Global Income Growth

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<p data-start="182" data-end="943"><strong>Your capital is at risk. Past performance is not a guide to future returns and any income is not guaranteed.&nbsp;</strong></p> <div class="flex flex-col text-sm pb-25"> <div class="text-base my-auto mx-auto pb-10 [--thread-content-margin:var(--thread-content-margin-xs,calc(var(--spacing)*4))] @w-sm/main:[--thread-content-margin:var(--thread-content-margin-sm,calc(var(--spacing)*6))] @w-lg/main:[--thread-content-margin:var(--thread-content-margin-lg,calc(var(--spacing)*16))] px-(--thread-content-margin)"> <div class="[--thread-content-max-width:40rem] @w-lg/main:[--thread-content-max-width:48rem] mx-auto max-w-(--thread-content-max-width) flex-1 group/turn-messages focus-visible:outline-hidden relative flex w-full min-w-0 flex-col agent-turn"> <div class="flex max-w-full flex-col gap-4 grow"> <div class="min-h-8 text-message relative flex w-full flex-col items-end gap-2 text-start break-words whitespace-normal outline-none keyboard-focused:focus-ring [.text-message+&amp;]:mt-1" data-message-author-role="assistant" data-message-id="73040ef4-ba4c-4862-9a2b-80c85a04ff88" data-message-model-slug="gpt-5-4-thinking" data-turn-start-message="true"> <div class="flex w-full flex-col gap-1 empty:hidden"> <div class="markdown prose dark:prose-invert w-full wrap-break-word light markdown-new-styling"> <p class="MsoNormal"><strong>Alasdair McHugh: </strong>Over the quarter, the portfolio delivered good absolute returns and good dividend growth. That’s consistent with the steady compounding and income growth we aim to provide for our clients.&nbsp;&nbsp;</p> <p class="MsoNormal">But relative performance was disappointing. The index was hard to match, continuing a pattern over the last couple of years: clients have received growing income, but capital growth has lagged exuberant markets driven by a narrow group of AI-related winners.&nbsp;</p> <p class="MsoNormal">The main explanation is valuation. Our holdings have continued to make operational progress, but the market has been less willing to pay for dependable, quality growth businesses.&nbsp;&nbsp;</p> <p class="MsoNormal">Good growth in earnings and dividends was offset by falling valuations. The derating was especially painful in software, where investors are questioning whether AI agents could undermine traditional per-seat subscription models.&nbsp;</p> <p class="MsoNormal">We take those risks seriously. But in several&nbsp;cases&nbsp;we believe the market is being too pessimistic. Intuit, for example, is still making strong progress in small businesses and assisted tax, and AI is already helping improve customer guidance and expert productivity.&nbsp;&nbsp;</p> <p class="MsoNormal">Accenture is also being treated as an AI casualty, despite earnings growth and a higher dividend.&nbsp;Evidently, we&nbsp;bought in too early to that one, but we still believe Accenture will be central to helping large companies adopt AI in practice.&nbsp;</p> <p class="MsoNormal">We have, however,&nbsp;taken action&nbsp;where the evidence has changed.&nbsp;&nbsp;</p> <p class="MsoNormal">We sold CME after the regulatory backdrop changed in a way that we believe weakens its competitive position.&nbsp;&nbsp;</p> <p class="MsoNormal">We reinvested where growth looks more durable. And one example of that is Cullen/Frost Bankers.&nbsp;&nbsp;</p> <p class="MsoNormal">Now most banks are poorly suited to our approach. They are highly leveraged, deeply cyclical, sensitive to interest rates and regulation, and their vulnerable to crises of confidence – in short, they are typically not in control of their own destiny.&nbsp;&nbsp;</p> <p class="MsoNormal">Now that belief holds in general. But in any sector, however challenging, there exists rare businesses whose culture,&nbsp;strategy,&nbsp;competitive&nbsp;position&nbsp;grant&nbsp;them an unusual degree of self-determination.