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<p><strong>Your capital is at risk. Past performance is not a guide to future returns. The following update is based on a representative portfolio. As such, stock examples may not be held in every client portfolio, and performance may differ.</strong></p>
<p><strong>Katie Muir (KM)</strong>: Hello and welcome to our International Growth webinar.</p>
<p>I’m Katie Muir and I’m joined today by investment managers Tom Coutts and Robert Wilson. In terms of the agenda for today, we’ll spend about 30 minutes in conversation with Tom and Robert and then we’ll open it up for Q&A for the remaining time. </p>
<p>First, to frame the discussion, a quick reminder of our philosophy. Our experience and academic research shows that a small number of big winners drive long-term equity returns. So our focus is on finding and owning around 50 or so exceptional growth companies from the international universe and patiently owning them in size to let asymmetry work in our clients’ favour.</p>
<p>So Tom, Robert, thanks for joining me today. Let’s start with reflections on 2025 and then we’ll maybe build from there into AI and where our research is uncovering new growth opportunities. </p>
<p>So Tom, starting with 2025, what were the biggest drivers of portfolio outcomes last year? And maybe if you could touch on where you saw the strongest operational delivery from companies and where the market recognised that or didn’t recognise it.</p>
<p><strong>Tom Coutts (TC)</strong>: Yeah, of course. Thanks, Katie, and thank you to all our clients for joining us today. A client said to me a couple of weeks ago that 2025 must have been a frustrating year for us, and I think that’s right. I think we are frustrated and disappointed that we didn’t do a better job for clients. Although we know that at a plan level you’ll all have had international value managers on the other side who will have had a terrific year.</p>
<p>So I guess of the two or three big drivers for us, that’s one: there’s a bunch of stuff that we didn’t own that you might characterise as value in nature. I’m partly satisfied with that as an answer, but not completely, because I think, as we all know, growth and value are labels, and a lot of the value creation comes as companies move from one to the other. So we can’t give ourselves a complete pass on that. I think we need to be constantly examining whether there are companies that we didn’t own that we should own and that we should think about in the future.</p>
<p>But moving on to what we did own in the portfolio, I think a couple of areas I’d highlight. One is our semiconductor holdings did exceptionally well. Robert’s been a big driver of that and he’ll come on and talk about this shortly. It’s a large, deliberate bet, if you like, that we’re taking there, and we’re very intentional in the specific companies we invest in, as you’d expect. It’s a lot more nuanced than just AI capex, but that’s the shorthand, I guess.</p>
<p>And then on the other side, two broad areas of disappointment. One was anything software-related. Again, we’ll come back to this. It had a tougher time. And then there was a general de-rating of high-quality, quality compounders. We’ve got some exposure to that. Think of the likes of Ferrari. I think there are actually lots of exciting opportunities in that area at the moment. There’s been a pretty indiscriminate sell-off of those high-quality, long-duration growth names. So that hopefully gives you a bit of an overall view.</p>
<p>Then areas of operational delivery and where that was recognised: lots of companies did well and did well in share price terms. So the likes of argenx, Belgian biotech, or Nubank in Brazil, fintech, did well and were rewarded. More interesting are some of the ones where there’s a discrepancy. Even the likes of Spotify, which we’ve held for a long time, is doing really, really well operationally. Shares are down maybe 15 per cent over the last year. And then you can go into some of the software names like WiseTech in logistics software, for example. So happy to go into any of those in detail, but as a broad overview, that hopefully gives a flavour.</p>
<p><strong>KM:</strong> Great, thanks, Tom. Is there one area you would call out where you saw the biggest gap between business progress and share prices during the year?</p>
<p><strong>TC:</strong> Yeah, I think it probably is some of those software names. I mentioned WiseTech, the Aussie logistics software company. I’m a big fan of it. I think it’s a really good company. They’ve invented the category in many ways, dominated it for a few years. And if you go back, let’s say 15 months, they had a couple of governance issues.</p>
<p>But spring last year, they bought a competitor, which was really the number two, and that increases their revenue by maybe 70 per cent, three quarters. It also increases the addressable market quite significantly. So if you look at the raw earnings power of that business, it’s grown significantly over the last year. I thought the odds of them trebling their revenue over the next half dozen years are significantly higher today than they were a year ago, and the shares are down by half.</p>
<p>So we’ve added to it once last year. We’re meeting the CEO in a couple of weeks’ time to talk about the acquisition progress there, more importantly, the AI threat opportunity. But that could be one where we may end up adding. There’s certainly been a big discrepancy between operational progress and, I think, future earnings power and the way the market’s treated that in the near term.</p>
<p><strong>KM: </strong>Great, thanks, Tom. Maybe moving on from performance and talking about portfolio activity, what we did last year in terms of changing the portfolio. So new investments, where we’ve been adding and trimming more recently, could you maybe provide a few examples there?</p>
