identify important trends and generate outsized returns in...

GaveKal UCITS Funds Newsletter November 2013

www.gavekal.com

Data Source: GaveKal Capital Limited/SGSS (Ireland) Limited/Morgan Stanley Capital International Inc. (“MSCI”)

Please see final pages for Important Disclosures

Louis-Vincent Gave [email protected]

Contact

Suite 3101, Central Plaza

18 Harbour Road, Wanchai

Hong Kong

Tel: +852 3987 6255

Fax: +852 2877 5083

Fund Website:

http://www.gavekal.com/gcl-asia/

http://www.gavekalcapital.com/ucitsfund.php

An End-of-Year Slumber?

With many markets entering an end of the year slumber, it was challenging to identify important trends and generate outsized returns in the various GaveKal UCITS funds. The World MSCI was up 1.78% in November, the Asia-Pacific MSCI, global bonds and the US dollar index (DXY) were essentially flat. Basically, November was a broadly uneventful month in which:

• The GaveKal Asian Opportunity UCITS fund (Euro) rose by 1.21%, making up some of the lost ytd relative ground.

• The GaveKal Knowledge Leaders UCITS fund (USD) rose by 1.3%.

• The GaveKal China Fixed Income UCITS fund (USD) rose by 0.44%, outperforming the HSBC China offshore investment grade bond index for the 16 month since inception 21 months ago, and delivering its 17th month (out of 21) of positive performance.

• The GaveKal Dynamic Futures UCITS fund (USD) rose by 1.33% for its tenth consecutive month of gains. Since inception in February of this year, the fund has gained 30.8%. Interestingly, the fund turned net short on December 11th.

So with little excitement coming from financial markets, we thought we should create our own spark and so launched, on December 1st, a new GaveKal UCITS fund: the GaveKal Asian Value Fund. The fund launched with US$10m of assets (all of which belong to GaveKal partners) and aims to own roughly 30-45 equities across “developing Asia” (ex-Japan and ex-Australia). The fund is managed by an old GaveKal friend, Gavin Ma (Gavin has been a client of GaveKal Research in his times at Wellington, Oeschle, and Tudor!) and Eric Wong (who has been with GaveKal for the past three years). And we feel fairly confident that the timing for our Asian value fund launch is rather propitious.

Look at it this way: if Asian blue chips such as Samsung Electronics (PER: 6.4x), Hyundai Motors (PER: 6.7x), HSBC (P/B: 1.1x) or Hutchinson Whampoa (PER: 13x) are back to valuation levels usually registered in crisis, then it seems likely that the opportunities in the second string, lesser known names may even prove more compelling. And they are: some of the names we have placed in the portfolio include Sinopec Engineering, with a cash to market-cap ratio of 16%, strong operating and free cash flows and strong order-book momentum as China upgrades its refining capacity and builds more coal-chemical projects. Or Huadian Fuxin, a diversified clean energy provider in China with a portfolio of wind, hydro, coal, nuclear and other renewable projects with stable cash flows of coal-fired and hydro power projects being used to fund expansion into renewable power projects. Or China Zhengtong Auto Services, a Chinese auto dealer beginning to enjoy recurring revenues from high-margin after-sales services (parts & services, finance & insurance).

And the list of Asian undervalued stocks goes on; though what leaves us encouraged is that, at last, the momentum of North Asia’s equity markets seems to have become positive. We thus hope that the combination of undervalued equities and positive momentum will prove a powerful one.



GaveKal Asian Opportunities UCITS Fund

The Fund’s Philosophy: Investing in Asia presents two major challenges for foreign investors: greater individual company risk and abrupt changes in policies by governments whose processes are very different than those that prevail in Western democracies. As a result, country risk tends to be a primary driver of return. Against this landscape, we believe that two strategies fundamentally make sense for investors aiming to deliver better risk-adjusted returns than equity benchmarks: a) a deep-value, bottom-up driven strategy or b) a strategy which aims to identify where in Asia bull markets are the most likely to unfold, and then overweight the more aggressive, higher-beta growth stocks in those countries. Of course, the downside of a focus on high-beta growth stocks is that when equity bear markets occur, these can prove very damaging. This is why, in the GaveKal Asian Opportunities UCITS Fund, we keep some of the fund’s capital invested in Asian fixed income. Through the combination of these three books, the GaveKal Asian Opportunities UCITS fund aims to outperform the Asia-Pacific MSCI index with a lower volatility. The fund offers daily liquidity with US$, Euro and GBP share classes.

Annualized Volatility and Returns Since Inception Historical Performance against Asia-Pacific MSCI

GaveKal Asian Opportunities UCITS Fund - Euro share class Inception date: January 2006

Latest NAV (EUR A) 163.46 Annualized returns since inception 6.40%

Monthly % change 1.21% Annualized volatility since inception 13.18%

12m % change 4.19% Number of equity positions 56

Returns since inception 63.46% Information ratio 0.47

Fund AUM EUR 468m Firm AUM USD 1.7b

GAOUF (EUR), 13.18%, 6.40%

MSCI ASIA TR (EUR), 14.92%,

2.18%

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GAOUF (EUR) Since Inception

GAOUF (EUR) MSCI ASIA TR (EUR)

Review of the past month: The fund outperformed the Asia MSCI for its second consecutive month in November with the outperformance coming entirely from the equity exposure—and within that, from the fund’s decision to overweight Japan and China. Starting the month, the fund was overweight China by some 12.8% which helped boost relative performance by 56bp, with another 31bp of outperformance coming from stock selection. In Japan, our second largest holding (Panasonic) started to catch favor as the market started to digest that Panasonic is now the producer for the car batteries going into the red-hot Tesla’s. Our stake in Panasonic alone contributed +31bp of performance with the stock selection effect in other Japanese stocks adding another +66bp.

