Prior to the appointment of Leon Sun and Amay Hattangadi, the fund was managed by a different team. The year 2020, which marked the last full year before the managerial change, showed strong performance with a NAV return of +12.57%. Historically, the fund benefitted from favorable macroeconomic conditions, positive investor sentiment in emerging markets, and a post-COVID recovery, particularly in sectors like financials, industrials, and consumer discretionary. The average 5-year annualized return until the end of 2020 was approximately +9.5%, demonstrating relative stability and growth momentum in line with the MSCI China A Onshore Index.

Since assuming responsibility in 2021, the fund has experienced notable volatility. The NAV returns have been as follows:

When compared to the MSCI China A Onshore Index, the fund underperformed both before and during the current management. From 2016–2020, the benchmark delivered approximately 10–12% annualized, slightly higher than the fund’s ~9.5%. During 2021–Feb 2025, the benchmark returned approximately -5.5% annually, while the fund lagged further with -9.5%. This suggests that while broader market conditions were challenging, the fund's active management also contributed to relative underperformance.

Before Tenure:

• Supportive monetary policy in China and post-COVID stimulus.
• Strong rebound in equity markets with momentum in consumer, tech, and financial sectors.
• Global appetite for EM equity exposure led to capital inflows.

• Chinese regulatory clampdowns (tech, education, property) created prolonged volatility.
• Underexposure to high-growth tech and AI names led to missed opportunities during rebounds.
• Overweights in financials, utilities, and state-owned enterprises faced valuation pressure.
• Global de-risking of China exposure due to geopolitical risks (US-China trade, Taiwan).

The transition to Leon Sun and Amay Hattangadi in 2021 coincided with a period of heightened macroeconomic and political uncertainty in China. While their tenure began with significant structural challenges, including property sector stress and shifting regulatory policies, the fund's ability to generate positive returns in 2024 reflects early signs of recovery. Despite this, cumulative performance remains negative, and underperformance versus the benchmark highlights the need for better alignment with market drivers such as technology and consumption-led growth. The managers have demonstrated selective stock-picking strength, but broader positioning needs recalibration to regain consistency.

Positive Contributors:

• Industrials: Stock picks in automation (e.g., Hangcha Group) gained due to AI/robotics optimism.
• Health Care: Outperformance due to selective exposure to high-quality pharmaceutical companies.

• Information Technology: Underweight positioning in a month dominated by AI/tech rallies.
• Consumer Discretionary: Exposure to underperforming retail and appliance names.
• Financials: Overweight positions in regional banks and SOEs that saw limited upside.

Top Contributors:

• China Merchants Expressway – Strong operational metrics and transport sector rebound.
• Guangdong Provincial Expressway - Benefited from infrastructure momentum.

• Bank of Jiangsu – Weak earnings momentum and investor concerns on credit risk.
• China Yangtze Power – Lack of growth catalysts weighed on investor sentiment.
• China Shenhua Energy – Coal sales volume down year-over-year, triggering profit-taking.
• Gree Electric – Softer demand for appliances amid economic caution.
• China Merchants Port – Limited upside amid muted global trade flows.

The broader Chinese equity market rallied in February 2025, with technology and AI sectors leading the way. Investors responded positively to China's government policy pivot in late 2024 aimed at stabilizing the property market and stimulating consumption. However, the fund's defensive positioning, particularly its underweight in high-momentum tech names, resulted in it lagging the broader index. Markets also saw a shift in favor toward consumer-focused and innovation-led companies, where the fund had limited exposure.

The fund’s underperformance in February 2025 was primarily driven by misalignment with market leadership trends. While the managers executed strong stock selection in areas like industrials and health care, significant opportunity costs were incurred due to the fund’s structural underweight in technology. Additionally, some large overweight positions in utilities and financials acted as drags. Moving forward, improved alignment with emerging macro and sectoral narratives — particularly AI, digitization, and domestic consumption — will be crucial to narrowing the performance gap.