CAF Overview

• Rate Policy Stability: The People's Bank of China maintained the one-year and five-year loan prime rates at 3.0% and 3.5%, respectively, extending an eight-month streak of policy stability, which underscores its commitment to market expectations and aims to ensure smooth economic operations.
• Economic Growth Data: China's economy expanded by 4.5% year-on-year in Q4 2025, marking the slowest growth in three years; however, the full-year growth reached 5%, meeting government targets, reflecting both challenges and achievements in economic recovery.
• Market Reaction: On Tuesday, the Shanghai Composite fell 0.3% to around 4,100, while the Shenzhen Component dropped 1.7% to 14,050, indicating cautious investor sentiment influenced by the unchanged interest rates and economic outlook.
• Currency Stability: The offshore yuan steadied at around 6.96 per dollar, close to 32-month highs, suggesting strong market confidence in the yuan amid the PBoC's decision to keep lending rates unchanged, potentially aiding in attracting foreign investment.

• Dividend Announcement: The Morgan Stanley China A Share Fund has declared a dividend of $0.262949 per share, with a record date of December 19, 2025, and a payable date of December 29, 2025, indicating the fund's ability to maintain stable returns in the current market environment.
• Uncertain Income Source: The dividend amount may partially be a return of capital according to federal tax regulations, with final determinations made after the end of 2025, which could impact investors' tax planning and return expectations.
• Asset Management Scale: As of September 30, 2025, Morgan Stanley Investment Management oversees $1.8 trillion in assets, highlighting its significant strength and market influence in the global investment management sector.
• Commitment to Investor Services: Morgan Stanley Investment Management is dedicated to providing outstanding long-term investment performance and a comprehensive suite of investment management solutions to a diverse client base, enhancing its position in the competitive financial services market.

• Repurchase Program Initiation: The Morgan Stanley China A Share Fund's Board has approved a cash tender offer to repurchase up to 20% of its outstanding shares at 98.5% of NAV, set to commence on March 3, 2026, and end on March 31, 2026, unless shares are trading at a premium.
• Conditional Tender Offer Policy Change: The Fund has shortened the measurement period for its performance-related conditional tender offer policy from five years to three years, allowing for a tender of up to 25% of shares if performance underperforms the MSCI China A Onshore Index, enhancing investor appeal.
• Ongoing Repurchase Program: As of October 31, 2025, the Fund has repurchased 664,960 shares at an average discount of -17.87%, demonstrating its commitment to enhancing shareholder value, with plans to suspend market purchases during the tender offer period.
• Clear Investment Strategy: The Fund aims to invest at least 80% of its assets in Chinese A-shares under normal circumstances, reflecting its long-term commitment to the Chinese market and its goal of creating value through capital growth.

• 2026 Cash Tender Offer Plan: The Board of the Morgan Stanley China A Share Fund has approved a cash tender offer to repurchase up to 20% of its outstanding shares at 98.5% of the net asset value, set to commence on March 3, 2026, and end on March 31, 2026, unless the shares are trading above NAV.
• Conditional Tender Offer Policy Change: The Fund has shortened the measurement period for its performance-related conditional tender offer policy from five years to three years, allowing for a tender of up to 25% of shares if performance underperforms the MSCI China A Onshore Index, enhancing investor appeal.
• Repurchase Program Execution: From January 1 to October 31, 2025, the Fund repurchased 302,038 shares at an average discount of -16.57%, demonstrating its ongoing commitment to enhancing shareholder value, with a total of 664,960 shares repurchased since inception at an average discount of -17.87%.
• Market Reaction Expectations: The implementation of this repurchase plan is expected to boost investor confidence, particularly amid market volatility, by providing an opportunity to repurchase shares at a discount, potentially attracting more investor interest in the Fund.

Chinese Stock Market Rally

• Investment Encouragement: Two major Wall Street banks are advising investors to capitalize on the current surge in Chinese stocks, highlighting a significant increase in the CSI 300 index, which has risen by 14% in 2025.
• Market Size: China's stock market boasts a total capitalization of approximately $11 trillion, making it the second-largest globally, trailing only behind the United States.

• Fee Reduction Announcement: Morgan Stanley Investment Management will lower the annual advisory fee for the Morgan Stanley China A Share Fund from 1.25% to 1.15%, effective July 1, 2025.

• Tender Offer Status: The conditions for a conditional tender offer have not been met, so no tender offer will occur at this time; performance has exceeded the benchmark index, and future assessments will be made every five years starting July 1, 2025.