The one tragic development in November in the region was the unleashing of Typhoon Haiyan which devastated the Philippines, killing thousands and unleashing misery in the affected parts of the country. As might be expected following such an exogenous shock, the MSCI Philippines fell -5.83% in USD term and PHP weakened by 1.3%. The fund lost -84bp on relative return as the fund remains overweight the country by some 7.5%.




Market Cap Exposure in US$ as % of Total NAV Fixed Income Allocation by Country as % of Total NAV

Equity Allocation by Country as % of Total NAV Top Ten Equity Positions

Currency Exposure as % of Total NAV Asset Allocation Over the Past Two Years

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EQUITIES (Including Futures) BONDS CASH

HKD, 27.22%

USD, 17.23%

CNY, 13.01%

SGD, 8.96%

PHP, 8.07%

KRW, 7.37%

MYR, 5.33%

AUD, 4.68%

INR, 2.94%EUR, 2.44%

TWD, 1.25%THB, 0.95% IDR, 0.43%

JPY, 0.14%

EQUITY % of NAV

P anas onic C orp 2.69%

S ams ung E lectronics 2.67%

Hutchis on Whampoa L td 2.55%

Agricultural B ank Of C hina-H 2.46%

Guangdong Inves tment L td 2.41%

C hina C ons truction B ank 2.35%

Techtronic 2.17%

Megaworld 2.12%

Toyota Motor C orp 1.92%

S inopec E ngineering Group-H 1.77%

Total 23.10%

China, 23.68%

Japan, 21.13%

Philippines, 8.07%

Korea, 7.37%

Hong Kong, 5.12%

Australia, 4.65%

India, 2.94%Taiwan, 1.25%

Thailand, 0.95%Singapore,

0.59%

Singapore, 8.50%

Malaysia, 5.69%

China, 5.33%

Hong Kong, 3.01%

Indonesia, 0.43% India, 0.16%

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Market Cap in US$




Fund Share Class Details

Fund Management and Service Providers Fund Terms Launch Date 11 January 2006

Domicile Ireland

Share Classes A and B (Institutional), C (Retail)

Denomination EUR/USD/GBP (Income & Accumulation Shares)

Issue Price €100/$100/£100

Minimum Subscription A & B €250,000/$250,000/£250,000

Minimum Subscription C €10,000/$10,000/£10,000

Fees A & B 1.5% management fee p.a., no performance fee

Fees C 2% management fee p.a., no performance fee

Dealing Day Daily (every day that is a Business Day in Dublin and Hong Kong)

Valuation Day The Business Day prior to the relevant Dealing Day

Subscription and Redemption Deadline

5pm (Irish time); 2 Business Days prior to the relevant Valuation Day

Redemption Fee None

Fund Reporting Status Yes (Share Class B GBP only)

Investment Advisor GaveKal Capital Limited

Auditor Deloitte & Touche

Administrator Societe Generale Securities Services, SGSS (Ireland) Limited

Custodian Societe Generale

Legal Advisor Dillon Eustace (Ireland)

G AOUF (E UR O A S hare C las s)Inc eption Date: 11 J an 2006

Net P erformance % -0.31% 1.18% -1.25% -1.15% -4.51% -0.18% 1.23% 1.09% 1.87% 3.67% 2.49% 3.53% 7.63% 7.63%

MS CI AS IA P AC TR (EURO) Return 0.21% 2.02% 0.26% 0.64% -7.94% -0.37% 0.01% 2.00% 0.69% 2.29% -0.60% 3.67% 2.44% 2.44%

Net P erformance % 1.75% -1.48% 2.98% 3.29% 6.38% 5.75% 4.18% -4.19% 5.86% 7.00% -6.76% 0.10% 26.57% 36.23%

MS CI AS IA P AC TR (EURO) Return 1.53% 0.94% -0.39% -1.03% 4.60% 1.21% 0.99% -1.85% 3.14% 3.29% -6.91% -1.68% 3.36% 5.88%

Net P erformance % -11.88% 0.49% -9.42% 4.30% -3.01% -9.35% 0.96% -0.67% -4.53% -7.19% 1.72% -0.28% -33.71% -9.69%

MS CI AS IA P AC TR (EURO) Return -10.62% 0.75% -8.90% 9.41% 0.38% -9.83% -2.13% 1.03% -10.59% -11.19% -3.52% -1.23% -39.22% -35.64%

Net P erformance % 4.92% -1.55% -1.46% 9.52% 6.72% 3.43% 8.14% -3.53% 5.12% -0.74% 3.09% 5.83% 46.14% 31.98%

MS CI AS IA P AC TR (EURO) Return 0.99% -8.58% 4.03% 12.66% 5.21% 1.80% 7.09% 0.91% 2.32% -1.89% -0.45% 7.03% 33.96% -13.79%

Net P erformance % -0.78% 1.62% 5.25% 2.68% 3.20% 1.00% -1.25% 0.74% 0.66% 1.16% 5.01% -0.20% 20.56% 59.12%

MS CI AS IA P AC TR (EURO) Return 0.12% 3.35% 6.99% 2.68% -2.42% -0.15% -0.62% 0.86% 1.48% 0.26% 6.30% 4.49% 25.46% 8.17%

Net P erformance % -2.57% -2.41% -1.97% -0.78% 1.46% -2.52% 2.47% -5.47% -1.42% -0.22% -0.32% 2.83% -10.66% 42.15%

MS CI AS IA P AC TR (EURO) Return -3.14% 0.11% -3.54% -1.58% 1.08% -1.71% 2.42% -8.53% -2.46% 4.71% -3.90% 4.12% -12.45% -5.30%

Net P erformance % 2.82% 2.29% -0.52% 0.56% -1.83% -0.57% 4.73% -3.58% 3.41% -0.63% 3.56% 1.00% 11.47% 58.45%