<p><strong>TC: </strong>Sure. Again, a couple of broad areas. There’s lots of nuance under this, but we’ve talked for a couple of years now about broadening the funnel and widening the types of growth companies we get into the portfolio. So in 2024, we added names like DSV or Hermès or Galderma. And then that continued in 2025 with the likes of RELX, Keyence and Belimo. I recognise these are just names for some clients, but the point is that these are companies from a variety of different industries and markets that diversify the portfolio in helpful ways, I think.</p>
<p>And so that process has continued and, if anything, it is accelerating this year. The other area where we’ve done quite a lot of work, again, Robert will come on to this, is within our semiconductor exposure, where we’ve been, again, deliberate and intentional in making sure that the right chips are on the right table in the right quantities. Again, I’ll let Robert talk about that.</p>
<p>Now, on the sell side, I think there’s not been anything quite as systematic as that. As usual, if the investment case isn’t playing out, if the risk reward is not as attractive as other opportunities, if the growth opportunity turns out to be less than we’d anticipated, there’s a bunch of reasons there. We might lose faith in the management, that kind of thing. A bunch of individual reasons, I think, on the sell side that it’s a bit less systematic there.</p>
<p><strong>KM: </strong>Okay, thanks. So, in terms of performance last year, [it’s] a combination of some stuff really working and being rewarded by the markets, some stuff delivering good fundamentals but [suffering] a de-rating, and then what we didn’t own. In the case of some of the stuff that's de-rated or lagged, what evidence do you see that keeps you confident that the upside is still intact?</p>
<p><strong>TC:</strong> Yeah, this always has to be case by case. We’re looking at every individual company. Go back to the WiseTech example: how do we think about the addressable market, and how do we think about their right to win that?</p>
<p>Spotify is a good one, perhaps, because it’s a more familiar business. They added 40m new customers last quarter, I think it was, so it’s still growing very nicely. The gross margin increased by 70 or 80 basis points, so it’s becoming more profitable. It’s creating a lot of value for its customers, but it’s extracting some of that value in a fair way, I think. And there’s good operational cost control as well. And yet the market hasn’t rewarded that, if anything it has punished the share price.</p>
<p>It’s that sort of thing: we’re looking at the fundamental progress of the business, mapping that to our thesis and thinking about long-term potential upside scenarios. We’re asking whether this company is mapping towards a really outlier-type potential in terms of how the business is performing, and then thinking about whether that’s reflected in the share price. If it’s not, we need to question that. If it is, our bias should be to top that holding up. And I think we put a bit more money into Spotify, I want to say, in the last week or two, as we rebalanced the portfolios. </p>
<p>So it’s that process of fundamental analysis linked to the long-term thesis, centred around the patience, the bottom-up stock picking, the proximity to management, all of these things, over and over again in the portfolio, and then mapping that to what the share price is telling us.</p>
<p><strong>KM: </strong>Yeah, great, thanks. And Spotify, [we think it’s] relatively early still in its monetisation journey.<br>It was a loss-making business a couple of years ago and it’s done a fantastic job of getting where it is today, but we still think there’s more to go.</p>
<p><strong>TC: </strong>Yeah. If any clients are interested, I think Daniel Ek, the founder, had his last results announcement two weeks ago as CEO. He’s now chair. I think reading the transcript of that is a really good summary of how their business is performing and how they think about things like AI.</p>
<p><strong>KM: </strong>Yeah, great, thanks. Building on those reflections, let’s move on and talk about the clearest structural change driver that we see in markets right now. So that’s AI. Robert, we’ve talked about framing the portfolio in an AI-disrupted world in a few broad categories. Can you maybe outline that structure for clients and why we think it’s useful for thinking about risk as well as opportunities where the long-term winners can emerge over the next five, 10 years?</p>
<p>Robert Wilson (RW): Sure, yeah. Clients who have known us for a while will know that we’ve had an AI question in our research framework for a couple of years now. It’s something that we’ve been taking seriously for some time and obviously the pace of change is really accelerating. OpenAI guiding to $30bn of revenue this year, for instance, clearly testifies to the reality of this being in the market now.</p>
<p>For us, we’ve thought about the portfolio in three buckets as an effort to think through our risk reward exposure. The first is AI infrastructure. So these are the companies who are enabling the build-out of AI, but also who are relatively undisruptable to some extent within that, because they’re physical hardware businesses that are tied into what it means for the industry to grow. At least in its current formulation, we don’t foresee them being disrupted by the technology. We see them being beneficiaries and enablers.</p>
<p>The second is AI inert companies. So these are companies who don’t really necessarily suffer or benefit materially, who continue to operate models that are currently in effect and that we expect to be reasonably stable. Admittedly, these seem to be less than we might have thought a while ago, but there are still some pretty good examples, I think, of businesses of that nature, and we can perhaps come on to those later.</p>
