(All MSCI index returns are shown net and in U.S. dollars unless otherwise noted.)

Markets Review

Against this backdrop, we believe it is particularly important to distinguish between businesses whose financial outcomes are dependent on prevailing macro conditions and those capable of succeeding across a range of environments. We recognize that “quality” is an over-used term—and often used too broadly—across the investment industry. For us, it is important to distinguish among three distinct forms of quality:

• Transient Quality can look exceptional at the peak of a cycle, with scarcity-driven pricing power, expanding margins and high returns on capital. On the surface the economics can appear highly attractive, but when supply eventually catches up, prices normalize and investors realize what has happened, significant valuation resets can occur.
• Conventional Quality possesses many of the characteristics traditionally associated with great businesses—powerful brands, customer loyalty, incumbency advantages and ecosystem lock-in—but the old moats are eroding. Digital advertising, ecommerce, private label, low barriers to entry and technological disruption have made certain franchises less structurally resilient than they once were.
• Durable Quality is where we are most energized because scarcity is permanent rather than cyclical (or at least less so). These businesses can raise prices ahead of inflation for years without impairing volume, protected by natural monopolies, geology, irreplaceable infrastructure, essentiality, regulation or deliberate scarcity. Consider businesses like luxury goods manufacturers, regulated utilities and mission-critical technology solutions, or specialty data providers, unique ingredient producers and transportation platforms.

By focusing on durable, high-quality businesses, we seek to look past short-term macroeconomic volatility and capitalize on the disconnects it can create between share prices and long-term earnings power. Importantly, we believe today’s environment continues to provide such opportunities, enabling us to selectively enhance the portfolio when we identify businesses offering a particularly compelling combination of quality, valuation and catalysts.

Performance and Attribution Summary

For the third quarter of 2026, Aristotle Capital’s Global Equity WM Composite posted a total return of 0.29% pure gross of fees (-0.20% net of fees), underperforming the MSCI ACWI Index, which returned 1.60%, and the MSCI World Index, which returned 1.88%. Please refer to the table below for detailed performance.

Performance (%)	3Q26	YTD	1 Year	3 Years	5 Years	10 Years	Since Inception*
Global Equity WM Composite (pure gross)	0.29	4.30	8.34	13.67	7.03	10.76	10.22
Global Equity WM Composite (net)	-0.20	2.76	6.22	11.46	4.92	8.56	8.04
MSCI ACWI Index (net)	1.60	13.03	16.75	21.73	11.57	12.38	10.61
MSCI World Index (net)	1.88	11.75	15.24	21.40	11.89	12.81	11.31

Microchip Technology, the microcontroller (MCU) and analog semiconductor producer, was a detractor during the period. The company’s stock sold off despite continued evidence of improvement in its underlying business. Customer inventories continued to normalize and bookings remained strong, supporting a recovery in demand following the prolonged industry downturn. Higher factory utilization and disciplined expense management also contributed to improved profitability and cash flow generation. While management noted potential capacity constraints at certain external manufacturing partners, Microchip’s internal capacity remains sufficient to support its growth expectations. We believe the company’s broad product portfolio, long-standing customer relationships and commitment to extended product lifecycles position it well to benefit from a continued recovery in its core end markets, while growing opportunities in data centers and aerospace & defense provide additional avenues for long-term growth.

Rentokil Initial, the U.K.-based pest control and hygiene services company, was a significant detractor during the quarter. Shares declined following the company’s interim results as investors focused on weaker growth in portions of its North American pest control business and management’s decision to retire its previous 2027 North American margin target. Importantly, North American organic growth improved from the prior year, while customer retention and profitability also increased. Under newly appointed CEO Mike Duffy, the company has strengthened its North American leadership team and is undertaking a broader operational restructuring, with plans to reinvest cost savings into initiatives intended to accelerate organic growth rather than maximize near-term margins. While we continue to assess the new management team’s strategy and execution, we believe Rentokil’s scale, route density and recurring service model provide the company with meaningful competitive advantages.

DBS Group, a leading Asian financial services company headquartered in Singapore, was the top contributor during the quarter. Shares rose following another strong earnings report, with record earnings supported by continued growth in wealth management and other fee-based businesses, as well as resilient net interest income despite lower local interest rates. The company continues to benefit from growing wealth creation across Asia, while its strong capital position has supported increased shareholder distributions and disciplined capital allocation. We believe DBS’s strong market position, diversified sources of earnings and disciplined capital allocation support attractive long-term returns.

Amgen, the biopharmaceutical company, was one of the largest contributors during the quarter. The company has continued to benefit from growth across several newer and expanding medicines, including Repatha (cholesterol), Evenity (osteoporosis), Tezspire (asthma) and Uplizna (rare autoimmune diseases), while also emphasizing clinical developments across its pipeline. While Amgen faces increasing biosimilar competition for several of its mature biologic therapies, the company is also benefiting from opportunities in the growing biosimilars market. Leveraging its biologics expertise and global manufacturing scale, the company has generated more than $15 billion in biosimilar sales since 2018, with additional candidates in development. We believe the breadth of Amgen’s portfolio and improving research productivity, combined with its ability to capitalize on its global commercial and manufacturing infrastructure, position the company to benefit as its pipeline develops.

Recent Portfolio Activity

Buys	Sells
E Ink Holdings*	Assa Abloy*
McKesson	Oshkosh

During the quarter, we sold our positions in Assa Abloy and Oshkosh and purchased E Ink Holdings and McKesson.