MS CI AS IA P AC TR (EURO) Return 7.08% 2.91% -1.19% -0.16% -3.54% 2.05% 4.28% -2.58% 2.09% -1.10% 2.10% 2.33% 14.69% 8.61%

Net P erformance % 2.03% 4.57% 2.22% 2.33% -0.86% -6.81% -3.21% -1.69% 0.64% 3.23% 1.21% 3.16% 63.46%

MS CI AS IA P AC TR (EURO) Return 0.09% 5.45% 2.76% 2.32% -3.45% -3.15% -0.60% -0.79% 4.33% 2.23% 0.08% 9.23% 18.64%

G AOUF (G B P S hare C lass es)Clas s A Inc eption Date: 2 Feb 2010 Clas s B Inc eption Date: 1 Dec 2009

GBP B S hare Class - Net P erformance % 3.27% 3.27% 3.27%

MS CI AS IA P AC TR (GBP ) Return B 3.91% 3.91% 3.91%

GBP A S hare Class - Net P erformance % 4.68% 5.88% 1.25% 2.41% -0.30% -1.71% 0.54% 0.71% 1.15% 4.68% 1.08% 22.05% 22.05%

GBP B S hare Class - Net P erformance % -3.13% 5.03% 5.86% 1.26% 2.41% -0.30% -1.70% 0.53% 0.70% 1.15% 4.69% 1.07% 18.60% 22.48%

MS CI AS IA P AC TR (GBP ) Return B -2.14% 6.37% 6.76% 0.10% -4.93% -3.33% 0.86% 0.36% 6.23% 0.59% 2.38% 7.05% 21.20% 25.94%

GBP A S hare Class - Net P erformance % -2.67% -3.18% 2.20% -0.31% -0.37% 0.79% -0.66% -4.52% -3.99% 1.74% -2.83% 0.35% -12.91% 6.29%

GBP B S hare Class - Net P erformance % -2.67% -3.18% 2.19% -0.31% -0.37% 0.79% -0.67% -4.52% -3.98% 1.73% -2.84% 0.36% -12.92% 6.66%

MS CI AS IA P AC TR (GBP ) Return B -3.48% -0.54% 0.39% -1.05% -0.50% 1.54% -0.75% -7.47% -5.32% 7.00% -6.35% 1.66% -14.66% 7.47%

GBP A S hare Class - Net P erformance % 2.11% 3.25% -0.99% -1.65% -3.24% 0.14% 1.74% -2.66% 3.82% 0.32% 4.49% 0.95% 8.23% 15.04%

GBP B S hare Class - Net P erformance % 2.11% 3.25% -1.00% -1.64% -3.25% 0.14% 1.73% -2.65% 3.82% 0.32% 4.50% 0.94% 8.22% 15.43%

MS CI AS IA P AC TR (GBP ) Return B 6.35% 3.92% -1.70% -2.41% -5.07% 2.65% 1.52% -1.70% 2.70% -0.26% 3.00% 2.52% 11.51% 19.85%

GBP A S hare Class - Net P erformance % 7.69% 5.19% 0.38% 2.50% 0.04% -6.58% -1.09% -4.32% -1.31% 4.50% -0.58% 5.72% 21.62%

GBP B S hare Class - Net P erformance % 7.69% 5.19% 0.37% 2.50% 0.05% -6.58% -1.08% -4.32% -1.31% 4.50% -0.58% 5.71% 22.02%

MS CI AS IA P AC TR (GBP ) Return B 5.41% 6.17% 0.68% 2.63% -2.52% -2.97% 1.52% -3.24% 2.25% 3.59% -1.92% 11.63% 33.78%

* Note: MS CI A s ia Pac TR (GBP) returns bas ed off of 1 December 2009 s tart date

G AOUF (US D A S hare C lass )Inc eption Date: 9 Mar 2010

Net P erformance % 1.25% 0.18% 2.55% -0.03% 5.02% -1.72% 8.12% 2.99% -1.65% 2.85% 20.89% 20.89%

MS CI AS IA P AC TR (US D) Return 2.23% 0.70% -9.61% -0.45% 5.79% -1.92% 8.92% 2.44% -0.40% 7.11% 14.43% 14.43%

Net P erformance % -0.43% -1.69% 0.72% 3.73% -1.69% -1.68% 1.56% -5.29% -8.13% 5.43% -5.34% -0.84% -13.56% 4.50%

MS CI AS IA P AC TR (US D) Return -0.74% 0.80% -0.75% 2.83% -2.05% -0.73% 1.51% -8.35% -8.97% 10.26% -8.75% 0.34% -15.11% -2.86%

Net P erformance % 3.68% 4.52% -0.96% -0.05% -8.29% 2.04% 1.64% -1.31% 5.54% 0.09% 3.95% 2.38% 13.21% 18.30%

MS CI AS IA P AC TR (US D) Return 8.00% 5.16% -1.37% -0.93% -9.85% 4.42% 1.44% -0.48% 4.57% -0.38% 2.35% 3.86% 16.78% 13.44%

Net P erformance % 5.05% 0.71% 0.41% 5.06% -2.55% -6.56% -1.13% -2.37% 3.32% 3.69% 1.36% 6.51% 26.00%

MS CI AS IA P AC TR (US D) Return 3.02% 1.56% 0.71% 5.01% -4.82% -2.90% 1.47% -1.32% 6.91% 2.75% -0.03% 12.44% 27.56%

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May



GaveKal Knowledge Leaders UCITS Fund

The Fund’s Philosophy: The fund was launched on the belief that the world’s most undervalued asset was the knowledge embedded in so many of the Western world’s leading companies. And the reason that “knowledge” is undervalued is that all too often spending on research, development, branding, staff training, delivery processes, big data, etc… is simply treated as expenses, run through the income statement, and not capitalized properly on the balance sheet. The fund’s premise is thus that, by going through a given company’s R&D spending, branding expenses and other key, yet poorly accounted for, investments, one can get an idea of a company’s “intangible capital” net worth and a better picture of what should constitute fair value.

