ment are based upon sources of information believed to be reliable, however, save to the extent required by applicable law or regulations, no guarantee, warranty or

representation (express or implied) is given as to its accuracy or completeness and, the Firm, its members, officers and employees of the corporate member do not accept

any liability or responsibility in respect of the information or any views expressed herein. All data is sourced from the Firm unless otherwise indicated. This document may

include forward-looking statements that are based upon the managers’ current opinions, expectations and projections. The Firm undertakes no obligation to update or

revise any forward-looking statements. Actual results could differ materially from those anticipated in the forward-looking statements. This document is not aimed at

persons who are residents of any country, including the United States of America (“USA”) and South Africa, where the funds referred to herein are not registered or ap-

proved for marketing and/or sale or in which the dissemination of information on the funds or services is not permitted. This document should not be distributed to any

third party without the express approval of the Firm. It has been designed for a professional audience only and should not be passed onto a retail audience.

Disclosure

1 Past performance is not indicative of future performance. Investors whose reference currency differs from the US dollar may be subject to exchange rate movements

that alter the value of their investments. MSCI Golden Dragon Total Return Index includes net dividends reinvested. Peer group is Bloomberg universe of equity funds

with Greater China geographical focus. Source: Charter Group Admin, Bloomberg, Cederberg.

2 Category definitions as per Cederberg. Source: Bloomberg, Cederberg

3 Source: Cederberg

4 Upside Capture is calculated by dividing the fund’s average NAV return during months in which the index had a positive return by the average index return during those

months. Downside Capture is calculated by dividing the fund’s average NAV return during months in which the index had a negative return by the average index return

during those months.

5 Median portfolio characteristics are quoted as of 11 June 2018. Source: Bloomberg, Cederberg.

6 As of 12 June 2018. Source: Cederberg.

Investors should note investment involves risk. The price of units may go down as well as up and past performance is not indicative of future results. Investors should read

the Fund’s Offering Memorandum for further details and risk factors, in particular those associated with investment in emerging markets. Information in this report has

been obtained from sources believed to be reliable but Cederberg Capital does not guarantee the accuracy or completeness of the information provided by third parties.

Cederberg Capital Limited

26 Throgmorton Street

London EC2N 2AN

Tel. +44 207 871 7228

Cederberg China

Suite 351, 3rd floor, 116 Shimen Road No.1

Shanghai 200041

Tel. +86 130 7217 1983

For more information please contact info@cederbergcap.com

www.cederbergcap.com

Cederberg Capital Limited is authorised and regulated by the Financial Conduct Authority (registration number 775092)

Cederberg Greater China Equity Fund Letter 31 May 2018