We first purchased Assa Abloy, the world’s largest provider of door opening and entrance solutions, in 2016. Over our investment period, the company strengthened its leading position in a fragmented industry, benefiting from significant replacement and upgrade demand, as well as the growing adoption of higher-value electromechanical and digital access solutions. The company also continued to build on its long track record of acquiring businesses and creating additional value through integration, operational improvement and access to its global platform. More recently, however, we believe the opportunity for incremental value creation through M&A has become less compelling, while opportunities to further optimize the company’s existing portfolio appear unlikely. As such, we chose to exit our position and redeploy capital into opportunities we believe offer a more attractive combination of valuation and catalysts. (*E Ink does not offer an ADR or GDR and was purchased only in accounts registered to trade on the Taiwan Stock Exchange. For those accounts unable to purchase E Ink, Assa Abloy continues to be held as a replacement.)

We first invested in Oshkosh, a manufacturer of specialty vehicles and access equipment, in the third quarter of 2013. During our holding period, we believe the company executed well on many of the catalysts we had identified, including improved profitability through pricing discipline, manufacturing efficiencies, a more favorable business mix, continued product innovation and the ramp-up of production of the U.S. Postal Service’s Next Generation Delivery Vehicle program. Given the progress, we chose to sell our position and redeploy the proceeds into what we believe is a more attractive opportunity in McKesson.

E Ink Holdings Inc.

Headquartered in Hsinchu, Taiwan, E Ink is the global leader in electronic paper (“ePaper”) display technology. Unlike traditional LCD or OLED screens, ePaper uses electrically charged color pigments to create a paper-like display that reflects ambient light and only requires power when an image changes. These characteristics allow ePaper displays to remain visible for extended periods while consuming very little energy, making the technology particularly well-suited for applications such as eReaders, electronic shelf labels (“ESLs”), eNotes and digital signage. E Ink holds an estimated 80%-90% share of the global ePaper display market and is currently the only manufacturer capable of mass-producing high-quality ePaper technology at scale.

Historically, E Ink was best known for supplying the displays used in eReaders such as Amazon’s Kindle and Rakuten’s Kobo. However, the business is increasingly being driven by ESLs—digital price tags that allow retailers to remotely update prices, promotions and product information across stores in real time. ESLs can reduce the labor associated with manually replacing paper labels, improve pricing accuracy and increasingly support inventory management and order fulfillment. E Ink does not manufacture the finished labels; rather, it supplies its proprietary ePaper material to leading ESL manufacturers, allowing the company to participate broadly in the growth of the market without competing in the more commoditized assembly business.

High-Quality Business

Some of the quality characteristics we have identified for E Ink include:

• A dominant position in ePaper displays, supported by proprietary technology, extensive intellectual property and decades of research and development;
• Significant barriers to entry arising from the technical complexity of ePaper manufacturing and the need for consistent product quality, scale and established relationships with leading device manufacturers and ESL solution providers; and
• A strong financial profile, including a net cash balance sheet and attractive returns on capital.

Attractive Valuation

We believe shares trade at a meaningful discount to our estimate of intrinsic value based on E Ink’s normalized earnings potential. Our analysis reflects the company’s long runway for growth across ePaper applications while recognizing the established earnings contribution from eReaders and eNotes.

Compelling Catalysts

Catalysts we have identified for E Ink, which we believe will cause its stock price to appreciate over our three- to five-year investment horizon, include:

• Continued adoption of ESL, particularly in the underpenetrated U.S. market, as retailers automate price changes, to reduce manual labor requirements and better integrate physical stores with inventory and order-management systems;
• Improving business mix as higher-margin ESL and other IoT applications become a larger portion of revenue, supporting higher normalized margins and returns over time;
• Growing replacement and upgrade demand as earlier ESL installations are refreshed with newer generations of the technology; and
• Expansion of ePaper into digital signage, supported by growing adoption of E Ink’s color technologies across retail, advertising and other commercial applications.

McKesson Corporation

Headquartered in Irving, Texas, and founded in 1833, McKesson is the market leader in U.S. pharmaceutical distribution. The company serves as a critical intermediary within the healthcare system, sourcing branded, generic, specialty, biosimilar and over-the-counter pharmaceuticals from manufacturers and delivering them to retail pharmacies, hospitals, health systems, physician practices, long-term care providers and other healthcare customers. Together with Cardinal Health and Cencora, McKesson is one of three dominant national pharmaceutical distributors that collectively account for more than 90% of the U.S. market.

McKesson’s role extends well beyond the physical distribution of pharmaceuticals. The company manages sourcing and inventory to help ensure reliable product availability, provides technology solutions, and helps manufacturers efficiently reach thousands of healthcare providers through a scaled distribution network. Over time, the company has expanded further into higher-value healthcare services, including oncology and multispecialty practice solutions, biopharma services, and prescription technology solutions that help improve medication access, affordability and adherence.

High-Quality Business

Some of the quality characteristics we have identified for McKesson include:

• Mission-critical distribution capabilities that are difficult to replicate, supported by national scale, extensive infrastructure and regulatory expertise;
• Long-standing customer relationships and multi-year distribution agreements that create meaningful switching costs and deepen McKesson’s role within the U.S. healthcare system;
• Attractive underlying economics, including what we consider to be strong returns on invested capital and FREE cash flow generation, supported by limited capital requirements and favorable working-capital dynamics; and
• Resilient demand characteristics, as prescription drug utilization is largely non-discretionary and less sensitive to broader macroeconomic cycles.

Attractive Valuation

We believe shares of McKesson are attractively valued given our estimates of normalized earnings. In our view, the company’s low reported distribution margins understate the attractive economics of its core pharmaceutical distribution business, while its growing higher-margin businesses in Oncology & Multispecialty, biopharma services and Prescription Technology Solutions should support higher normalized earnings and FREE cash flow over time.

