Fund Overview - The fund is named "Huaxia CSI Dividend Quality ETF" and was established on December 20, 2021, with a total share of 546,290,777.00 at the end of the reporting period [1][2] - The fund aims to closely track the CSI Dividend Quality Index, targeting an absolute tracking deviation of no more than 0.2% on a daily basis and an annual tracking error of no more than 2% [1][2] - The fund employs various investment strategies, including full replication, alternative strategies, and investment in derivatives and bonds [1][2] Financial Performance - The fund achieved a realized income of 8,028,150.80 RMB and a profit of 19,549,449.27 RMB during the reporting period from January 1, 2025, to June 30, 2025 [2][3] - The weighted average net value profit rate for the period was 3.60%, with a net asset value of 514,654,634.43 RMB and a net asset value per share of 0.9421 RMB at the end of the period [2][3] - The cumulative net value growth rate since the fund's inception is -5.79% [2][3] Market Environment - The macroeconomic environment in China showed resilience, with a GDP growth rate of 5.3% in the first half of 2025, supported by counter-cyclical policies and adjustments in export structures [12][13] - The A-share market experienced high volatility but recorded positive returns across major indices, with sectors like non-ferrous metals, banking, and military industries performing well [12][13] - The fund's tracking deviation was +2.04%, primarily due to dividend distributions, operational expenses, and index adjustments [13] Management and Operations - The fund management company, Huaxia Fund Management Co., Ltd., has a strong reputation and extensive experience in managing ETF products, being one of the largest in the domestic market [4][5] - The fund management adheres to strict compliance with regulations and has implemented robust risk monitoring and control mechanisms [11][15] - The fund did not distribute profits during the reporting period, aligning with regulatory requirements [14][15] Client Services - In the first half of 2025, the fund management company focused on enhancing customer experience through improved online services and educational initiatives [7] - The company has established liquidity service partnerships with several securities firms to ensure smooth market operations for the fund [13]

Quantitative Models and Construction Methods - **Model Name**: Dividend Growth Strategy **Model Construction Idea**: Focuses on identifying stocks with strong dividend growth potential, aiming to outperform pure dividend assets by leveraging growth-oriented metrics[5][14] **Model Construction Process**: The strategy selects stocks based on their historical dividend growth rates and projected growth potential. It emphasizes companies with consistent dividend increases and robust financial health. Specific metrics or formulas were not detailed in the report[5][14] **Model Evaluation**: Demonstrated superior performance compared to pure dividend assets, indicating its effectiveness in capturing growth opportunities within dividend-paying stocks[5][14] - **Model Name**: Dividend Quality Strategy **Model Construction Idea**: Targets high-quality dividend stocks by assessing financial stability and sustainability of dividend payouts[5][14] **Model Construction Process**: The strategy evaluates companies based on financial metrics such as return on equity (ROE), debt-to-equity ratio, and earnings stability. It prioritizes firms with strong balance sheets and consistent profitability. Specific formulas were not provided[5][14] **Model Evaluation**: Outperformed pure dividend assets, showcasing its ability to identify stable and reliable dividend-paying companies[5][14] - **Model Name**: Balanced Dividend 50 Portfolio **Model Construction Idea**: Combines defensive and growth-oriented dividend stocks to achieve a balanced risk-return profile[13][23] **Model Construction Process**: The portfolio is constructed by selecting 50 stocks that exhibit both high dividend yields and growth potential. It uses a combination of dividend yield, growth metrics, and financial stability indicators. Detailed formulas were not disclosed[13][23] **Model Evaluation**: Achieved significant excess returns relative to the benchmark, highlighting its balanced approach's effectiveness[13][23] - **Model Name**: High Dividend 30 Portfolio **Model Construction Idea**: Focuses on high-dividend-yielding stocks, particularly from central and state-owned enterprises, to provide stable income[13][23] **Model Construction Process**: The portfolio selects 30 stocks with the highest dividend yields among central and state-owned enterprises. It emphasizes income generation and stability. Specific formulas were not mentioned[13][23] **Model Evaluation**: Delivered consistent excess returns, demonstrating its suitability