Companies with a large stock of unrecognized and undervalued intangible capital should typically generate recurrent cash flows with a lower volatility than companies which depend on a stock of physical capital to generate cash-flows. As such, the share price performance of what we have come to call “platform companies” and “knowledge leaders” should prove less volatile than that of the overall market. And a well-diversified, non-concentrated, portfolio of “knowledge leaders” should, over the life of cycle, deliver better risk-adjusted returns then that of the global equity markets.

GaveKal Knowledge Leaders Fund - USD share class Inception date: September 2006

Latest NAV 153.50 Annualized returns since inception 6.14%

Monthly % change 1.30% Average monthly returns 0.59%

12m % change 15.67% 12m volatility 7.52%

Returns since inception 53.50% Sharpe ratio (12 months) 2.07

Fund AUM USD 159m Firm AUM USD 1.7b

Annualized Volatility and Returns Since Inception Historical Performance against MSCI World

Review of the past month: The month of November was very quiet in most global equity markets and there were few key trends to discern. The fund added value through its country selection effect (+0.23%) though individual stock selection dragged returns a little lower (-0.71%). The positive country allocation was evidenced by the zero allocation in Australia and Canada and overweight positions in United States. (+28bp, +14bp, +30bp respectively). Unfortunately, this outperformance was then eaten up by negative selection effects in the United States (-66bp) and Japan (-26bp). Another drag on performance was the fund’s cautious stance and use of cash to reduce the fund’s overall volatility. So far this year, this use of cash has undeniably been a drag on performance though the development of recent weeks, with a number of markets now making one month lows (as we write), would seem to indicate that we may be entering a market environment in which the fund’s defensive stance starts to be rewarded?

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GKLF (USD) Since Inception

GKLF (USD) MSCI DAILY TR NET WORLD (USD)

GKLF (USD), 15.38%, 6.14%

MSCI DAILY TR NET WORLD

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Sector Exposure as % of Equity Positions

Country Exposure as % of Equity Positions

Asset Allocation Over the Past Two Years

Top Ten Equity Positions

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EQUITIES CASH

E QUIT Y % of NAVHenry S chein Inc 2.16%S t Jude Medical Inc 2.14%B ris tol Myers S quibb C o 2.12%Q iagen Nv 2.09%Illinois Tool W orks Inc 2.08%S tryker C orp 2.05%Zimmer Holding Inc 2.05%K oninklijke Ahold Nv 2.04%Netapp Inc 2.02%Medtronic Inc 2.01% T otal 20.77%

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Market Cap in US$

USD, 70.31%

EUR, 9.64%

JPY, 9.19%

GBP, 5.97%

CHF, 3.54% SEK, 1.36%

United States, 71.38%

Netherlands, 6.79%

United Kingdom,

5.48%

Japan, 4.79%

Switzerland, 4.41%

Germany, 4.33%

Ireland, 1.52% France, 1.30%

Health Care, 39.49%

Information Technology, 26.32%

Consumer Staples, 12.17%

Consumer Discretionary, 11.48%

Industrials, 9.23%Telecommunication,

1.30%





Fund Management and Service Providers Fund Terms Investment Advisor GaveKal Capital Limited Non-discretionary Sub Advisor GaveKal Capital, LLC Auditor Deloitte & Touche Administrator Societe Generale Securities Services, SGSS (Ireland) Limited Custodian Societe Generale Legal Advisor Dillon Eustace (Ireland)

Launch Date 1 September 2006 Domicile Ireland Share Classes A and B Denomination USD/GBP Issue Price $100/£100 Minimum Subscription A & B $20,000 or its equivalent Fees A & B 2% management fee p.a., no performance fee Dealing Day Daily (every day that is a Business Day in Dublin and Hong Kong) Valuation Day The Business Day prior to the relevant Dealing Day Subscription and Re-demption Deadline 5pm (Irish time); 2 Business Days prior to the relevant Valuation

Day Redemption Fee None

Share Class ISIN Share Class A USD IE00B1DS1042 Share Class B GBP IE00B895LT75

Net P erformance % 0.16% 2.84% 0.96% 2.16% 6.24% 6.24%

MS CI W ORL D (US D) Return 0.72% 3.67% 2.45% 2.03% 9.15% 9.15%

Net P erformance % 2.94% -0.07% 2.84% 2.72% 2.62% 1.71% 0.29% -1.11% 8.14% 6.59% -4.59% 0.78% 24.67% 32.45%

MS CI W ORL D (US D) Return 1.18% -0.52% 1.83% 4.41% 2.80% -0.77% -2.21% -0.08% 4.76% 3.07% -4.09% -1.29% 9.04% 19.02%

Net P erformance % -12.14% -0.10% -1.07% 4.12% 1.20% -7.01% 2.72% 0.10% -6. 71% -17.65% -7.91% 3.16% -36.16% -15.44%

MS CI W ORL D (US D) Return -7.64% -0.58% -0.96% 5.26% 1.52% -7.98% -2.44% -1.40% -11.89% -18.96% -6.47% 3.21% -40.71% -29.44%

Net P erformance % -7.33% -8.44% 6.36% 7.23% 3.53% 1.58% 8.30% 0.68% 5.36% -1.93% 3.76% 3.43% 23.05% 4.05%

MS CI W ORL D (US D) Return -8.76% -10.24% 7.54% 11. 22% 9.06% -0.45% 8.47% 4.13% 3.99% -1.78% 4.09% 1.80% 29.99% -8.28%

Net P erformance % -4.09% 2.01% 5.72% 1.90% -7.68% -3.82% 5.92% -4.11% 8.71% 3.77% -1.56% 4.18% 9.95% 14.40%