Compelling Catalysts

Catalysts we have identified for McKesson, which we believe will cause its stock price to appreciate over our three- to five-year investment horizon, include:

• Continued expansion of the Oncology & Multispecialty segment through additional physician practices and a growing suite of services spanning drug distribution, technology, clinical research and practice management;
• Continued growth in biopharma services and Prescription Technology Solutions, as McKesson helps manufacturers, providers, pharmacies and patients improve medication access, affordability and adherence;
• Expansion of McKesson’s oncology practice-management capabilities into adjacent specialties, such as ophthalmology, through targeted acquisitions and internal investment;
• Ongoing expansion of NorthStar Rx (McKesson’s own private-label generic pharmaceutical business) into biosimilars, leveraging its established oncology relationships as biosimilar adoption grows; and
• Ongoing progress toward the separation of Medical-Surgical Solutions, allowing management to focus capital and resources on McKesson’s higher-return businesses.

Conclusion

Periods of relative underperformance can test conviction, particularly when market leadership is narrow and rapidly changing. However, we believe the appropriate response is not to chase what has recently worked but to remain focused on the long-term drivers of value creation. This discipline has guided our investment process across multiple market cycles and continues to shape how we position the portfolio today.

Importantly, recent performance has not been accompanied by a deterioration in the businesses we own. In many cases, earnings have continued to grow even as valuation multiples have compressed, creating what we believe is an increasingly attractive disconnect between share prices and normalized earnings power. While periods like this are challenging, they can also create opportunity for long-term investors. We believe the very conditions that have challenged recent relative performance have strengthened the portfolio’s prospective return potential.

At Aristotle Atlantic Partners, LLC (Aristotle Atlantic), a pillar of our investment process is identifying secular themes. These are long-term trends characterized by significant, multi-year shifts in spending patterns driven by consumers, governments, or corporations. In September 2020, we published a white paper introducing personalized medicine as one of these themes. In the six years since, several regulatory, clinical, and commercial milestones have provided meaningful support to our thesis and broadened the associated investment opportunity set. This Thought Piece is intended to update investors on how our thinking has evolved.

To read the full thought piece, please use the link below. 

(All MSCI index returns are shown net and in U.S. dollars unless otherwise noted.)

Markets Review

Against this backdrop, we believe it is particularly important to distinguish between businesses whose financial outcomes are dependent on prevailing macro conditions and those capable of succeeding across a range of environments. We recognize that “quality” is an over-used term—and often used too broadly—across the investment industry. For us, it is important to distinguish among three distinct forms of quality:

• Transient Quality can look exceptional at the peak of a cycle, with scarcity-driven pricing power, expanding margins and high returns on capital. On the surface the economics can appear highly attractive, but when supply eventually catches up, prices normalize and investors realize what has happened, significant valuation resets can occur.
• Conventional Quality possesses many of the characteristics traditionally associated with great businesses—powerful brands, customer loyalty, incumbency advantages and ecosystem lock-in—but the old moats are eroding. Digital advertising, ecommerce, private label, low barriers to entry and technological disruption have made certain franchises less structurally resilient than they once were.
• Durable Quality is where we are most energized because scarcity is permanent rather than cyclical (or at least less so). These businesses can raise prices ahead of inflation for years without impairing volume, protected by natural monopolies, geology, irreplaceable infrastructure, essentiality, regulation or deliberate scarcity. Consider businesses like luxury goods manufacturers, regulated utilities and mission-critical technology solutions, or specialty data providers, unique ingredient producers and transportation platforms.

By focusing on durable, high-quality businesses, we seek to look past short-term macroeconomic volatility and capitalize on the disconnects it can create between share prices and long-term earnings power. Importantly, we believe today’s environment continues to provide such opportunities, enabling us to selectively enhance the portfolio when we identify businesses offering a particularly compelling combination of quality, valuation and catalysts.

Performance and Attribution Summary

For the third quarter of 2026, Aristotle Capital’s Global Equity Composite posted a total return of 0.20% gross of fees (0.07% net of fees), underperforming the MSCI ACWI Index, which returned 1.60%, and the MSCI World Index, which returned 1.88%. Please refer to the table below for detailed performance.

Performance (%)	3Q26	YTD	1 Year	3 Years	5 Years	10 Years	Since Inception*
Global Equity Composite (gross)	0.20	6.17	9.99	14.35	7.14	10.87	10.20
Global Equity Composite (net)	0.07	5.77	9.44	13.79	6.61	10.32	9.66
MSCI ACWI Index (net)	1.60	13.03	16.75	21.73	11.57	12.38	10.40
MSCI World Index (net)	1.88	11.75	15.24	21.40	11.89	12.81	11.09

Rentokil Initial, the U.K.-based pest control and hygiene services company, was a significant detractor during the quarter. Shares declined following the company’s interim results as investors focused on weaker growth in portions of its North American pest control business and management’s decision to retire its previous 2027 North American margin target. Importantly, North American organic growth improved from the prior year, while customer retention and profitability also increased. Under newly appointed CEO Mike Duffy, the company has strengthened its North American leadership team and is undertaking a broader operational restructuring, with plans to reinvest cost savings into initiatives intended to accelerate organic growth rather than maximize near-term margins. While we continue to assess the new management team’s strategy and execution, we believe Rentokil’s scale, route density and recurring service model provide the company with meaningful competitive advantages.

