2012 China Confidential - Excel China Fund

For Professional Investors Only

February 2012

Agnes Deng Co-Portfolio Manager of Excel China Fund & Head of Hong Kong Equities at Barings

For Dealer Use Only

China Confidential

February 2012

EXCEL CHINA FUND

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Excel Funds Management Inc. is Canada’s first and only emerging markets focused mutual fund provider. For over 12 years, we have been partnering exclusively with best in class, on-the-ground portfolio managers that bring Canadian investors firsthand insight and expertise in these flourishing economies. Through our funds, investors gain early exposure to companies positioned to become future leaders in some of the world’s fastest growing markets. Excel Funds maintains a highly ranked fund family that is focused on emerging market growth opportunities.

China Market Investment Strategy

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  Inflation and policy risk should start moderate. Policy sensitive sector could reverse the under-performance.

  Market valuation is close to the historical trough on bearish sentiment. Upcoming earning downgrade risk is largely priced in.

  Expect China policy to place more emphasis on “pro-growth”. Policy easing targeting the small and medium enterprises already begun.

  Raising wages will continue to support consumption. Social housing and public utilities becomes the new driver for fixed asset investment growth. Domestic demand will largely offset export slowdown.

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Source: NBS, CEIC, UBS estimates (January 2012)

Tightening bias to remain, key is when it will peak out

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China: Purchasing Manager Index (PMI)

Economic Contraction

Economic Expansion

China shifting policy, but slowly

Interest rate

Source: HSBC as at January 2012 Source: CLSA as at January 2012

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YoY growth rate of M2 Loan-to-deposit ratio

We do not share the view of an ‘imminent’ banking crisis in China

Source: YoY growth rate of M2 – CLSA as at January 2012; Loan-to-deposit ratio - CEIC, RBS as at January 2012

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Central Government Debt Outstanding (as a % of GDP)

China appears to be able to service its debt with ease, even if it had to absorb all local government debt

Source :IMF, RBS as at September 2011

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China: average annual wage Wage inflation in different sectors

Note: Assuming the average annual wage for 2015 = twice that for 2009, as 2010 figure is not available

Double compared with 2010

Source: (China: average annual wage) Ministry of Human Resources and Social Security, Daiwa Securities Group as of 30 September 2010; (Wage inflation in different sectors) CEIC, HSBC as at September 2011

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Offshore-listed Chinese stocks are trading below the historical mean in P/E terms Forward P/E for MSCI China

Source: Goldman Sachs as at January 2012

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  Increase exposure in policy sensitive sector valuation largely priced in policy risk and concern of economic slowdown

  Property stocks become attractive on low valuation and recovery of transaction volume

  Focus on earnings visibility and quality growth ideas in Technology and Internet sector

  Revisit the export sector focus on market leaders which play consolidator roles and with strong balance sheet

Source: Barings

China’s Team and Investment Process

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Agnes Deng Head of HK China Equities Investment Experience: 13 Years

William Fong Investment Experience:

12 Years

Jim Chen Investment Experience:

9 Years

Winston Ke Investment Experience:

6 Years

Derick Leung Investment Experience:

6 Years

Lin Tang Investment Experience:

3 Years

Nicola Lai Investment Experience:

6 Years (Taiwan Specialist)

Investment Managers Analysts

Asian Country Specialists Risk Management Portfolio Analytics Strategic Policy Group

Zhi Zhi Tan Investment Experience:

6 Years

Source: Barings

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High

Low

Valuation Cheap Expensive

Growth at a reasonable

price

Gro

wth

We seek under-recognised growth companies that will deliver positive surprise

  We seek to identify “Unrecognized Growth” opportunities at their earliest stages in an unconstrained investment universe.

  90/120 rule : 90-120% of market PER

Source: Barings Source: Barings

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Research augmented by regular contact with target companies

GROWTH VALUATION MANAGEMENT LIQUIDITY CURRENCY

Unrecognized growth

Favorable risk/reward

Credible management

Ability to finance growth

Sensitivity to currency

Enterprise Value/Earnings Before Interest, Tax, Depreciation and Amortization

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Transportation: Airline . Shipping .

Port . Toll Road

Financials: Banks .