MS CI W ORL D (US D) Return -4.13% 1.41% 6.19% 0.01% -9.54% -3.47% 8.11% -3.73% 9.32% 3.73% -2.16% 7.35% 11.76% 2.51%

Net P erformance % -0.20% 3.14% -0.61% 4.20% 1.00% -0.15% -0.37% -3.90% -1. 50% 5.99% -2.07% 0.89% 6.18% 21.47%

MS CI W ORL D (US D) Return 2.26% 3.50% -0.99% 4.25% -2.07% -1.58% -1.81% -7.05% -8. 64% 13.69% -8.91% 3.89% -5.54% -3.17%

Net P erformance % 4.39% 1.57% 2.55% -0. 70% -3.94% 2.65% 0.49% 1.79% 1.90% -2.12% 0.59% -1.23% 7.90% 31.07%

MS CI W ORL D (US D) Return 5.02% 5.21% 0.97% -1. 14% -8.63% 5.10% 1.29% 2.54% 2.75% -0.68% 1.28% 1.88% 15.83% 12.16%

Net P erformance % 3.77% 1.01% 3.70% 1.87% -0.86% -0.38% 3.21% -2.91% 2.28% 3.15% 1.30% 17.11% 53.50%

MS CI W ORL D (US D) Return 5.09% 0.17% 2.35% 3.14% 0.04% -2.46% 5.26% -2.13% 5.00% 3.91% 1.78% 24.05% 39.13%

May

2013

Dec

2008

2009

2010

2011

2012

Calendar Year

P erf. S ince InceptionInc eption Date: 1 S ept 2006

2006

2007

NovG K LF (US D A S hare C lass)

J an Feb Mar Apr J un J ul Aug S ep Oct



The Fund’s Philosophy: The 2008 crisis, along with the aggressive quantitative easing policies which ensued, were a wake-up call for most emerging markets, not least of which was China. Basically, relying on an uncertain US dollar to finance the rapidly growing intra-emerging market trade no longer made sense. Just as Europe had to start embracing the deutschmark as a means of exchange in the 1970s, emerging markets have begun to embrace the renminbi. For China, transforming the RMB into a trading currency presents some risk (namely the gradual loss of control over the domestic financial industry), but it is also key in helping China move up the export value chain, away from high volume and low margin consumer goods, and towards high margin capital goods. Indeed, in order to help boost capital goods exports, China needs to be able to offer financing terms; and one would always rather do this in one’s own currency rather than that of the competitor’s. Thus, the internationalization of the RMB is key to China’s continued export growth. But this internationalization can only occur if the RMB is perceived as being a strong currency, and if the RMB bond market is seen as stable. This is why, in recent years, the Chinese government has proven itself willing to sacrifice the Chinese equity market, and even growth, to ensure stability in the fixed income and exchange rate markets. The RMB bond market offers one of the more attractive risk-reward investment propositions today.

GaveKal China Fixed Income UCITS Fund

GaveKal China Fixed Income Fund - USD share class Inception date: March 2012

Latest NAV 113.99 60-Day Realized Daily Volatility 1.32%

Monthly % change 0.44% Weighted Modified Duration 2.37

12m % change 8.28% Weighted Yield to Maturity 4.69%

Returns since inception 13.99% Number of positions 55

Strategy AUM USD 344m Firm AUM USD 1.7b

Fund AUM USD 190m Sharpe Ratio 2.34

Annualized Volatility and Returns Since Inception Historical Performance vs. Benchmark

Review of the past month: The dim-sum bond market, and the CNH market, were surprisingly quiet given all the news coming out of the Third Plenum (and the accelerating pace of financial deregulation that followed). As such, generating outsized returns was challenging and the fund only rose 0.44% while the benchmark gained 0.4%. Still, this marks the 16th month of outperformance since we started the fund 21 months ago, and the 17th month of overall positive performance.

As discussed in previous newsletters, the major issue we can identify going forward is that the liquidity on the dim sum bond market remains somewhat constrained. This is why, with our assets under management now approaching the US$350m we had identified as our desired capacity when we launched a little under two years ago, we will no longer be marketing the fund. Of course, we remain open to investments from existing GaveKal investors.

GCFIF (USD), 3.27%, 7.77%

HSBC OFFSHORE

RMB INVESTMENT GRADE BOND (USD), 2.76%,

4.48%3.00%

4.00%

5.00%

6.00%

7.00%

8.00%

9.00%

2.60% 2.80% 3.00% 3.20% 3.40% 3.60% 3.80%

Annu

aliz

ed R

etur

n


GCFIF (USD)

90

95

100

105

110

115

120

Feb-

12

Mar

-12

Apr

-12

May

-12

Jun-

12

Jul-1

2

Aug

-12

Sep

-12

Oct

-12

Nov

-12

Dec

-12

Jan-

13

Feb-

13

Mar

-13

Apr

-13

May

-13

Jun-

13

Jul-1

3

Aug

-13

Sep

-13

Oct

-13

Nov

-13

GCFIF (USD) Since Inception

GCFIF (USD)HSBC Offshore RMB Investment Grade Total Return (USD)Barclays US Aggregate Government - Long - Index