Microchip Technology, the microcontroller (MCU) and analog semiconductor producer, was a detractor during the period. The company’s stock sold off despite continued evidence of improvement in its underlying business. Customer inventories continued to normalize and bookings remained strong, supporting a recovery in demand following the prolonged industry downturn. Higher factory utilization and disciplined expense management also contributed to improved profitability and cash flow generation. While management noted potential capacity constraints at certain external manufacturing partners, Microchip’s internal capacity remains sufficient to support its growth expectations. We believe the company’s broad product portfolio, long-standing customer relationships and commitment to extended product lifecycles position it well to benefit from a continued recovery in its core end markets, while growing opportunities in data centers and aerospace & defense provide additional avenues for long-term growth.

DBS Group, a leading Asian financial services company headquartered in Singapore, was the top contributor during the quarter. Shares rose following another strong earnings report, with record earnings supported by continued growth in wealth management and other fee-based businesses, as well as resilient net interest income despite lower local interest rates. The company continues to benefit from growing wealth creation across Asia, while its strong capital position has supported increased shareholder distributions and disciplined capital allocation. We believe DBS’s strong market position, diversified sources of earnings and disciplined capital allocation support attractive long-term returns.

Amgen, the biopharmaceutical company, was one of the largest contributors during the quarter. The company has continued to benefit from growth across several newer and expanding medicines, including Repatha (cholesterol), Evenity (osteoporosis), Tezspire (asthma) and Uplizna (rare autoimmune diseases), while also emphasizing clinical developments across its pipeline. While Amgen faces increasing biosimilar competition for several of its mature biologic therapies, the company is also benefiting from opportunities in the growing biosimilars market. Leveraging its biologics expertise and global manufacturing scale, the company has generated more than $15 billion in biosimilar sales since 2018, with additional candidates in development. We believe the breadth of Amgen’s portfolio and improving research productivity, combined with its ability to capitalize on its global commercial and manufacturing infrastructure, position the company to benefit as its pipeline develops.

Recent Portfolio Activity

Buys	Sells
E Ink Holdings*	Assa Abloy
McKesson	Oshkosh

During the quarter, we sold our positions in Assa Abloy and Oshkosh and purchased E Ink Holdings and McKesson.

We first purchased Assa Abloy, the world’s largest provider of door opening and entrance solutions, in 2016. Over our investment period, the company strengthened its leading position in a fragmented industry, benefiting from significant replacement and upgrade demand, as well as the growing adoption of higher-value electromechanical and digital access solutions. The company also continued to build on its long track record of acquiring businesses and creating additional value through integration, operational improvement and access to its global platform. More recently, however, we believe the opportunity for incremental value creation through M&A has become less compelling, while opportunities to further optimize the company’s existing portfolio appear unlikely. As such, we chose to exit our position and redeploy capital into opportunities we believe offer a more attractive combination of valuation and catalysts. (*E Ink does not offer an ADR or GDR and was purchased only in accounts registered to trade on the Taiwan Stock Exchange. For those accounts unable to purchase E Ink, Assa Abloy continues to be held as a replacement.)

We first invested in Oshkosh, a manufacturer of specialty vehicles and access equipment, in the third quarter of 2013. During our holding period, we believe the company executed well on many of the catalysts we had identified, including improved profitability through pricing discipline, manufacturing efficiencies, a more favorable business mix, continued product innovation and the ramp-up of production of the U.S. Postal Service’s Next Generation Delivery Vehicle program. Given the progress, we chose to sell our position and redeploy the proceeds into what we believe is a more attractive opportunity in McKesson.

E Ink Holdings Inc.

Headquartered in Hsinchu, Taiwan, E Ink is the global leader in electronic paper (“ePaper”) display technology. Unlike traditional LCD or OLED screens, ePaper uses electrically charged color pigments to create a paper-like display that reflects ambient light and only requires power when an image changes. These characteristics allow ePaper displays to remain visible for extended periods while consuming very little energy, making the technology particularly well-suited for applications such as eReaders, electronic shelf labels (“ESLs”), eNotes and digital signage. E Ink holds an estimated 80%-90% share of the global ePaper display market and is currently the only manufacturer capable of mass-producing high-quality ePaper technology at scale.

Historically, E Ink was best known for supplying the displays used in eReaders such as Amazon’s Kindle and Rakuten’s Kobo. However, the business is increasingly being driven by ESLs—digital price tags that allow retailers to remotely update prices, promotions and product information across stores in real time. ESLs can reduce the labor associated with manually replacing paper labels, improve pricing accuracy and increasingly support inventory management and order fulfillment. E Ink does not manufacture the finished labels; rather, it supplies its proprietary ePaper material to leading ESL manufacturers, allowing the company to participate broadly in the growth of the market without competing in the more commoditized assembly business.

High-Quality Business 

Some of the quality characteristics we have identified for E Ink include:

• A dominant position in ePaper displays, supported by proprietary technology, extensive intellectual property and decades of research and development;
• Significant barriers to entry arising from the technical complexity of ePaper manufacturing and the need for consistent product quality, scale and established relationships with leading device manufacturers and ESL solution providers; and
• A strong financial profile, including a net cash balance sheet and attractive returns on capital.

Attractive Valuation 

We believe shares trade at a meaningful discount to our estimate of intrinsic value based on E Ink’s normalized earnings potential. Our analysis reflects the company’s long runway for growth across ePaper applications while recognizing the established earnings contribution from eReaders and eNotes.

Compelling Catalysts

Catalysts we have identified for E Ink, which we believe will cause its stock price to appreciate over our three- to five-year investment horizon, include:

• Continued adoption of ESL, particularly in the underpenetrated U.S. market, as retailers automate price changes, to reduce manual labor requirements and better integrate physical stores with inventory and order-management systems;
• Improving business mix as higher-margin ESL and other IoT applications become a larger portion of revenue, supporting higher normalized margins and returns over time;
• Growing replacement and upgrade demand as earlier ESL installations are refreshed with newer generations of the technology; and
• Expansion of ePaper into digital signage, supported by growing adoption of E Ink’s color technologies across retail, advertising and other commercial applications.