Insurance . Brokerage

Telecoms IT + Internet

Effective, Efficient and Focus

Consumer - C. Staples - Healthcare - C. Disc. - Retails

Property - Commercial - Residential

- Energy - Basic Material

Coa

l Utilities - IPP

Manu- facture

Construction

Commodities

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Active comprehensive coverage and rating

Stock Universe 1720

Primary Companies Researched 169

Index Stocks Covered 78

Index weight researched 84.4%

Non-index names researched 91

“1” & “2” rated stocks 104

Company visit in last twelve months 1001*

Screening Process

Data as of 31 January 2012, Source: Barings, MSCI, Factset * Data as at 30 June 2011

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  All research ideas scored by conviction: 1 (outperform) to 5 (underperform)

  Same treatment on index stocks vs non index stock, small-mid caps vs big caps

  Portfolio focused on companies scored 1 and 2

  System engenders accountability, transparency and communication

Transparent methodology of conviction based scoring

Common, transparent stock research and scoring system

Stock Score versus Benchmark June 2007 to June 2011

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  Unrecognised earnings growth prospects

  Bottoming of earnings expectations and valuations

  Catalyst that will lead to the stock being re-rated

  Focus on stocks rated 1 to 2

  Stock is downgraded to sell

  We detect deterioration in fundamental outlook

  We believe valuations have fully discounted growth prospects

  We have a significantly more attractive idea

We buy when we identify Triggers for a sell

A disciplined approach to buy and sell

IPO Process   Selective in IPO subscription

  Focus on long term investment conviction

  Clear target on both price and position size

Portfolio Construction & Fund Performance

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Greater focus on China direct plays, due to their compelling valuation and growth prospects

Source: Baring Asset Management

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Focusing on the secular ‘growth’ sectors

Sector Allocation vs Index* Major Underweight/Overweight Positions Fund (%) Index (%)*

Information Tech 24.4 6.0

Consumer Disc 13.2 6.0

Health Care 4.0 0.8

[Cash] 2.3 --

Materials 5.0 5.3

Industrials 5.9 6.6

Utilities -- 2.1

Consumer Staples 0.9 5.3

Energy 13.4 19.0

Telecom Services 4.0 12.7

Financials 27.0 36.2

* Index - MSCI China Source: Baring Asset Management

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Portfolio Characteristics

Portfolio (%)

Index* (%)

Forward P/E (FY2) 10.2x 8.9x

Price/Book 2.2x 1.9x

ROE 22.8% 21.4%

Number of Stocks 60 148

Portfolio Turnover Risk Summary Tracking Error vs. Index* 8.1%

Beta vs. Index* 1.1

The rolling 12 month portfolio turnover (adjusted)

79.2%

Market Capitalization Comparison Portfolio

(%) Benchmark*

(%)

Over US$10 bn 39.8 63.9

US$1-10 bn 51.3 34.7

Below US$1 bn 7.7 1.4

Weighted Avg (US$ bn) 24.1 54.3

Remarks: Investment involves risk. Past performance is not an indication of future performance. Please refer to the Regulatory Disclosure. Source : MSCI, Style Research, Barings * Index: MSCI China

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Last updated: 30th January 2012

Agnes Deng, CFA

Head of Hong Kong China Equities Investment Director, Asia Pacific Equity

Location: Hong Kong Investment Experience: 13 Years

Agnes is the investment manager of the Baring Hong Kong China Fund and Greater China Fund Inc. She also takes the lead role in Hong Kong China specialist research. Agnes joined Baring Asset Management in 2007 from Standard Life Investment (SLI) in Asia where she was an Investment Director with considerable experience in running portfolios focusing on the Hong Kong China as well as the Asian region. The SLI China Fund she managed consistently ranked in the top quartile positions in the peer group performance surveys. Agnes also worked closely with Standard Life’s asset management joint venture in China and provided recommendations on strategy and asset allocation. Agnes received a BA in English Literature from Xiang Tan University (Hunan) China and an M.B.A. from the McGill University, Montreal, Canada. Agnes was awarded the CFA designation in 2001. She speaks English, Mandarin and Cantonese fluently.


William Fong, CFA

Investment Director, Asia Pacific Equity


William is the lead manager of Baring China Select Fund and Baring China Growth Fund. He also manages a number of dedicated Hong Kong China portfolios including the co-manager role of Greater China Fund, Inc. His research responsibilities include Hong Kong, China and Taiwan. He is also a member of the Technology Global sector team. William joined Baring Asset Management in 2004 from Primasia Securities where as an Investment Analyst specialising on Taiwanese stocks. He received a B.B.A. (Hons.) in Finance from The Chinese University of Hong Kong. William was awarded the CFA designation in 2003. He is fluent in Cantonese, English and Mandarin.