&nbsp;&nbsp;</p> <p class="MsoNormal">Cullen/Frost is such a company. It’s a relationship-led Texan bank with a strong deposit franchise, conservative management, and a long record of organic growth and credit discipline. We believe it can compound book value at attractive rates, with less downside risk than many of it’s peers.&nbsp;&nbsp;</p> <p class="MsoNormal">That adds a different source of growth to the portfolio, a key aim as we&nbsp;seek&nbsp;to broaden its growth drivers to ensure it can compound in a broader range of environments.&nbsp;</p> <p class="MsoNormal">We believe there are opportunities like this in every sector, and we intend to keep finding them.&nbsp;</p> <p class="MsoNormal">We are also determined to keep strengthening our portfolio.&nbsp;&nbsp;</p> <p class="MsoNormal">Once a year in our Quality Growth Review, we test whether the companies we own are doing what we bought them to do. We strip out currency effects, disposals, tax wheezes and accounting noise and we compare each holding’s clean earnings growth with the 10% rate that we seek.&nbsp;</p> <p class="MsoNormal">The slide on screen summarises this exercise. The portfolio-level result was&nbsp;reassuring:&nbsp;five-year earnings growth is on target. But the spread beneath&nbsp;that average matters. Some holdings are compounding well above our hurdle. Some are simply in cyclical troughs.&nbsp;&nbsp;</p> <p class="MsoNormal">But others prompt a tougher question: is compounding interrupted, or has it been disrupted? Would we buy this company today, knowing what we now know?&nbsp;&nbsp;</p> <p class="MsoNormal">This led to the sale of T. Rowe Price. We admired its long-term culture and its client focus, but the shift towards passive investing has proved relentless, fee pressure has persisted, and outflows have continued.&nbsp;</p> <p class="MsoNormal">The theme of our investor letter this quarter is belief. We compare the beliefs represented in your portfolio with those embedded in the index.&nbsp;&nbsp;</p> <p class="MsoNormal">And we do so acutely aware that an index tracker is the obvious alternative, and that our recent underperformance has been felt not as a capital loss, but as a real opportunity cost.&nbsp;</p> <p class="MsoNormal">So why should clients continue to believe in our approach?&nbsp;</p> <p class="MsoNormal">First, the portfolio’s fundamentals&nbsp;remain&nbsp;sound. Earnings and dividends are still growing.&nbsp;&nbsp;</p> <p class="MsoNormal">Second, valuations are favourable following quality’s derating, improving the outlook over the&nbsp;long-run.&nbsp;&nbsp;</p> <p class="MsoNormal">And third, the portfolio offers much more diversification than the index: AI infrastructure, yes, but also exciting themes like electrification, health&nbsp;innovation&nbsp;and digital consumption, each of which in good balance.&nbsp;</p> <p class="MsoNormal">And finally, the index&nbsp;appears to embed&nbsp;a bold assumption: that AI can drive a quick and smooth step-change in corporate profitability, including&nbsp;nearly 20%&nbsp;earnings growth over the next year.&nbsp;&nbsp;</p> <p class="MsoNormal">This implies a significant shift from labour to capital, as jobs are lost to bolster corporate margins.&nbsp;</p> <p class="MsoNormal">Now that may be technologically achievable, but whether it is socially acceptable we think is&nbsp;perhaps the&nbsp;biggest question.&nbsp;&nbsp;</p> <p class="MsoNormal">We think this could affect the speed and smoothness of the AI roll out, particularly in industries beyond software.&nbsp;&nbsp;</p> <p class="MsoNormal">And if markets become less forgiving, clients will come to value a portfolio that’s built on evidence, resilience, dividend growth and disciplined self-correction.&nbsp;</p> <p class="MsoNormal">The last two years have tested your belief in us. And&nbsp;they&nbsp;have tested ours too.&nbsp;&nbsp;</p> <p class="MsoNormal">But they have not changed what we believe works over time: owning dependable growth companies, paying sensible prices, learning from mistakes, and allowing compounding to work its magic.