McKesson Corporation

Headquartered in Irving, Texas, and founded in 1833, McKesson is the market leader in U.S. pharmaceutical distribution. The company serves as a critical intermediary within the healthcare system, sourcing branded, generic, specialty, biosimilar and over-the-counter pharmaceuticals from manufacturers and delivering them to retail pharmacies, hospitals, health systems, physician practices, long-term care providers and other healthcare customers. Together with Cardinal Health and Cencora, McKesson is one of three dominant national pharmaceutical distributors that collectively account for more than 90% of the U.S. market.

McKesson’s role extends well beyond the physical distribution of pharmaceuticals. The company manages sourcing and inventory to help ensure reliable product availability, provides technology solutions, and helps manufacturers efficiently reach thousands of healthcare providers through a scaled distribution network. Over time, the company has expanded further into higher-value healthcare services, including oncology and multispecialty practice solutions, biopharma services, and prescription technology solutions that help improve medication access, affordability and adherence.

High-Quality Business 

Some of the quality characteristics we have identified for McKesson include:

• Mission-critical distribution capabilities that are difficult to replicate, supported by national scale, extensive infrastructure and regulatory expertise;
• Long-standing customer relationships and multi-year distribution agreements that create meaningful switching costs and deepen McKesson’s role within the U.S. healthcare system;
• Attractive underlying economics, including what we consider to be strong returns on invested capital and FREE cash flow generation, supported by limited capital requirements and favorable working-capital dynamics; and
• Resilient demand characteristics, as prescription drug utilization is largely non-discretionary and less sensitive to broader macroeconomic cycles.

Attractive Valuation 

We believe shares of McKesson are attractively valued given our estimates of normalized earnings. In our view, the company’s low reported distribution margins understate the attractive economics of its core pharmaceutical distribution business, while its growing higher-margin businesses in Oncology & Multispecialty, biopharma services and Prescription Technology Solutions should support higher normalized earnings and FREE cash flow over time.

Compelling Catalysts

Catalysts we have identified for McKesson, which we believe will cause its stock price to appreciate over our three- to five-year investment horizon, include:

• Continued expansion of the Oncology & Multispecialty segment through additional physician practices and a growing suite of services spanning drug distribution, technology, clinical research and practice management;
• Continued growth in biopharma services and Prescription Technology Solutions, as McKesson helps manufacturers, providers, pharmacies and patients improve medication access, affordability and adherence;
• Expansion of McKesson’s oncology practice-management capabilities into adjacent specialties, such as ophthalmology, through targeted acquisitions and internal investment;
• Ongoing expansion of NorthStar Rx (McKesson’s own private-label generic pharmaceutical business) into biosimilars, leveraging its established oncology relationships as biosimilar adoption grows; and
• Ongoing progress toward the separation of Medical-Surgical Solutions, allowing management to focus capital and resources on McKesson’s higher-return businesses.

Conclusion

Periods of relative underperformance can test conviction, particularly when market leadership is narrow and rapidly changing. However, we believe the appropriate response is not to chase what has recently worked but to remain focused on the long-term drivers of value creation. This discipline has guided our investment process across multiple market cycles and continues to shape how we position the portfolio today.

Importantly, recent performance has not been accompanied by a deterioration in the businesses we own. In many cases, earnings have continued to grow even as valuation multiples have compressed, creating what we believe is an increasingly attractive disconnect between share prices and normalized earnings power. While periods like this are challenging, they can also create opportunity for long-term investors. We believe the very conditions that have challenged recent relative performance have strengthened the portfolio’s prospective return potential.

(All MSCI index returns are shown net and in U.S. dollars unless otherwise noted.)

Markets Review

Against this backdrop, we believe it is particularly important to distinguish between businesses whose financial outcomes are dependent on prevailing macro conditions and those capable of succeeding across a range of environments. We recognize that “quality” is an over-used term—and often used too broadly—across the investment industry. For us, it is important to distinguish among three distinct forms of quality:

• Transient Quality can look exceptional at the peak of a cycle, with scarcity-driven pricing power, expanding margins and high returns on capital. On the surface the economics can appear highly attractive, but when supply eventually catches up, prices normalize and investors realize what has happened, significant valuation resets can occur.
• Conventional Quality possesses many of the characteristics traditionally associated with great businesses—powerful brands, customer loyalty, incumbency advantages and ecosystem lock-in—but the old moats are eroding. Digital advertising, ecommerce, private label, low barriers to entry and technological disruption have made certain franchises less structurally resilient than they once were.
• Durable Quality is where we are most energized because scarcity is permanent rather than cyclical (or at least less so). These businesses can raise prices ahead of inflation for years without impairing volume, protected by natural monopolies, geology, irreplaceable infrastructure, essentiality, regulation or deliberate scarcity. Consider businesses like luxury goods manufacturers, regulated utilities and mission-critical technology solutions, or specialty data providers, unique ingredient producers and transportation platforms.

By focusing on durable quality, we seek to look beyond the whipsaw of macroeconomic events and capitalize on the disconnects they can create between share prices and long-term normalized earnings power. Importantly, we believe today’s environment continues to provide such opportunities, enabling us to selectively enhance the portfolio when we identify businesses offering a particularly compelling combination of quality, valuation and catalysts.

Performance and Attribution Summary

For the third quarter of 2026, Aristotle Capital’s International Equity ADR Composite posted a total return of -0.42% gross of fees (-0.54% net of fees), underperforming the MSCI EAFE Index, which returned 0.81%, and the MSCI ACWI ex USA Index, which returned 0.48%. Please refer to the table below for detailed performance.

