Excel China Fund Commentary

As of November 30, 2011

The market fell in November amid concern over the European debt crisis and China’s slowdown. Meanwhile, the latest economic data suggests that inflation pressures are declining. Sector-wise, Information Technology was the worst performer during the month, followed by Healthcare and Financials. In terms of Fund performance, the focus on quality and domestic consumption growth in China continued to be beneficial. This was reflected in successful stock selection of several Information Technology, Industrial and Financial stocks.

Market Synopsis
While the market corrected in November due to concerns regarding the EU debt crisis, we believe that inflation and policy risk should start to moderate. The government's pro-growth policies will also make the SME sector, especially mid-caps, deserving of renewed interest going into 2012.

Fund Positioning
We trimmed our position in the luxury auto sector after strong performance. We added some banks as valuations became attractive following the recent market correction. We also added some industrial names, as we are turning more positive on the resumption of government spending on fixed asset investment. We remain positive on companies in the consumer sector, which should benefit from the government's pro-consumption policies, stable demand and strong economic growth.

 Market & Fund Outlook
Our strategy will focus on high conviction companies, which we believe can deliver sustainable earnings growth in the coming years; especially those with strong balance sheets and robust cash flow. We will selectively add to positions in these companies which have been oversold.

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