&nbsp;</p> </div> </div> </div> </div> </div> </div> </div> <h3 class="TABLEHEADER1212pt">Global Income Growth</h3> <p><strong>Annual past performance to 30 June each year (%)</strong></p> <table border="1" style="border-collapse: collapse; width: 100%; border-width: 0px; height: 112.727px;"> <tbody> <tr style="height: 18.7879px;"> <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: 18.7879px;">&nbsp;</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: 18.7879px;"><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: 18.7879px;"><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: 18.7879px;"><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: 18.7879px;"><strong>2025</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: 18.7879px;"><strong>2026</strong></td> </tr> <tr style="height: 18.7879px;"> <td style="border: 1px solid rgb(204, 204, 204); padding: 10px; height: 18.7879px;">Global Income Growth Composite (gross)</td> <td style="border: 1px solid rgb(204, 204, 204); padding: 10px; height: 18.7879px;">-13.7</td> <td style="border: 1px solid rgb(204, 204, 204); padding: 10px; height: 18.7879px;">18.3</td> <td style="border: 1px solid rgb(204, 204, 204); padding: 10px; height: 18.7879px;">10.3</td> <td style="border: 1px solid rgb(204, 204, 204); padding: 10px; height: 18.7879px;">8.9</td> <td style="border: 1px solid rgb(204, 204, 204); padding: 10px; height: 18.7879px;">2.9</td> </tr> <tr style="height: 18.7879px;"> <td style="border: 1px solid rgb(204, 204, 204); padding: 10px; height: 18.7879px;">Global Income Growth Composite (net)</td> <td style="border: 1px solid rgb(204, 204, 204); padding: 10px; height: 18.7879px;">-14.2</td> <td style="border: 1px solid rgb(204, 204, 204); padding: 10px; height: 18.7879px;">17.7</td> <td style="border: 1px solid rgb(204, 204, 204); padding: 10px; height: 18.7879px;">9.7</td> <td style="border: 1px solid rgb(204, 204, 204); padding: 10px; height: 18.7879px;">8.3</td> <td style="border: 1px solid rgb(204, 204, 204); padding: 10px; height: 18.7879px;">2.3</td> </tr> <tr style="height: 18.7879px;"> <td style="border: 1px solid rgb(204, 204, 204); padding: 10px; height: 18.7879px;">Responsible Global Equity Income Composite (gross)</td> <td style="border: 1px solid rgb(204, 204, 204); padding: 10px; height: 18.7879px;">-13.2</td> <td style="border: 1px solid rgb(204, 204, 204); padding: 10px; height: 18.7879px;">20.3</td> <td style="border: 1px solid rgb(204, 204, 204); padding: 10px; height: 18.7879px;">12.2</td> <td style="border: 1px solid rgb(204, 204, 204); padding: 10px; height: 18.7879px;">8.2</td> <td style="border: 1px solid rgb(204, 204, 204); padding: 10px; height: 18.7879px;">3.8</td> </tr> <tr style="height: 18.7879px;"> <td style="border: 1px solid rgb(204, 204, 204); padding: 10px; height: 18.7879px;">Responsible Global Equity Income Composite (net)</td> <td style="border: 1px solid rgb(204, 204, 204); padding: 10px; height: 18.7879px;">-13.6</td> <td style="border: 1px solid rgb(204, 204, 204); padding: 10px; height: 18.7879px;">19.6</td> <td style="border: 1px solid rgb(204, 204, 204); padding: 10px; height: 18.7879px;">11.6</td> <td style="border: 1px solid rgb(204, 204, 204); padding: 10px; height: 18.7879px;">7.6</td> <td style="border: 1px solid rgb(204, 204, 204); padding: 10px; height: 18.7879px;">3.2</td> </tr> <tr style="height: 18.7879px;"> <td style="border: 1px solid rgb(204, 204, 204); padding: 10px; height: 18.7879px;">MSCI ACWI Index</td> <td style="border: 1px solid rgb(204, 204, 204); padding: 10px; height: 18.7879px;">-15.4</td> <td style="border: 1px solid rgb(204, 204, 204); padding: 10px; height: 18.7879px;">17.1</td> <td style="border: 1px solid rgb(204, 204, 204); padding: 10px; height: 18.7879px;">19.9</td> <td style="border: 1px solid rgb(204, 204, 204); padding: 10px; height: 18.7879px;">16.7</td> <td style="border: 1px solid rgb(204, 