Performance (%)	3Q26	YTD	1 Year	3 Years	5 Years	10 Years	Since Inception*
International Equity ADR Composite (gross)	-0.42	2.86	8.80	14.49	6.91	8.61	7.38
International Equity ADR Composite (net)	-0.54	2.48	8.26	13.93	6.38	8.08	6.84
MSCI EAFE Index (net)	0.81	10.33	15.69	18.40	9.32	9.07	7.43
MSCI ACWI ex USA Index (net)	0.48	14.22	20.00	20.54	9.55	9.25	7.32

Cameco, one of the world’s largest uranium producers, was a primary detractor during the quarter. The company’s stock sold off amid concerns that disruptions at its Canadian uranium operations (including Cigar Lake, McArthur River and Key Lake) would temporarily dampen near-term production. Despite these challenges, the company maintained its annual production outlook, while average realized prices continued to improve and long-term uranium prices reached decade highs. Cameco’s extensive use of long-term contracts, combined with the production flexibility of its tier-one assets, helps insulate the business from short-term commodity price fluctuations and operational volatility. We believe the company remains well-positioned to benefit from growing global demand for nuclear energy through its high-quality uranium assets, fuel services capabilities and ownership interest in Westinghouse.

Rentokil Initial, the U.K.-based pest control and hygiene services company, was a detractor during the quarter. Shares declined following the company’s interim results as investors focused on weaker growth in portions of its North American pest control business and management’s decision to retire its previous 2027 North American margin target. Importantly, North American organic growth improved from the prior year, while customer retention and profitability also increased. Under newly appointed CEO Mike Duffy, the company has strengthened its North American leadership team and is undertaking a broader operational restructuring, with plans to reinvest cost savings into initiatives intended to accelerate organic growth rather than maximize near-term margins. While we continue to assess the new management team’s strategy and execution, we believe Rentokil’s scale, route density and recurring service model provide the company with meaningful competitive advantages.

DBS Group, a leading Asian financial services company headquartered in Singapore, was a top contributor during the quarter. Shares rose following another strong earnings report, with record earnings supported by continued growth in wealth management and other fee-based businesses, as well as resilient net interest income despite lower local interest rates. The company continues to benefit from growing wealth creation across Asia, while its strong capital position has supported increased shareholder distributions and disciplined capital allocation. We believe DBS’s strong market position, diversified sources of earnings and disciplined capital allocation support attractive long-term returns.

Accenture, a leading technology consulting and managed services company, was a primary contributor during the quarter after being the strategy’s largest detractor during the first half of the year. Shares rallied as investor sentiment improved following significant concerns about the potential impact of artificial intelligence on traditional consulting and technology services. While market perceptions of AI’s impact on the industry have shifted considerably, our focus has remained on the underlying business and Accenture’s ability to create value for its clients. For decades, the company’s deep industry expertise, longstanding client relationships, and broad technology ecosystem positioned it to help enterprises integrate new technologies and redesign increasingly complex business processes. The latest wave of technological innovation is no different. We believe these capabilities become more valuable, rather than less, as the pace of technological change accelerates and Accenture becomes mission critical to global enterprises seeking to evolve, adapt and grow.

Recent Portfolio Activity

Buys	Sells
WEG	Michelin

During the quarter, we sold our position in Michelin and invested in WEG.

We initially invested in Michelin, one of the world’s largest tire manufacturers, in the first quarter of 2021. In our view, the company benefits from a strong competitive position driven by its global scale, brand strength and continued leadership in cutting-edge tire technology. During our ownership, Michelin made progress on several of the catalysts we had identified, including shifting its product mix toward higher-margin specialty and large-diameter tires, while pursuing initiatives to improve operating efficiency and expand into higher-growth businesses. However, our ongoing research, including work on Michelin’s competitors, led us to reassess some elements of our original investment thesis as competitive dynamics evolved and the opportunity for further profitability improvements became less certain. As a result, we chose to exit our position to fund what we believe is a more compelling opportunity in WEG.

WEG S.A.

Headquartered in Jaraguá do Sul, Brazil, and founded in 1961, WEG is a global electrical equipment manufacturer that has evolved from a Brazilian electric motor producer into a diversified industrial platform. The company makes equipment that helps generate, transmit, convert, control and use electricity across industrial and infrastructure applications, including motors, drives, automation systems, transformers, generators and alternators. These products serve end markets such as manufacturing, mining, oil and gas, water infrastructure, utilities, renewable energy, and data centers, giving WEG exposure to both traditional industrial demand and longer-term investment in electrification, grid modernization and automation.

WEG’s differentiation lies less in the product categories themselves than in the operating model it has built around them. Motors, transformers and other electrical equipment markets can be cyclical, competitive and capital intensive, but WEG has historically generated attractive profitability through vertical integration, engineering discipline, cost control and a long-term reinvestment culture. Its roots in southern Brazil, a region with a strong engineering and manufacturing tradition, have helped shape this operating culture. In our opinion, this model has allowed the company to expand from a strong Brazilian base into international markets while maintaining attractive returns and a strong balance sheet.

High-Quality Business 

Some of the quality characteristics we have identified for WEG include:

• A vertically integrated manufacturing model that supports cost efficiency, quality control, product customization and supply-chain reliability;
• Significant scale and established market positions across core product categories, including global leadership in low-voltage industrial motors and a dominant position in Latin American transformers;
• A long-term ownership culture, with the founding families retaining a controlling interest and supporting continued reinvestment in the business; and
• A strong financial profile, including a net cash balance sheet and a long track record of growth, with only one year of negative revenue growth over the past 15 years.