<p>And then the third is AI-sensitive companies. So these are companies we expect there to be a varying degree of impact. In most of those cases, we expect there to be some opportunities for some of those companies, but we also think the risk of disruption is higher probably than it was previously.</p>
<p>In our first attempts at this exercise, we considered four buckets. One was applications we thought would benefit and then we thought applications that might be disrupted. The reality is it’s just too early to say in many cases. We can map it out to some extent and try to see where we’re going, read the tea leaves as they emerge, but the reality is in many cases we just can’t say in advance. So we have to be sensitive to the fact there’s a real uncertainty and risk there for that kind of company. But obviously this should map to some extent to the amount of risk that we foresee. And the relative advantage of the infrastructure names is that they are less likely to be disrupted. So that’s one framing that we’re using in thinking about the portfolio.</p>
<p><strong>KM: </strong>Thanks, Robert. Maybe delving deeper into that AI infrastructure layer. So at the moment, that’s mainly represented in the portfolio by our semiconductor holdings. Over the next five to 10 years, where do you see the durable economics, or the value, in the AI build-out going? And what makes this area for us where we can really build conviction and own in size?</p>
<p><strong>RW: </strong>Yeah, well the first thing I would say is I wouldn’t necessarily think that all the infrastructure is semiconductor. Obviously the majority of it is, and that’s where our concentration is at the minute, and the competitive advantage questions are easier for us to answer. But we are looking more broadly at what pieces of infrastructure are enabling AI build-out, that are going beyond just chips in the pure sense of the term.</p>
<p>So that might include, for instance, CSPs, cloud service providers, who provide compute infrastructure at a layer beneath semiconductors. And above it, you might think of energy and power enablement as well. Those are areas that we’re actively exploring.</p>
<p>Within semiconductors, to your point about what are we really looking for, I think our behaviour will probably answer that. We’re looking at areas where companies have particularly high market share, which communicates a technology advantage, and especially in technologies that we think there are credible reasons to believe will continue to increase in their quote unquote “intensity factor”. In other words, they will continue to be more relevant in pushing the leading edge technology.</p>
<p>Two that I would call out there are Advantest and Disco. Advantest is testing equipment. As the value of these chips continues to pick up, yield loss becomes intolerable. So testing and understanding what’s going wrong, especially at the leading edge, becomes more important. And that’s a massive demand driver for Advantest that we’re seeing come through.</p>
<p>Disco is grinding and dicing of wafers into more elaborate formulations. This is particularly relevant to high bandwidth memory, or HBM. So those are two examples where we expect the intensity to increase. In both cases, those companies represent extremely high portions of the market.</p>
<p>We have, within our semiconductor budget, taken some funding away from areas where we expect them to be less high growth or where we think the valuation represents a less promising reward factor accordingly, and redeployed in a strategic sense. So that’s how we’re thinking about it.</p>
<p><strong>KM: </strong>And Advantest is a relatively new holding. We added that to the portfolio, I think, mid-2024, and it’s been one of our top contributors since. And I know you’ve met the company multiple times in Japan and did that original work, so it’s been a great investment for clients so far.</p>
<p>We did get one question ahead of this webinar on this topic. It was around the hyperscalers, which I assume is the cloud service providers that you mentioned. Are these becoming utility companies in disguise?</p>
<p><strong>RW: </strong>I think there’s a sense in which they might plausibly be considered a kind of utility at some point. I can see the case for that, but maybe not a regulated utility. I think that’s an interesting consideration.</p>
<p>Currently, the economics of this are proving extremely strong. It was a real seminal moment in the market, going back seven or eight years ago, when AWS first revealed its economics and showed that AWS was more profitable than Amazon retail was. And that was for a business that’s comparatively unappealing by comparison to GPU CSPs.</p>
<p>The purchases of AI accelerators by cloud service providers, especially this new wave of cloud service providers, the payback periods are under six months in many cases. So this is an extremely accretive business. It really depends on what kind of environment we are in the future with respect to the supply and demand of compute. But so far, we are in an extremely supply constrained environment.</p>
<p>Given the nature of the power constraint in particular that’s emerging, I’d expect that supply to become more and more valuable. So there’s very good economics there. We do have a limited amount of exposure to that in the portfolio, but it’s an area that we’re looking at more.</p>
<p><strong>KM:</strong> Thanks. Maybe one more on sizing of individual positions within our semiconductor exposure. What sources of insight do you find helpful, or what really helps us move the dial on conviction there?</p>
<p><strong>RW:</strong> I think the most relevant source of insight for us is still very much talking to the companies. There are more and more sophisticated things we can do with respect to AI usage on our part to internalise more and more transcripts and look at more and more experts. But I personally find getting in the room very valuable.</p>