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Jim Chen, CFA

Investment Manager, Asia Pacific Equity

Location: Hong Kong Investment Experience: 9 Years Industry Experience: 11 Years

Jim is an investment manager responsible for institutional China portfolios in our Hong Kong China equities team. He joined Barings in July 2010 from Sumitomo Mitsui Asset Management (Hong Kong) where he managed Greater China funds and led the China research analyst team. Prior to that, he worked for CITIC Capital Holdings as a fund manager of its China funds. Jim received a BA in International Trade from Wuhan University China, an MA in Financial Economics from the University of Maine, USA, and an MBA from Northeastern University, Boston, USA. He is also a CFA Charterholder. Jim speaks English, Cantonese and Mandarin fluently.


Winston Ke, CFA

Senior Investment Analyst, Asia Pacific Equity


Winston has research responsibility for Hong Kong and China. He joined Baring asset management in April 2010 from First State Cinda Asset Management where he covered China A share market as a senior equity analyst. He started his career as a management trainee with HSBC. He is a CFA Charterholder and received a BA and a MA from Nanjing University. He is fluent in English and Mandarin.

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Derick Leung

Investment Analyst, Asia Pacific Equity


Derick Leung has research responsibility for Hong Kong and China . He joined Baring Asset Management in May 2008 from Geminis Capital International, where he worked as an analyst covering Greater China markets. He received a BEng from The University of Hong Kong and an Msc from University of Warwick. He is fluent in Cantonese, English and Mandarin.


Zhi Zhi Tan



Zhizhi has research responsibility for Hong Kong and China. He joined Baring Asset Management in December 2011 from Heju Investment, where he was a senior equity analyst. Prior to that, he worked as an investment analyst for ABN AMRO TEDA Fund Management, covering commodities and telecommunication sector from 2006 to 2010. Zhizhi received a BA from Renmin University of China. He is fluent in English and Mandarin.

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Lin Tang



Lin Tang has research responsibility for Hong Kong and China. She joined Baring Asset Management in October 2010 from HSBC Markets (Asia) Limited, where she worked as an equity sales covering Hong Kong and China markets. She received an MBA in Finance from The University of Chicago Graduate School of Business. She is fluent in Mandarin, English and Cantonese.

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EXCEL FUNDS Commissions, trailing commissions, management fees and expenses all may be associated with mutual fund investments. Please read the simplified prospectus before investing. The indicated rates of return are the historical annual compounded total return including changes in unit value and reinvestment of all distributions and do not take into account sales, redemption, distribution or optional charges or income taxes payable by any security holder that would have reduced returns. Mutual funds are not guaranteed, their values change frequently and past performance may not be repeated. The rates of return shown are used only to illustrate the effects of the compound growth rate and are not intended to reflect future values of the returns on investment in Excel Funds.

BARINGS ASSET MANAGEMENT (ASIA) LIMITED This document is issued by Baring Asset Management (Asia) Limited. This document is intended for receipt solely by persons who are professional investors/advisors and must not be circulated or distributed to other persons. The information in this document does not constitute investment, tax, legal or other advice or recommendation or, an offer to sell or an invitation to apply for any product or service of Baring Asset Management. We reasonably believe that the information contained herein is accurate as at the date of publication but no warranty (express or implied) or guarantee is given as to accuracy. The information and any opinions expressed herein may change at any time. This document must not be used, or relied on, for purposes of any investment decisions. Baring Asset Management group and its affiliates/staff may own or have positions in any investment mentioned herein or any investment related thereto and from time to time add to or dispose of any such investment. This document may include forward-looking statements which are based on our current opinions, expectations and projections as of the date on the cover hereof. We undertake no obligation to update or revise any forward-looking statements. Actual results could differ materially from those anticipated in the forward-looking statements.

Transactions in derivative instruments may be used to meet the investment objectives of the Fund and may therefore lead to higher volatility to its net asset value and may involve a greater degree of risk than is the case with conventional securities.

A portion of the fund’s portfolio is invested into emerging markets and investors should be aware of the risk associated with such investments.

Investment involves risks. The price of units may go down as well as up and the past performance does not indicate future performance. Investors should read the offering documents for details and the risk factors. Investors should not base on this document alone to make investment decisions. Investors please refer to offering documents for further details, including risk factors. This document has not been reviewed by the Securities and Futures Commission of Hong Kong.

Research Material Baring Asset Management only produces research for its own internal use. Where details of research are provided in this document it is provided as an example of research undertaken by Baring Asset Management and must not be used, or relied upon, for the purposes of any investment decisions. The information and opinions expressed herein may change at anytime.

Economy & Finance

2012 China Confidential - Excel China Fund