for income-focused investors[13][23] - **Model Name**: Electronic Balanced Allocation Enhanced Portfolio **Model Construction Idea**: Aims to achieve balanced exposure within the electronics sector by diversifying across sub-industries[13][31] **Model Construction Process**: The portfolio allocates investments across various electronics sub-industries, balancing growth and stability. It uses sector-specific metrics to identify leading companies. Detailed formulas were not provided[13][31] **Model Evaluation**: Achieved positive returns but underperformed the electronics sector index, indicating room for improvement in capturing sector-wide trends[13][31] - **Model Name**: Electronics Sector Select Enhanced Portfolio **Model Construction Idea**: Focuses on mature sub-industry leaders within the electronics sector to capture stable growth[13][31] **Model Construction Process**: The portfolio targets leading companies in mature electronics sub-industries, emphasizing financial stability and market leadership. Specific formulas were not disclosed[13][31] **Model Evaluation**: Delivered positive returns but failed to outperform the electronics sector index, suggesting limited effectiveness in capturing broader sector dynamics[13][31] --- Model Backtesting Results - **Dividend Growth Strategy**: Weekly average return exceeded 2%, outperforming pure dividend assets[5][14] - **Dividend Quality Strategy**: Weekly average return exceeded 2%, outperforming pure dividend assets[5][14] - **Balanced Dividend 50 Portfolio**: Weekly excess return of approximately 0.99% relative to the CSI Dividend Total Return Index; year-to-date excess return of 6.04%[13][23] - **High Dividend 30 Portfolio**: Weekly excess return of approximately 0.76% relative to the CSI Dividend Total Return Index[13][23] - **Electronic Balanced Allocation Enhanced Portfolio**: Weekly return of approximately 5.01%, underperforming the electronics sector index[13][31] - **Electronics Sector Select Enhanced Portfolio**: Weekly return of approximately 3.91%, underperforming the electronics sector index[13][31]

- The report introduces several active quantitative strategies launched by the Changjiang Quantitative Team since July 2023, including the Dividend Selection Strategy and the Industry High Winning Rate Strategy[6][13] - The "Dividend Quality" segment showed relatively active performance with a weekly average return of approximately 1.64%, indicating excess returns compared to pure dividend assets[6][16] - The "Central State-Owned Enterprises High Dividend 30 Portfolio" and the "Balanced Dividend 50 Portfolio" both outperformed the CSI Dividend Total Return Index this week, with excess returns of approximately 0.61% and 1.51%, respectively[6][22] - The "Balanced Dividend 50 Portfolio" achieved positive returns this week[6][22] - The "Electronic Balanced Allocation Enhanced Portfolio" and the "Electronic Sector Preferred Enhanced Portfolio" both achieved positive returns this week, although they did not outperform the electronic industry index[7][31] - The "Electronic Sector Preferred Enhanced Portfolio" had a weekly return of approximately 6.20%, outperforming the median of technology-themed fund products[7][31] Quantitative Models and Construction Methods 1. Model Name: Dividend Selection Strategy; Model Construction Idea: Focuses on selecting stocks with high dividend yields and quality; Model Construction Process: The strategy involves screening stocks based on dividend yield, payout ratio, and other fundamental factors to construct a portfolio that aims to provide stable and high returns; Model Evaluation: The strategy has shown to provide excess returns compared to pure dividend assets[6][13][16] 2. Model Name: Industry High Winning Rate Strategy; Model Construction Idea: Focuses on selecting stocks within high-performing industries; Model Construction Process: The strategy involves identifying industries with strong performance and selecting stocks within those industries based on various fundamental and technical factors; Model Evaluation: The strategy aims to provide alternative perspectives and investment choices for investors by tracking market hotspots and selecting individual stocks within high-performing industries[6][13] Model Backtesting Results 1. Dividend Selection Strategy, Excess Return: 1.64%[6][16] 2. Central State-Owned Enterprises High Dividend 30 Portfolio, Excess Return: 0.61%[6][22] 3. Balanced Dividend 50 Portfolio, Excess Return: 1.51%[6][22] 4. Electronic Sector Preferred Enhanced Portfolio, Weekly Return: 6.20%[7][31] Quantitative Factors and Construction Methods 1. Factor Name: Dividend Quality; Factor Construction Idea: Focuses on stocks with high dividend quality; Factor Construction Process: The factor involves screening stocks based on dividend yield, payout ratio, and other fundamental