<p>So in two weeks, I’ll be in Japan, Korea and Taiwan to talk to not just the companies we invest in, but their suppliers and their customers, to get a sense of where they see the opportunity and how they see the technology evolving. With respect to the changes and adjustments we’ve made within that segment of the portfolio, it’s really about getting ahead of where the puck is going. Where are the areas of intensity increases that we’re foreseeing? And that has changed over the past year or two. For instance, there was almost no conversation about power limitations until quite recently. So as long as we keep our ear to the ground, I think we can continue to move the portfolio around.</p>
<p><strong>KM: </strong>Thanks, Robert. Just a quick reminder to those watching: there is a question and answer box where you can submit questions. So please do send them in as they come up, and I’ll try and get to as many of them as possible at the end.</p>
<p>But let’s move on from AI infrastructure to the more two-sided part of AI, the areas that we think are more AI-sensitive and where there is more uncertainty perhaps. The most obvious example being software at the moment. Tom, many clients are asking us at the moment: is the SaaS sell-off an opportunity? How are we thinking about where software businesses sit on the spectrum of beneficiary, those strengthened by AI, versus disrupted? And how do we go about identifying who the winners will be?</p>
<p><strong>TC: </strong>Yeah, you’re absolutely right to talk about the spectrum. If I had to guess, I’d say that, on average, maybe the sell-off is overdone, but the phrase “on average” is carrying a lot of weight there. This will be a wide distribution of outcomes and we need to make sure that we’re focused on the companies that do well out of it rather than those that really suffer.</p>
<p>As Robert said, and I need to emphasise this, we’ve been thinking about this, incorporating this into our research framework, for a long time. I would hope that our analysis of the last few years has led us towards a subset of companies within software that are adaptable, resilient, forward-looking, growing with their customers, providing a service that can’t easily be ripped out and replaced by plugging AI into your database or into your manufacturing process, whatever it might be.<br>But also, of course, as clients will know, we start from a position of being profound believers in the transformational impact of technology and the effect that has on stock markets. So we’re very alert to this. We’re thinking about it quite a lot.</p>
<p>To your point about beneficiary or disrupted, most of the companies we invest in in this area are deeply embedded in customer workflows, which is very important. There are often litigation or regulatory risks that their customers will face in terms of the answers they’re having to give. The companies are often pulling data from multiple sources, longitudinal data that needs to be high fidelity and where the cost of all this is relatively small compared to the value that it gives to their customers and to the risk of getting it wrong.</p>
<p>If you have those factors added up, I think it means the threshold for a customer ripping out your product and replacing it with generative AI is fairly high. Having said that, we’re under no illusions about how transformational this technology could be. We are, as we always are, slightly paranoid in questioning every company and thinking about what its right to win is, what its right to continue serving its customers well is.</p>
<p>So our process is: start with a thesis about why this company has a right to win, is serving its customers in a sustainable way, has a good growth opportunity, and then challenge that constantly by talking to the company, as Robert talked about, by thinking from first principles, by talking to potential competitors. And then obviously by thinking about what the market’s telling you in terms of share prices.</p>
<p><strong>KM: </strong>Great, thanks Tom. Brian talked at one of our last PCG meetings about a tech-savvy company, I think in Japan, who’d organised a weekend-long hackathon to try and see if they could replace some of the SaaS businesses, or subscriptions, that they use. And what came out of that is they managed to do it in maybe 30 or 40 per cent of cases. But it just shows that there’s a big tail of companies that are very mission critical and very difficult to replicate, and that’s what we’re focused on.</p>
<p><strong>TC: </strong>That’s right. It’ll be very, very uneven across the SaaS industry, if you can even call it an industry.</p>
<p><strong>KM:</strong> Brilliant. Moving on, Robert, staying with the portfolio lens, let’s round out the framework and AI picture with companies that we think are going to be relatively insulated from this technology.</p>
<p><strong>RW: </strong>Sure. As I said at the beginning, it’s looking like less than we might have expected, maybe, and I think that speaks to the power of the technology. But maybe the area that I think is perhaps most growth accommodative but likely to be immune to some of the disruptive effects would be healthcare.</p>
<p>There are some truly inert areas of the portfolio, like luxury, Hermès, perhaps Ferrari, although that’s more debatable, Brunello Cucinelli for clients who own it, where I think it’s relatively neutral as to how that really affects it. The product is aesthetic and social in nature, it’s a different kind of consideration.</p>
<p>With healthcare, there’s a sense in which the core competitive advantages have always been essentially legal competitive advantages. It depends on what area within healthcare, obviously, but especially within drugs and pharmaceuticals, that’s a legal infrastructure. At this point, we’re not seeing a world where we expect AI’s effect to be to evade intellectual property and regulated monopolies. So we expect their competitive advantage to be protected.</p>