Top Ten Positions

Duration Exposure

Ratings Breakdown vs. Benchmark

Underlying Country Exposure

Sector Exposure Currency Exposure

BONDS % of NAV

GLOBAL LOGISTIC PROPERTI (GLPSP 4 05/11/18) 4.93%

BANCO BTG PACTUAL/CAYMAN (BTGPBZ 4.1 03/26/16) 4.73%

CIFI HOLDINGS GRP (CIFIHG 12 1/4 04/15/18) 4.55%

SUNAC CHINA HOLDINGS LTD (SUNAC 9 3/8 04/05/18) 4.24%

AVIC INTL FINANCE INVEST (CATIC 4.8 07/09/15) 3.50%

BOC AVIATION PTE LTD (BCHINA 4 1/2 11/20/18) 3.41%

CHINA GENERAL NUCLEAR (CHGDNU 3 3/4 11/01/15) 3.37%

HSBC BANK CHINA CO LTD (HSBC 0 01/10/15) 3.21%

BP CAPITAL MARKETS PLC (BPLN 3.95 10/08/18) 3.10%

ITNL OFFSHORE PTE LTD (ILFSIN 5 3/4 04/26/15) 2.81%

Total 37.85%

0.00%

5.00%

10.00%

15.00%

20.00%

25.00%

30.00%

35.00%

40.00%

45.00%

Fund Benchmark

0.00%

5.00%

10.00%

15.00%

20.00%

25.00%

30.00%

35.00%

40.00%

0-1 1-2 2-3 3-4 4-5 10-11

Duration Exposure of GCFIF

CNH78.19%

USD21.41%

EUR0.37%

SGD0.03%

0% 5% 10% 15% 20% 25% 30% 35% 40%

Water

Transportation

Telecommunications

Real Estate

Oil&Gas Services

Oil&Gas

Multi-National

Machinery-Diversif ied

Investment Companies

Insurance

Home Furnishings

Electric

Diversif ied Finan Serv

Commercial Services

Chemicals

Banks

Auto Manufacturers

Aerospace/Defense

China, 44.18%

Singapore, 11.15%

India, 8.98%

Latin America, 8.67%

UK, 5.15%

France, 3.87%

Korea, 2.65%

Germany, 2.00%

Japan, 1.81%USA, 1.77%

Hong Kong, 1.76%

Malaysia, 1.14% Russia, 1.05%

Middle East, 0.45%





Fund Management and Service Providers Fund Terms

Launch Date 1 March 2012 Domicile Ireland Share Classes A Denomination USD/EUR Issue Price $100/€100 Minimum Subscription A $50,000 Fees A & B 0.5% management fee p.a., no performance fee Dealing Day Daily (every day that is a Business Day in Dublin and Hong Kong) Valuation Day The Business Day prior to the relevant Dealing Day Subscription and Re-demption Deadline

5pm (Irish time); 2 Business Days prior to the relevant Valuation Day 5pm (Irish time); 5 Business Days prior to the relevant Valuation Day

Redemption Fee None

Share Class Bloomberg Ticker ISIN Share Class A USD GACHFIU ID IE00B734TY42 Share Class A EURO GACHFIE ID IE00B7LZ3N65

Investment Advisor GaveKal Capital Limited Auditor Deloitte & Touche Administrator Societe Generale Securities Services, SGSS (Ireland) Limited Custodian Societe Generale Legal Advisor Dillon Eustace (Ireland)

Net P erformance % -0.69% -0.17% -1.28% 0.80% 0.72% 0.85% 1.63% 1.94% 1.41% 0.92% 6.24% 6.24%

HS BC Offshore Renminbi Investment Grade Total Return (US D)

0.02% 0.08% -1.15% 0.60% -0.06% 0.24% 0.64% 1.59% 0.74% 0.48% 3.20% 3.20%

Net P erformance % 1.15% 0.49% 0.38% 1.59% 0.56% -1.91% 0.73% 0.92% 1.01% 1.75% 0.44% 7.29% 13.99%

HS BC Offshore Renminbi Investment Grade Total Return (US D)

1.03% 0.17% 0.67% 1.29% 0.58% -2.18% 0.70% 0.43% 0.38% 1.09% 0.40% 4.62% 7.97%

Net P erformance % -0.58% 0.44% 5.68% -1.79% 3.79% -1.48% -0.42% 1.21% 1.03% -0.44% 7.43% 7.43%

HS BC Offshore Renminbi Investment Grade Total Return (EUR )

-0.10% 0.86% 5.77% -1.69% 2.75% -1.87% -1.74% 0.85% 0.50% -1.00% 4.14% 4.14%

Net P erformance % -1.76% 4.34% 2.20% -1.05% 2.30% -2.19% -1.40% 1.64% -1.61% 1.30% 0.30% 3.91% 11.63%

HS BC Offshore Renminbi Investment Grade Total Return (EUR )

-1.84% 4.00% 2.72% -1.29% 2.03% -2.43% -1.36% 0.98% -2.05% 0.58% 0.49% 1.62% 5.83%


2012

Nov DecC alendar

YearInc eption Date: 1 Marc h 2012J un J ul Aug S ep Oct

G C FIF (E UR A S hare C las s)

J an Feb Mar

2013

2013

P erf. S ince InceptionInc eption Date: 1 Marc h 2012

2012

J un J ul Aug S ep Oct Nov

G C FIF (US D A S hare C las s)

J an Feb DecC alendar

YearMar Apr May

Apr May



GaveKal Dynamic Futures UCITS Fund

GaveKal Dynamic Futures Fund - USD share class Inception date: February 2013 Latest NAV 130.81 VaR (99%,20 days) as of 29 November 2013 7.28% Monthly % change 1.33% Gross Exposure at month end 138.3% 3m % change 6.06% Net Exposure at month end +80.0% Returns since inception 30.81% Fund AUM USD 22.19M