Attractive Valuation 

We believe shares of WEG are attractively valued given our estimates of normalized earnings. In our view, the company’s long-term opportunities for international expansion, additional manufacturing capacity and market share gains are not fully reflected in its current valuation, as investor attention remains focused on near-term uncertainty surrounding tariffs, renewable energy demand and Brazil-related macroeconomic volatility.

Compelling Catalysts

Catalysts we have identified for WEG, which we believe will cause its stock price to appreciate over our three- to five-year investment horizon, include:

• Continued expansion beyond Brazil, particularly in motors, transformers, alternators and automation, as WEG builds scale and market share in international markets;
• Further localization and vertical integration of manufacturing capacity, supporting customer service, supply-chain efficiency and WEG’s ability to replicate its operating model outside of Brazil;
• Continued integration and improvement of acquired businesses, including Marathon in motors and alternators and Crompton Greaves Power Systems in transformers, as WEG applies its manufacturing discipline and reinvestment model to these platforms; and
• Expansion of transformer manufacturing capacity, including planned capacity additions through 2028, supported by demand for grid investment, electrification and data center-related electrical infrastructure.

Conclusion

Periods of relative underperformance can test conviction, particularly when market leadership is narrow and rapidly changing. However, we believe the appropriate response is not to chase what has recently worked but to remain focused on the long-term drivers of value creation. This discipline has guided our investment process across multiple market cycles and continues to shape how we position the portfolio today.

Importantly, recent performance has not been accompanied by a deterioration in the businesses we own. In many cases, earnings have continued to grow even as valuation multiples have compressed, creating what we believe is an increasingly attractive disconnect between share prices and normalized earnings power. While periods like this are challenging, they can also create opportunity for long-term investors. We believe the very conditions that have challenged recent relative performance have strengthened the portfolio’s prospective return potential.

(All MSCI index returns are shown net and in U.S. dollars unless otherwise noted.)

Markets Review

Against this backdrop, we believe it is particularly important to distinguish between businesses whose financial outcomes are dependent on prevailing macro conditions and those capable of succeeding across a range of environments. We recognize that “quality” is an over-used term—and often used too broadly—across the investment industry. For us, it is important to distinguish among three distinct forms of quality:

• Transient Quality can look exceptional at the peak of a cycle, with scarcity-driven pricing power, expanding margins and high returns on capital. On the surface the economics can appear highly attractive, but when supply eventually catches up, prices normalize and investors realize what has happened, significant valuation resets can occur.
• Conventional Quality possesses many of the characteristics traditionally associated with great businesses—powerful brands, customer loyalty, incumbency advantages and ecosystem lock-in—but the old moats are eroding. Digital advertising, ecommerce, private label, low barriers to entry and technological disruption have made certain franchises less structurally resilient than they once were.
• Durable Quality is where we are most energized because scarcity is permanent rather than cyclical (or at least less so). These businesses can raise prices ahead of inflation for years without impairing volume, protected by natural monopolies, geology, irreplaceable infrastructure, essentiality, regulation or deliberate scarcity. Consider businesses like luxury goods manufacturers, regulated utilities and mission-critical technology solutions, or specialty data providers, unique ingredient producers and transportation platforms.

By focusing on durable quality, we seek to look beyond the whipsaw of macroeconomic events and capitalize on the disconnects they can create between share prices and long-term normalized earnings power. Importantly, we believe today’s environment continues to provide such opportunities, enabling us to selectively enhance the portfolio when we identify businesses offering a particularly compelling combination of quality, valuation and catalysts.

Performance and Attribution Summary

For the third quarter of 2026, Aristotle Capital’s International Equity ADR WM Composite posted a total return of 0.07% pure gross of fees (-0.43% net of fees), underperforming the MSCI EAFE Index, which returned 0.81%, and the MSCI ACWI ex USA Index, which returned 0.48%. Please refer to the table below for detailed performance.

Performance (%)	3Q26	YTD	1 Year	3 Years	5 Years	10 Years	Since Inception*
International Equity ADR WM Composite (pure gross)	0.07	3.97	10.01	14.79	7.08	8.75	8.63
International Equity ADR WM Composite (net)	-0.43	2.44	7.87	12.56	4.97	6.60	6.30
MSCI EAFE Index (net)	0.81	10.33	15.69	18.40	9.32	9.07	8.50
MSCI ACWI ex USA Index (net)	0.48	14.22	20.00	20.54	9.55	9.25	8.13

Cameco, one of the world’s largest uranium producers, was a primary detractor during the quarter. The company’s stock sold off amid concerns that disruptions at its Canadian uranium operations (including Cigar Lake, McArthur River and Key Lake) would temporarily dampen near-term production. Despite these challenges, the company maintained its annual production outlook, while average realized prices continued to improve and long-term uranium prices reached decade highs. Cameco’s extensive use of long-term contracts, combined with the production flexibility of its tier-one assets, helps insulate the business from short-term commodity price fluctuations and operational volatility. We believe the company remains well-positioned to benefit from growing global demand for nuclear energy through its high-quality uranium assets, fuel services capabilities and ownership interest in Westinghouse.

Rentokil Initial, the U.K.-based pest control and hygiene services company, was a detractor during the quarter. Shares declined following the company’s interim results as investors focused on weaker growth in portions of its North American pest control business and management’s decision to retire its previous 2027 North American margin target. Importantly, North American organic growth improved from the prior year, while customer retention and profitability also increased. Under newly appointed CEO Mike Duffy, the company has strengthened its North American leadership team and is undertaking a broader operational restructuring, with plans to reinvest cost savings into initiatives intended to accelerate organic growth rather than maximize near-term margins. While we continue to assess the new management team’s strategy and execution, we believe Rentokil’s scale, route density and recurring service model provide the company with meaningful competitive advantages.