<p>The main interesting thing is that these companies have struggled with productivity over the past couple of years. They famously exhibited an inverse Moore’s law phenomenon where the more they spend, the less they get in terms of finding additional targets or modalities. Now there is a very new means to discover drugs and the cost structure of even clinical trials has changed quite meaningfully.</p>
<p>Across our healthcare exposure, Akeso, WuXi Bio[logics], some on the hardware side, Ambu, the endoscopy company from Denmark, or Sartorius, the machines for producing biologic equipment, we shouldn’t really expect any negative headwinds. In my view, we should expect that this is probably accommodative for that kind of space.</p>
<p>Zooming out, I would say healthcare is a good one. Some industrials is probably fair to say. And the other area that’s relatively inert is probably a lot of financials, although you have to be sector-specific. You have to be quite careful about what you’re counting in there.</p>
<p><strong>KM:</strong> So what we’re saying is that AI-inert is a simplification, because AI is going to touch everything. But the idea is uncorrelated growth drivers where we think edge and growth dynamics should be relatively insulated. You mentioned industrials there. Names in the portfolio at the moment would include the likes of Atlas Copco and DSV, et cetera, that we own already, and there may be other opportunities we’re looking at in that space as well.</p>
<p>To pick up on healthcare and dive into that a little bit more, we’ve observed some exciting innovation coming out of China in the healthcare space more recently. You mentioned Akeso and WuXi Biologics. They’re examples of a couple of existing holdings. Akeso, we initiated a position in just last year. Could you maybe talk about what’s been happening or what we’ve been observing there and the factors that have really driven some of that success in Chinese innovation in healthcare?</p>
<p><strong>RW: </strong>Yeah. The short of it is that China is now out-licensing more drugs than the United States is, which is pretty mind-boggling. I don’t think anybody would have thought that was possible even five years ago. It’s now producing novel types of therapeutics that aren’t available anywhere else and with new cost structures that people perhaps didn’t anticipate in advance.</p>
<p>There are over 7,000 clinical trials in China. The cost to run those trials is very low because they enrol very quickly. So we’ve seen an explosion in the space. Of course, that begs the question: why? And the answer is because of the engineering dividend, which is the phrase that people typically refer to whenever they are talking about the repatriation of Chinese talent back into China. It must be said this is not necessarily a Chinese policy. In some cases in the United States, it’s because of a sort of implicit hostility in high-sensitivity industries that is triggering a repatriation of that talent.</p>
<p>In the case of Akeso, which is a relatively new company, that means they’re developing ideas that might otherwise have been developed in traditional multinational pharmaceutical companies but are forming the basis of new companies that are Chinese in nature.</p>
<p>In the case of Akeso, they have a particular drug called ivonescimab, which is a bispecific antibody that is probably very wide on cancer applications, but in particular has promise in lung cancer and therefore targets the largest revenue opportunity in oncology. Clients might be familiar with Merck’s Keytruda, which is a $30bn drug, the largest-selling drug in the world. In theory, some of the trial data suggests that ivonescimab has an almost 50 per cent improvement on survival rates above Keytruda.</p>
<p>So this is mind-boggling stuff that really contributes to human welfare. If they get that right, that can fuel a massive new pipeline of additional drugs that can be developed in China and then developed or commercialised outside of China as well. So this is a pretty big opportunity and something that’s very new that we’ve been keen to learn more about. Last year I was in China, again, trying to speak to Akeso and learn from some of these other new companies about what’s coming down the pipeline.</p>
<p><strong>KM: </strong>Geopolitics is clearly front and centre, so how do we think about Akeso’s opportunity in that framework? And we discussed at the research meeting this week, a longer-standing holding, WuXi Biologics, who was perhaps even more exposed to geopolitics a few years ago. What’s the update on that company in light of the [US] BIOSECURE Act, for example?</p>
<p><strong>RW:</strong> In Akeso’s case, the short answer is we try to be relatively careful about what we’re underwriting and try to segment different scenarios. There is a scenario in which Akeso makes it into the US markets, retaining its economics in a conventional sense. There is a scenario in which it does not and in which it’s able to only sell into domestic China and rest of world opportunities, depending upon which regulator accepts it.</p>
<p>We do know the FDA has become more difficult to please and has become politicised in nature in some cases. We have to segment these different possible outcomes and underwrite them separately and probabilistically, ultimately, for different levels of asymmetry. In that sense, we try to make sure that some of the more conservative scenarios still reward shareholders.</p>
<p>The favourable consideration here is that valuations are different in nature. Some of these Chinese assets are not priced at nearly the same kind of valuation premiums that you might expect for a Western biotech. So it’s easier to construct these more tiered or segmented cases.</p>