November Contribution

Topix 0.12% SMI 30 0.00 %

Hang Seng - 0.18% S&P 500 0.31%

CAC 40 - 0.07% DJIA 30 0.39 %

DAX 30 0.18 % Nasdaq 100 0.03 %

EuroStoxx 50 0.03 % Russell 2000 0.02 %

FTSE 100 0.05 % Boosters 0.45 %

November Top 10 Active Position

S&P500 E-mini Fut. +20.0 % SMI Futures + 10.5 %

DJIA 30 Futures + 19.5 % EuroStoxx 50 Fut. -10.1 %

FTSE 100 Futures + 19.5 % Topix Futures + 8.5 %

S&P500 Futures + 17.8 % DAX 30 Futures + 5.8 %

Nasdaq 100 Fut. + 10.7 % CAC 40 Futures + 5.5 %

Jan Feb Mar May Jun Jul Aug Sep

Net Performance % 2013

0.47% 3.13% 7.19% 2.62% 4.36% 0.74% 0.47%

NAV 100.47 103.61 114.32 117.32 122.43 123.34 123.92

GDFF Inception Date: 21 Feb 2013 Nov

1.33%

130.81

Dec

Oct

4.17%

129.09

Calendar Year

30.81%

Perf. Since Inception

30.81%

Apr

2.93%

106.65

Launch Date 21 February 2013 Domicile Ireland Denomination USD Issue Price $100 Minimum Subscription $20,000 Fees 0% management fee p.a., 20% performance fee with High Water Mark Dealing Day Weekly (every Wednesday that is a Business Day in Dublin) Valuation Day The Business Day prior to the relevant Dealing Day Subscription and Re-demption Deadline 4pm (Irish time); 3 Business Days prior to the relevant Valuation Day Redemption Fee None


Auditor Deloitte & Touche Administrator Societe Generale Securities Services, SGSS (Ireland) Limited Custodian Societe Generale Legal Advisor Dillon Eustace (Ireland)

Sub Investment Advisor GaveKal Investments Fund Management and Service Providers Fund Terms

Share Class Bloomberg Ticker ISIN Share Class A USD GAVDYNA ID IE00B7LBLW93


Performance: Equity markets moved sideways during the first half of the month before continuing their march higher by the end of the month. In this environment, the GaveKal Dynamic Futures Fund posted another positive month, reaching the 30% stalemate. November delivered +1.33 %.



GaveKal Dynamic Futures (Euro) UCITS Fund

GaveKal Dynamic Futures (Euro Currency) Fund - EUR share class Inception date: September 2013 Latest NAV 103.84 VaR (99%,20 days) as of 29 November 2013 7.30% Monthly % change 1.20% Gross Exposure at month end 138.3% 3m % change N/A Net Exposure at month end +80.0% Returns since inception 3.84% Fund AUM EUR 19.92M

November Contribution

Topix 0.12 % SMI 30 - 0.01 %

Hang Seng - 0.19 % S&P 500 0.28%

CAC 40 - 0.06 % DJIA 30 0.38 %

DAX 30 0.18 % Nasdaq 100 0.02 %

EuroStoxx 50 0.03 % Russell 2000 0.00 %

FTSE 100 0.04 % Boosters 0.40 %

November Top 10 Active Position

S&P500 E-mini Fut. +20.0 % SMI Futures + 10.5 %

DJIA 30 Futures + 19.5 % EuroStoxx 50 Fut. -10.1 %

FTSE 100 Futures + 19.5 % Topix Futures + 8.5 %

S&P500 Futures + 17.8 % DAX 30 Futures + 5.8 %

Nasdaq 100 Fut. + 10.7 % CAC 40 Futures + 5.5 %

Jan Feb Mar May Jun Jul Aug Sep

Net Performance % 2013

-1.34%

NAV 98.66

GDFECF Inception Date: 03 Sep 2013 Nov

1.20%

103.84

Dec

Oct

4.00%

102.61

Calendar Year

3.84%

Perf. Since Inception

3.84%

Apr

Launch Date 3 September 2013 Domicile Ireland Denomination EUR Issue Price €100 Minimum Subscription €20,000 Fees 0% management fee p.a., 20% performance fee with High Water Mark Dealing Day Weekly (every Wednesday that is a Business Day in Dublin) Valuation Day The Business Day prior to the relevant Dealing Day Subscription and Re-demption Deadline 4pm (Irish time); 3 Business Days prior to the relevant Valuation Day Redemption Fee None


Auditor Deloitte & Touche Administrator Societe Generale Securities Services, SGSS (Ireland) Limited Custodian Societe Generale Legal Advisor Dillon Eustace (Ireland)

Sub Investment Advisor GaveKal Investments Fund Management and Service Providers Fund Terms

Share Class Bloomberg Ticker ISIN Share Class A EUR GAVDYNE ID IE00BBX47710


Performance: Equity markets moved sideways during the first half of the month before continu-ing their march higher by the end of the month. In this environment, the GaveKal Dynamic Futures Euro Currency Fund posted a positive month. November delivered +1.20 %.



GaveKal Dynamic Futures UCITS Fund

At the end of October, we noted that investor sentiment was gradually reaching an extreme level of confidence. This ex-cessive confidence increased the probability of a near term correction. However, any signal given by secondary indica-tors always needs to be confirmed by prices (the primary indicator). Therefore, as soon as market nervousness was de-tected, the Model reversed its exposure and opened a new net short position. Nevertheless, the following days, the uptrend resumed. Hence, the Model objec-tively acknowledged that the uptrend was still alive and reinstated a net long position. The Model was right and markets continued their upward trend.

This series of events allows us to point out 2 key fea-tures of systematic investing:

1. DISCIPLINE: the rule is clear, ALL the signals are implemented.

2. Do not fight the trend. Prices are the primary indicator in a Trend Following System.

Trend: Most markets continue to trend higher (new all time highs on S&P500) with the exception of the UK market where the FTSE 100 exhibits a weakening trend.

Sentiment: Investor sentiment reached the excess confidence area in November (green circles on the right chart) increasing the prob-ability of a near term correction. BUT price needs to confirm. Wait and see mode!

Exhaustion/Technicals: Technical indicators continue to oscillate at high levels.

Breadth: The environment remains healthy. Some breadth indicators exhibit negative divergences, but there are secondary indicators. Again here, wait for prices to confirm before acting on this.

Focus On The Discipline

What’s Next?

