Summary

• For the quarter ended September 30, 2026, the Asia ex Japan Total Return Equity Fund returned -3.49% (I Acc USD), while its benchmark, the MSCI All Country Asia ex Japan Index, returned -0.23%.
• Q3 relative performance was affected primarily by stock selection in Taiwan, China/Hong Kong and India, partly offset by positive contributions from the Fund’s overweight position in South Korea and zero exposure in the Philippines.
• The portfolio remained aligned with its total return philosophy, balancing growth, core and value opportunities while actively managing country, sector and security-level risk.

Market Review

Asian equity markets declined during the third quarter as higher oil prices, rising U.S. bond yields, geopolitical tensions and global trade uncertainty weighed on investor sentiment. These headwinds combined to create a more challenging environment for risk assets across the region, with investors becoming increasingly selective in their approach to capital allocation as the cost of capital rose and the outlook for global growth became less certain. Performance diverged across countries and sectors, creating a more selective environment for investors and broadening market leadership beyond the narrow group of AI-related companies that had driven returns earlier in the year.

Technology-sector volatility remained an important driver of performance. South Korea experienced significant swings despite strong underlying fundamentals, with export growth continuing to be supported by semiconductor demand. Taiwan remained relatively resilient as ongoing investment in AI infrastructure and semiconductor exports continued to support economic activity. However, following strong gains across parts of the technology supply chain, investors increasingly focused on valuations and earnings sustainability, leading to a more discerning approach to technology exposure that distinguished between businesses with durable structural growth and those benefiting from more cyclical or sentiment-driven tailwinds.

China faced a mixed economic backdrop, with subdued consumer demand, continued property-sector weakness and softer industrial profits despite policy support. The persistence of these headwinds reflects the structural nature of some of the challenges facing the Chinese economy, particularly in the property sector, where the adjustment process continues to weigh on household wealth and consumer confidence. However, select Chinese financials, materials and internet businesses demonstrated resilient earnings and attracted increased investor interest, supported by attractive valuations relative to regional peers.

India underperformed as foreign investor outflows, currency weakness and higher energy prices weighed on sentiment. External pressures and elevated valuations in parts of the Indian market challenged near-term returns, although the country's long-term structural growth outlook appears to remain intact.

Market leadership broadened, with Financials, industrials and commodity-related businesses generally more resilient than many higher-growth technology companies, reflecting an environment in which investors placed greater emphasis on earnings quality, valuations and company-specific fundamentals. This rotation toward more defensively positioned and valuation-sensitive areas of the market is consistent with a late-cycle dynamic in which the margin of safety offered by a company's current earnings and asset base becomes more important than the optionality embedded in long-duration growth expectations.

This environment remains supportive of a flexible investment approach that may dynamically balance exposure across growth, core and value opportunities while adapting to changing market conditions.

Performance

For the quarter ended September 30, 2026, the Asia ex Japan Total Return Equity Fund returned -3.49% (I Acc USD), while its benchmark, the MSCI All Country Asia ex Japan Index, returned -0.23%.

Stock selection in Taiwan, China/Hong Kong and India detracted from relative returns, while the Fund’s overweight position in South Korea and zero exposure in the Philippines contributed.

South Korea

South Korea remained the portfolio’s largest overweight country and was the biggest source of both opportunity and volatility. Within the Financial sector, Samsung Fire & Marine Insurance, KB Financial Group and Hana Financial Group performed well as higher rates and improving capital-return frameworks supported financial companies. These gains were more than offset by weakness in technology-related holdings, including SK Hynix, SK Square and SK Inc., as sentiment toward parts of the Korean technology complex softened amid concerns of AI capital expenditure and the sustainability of near-term earnings growth.

China and Hong Kong

China and Hong Kong detracted from relative performance due to negative stock selection, partly offset by the Fund’s overweight allocation. China Construction Bank and Industrial and Commercial Bank of China benefited from attractive valuations and stable earnings. Both are large state-owned commercial banks with broad deposit and lending franchises. Their shares were supported by stable asset quality, solid earnings, improving shareholder distributions and renewed investor demand for income-oriented financial holdings. In contrast, technology holdings such as Wus Printed Circuit, an electronics manufacturer specializing in the research, development and production of printed circuit boards, and Cambricon Technologies, AI chips designer, delivered negative performance as investors took profits.

Taiwan

Taiwan detracted due to an underweight allocation and weakness in select technology holdings. Taiwan Semiconductor Manufacturing Co, the world’s largest dedicated semiconductor foundry, and MediaTek, Taiwan’s leading fabless semiconductor company, contributed positively, but electronics and networking companies faced pressure as investors rotated away from parts of the AI supply chain that had experienced substantial valuation expansion.

India

India was another source of weakness during the quarter. Several financial, industrial and consumer holdings underperformed as sentiment softened and investors became more cautious about near-term growth expectations, particularly in the context of currency weakness and elevated energy import costs. We continue to maintain a long-term constructive view on India's structural growth potential and see the period of underperformance as a potential opportunity to reassess positioning at more attractive entry points.

Positioning

South Korea remained the largest country allocation as we continued to find opportunities among Korean Technology, Financial and Industrial companies where valuations appeared compelling relative to earnings prospects. Taiwan also remained a significant allocation, although the portfolio remained underweight the benchmark, with exposure focused on semiconductor and electronics companies positioned to benefit from long-term technology spending.

China and Hong Kong exposure remained focused on internet platforms, financial institutions, industrial companies and domestic-demand opportunities. Financials became a larger source of portfolio resilience as investors focused more closely on earnings quality, income and valuation support. During the quarter, we initiated a position in BOC Hong Kong Holdings Ltd, a Hong Kong-based financial services group. The addition aligns with our overweight in financials and our broader focus on companies offering selective access to opportunities in China through Hong Kong.

We continue to maintain an underweight to India despite its constructive long-term outlook, as we are more cautious about near-term earnings growth expectations, particularly in the context of elevated energy import costs.

Outlook

We remain constructive on the long-term opportunity set across Asia despite continued market volatility and periodic shifts in investor sentiment. The region's combination of structural growth drivers across multiple countries, improving corporate governance, attractive valuations in selected markets and deep integration into global technology and industrial supply chains continues to provide a compelling long-term investment case in our view, even as near-term uncertainty creates tactical challenges for investors.

Year-to-date returns have been concentrated, and economic conditions across the region remain uneven. China's recovery continues to progress gradually, while Taiwan and South Korea remain supported by technology demand and export growth that continues to be underpinned by the global buildout of AI infrastructure and advanced semiconductor capacity. India continues to offer attractive long-term structural growth opportunities despite periods of market volatility, and selective opportunities continue to be seen across Southeast Asian markets, where a combination of domestic consumption growth, manufacturing investment and improving corporate governance is creating a broadening set of investable opportunities.

We expect returns will likely broaden beyond the narrow group of high-growth technology stocks and be increasingly driven by earnings growth rather than broad market momentum. This environment could be increasingly favourable for active management and reinforces the importance of maintaining a flexible portfolio that can adapt as opportunities emerge across countries, sectors and styles overly relying on any single source of return or macroeconomic scenario.

Our Dividend Growth holdings provide participation in long-term technology adoption, digitalization and rising consumer demand. Core holdings offer resilient earnings profiles at reasonable valuations, while Value/Dividend Payer holdings seek to benefit from improving fundamentals, corporate actions or changing market expectations, and provide a ballast to the portfolio in times of market stress. We believe that the Fund's total return philosophy and its emphasis on balancing upside participation with downside protection are well suited to this environment.