<p>WuXi, as you say, has been a relatively nail-biting experience. It feels like the worst of it has passed. There was a period of massively excessive negativity. It wasn’t difficult to do the DCF on the pipeline and see that even under the worst terms of the BIOSECURE Act, as it was suggested to be implemented, shareholders would receive cash flows that would exceed the market cap without any growth. That gave us some succour in holding on.</p>
<p>In fact, it has turned out, as the company suggested it likely would, that the dependency of biotechs, smaller biotechs, even in the United States, on WuXi Biologics in order to manufacture its drugs and develop its commercial pipeline is key. WuXi has been able to make that case and its clients have been able to make that case to Congress and in other contexts as well. As a result, those more aggressive formulations of the BIOSECURE Act have been pulled.</p>
<p>There likely will be additional regulation that comes at some point that is not necessarily friendly. Again, this is a valuation-relative question: what do we really have to underwrite from here? We just have to do our homework and be careful about what risk we’re exposing ourselves to. But so far, WuXi have executed very well and had to pivot a lot in terms of the capabilities they need to flex and the case they need to make for their social licence to operate. So far, that’s been to our benefit.</p>
<p><strong>KM:</strong> Great, thanks, Robert. A reminder, if you’ve got a question, please add it to the question box.<br>Tom, picking up on what you said at the beginning around the areas of the market that rallied without us last year: one of the areas we touched on in the webinar last year was defence. Since then, Germany has substantially increased its defence budget and we’re seeing a step up in strategic spending globally. Are there areas that might create outlier opportunities, maybe outside the beneficiaries so far? And how are we thinking about the defence sector in general?</p>
<p><strong>TC:</strong> We’ve not taken any holdings there so far. You can think of three layers: The company layer, where we’re looking for great growth companies, then interesting thematic growth drivers at some level and then the portfolio context. I think defence companies have an interesting thematic growth driver and they’re different at a portfolio level. But at a the business or individual company level, we struggle to find things that are really compelling, certainly in the listed space. That’s in contrast to some of the unlisted companies that our private colleagues have invested in.</p>
<p>I think the problem is that most of the big defence companies look like and feel like yesterday’s companies, yesterday’s technology. We believe in technological progress and innovation and most of the innovation in the defence industry is happening outside the large listed companies. So it’s never say never, but not so far. Certainly we haven’t found those to be compelling enough.</p>
<p><strong>KM: </strong>Yeah, and you heard from a former army general towards the end of last year, didn’t you, who was talking exactly to that and about how innovation doesn’t happen between wars, it happens once we’re in a new war. And we’ve seen that with Ukraine, unfortunately, that drones and other new bits of technology have been helping to fight the war.</p>
<p>Turning to questions now, we’ve had one picking up on AI disruption again, specifically on software services, SaaS. Both from a portfolio level and company perspective with the likes of Wix, WiseTech, MakeMyTrip and Xero, but also the broader market: is the indiscriminate selling by the market warranted?</p>
<p><strong>TC: </strong>I don’t think the indiscriminate selling is warranted. I think we are in “shoot first, ask questions later” territory, if I’ve got that the right way around. It reminds me a bit of what happened with Google/Alphabet 18 months ago, where it was an AI loser for a long time and then that narrative changed very sharply.</p>
<p>As you know, we try hard not to react too much to noise. But I think we should be prepared to react quite quickly to changing fundamentals in either direction. That does mean, as Robert talked about, and I think WuXi was a good example, staying close to management teams, but having a “listen and trust but verify” approach to what they tell us. And going back to the foundational assumptions for every company.</p>
<p>So I think it is somewhat indiscriminate, but even within those four names that were mentioned, if you asked me to rank those by preference, I’d have quite a strong preference for one over the fourth one. So we haven’t wholesale put money into those companies that have suffered. But we’ve touched on Spotify, we’ve touched on WiseTech, we have added to those over the last year or two, not recently in the case of WiseTech. Atlassian we topped up a little bit recently, I think, as well. So we’re doing little bits in a patient, deliberate way.</p>
<p>I should say our starting point is about, it depends on the client model, maybe a 4 per cent or 5 per cent overweight here. So it’s a material position, but not a portfolio-defining one. So I think it is indiscriminate. I understand where it’s coming from, but I think that narrative will play through and you’ll get more discrimination, more differentiation, as individual companies give different narratives and provide the evidence to support what they’re doing.</p>
<p><strong>KM: </strong>Great, thanks, Tom. And we’ve had another follow-up on the topic of healthcare: what’s the current view of Novo Nordisk? It’s been an early leader in weight loss, but seems like it’s lagging behind now, whether it’s Eli Lilly or generics and other players coming into this field. Thoughts there from either of you?</p>
<p><strong>TC: </strong>When we took a holding, I’m going to say 18 months ago, maybe two years ago, we talked about building up to about a 3 per cent weight at that time, which would have been unusual for us. We got halfway through that process and then stopped because it felt like things had changed quite severely.</p>