204, 204); padding: 10px; height: 18.7879px;">24.2</td> </tr> </tbody> </table> <p>&nbsp;</p> <p><strong>Annualised returns to 30 June 2026 (%)</strong></p> <table border="1" style="border-collapse: collapse; width: 99.9907%; 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: 49.2742%;">&nbsp;</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: 11.3816%;"><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: 11.798%;"><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: 13.1862%;"><strong>10 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; width: 14.2963%;"><strong>Since inception*</strong></td> </tr> <tr style="height: 18.5px;"> <td style="border: 1px solid rgb(204, 204, 204); padding: 10px; height: 18.5px; width: 49.2742%;">Global Income Growth Composite (gross)</td> <td style="border: 1px solid rgb(204, 204, 204); padding: 10px; height: 18.5px; width: 11.3816%;">2.9</td> <td style="border: 1px solid rgb(204, 204, 204); padding: 10px; height: 18.5px; width: 11.798%;">4.8</td> <td style="border: 1px solid rgb(204, 204, 204); padding: 10px; height: 18.5px; width: 13.1862%;">10.0</td> <td style="border: 1px solid rgb(204, 204, 204); padding: 10px; width: 14.2963%;">N/A</td> </tr> <tr style="height: 18.5px;"> <td style="border: 1px solid rgb(204, 204, 204); padding: 10px; height: 18.5px; width: 49.2742%;">Global Income Growth Composite (net)</td> <td style="border: 1px solid rgb(204, 204, 204); padding: 10px; height: 18.5px; width: 11.3816%;">2.3</td> <td style="border: 1px solid rgb(204, 204, 204); padding: 10px; height: 18.5px; width: 11.798%;">4.2</td> <td style="border: 1px solid rgb(204, 204, 204); padding: 10px; height: 18.5px; width: 13.1862%;">9.4</td> <td style="border: 1px solid rgb(204, 204, 204); padding: 10px; width: 14.2963%;">N/A</td> </tr> <tr style="height: 18.5px;"> <td style="border: 1px solid rgb(204, 204, 204); padding: 10px; height: 18.5px; width: 49.2742%;">Responsible Global Equity Income Composite (gross)</td> <td style="border: 1px solid rgb(204, 204, 204); padding: 10px; height: 18.5px; width: 11.3816%;">3.8</td> <td style="border: 1px solid rgb(204, 204, 204); padding: 10px; height: 18.5px; width: 11.798%;">5.7</td> <td style="border: 1px solid rgb(204, 204, 204); padding: 10px; height: 18.5px; width: 13.1862%;">N/A</td> <td style="border: 1px solid rgb(204, 204, 204); padding: 10px; width: 14.2963%;">11.5</td> </tr> <tr> <td style="border: 1px solid rgb(204, 204, 204); padding: 10px; width: 49.2742%;">Responsible Global Equity Income Composite (net)</td> <td style="border: 1px solid rgb(204, 204, 204); padding: 10px; width: 11.3816%;">3.2</td> <td style="border: 1px solid rgb(204, 204, 204); padding: 10px; width: 11.798%;">5.1</td> <td style="border: 1px solid rgb(204, 204, 204); padding: 10px; width: 13.1862%;">N/A</td> <td style="border: 1px solid rgb(204, 204, 204); padding: 10px; width: 14.2963%;">10.9</td> </tr> <tr> <td style="border: 1px solid rgb(204, 204, 204); padding: 10px; width: 49.2742%;">MSCI ACWI Index</td> <td style="border: 1px solid rgb(204, 204, 204); padding: 10px; width: 11.3816%;">24.2</td> <td style="border: 1px solid rgb(204, 204, 204); padding: 10px; width: 11.798%;">11.5</td> <td style="border: 1px solid rgb(204, 204, 204); padding: 10px; width: 13.1862%;">13.3</td> <td style="border: 1px solid rgb(204, 204, 204); padding: 10px; width: 14.2963%;">15.2</td> </tr> </tbody> </table> <p><span class="source-text">*Inception date for Responsible Global Equity Income: 31 December 2018.</span></p> <p><span class="source-text">Source: Revolution, MSCI. US dollars. Net 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>&nbsp;</p> <p><strong>Past performance is not a guide to future returns.</strong></p> <p>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.</p> <p>&nbsp;</p> <h3>Risk factors&nbsp;</h3> <p>This communication was produced and approved in July 2026 and has not been updated subsequently. 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