factors to identify stocks with high dividend quality; Factor Evaluation: The factor has shown to provide excess returns compared to pure dividend assets[6][16] 2. Factor Name: Industry Performance; Factor Construction Idea: Focuses on stocks within high-performing industries; Factor Construction Process: The factor involves identifying industries with strong performance and selecting stocks within those industries based on various fundamental and technical factors; Factor Evaluation: The factor aims to provide alternative perspectives and investment choices for investors by tracking market hotspots and selecting individual stocks within high-performing industries[6][13] Factor Backtesting Results 1. Dividend Quality Factor, Weekly Average Return: 1.64%[6][16] 2. Industry Performance Factor, Weekly Return: 6.20%[7][31]

Core Viewpoint - The article discusses the strong performance of the dividend index in recent years, its driving factors, and the potential for continued growth in the future [1][5][47]. Performance Overview - The dividend index has shown strong performance in recent years, with some dividend funds increasing in value by 50%-80% [8][47]. - From 2018 to 2021, the growth style bull market saw the growth style index rise over 150%, while the dividend index lagged behind [6]. - However, from 2022 to 2024, the dividend index has performed well, showing overall growth [7]. Sources of Returns - The four main sources of returns for dividend index funds are: 1. **Undervalued Buy-in and Valuation Improvement**: The dividend index has seen a significant increase in price-to-earnings (P/E) ratio from around 7-8 times in 2018 to approximately 9-10 times by May 2025 [18][19][22]. 2. **Profit Growth**: The underlying companies of the dividend index have shown stable profit growth, particularly from 2022 to 2024, which supports the index's performance [27]. 3. **Dividend Yield**: The current dividend yield has increased significantly compared to 5-10 years ago, with many stocks now yielding 5%-6% [30][34]. 4. **Rule Optimization**: The optimization of index rules has improved returns, with newer indices incorporating additional criteria for stock selection [39][44]. Historical Performance Metrics - The annualized return of the dividend index since the end of 2004 is 8.73%, which increases to 12.52% when accounting for dividends [13][14]. - The long-term growth rate of the dividend index is estimated at 8%-9%, with an additional annual dividend yield of 3%-4% [14]. Policy Impact - Recent policies have encouraged companies to increase dividend payouts, resulting in a rise in the number and amount of cash dividends distributed by A-share companies, reaching approximately 2.4 trillion in 2024 [33]. - The proportion of profits distributed as dividends has increased from 30%-40% to 40%-50% for some companies [34]. Conclusion - The combination of undervalued buy-in, profit growth, increased dividend yields, and optimized rules are expected to continue driving the long-term growth of the dividend index [47].

Group 1: Dividend Performance Analysis - Historically, the China Securities Dividend Index significantly underperformed in June and October since 2010, with excess return rates against the CSI 300 and the entire A-share market around 33%[16] - In June 2015 and 2018, dividends showed excess returns relative to the CSI 300 and the entire A-share market, benefiting from high volatility environments[8] - The Hong Kong Stock Connect High Dividend Index has consistently outperformed the CSI 300 Total Return Index and the Hong Kong Stock Connect Index, with monthly winning rates of 30% in January and October, which are the lowest for the year[27] Group 2: Seasonal Effects and Industry Performance - The months of March to May and August to December are favorable periods for the Hong Kong Stock Connect High Dividend Index to outperform the CSI 300 and the Hong Kong Stock Connect Index[28] - Most industries, except for consumer sectors like automobiles and home appliances, showed no excess returns in June and October since 2010, with utilities performing relatively better in June[22] - The banking and transportation sectors, along with high-weight industries like construction materials and real estate, experienced significant drawdowns in June[22] Group 3: Reasons for Seasonal Effects - The low winning rates for dividends in June and October are linked to the completion of annual and semi-annual reports, leading to a rise in market risk appetite post-reporting periods[30] - The phenomenon of "抢权行情" (right grabbing market) occurs around the ex-dividend dates, where stock prices may decline post-ex-dividend due to preemptive buying behavior[31] - The market's risk appetite tends to recover after the financial reporting periods, which negatively impacts the overall performance of dividend stocks[40]