Latest trust commentary

The underlying portfolio continued to deliver strong outperformance compared to the benchmark during the quarter, finishing three consecutive months outperformance and strong alpha generation over the year of 2024. The market volatility remained high, however, stock selection constantly added value despite some swings in the market trend for style and size factors. Nonetheless, our well balanced portfolio weathered the market well amid high volatility. The Fund’s gearing also had a positive impact thanks to the market rise.

Against the Fund’s benchmark, Fujikura, a fibre cable maker, continued to add strong value as the largest individual positive contributor, mainly thanks to strong earnings prospects backed by the demands from AI trend. Financials stocks also enjoyed strong returns upon the increase of JGB yields, and our position in Sumitomo Mitsui Financial Group contributed. Sanki Engineering, a small cap plant engineering company, also added value thanks to its earnings strength as well as share buyback

On the other hand, there were some offsetting negative contributions mainly coming from not holding some of large cap stocks such as Mitsubishi USF Financial Group and Sony Group. Among the stocks held, Tazmo, a small cap semiconductor manufacturing equipment maker, detracted due to weaker earnings progress.

• Concentration risk: The company may be concentrated in a limited number of geographical regions, industry sectors, markets and/or individual positions. This may result in large changes in the value of the company, both up or down, which may adversely impact the performance of the company.

• Currency risk: The company can be exposed to different currencies. Changes in foreign exchange rates could create losses.

• Concentration risk: The fund may be concentrated in a limited number of geographical regions, industry sectors, markets and/or individual positions. This may result in large changes in the value of the fund, both up or down.

• Currency risk: The fund may lose value as a result of movements in foreign exchange rates, otherwise known as currency rates.

• Derivatives risk: Derivatives, which are financial instruments deriving their value from an underlying asset, may be used to manage the portfolio efficiently. The fund may also materially invest in derivatives including using short selling and leverage techniques with the aim of making a return. A derivative may not perform as expected, may create losses greater than the cost of the derivative and may result in losses to the fund.

• Gearing risk: The company may borrow money to make further investments, this is known as gearing. Gearing will increase returns if the value of the investments purchased increase by more than the cost of borrowing, or reduce returns if they fail to do so. In falling markets, the whole of the value in that investment could be lost, which would result in losses to the fund.

• Liquidity risk: In difficult market conditions, the fund may not be able to sell a security for full value or at all. This could affect performance and could cause the fund to defer or suspend redemptions of its shares, meaning investors may not be able to have immediate access to their holdings.

• Operational risk: Operational processes, including those related to the safekeeping of assets, may fail. This may result in losses to the fund.

• Performance risk: Investment objectives express an intended result but there is no guarantee that such a result will be achieved. Depending on market conditions and the macro economic environment, investment objectives may become more difficult to achieve.

• Counterparty risk: The fund may have contractual agreements with counterparties. If a counterparty is unable to fulfil their obligations, the sum that they owe to the fund may be lost in part or in whole.

• Market risk: The value of investments can go up and down and an investor may not get back the amount initially invested.