<p>We’ve had several rounds of discussion, and the fact that we haven’t added to it will, I guess, tell its own story. I think we are unpersuaded by their competitive position, but at the same time we recognise there is still a significant opportunity. So I think things could go in either direction from here for us in terms of the holding size. </p>
<p>I don’t mind having a small holding as it currently is, but I have to say it’s clearly being outcompeted by Lilly at the moment. And as we all know, there are patent cliffs not that far away. So we’ll see what happens there.</p>
<p><strong>KM: </strong>Thanks, Tom. We’ll finish on a couple of quickfire ones. As you both look forward today, how would you describe the portfolio’s positioning? Where are our highest conviction exposures and what gives you the most confidence that the portfolio is set up well for the next five to 10 years?</p>
<p><strong>RW:</strong> It depends on what level of generality one talks about. Clearly, our biggest bet is on the best companies, companies with very strong competitive advantages. That’s our most general bet. But trying to drill down to some sectoral or thematic concentrations, clearly the AI and semiconductor bet is our largest. Because we do believe that disruption is coming and that if you view the world on a five-year view, it will not look the same. It will look meaningfully different, and there is a lot of evidence that indicates that’s the case.</p>
<p>We have to be sensitive to the amount of aggregate risk we’re taking, the size of our bet across the portfolio and how we calibrate within that segment. You will continue to see us redistribute as we trade around in that portion of the portfolio. But that’s probably our highest conviction bet across the portfolio. Is there anything you’d add to that, Tom?</p>
<p><strong>TC:</strong> It feels to me like international markets have started to have their moment in the sun in the last year or two, and I think we’re extremely well placed. There are some big growth drivers, types of businesses, that are very hard, if not impossible, to replicate within a US context. Some of the AI capex names are completely in that camp. Many of the international branded goods companies are completely in that camp.</p>
<p>And then you’ve got idiosyncratic companies like Spotify, like MercadoLibre or Nubank, companies that give you exposure to developing and emerging economies, billions of people around the world. I think our pipeline is broader than ever. I feel we’re in pretty good shape.</p>
<p>Performance-wise last year was a bit frustrating, lagging a big spike, but I think the progress of the companies is good. The names we’re looking at are good. We’re continuing to broaden the funnel and make sure we’re getting a diverse range of exciting international growth companies into the portfolio.</p>
<p>So I feel pretty good about things. We are committed to trying to give clients a less bumpy ride than they’ve had, and that’s part of this broadening out. But we can do that through working on the inputs and then letting the outputs be what they’ll be on the back of that.</p>
<p><strong>KM: </strong>Brilliant. Thanks, Tom. I think that’s a good note to leave us on. Thank you, Robert, as well. And thank you to everyone for joining and for your questions. We appreciate your ongoing support and look forward to speaking to you again soon. Thanks. <br><br></p>
<h3 class="TABLEHEADER1212pt">International Growth</h3>
<p><strong>Annual past performance to 31 December each year (%)</strong></p>
<table border="1" style="border-collapse: collapse; width: 100%; border-width: 0px; height: 74.6668px;">
<tbody>
<tr style="height: 18.6667px;">
<td style="border-width: 1px 1px 2px; border-style: solid; border-color: rgb(204, 204, 204) rgb(204, 204, 204) rgb(0, 0, 0); border-image: initial; padding: 10px; height: 18.6667px;"> </td>
<td style="border-width: 1px 1px 2px; border-style: solid; border-color: rgb(204, 204, 204) rgb(204, 204, 204) rgb(0, 0, 0); border-image: initial; padding: 10px; height: 18.6667px; text-align: right;"><strong>2021</strong></td>
<td style="border-width: 1px 1px 2px; border-style: solid; border-color: rgb(204, 204, 204) rgb(204, 204, 204) rgb(0, 0, 0); border-image: initial; padding: 10px; height: 18.6667px; text-align: right;"><strong>2022</strong></td>
<td style="border-width: 1px 1px 2px; border-style: solid; border-color: rgb(204, 204, 204) rgb(204, 204, 204) rgb(0, 0, 0); border-image: initial; padding: 10px; height: 18.6667px; text-align: right;"><strong>2023</strong></td>
<td style="border-width: 1px 1px 2px; border-style: solid; border-color: rgb(204, 204, 204) rgb(204, 204, 204) rgb(0, 0, 0); border-image: initial; padding: 10px; height: 18.6667px; text-align: right;"><strong>2024</strong></td>
<td style="border-width: 1px 1px 2px; border-style: solid; border-color: rgb(204, 204, 204) rgb(204, 204, 204) rgb(0, 0, 0); border-image: initial; padding: 10px; height: 18.6667px; text-align: right;"><strong>2025</strong></td>
</tr>
<tr style="height: 18.6667px;">
<td style="border: 1px solid rgb(204, 204, 204); padding: 10px; height: 18.6667px;">International Growth Composite (gross)</td>
<td style="border: 1px solid rgb(204, 204, 204); padding: 10px; height: 18.6667px; text-align: right;">-9.6</td>
<td style="border: 1px solid rgb(204, 204, 204); padding: 10px; height: 18.6667px; text-align: right;">-35.9</td>
<td style="border: 1px solid rgb(204, 204, 204); padding: 10px; height: 18.6667px; text-align: right;">15.7</td>
<td style="border: 1px solid rgb(204, 204, 204); padding: 10px; height: 18.6667px; text-align: right;">9.0</td>
<td style="border: 1px solid rgb(204, 204, 204); padding: 10px; height: 18.6667px; text-align: right;">16.8</td>
</tr>
<tr style="height: 18.6667px;">