DBS Group, a leading Asian financial services company headquartered in Singapore, was a top contributor during the quarter. Shares rose following another strong earnings report, with record earnings supported by continued growth in wealth management and other fee-based businesses, as well as resilient net interest income despite lower local interest rates. The company continues to benefit from growing wealth creation across Asia, while its strong capital position has supported increased shareholder distributions and disciplined capital allocation. We believe DBS’s strong market position, diversified sources of earnings and disciplined capital allocation support attractive long-term returns.

Accenture, a leading technology consulting and managed services company, was a primary contributor during the quarter after being the strategy’s largest detractor during the first half of the year. Shares rallied as investor sentiment improved following significant concerns about the potential impact of artificial intelligence on traditional consulting and technology services. While market perceptions of AI’s impact on the industry have shifted considerably, our focus has remained on the underlying business and Accenture’s ability to create value for its clients. For decades, the company’s deep industry expertise, longstanding client relationships, and broad technology ecosystem positioned it to help enterprises integrate new technologies and redesign increasingly complex business processes. The latest wave of technological innovation is no different. We believe these capabilities become more valuable, rather than less, as the pace of technological change accelerates and Accenture becomes mission critical to global enterprises seeking to evolve, adapt and grow.

Recent Portfolio Activity

Buys	Sells
WEG	Michelin

During the quarter, we sold our position in Michelin and invested in WEG.

We initially invested in Michelin, one of the world’s largest tire manufacturers, in the first quarter of 2021. In our view, the company benefits from a strong competitive position driven by its global scale, brand strength and continued leadership in cutting-edge tire technology. During our ownership, Michelin made progress on several of the catalysts we had identified, including shifting its product mix toward higher-margin specialty and large-diameter tires, while pursuing initiatives to improve operating efficiency and expand into higher-growth businesses. However, our ongoing research, including work on Michelin’s competitors, led us to reassess some elements of our original investment thesis as competitive dynamics evolved and the opportunity for further profitability improvements became less certain. As a result, we chose to exit our position to fund what we believe is a more compelling opportunity in WEG.

WEG S.A.

Headquartered in Jaraguá do Sul, Brazil, and founded in 1961, WEG is a global electrical equipment manufacturer that has evolved from a Brazilian electric motor producer into a diversified industrial platform. The company makes equipment that helps generate, transmit, convert, control and use electricity across industrial and infrastructure applications, including motors, drives, automation systems, transformers, generators and alternators. These products serve end markets such as manufacturing, mining, oil and gas, water infrastructure, utilities, renewable energy, and data centers, giving WEG exposure to both traditional industrial demand and longer-term investment in electrification, grid modernization and automation.

WEG’s differentiation lies less in the product categories themselves than in the operating model it has built around them. Motors, transformers and other electrical equipment markets can be cyclical, competitive and capital intensive, but WEG has historically generated attractive profitability through vertical integration, engineering discipline, cost control and a long-term reinvestment culture. Its roots in southern Brazil, a region with a strong engineering and manufacturing tradition, have helped shape this operating culture. In our opinion, this model has allowed the company to expand from a strong Brazilian base into international markets while maintaining attractive returns and a strong balance sheet.

High-Quality Business 

Some of the quality characteristics we have identified for WEG include:

• A vertically integrated manufacturing model that supports cost efficiency, quality control, product customization and supply-chain reliability;
• Significant scale and established market positions across core product categories, including global leadership in low-voltage industrial motors and a dominant position in Latin American transformers;
• A long-term ownership culture, with the founding families retaining a controlling interest and supporting continued reinvestment in the business; and
• A strong financial profile, including a net cash balance sheet and a long track record of growth, with only one year of negative revenue growth over the past 15 years.

Attractive Valuation 

We believe shares of WEG are attractively valued given our estimates of normalized earnings. In our view, the company’s long-term opportunities for international expansion, additional manufacturing capacity and market share gains are not fully reflected in its current valuation, as investor attention remains focused on near-term uncertainty surrounding tariffs, renewable energy demand and Brazil-related macroeconomic volatility.

Compelling Catalysts

Catalysts we have identified for WEG, which we believe will cause its stock price to appreciate over our three- to five-year investment horizon, include:

• Continued expansion beyond Brazil, particularly in motors, transformers, alternators and automation, as WEG builds scale and market share in international markets;
• Further localization and vertical integration of manufacturing capacity, supporting customer service, supply-chain efficiency and WEG’s ability to replicate its operating model outside of Brazil;
• Continued integration and improvement of acquired businesses, including Marathon in motors and alternators and Crompton Greaves Power Systems in transformers, as WEG applies its manufacturing discipline and reinvestment model to these platforms; and
• Expansion of transformer manufacturing capacity, including planned capacity additions through 2028, supported by demand for grid investment, electrification and data center-related electrical infrastructure.

Conclusion

Periods of relative underperformance can test conviction, particularly when market leadership is narrow and rapidly changing. However, we believe the appropriate response is not to chase what has recently worked but to remain focused on the long-term drivers of value creation. This discipline has guided our investment process across multiple market cycles and continues to shape how we position the portfolio today.

Importantly, recent performance has not been accompanied by a deterioration in the businesses we own. In many cases, earnings have continued to grow even as valuation multiples have compressed, creating what we believe is an increasingly attractive disconnect between share prices and normalized earnings power. While periods like this are challenging, they can also create opportunity for long-term investors. We believe the very conditions that have challenged recent relative performance have strengthened the portfolio’s prospective return potential.