The Fund’s Philosophy: The Fund’s objective is to achieve capital growth by investing in, or gaining exposure to diversified portfolio of international equity indices primarily through the use of futures. The Fund uses futures contracts to take a directional view on particular equity indices, whether by (i) being short futures in order to benefit from anticipated downward corrections in the pricing of equity indices; or (ii) being long futures in order to benefit from upwards movements in the pricing of equity indices. In order to identify trends, and shifts in trends, the Fund relies on technical and quantitative indicators and models. Those indicators/models include data or signals related to prices, volume, breadth, investor sentiment and volatility. In a first place, the manager identifies a trend. In the second place, the manager will estimate the probability for the trend to continue by using a series of indicators. If a trend is anticipated to continue with a good degree of probability, the manager takes a position in a corresponding futures.

GaveKal UCITS Funds Newsletter Important Disclaimers

This Newsletter has been approved by GaveKal Capital Limited for information purposes only and may only be communicated to persons who are of a kind to whom unregulated collective investment scheme may be promoted. It does not constitute an offer or solicitation to any person in any jurisdiction to purchase or sell any investment. No information in this document should be construed as providing financial, investment or other professional advice. The GaveKal Asian Opportunities UCITS Fund, the GaveKal Knowledge Leaders UCITS Fund, the GaveKal Greater China Fund, the GaveKal Asian Growth UCITS Fund, the GaveKal China Fixed Income UCITS Fund and the GaveKal Dynamic Futures UCITS Fund (the “Funds”) are sub-funds of the GaveKal UCITS Fund, an open-ended umbrella unit trust established as an undertaking for collective investment in transferable securities pursuant to the European Communities (Undertakings for Collective Investment in Transferable Securities) Regulations, 2003 (as amended). The GaveKal Knowledge Leaders Fund is a sub-fund of GaveKal Multi-Fund PLC, an open-ended umbrella variable investment company established as an undertaking for collective investment in transferable securities pursuant to the European Communities (Undertakings for Collective Investment in Transferable Securities) Regulations, 2003 (as amended). GaveKal Capital Limited has been appointed as investment adviser to the GaveKal UCITS Fund and the GaveKal Multi-Fund PLC. The distribution of the prospectuses relating to the Funds (each the “Prospectus”) is restricted in certain jurisdictions and accordingly it is the responsibility of any person or persons wishing to make an application to invest therein to inform themselves of, and to observe, all applicable laws and regulations of any relevant jurisdiction. The information below is for general guidance only and further information is available in the Prospectus. The taxation implications of investing in the Funds will depend on individual financial circumstances and the investor’s country of residence. Application to invest in the Funds must only be made on the basis of the Prospectus and subscription documentation. United Kingdom: The GaveKal Asian Opportunities UCITS Fund is authorised as a UCITS scheme and has been recognised in the UK for the purposes of section 264 of the Financial Services and Markets Act 2000. The promotion of the Fund and the distribution of the Prospectus is restricted by law. Many of the protections provided by the United Kingdom’s regulatory regime will not apply to investors in the Fund, including access to the Financial Ombudsman Service and the Financial Services Compensation Scheme. United States: The shares of the Funds (the “Shares”) have not been and will not be registered under the Securities Act 1933 of the United States (as amended) (the “1933 Act”), or the securities laws of any of the States of the United States. The Shares may not be offered, sold or delivered directly or indirectly in the United States or to or for the account or benefit of any “US Person“ as defined in Regulation S under the 1933 Act except pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the 1933 Act and any applicable State laws. The Fund has not been and will not be registered under the United States Investment Company Act of 1940 (as amended) (the “1940 Act”) since Shares will only be sold to United States persons who are “qualified purchasers”, as defined in the 1940 Act. There has not been and will not be any public offering of the Shares in the United States. Investment Risks Investment in the Funds carries substantial risk. There can be no assurance that the investment objectives of the Funds will be achieved and investment results may vary substantially over time. Investment in the Funds is not intended to be a complete investment programme for any investor. Investment in the Funds is intended for experienced investors who are able to understand and accept the risks involved. The value of all investments and the income derived there from can decrease as well as increase. This may be due, in part, to exchange rate fluctuations in investments that have an exposure to currencies other than the base currency of the Funds. Past performance is no guide to or guarantee of future performance. The value of commodity and derivative investments such as options and futures can be extremely volatile. The Funds may invest in securities of distressed companies, illiquid securities and non-publicly traded securities. Persons considering investing in the Funds should read the risk disclosure in the Prospectus. Copyright and Other Rights The copyright, trademarks and all similar rights of this Newsletter and the contents, including all information, graphics, code, text and design, are owned by GaveKal Capital Limited. Information contained in this Newsletter must not be reproduced, copied or redistributed in whole or in part. Limitation of Liability and Indemnity GaveKal Capital Limited does not warrant the accuracy, adequacy or completeness of the information and data contained herein and expressly disclaims liability for errors or omissions in this information and data. No warranty of any kind, implied, expressed or statutory, is given in conjunction with the information and data. GaveKal Capital Limited accepts no liability for any loss or damage arising out of the use or misuse of or reliance on the information provided including, without limitation, any loss of profits or any other damage, direct or consequential. You agree to indemnify and hold harmless GaveKal Capital Limited and its affiliates, and the partners and employees of GaveKal Capital Limited and its affiliates from and against any and all liabilities, claims, damages, losses or expenses, including legal fees and expenses, (together, “Losses”) arising out of your access to or use of the information in this Newsletter, save to the extent that such Losses may not be excluded pursuant to relevant law or regulation. Any opinions contained in this Newsletter may be changed after issue at any time without notice.

GaveKal Capital Limited, whose registered address is: Suite 3101, Central Plaza, 18 Harbour Road, Wanchai, Hong Kong, is licensed by the Securities and Futures

Commission of Hong Kong.

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