<td style="border: 1px solid rgb(204, 204, 204); padding: 10px; height: 18.6667px;">International Growth Composite (net)</td>
<td style="border: 1px solid rgb(204, 204, 204); padding: 10px; height: 18.6667px; text-align: right;">-10.1</td>
<td style="border: 1px solid rgb(204, 204, 204); padding: 10px; height: 18.6667px; text-align: right;">-36.3</td>
<td style="border: 1px solid rgb(204, 204, 204); padding: 10px; height: 18.6667px; text-align: right;">15.0</td>
<td style="border: 1px solid rgb(204, 204, 204); padding: 10px; height: 18.6667px; text-align: right;">8.4</td>
<td style="border: 1px solid rgb(204, 204, 204); padding: 10px; height: 18.6667px; text-align: right;">16.1</td>
</tr>
<tr style="height: 18.6667px;">
<td style="border: 1px solid rgb(204, 204, 204); padding: 10px; height: 18.6667px;">MSCI ACWI ex US Index*</td>
<td style="border: 1px solid rgb(204, 204, 204); padding: 10px; height: 18.6667px; text-align: right;">8.3</td>
<td style="border: 1px solid rgb(204, 204, 204); padding: 10px; height: 18.6667px; text-align: right;">-15.6</td>
<td style="border: 1px solid rgb(204, 204, 204); padding: 10px; height: 18.6667px; text-align: right;">16.2</td>
<td style="border: 1px solid rgb(204, 204, 204); padding: 10px; height: 18.6667px; text-align: right;">6.4</td>
<td style="border: 1px solid rgb(204, 204, 204); padding: 10px; height: 18.6667px; text-align: right;">33.1</td>
</tr>
</tbody>
</table>
<p> </p>
<p><strong>Annualised returns to 31 December 2025 (%)</strong></p>
<table border="1" style="border-collapse: collapse; width: 100%; border-width: 0px; height: 92.5px;">
<tbody>
<tr style="height: 37px;">
<td style="border-width: 1px 1px 2px; border-style: solid; border-color: rgb(204, 204, 204) rgb(204, 204, 204) rgb(0, 0, 0); border-image: initial; padding: 10px; height: 37px; width: 61.3043%;"> </td>
<td style="border-width: 1px 1px 2px; border-style: solid; border-color: rgb(204, 204, 204) rgb(204, 204, 204) rgb(0, 0, 0); border-image: initial; padding: 10px; height: 37px; width: 13.0435%; text-align: right;"><strong>1 year</strong></td>
<td style="border-width: 1px 1px 2px; border-style: solid; border-color: rgb(204, 204, 204) rgb(204, 204, 204) rgb(0, 0, 0); border-image: initial; padding: 10px; height: 37px; width: 12.6522%; text-align: right;"><strong>5 years</strong></td>
<td style="border-width: 1px 1px 2px; border-style: solid; border-color: rgb(204, 204, 204) rgb(204, 204, 204) rgb(0, 0, 0); border-image: initial; padding: 10px; height: 37px; width: 12.7826%; text-align: right;"><strong>10 years</strong></td>
</tr>
<tr style="height: 18.5px;">
<td style="border: 1px solid rgb(204, 204, 204); padding: 10px; height: 18.6667px; width: 61.3043%;">International Growth Composite (gross)</td>
<td style="border: 1px solid rgb(204, 204, 204); padding: 10px; height: 18.5px; width: 13.0435%; text-align: right;">16.8</td>
<td style="border: 1px solid rgb(204, 204, 204); padding: 10px; height: 18.5px; width: 12.6522%; text-align: right;">-3.1</td>
<td style="border: 1px solid rgb(204, 204, 204); padding: 10px; height: 18.5px; width: 12.7826%; text-align: right;">9.3</td>
</tr>
<tr style="height: 18.5px;">
<td style="border: 1px solid rgb(204, 204, 204); padding: 10px; height: 18.6667px; width: 61.3043%;">International Growth Composite (net)</td>
<td style="border: 1px solid rgb(204, 204, 204); padding: 10px; height: 18.5px; width: 13.0435%; text-align: right;">16.1</td>
<td style="border: 1px solid rgb(204, 204, 204); padding: 10px; height: 18.5px; width: 12.6522%; text-align: right;">-3.7</td>
<td style="border: 1px solid rgb(204, 204, 204); padding: 10px; height: 18.5px; width: 12.7826%; text-align: right;">8.7</td>
</tr>
<tr style="height: 18.5px;">
<td style="border: 1px solid rgb(204, 204, 204); padding: 10px; height: 18.6667px; width: 61.3043%;">MSCI ACWI ex US Index</td>
<td style="border: 1px solid rgb(204, 204, 204); padding: 10px; height: 18.5px; width: 13.0435%; text-align: right;">33.1</td>
<td style="border: 1px solid rgb(204, 204, 204); padding: 10px; height: 18.5px; width: 12.6522%; text-align: right;">8.5</td>
<td style="border: 1px solid rgb(204, 204, 204); padding: 10px; height: 18.5px; width: 12.7826%; text-align: right;">8.6</td>
</tr>
</tbody>
</table>
<p><span class="source-text">*MSCI EAFE Index prior to 30 September 2018</span></p>
<p><span class="source-text">Source: Revolution, MSCI. US dollars. Returns have been calculated by reducing the gross return by the highest annual management fee for the composite. 1 year figures are not annualised.</span> </p>
<p><strong>Past performance is not a guide to future returns.</strong></p>
<p><span class="source-text">Legal notice: MSCI makes no express or implied warranties or representations and shall have no liability whatsoever with respect to any MSCI data contained herein. The MSCI data may not be further redistributed or used as a basis for other indexes or any securities or financial products. This report is not approved, endorsed, reviewed or produced by MSCI. None of the MSCI data is intended to constitute investment advice or a recommendation to make (or refrain from making) any kind of investment decision and may not be relied on as such.</span></p>
<p> </p>
<h3>Risk Factors</h3>
<p>The views expressed should not be considered as advice or a recommendation to buy, sell or hold a particular investment. They reflect opinion and should not be taken as statements of fact nor should any reliance be placed on them when making investment decisions. </p>
<p>This communication was produced and approved in March 2026 and has not been updated subsequently. It represents views held at the time of writing and may not reflect current thinking.</p>
<h3>Potential for Profit and Loss</h3>
<p>All investment strategies have the potential for profit and loss, your or your clients’ capital may be at risk. Past performance is not a guide to future returns.</p>
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