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

Markets Review

Sources: CAPS CompositeHub^TM, Bloomberg
Past performance is not indicative of future results. Aristotle International Equity ADR WM Composite returns are presented pure gross and net of the maximum wrap fee and include the reinvestment of all income. Pure gross returns do not reflect the deduction of any trading costs or other fees and are supplemental to the net returns. Net returns are calculated by subtracting the highest applicable wrap/SMA fee, which includes trading costs and custodial fees, from the pure gross composite return (From inception to 12/31/2015, the highest applicable wrap/SMA fee is 3.00% on an annual basis, or 0.75% quarterly. From 1/1/2016 to 12/31/2023, the highest applicable wrap/SMA fee is 2.00% on an annual basis, or 0.50% quarterly and 0.17% monthly from 1/1/2024 to present.) Please see important disclosures at the end of this document.

Global equity markets pulled back in the first quarter, with the MSCI ACWI Index falling 3.20% during the period. Global fixed income markets also weakened, as the Bloomberg Global Aggregate Bond Index decreased 1.07%. From a style perspective, value stocks outperformed growth, with the MSCI ACWI Value Index exceeding the MSCI ACWI Growth Index by 8.85%.

The MSCI EAFE Index fell 1.24% during the period, while the MSCI ACWI ex USA Index declined 0.71%. Within the MSCI EAFE Index, the U.K. and Asia were the strongest performers, while the United States and Europe & Middle East lagged. On a sector basis, eight out of the eleven sectors within the MSCI EAFE Index posted negative returns, with Consumer Discretionary, Financials and Communication Services performing the worst. Conversely, Energy, Utilities and Materials were the only sectors with positive returns.

Geopolitical developments contributed to increased volatility during the quarter. Trade policy uncertainty persisted, as a Supreme Court ruling limited the U.S. government’s ability to impose certain tariffs, adding complexity for businesses navigating global supply chains. In addition, escalating conflict in the Middle East disrupted shipping activity through the Strait of Hormuz, a key route for global energy supply. The resulting supply uncertainty led to a significant increase in oil prices and heightened volatility across energy markets. In a March report, the OECD noted that the Middle East conflict was testing the resilience of the global economy but held its forecast for 2026 global growth at 2.9%.

Given these dynamics, central banks maintained a cautious stance, with the Federal Reserve, Bank of England, European Central Bank and Bank of Japan holding policy rates steady amid elevated uncertainty.

Performance and Attribution Summary

For the first quarter of 2026, Aristotle Capital’s International Equity ADR WM Composite posted a total return of -3.39% pure gross of fees (-3.88% net of fees), underperforming the MSCI EAFE Index, which returned -1.24%, and the MSCI ACWI ex USA Index, which returned -0.71%. Please refer to the table below for detailed performance.

Source: FactSet
Past performance is not indicative of future results. Sector attribution shows how much of a portfolio’s overall return is directly attributable to stock selection and asset allocation decisions within the portfolio, highlighting which sectors contributed or detracted to the total return. Attribution includes the reinvestment of income. Attribution is presented gross of fees and does not include the deduction of all fees and expenses that a client or investor has paid or would have paid. Please refer to the pure gross and net composite returns included within to understand the overall impact of fees.

From a sector perspective, the portfolio’s underperformance relative to the MSCI EAFE Index can be attributed to security selection while allocation effects contributed. Security selection in Industrials, Energy and Materials detracted most from the portfolio’s relative performance. Conversely, security selection in Health Care and Consumer Discretionary, as well as an overweight in Energy, contributed to relative returns.

Regionally, both security selection and allocation effects were responsible for the portfolio’s underperformance. Security selection in Asia and Europe & Middle East detracted most from relative performance, while exposure to Emerging Markets and Canada contributed.

Contributors and Detractors for 1Q 2026

Relative Contributors	Relative Detractors
Cameco	MonotaRO
Credicorp	Accenture
Otsuka Holdings	Sony
TotalEnergies	Brookfield
GSK	Experian

Relative contributors and detractors are based on attribution total effect and exclude benchmark securities not held in the portfolio.

MonotaRO, the Japanese business-to-business (B2B) e-commerce platform, was the largest detractor during the quarter. While results remained strong, the stock price was pressured by softer order trends in the enterprise business and a moderation in new customer additions following a period of unusually strong growth. Sentiment was also pressured by the company’s exposure to small and medium-sized enterprises in manufacturing and construction, cyclical and cost-sensitive end markets, particularly amid elevated input costs. Despite these near-term headwinds, profitability remained stable, with margin expansion supported by procurement efficiencies, reduced promotional discounting and higher royalty income. Enterprise business also grew more than 20% through newly connected corporations, expanding to approximately one-third of sales, highlighting its increasing importance within the business and reinforcing a key catalyst we originally identified. Management also announced a ¥10 billion share repurchase program, supporting shareholder returns and reflecting continued discipline in capital allocation. Over the longer term, we believe MonotaRO remains well-positioned to continue gaining share in Japan’s fragmented and underpenetrated MRO market. The company’s broad assortment, operating scale and growing enterprise presence, in our view, support a business that is becoming more embedded in customer procurement workflows over time.

Brookfield, one of the world’s largest and most diversified real asset investors and alternative asset managers, was a detractor for the quarter. Shares of alternative asset managers came under pressure during the period, driven in part by investor concerns around private credit and less-liquid strategies. We believe these concerns are less applicable to Brookfield given the breadth of its platform and its focus on real assets, including infrastructure, renewable power and real estate, rather than any concentrated exposure to a single strategy. The company continues to execute on several key initiatives, including scaling its insurance platform, which provides a growing source of permanent capital to support its investment activities. It is also seeing improving performance in its real estate portfolio, where underlying fundamentals remain strong, with high occupancy levels and positive leasing spreads across its portfolio of large-scale, well-located properties. In addition, Brookfield is building a pipeline of asset sales supported by ongoing development and repositioning of assets, with monetization activity expected to increase as capital markets continue to normalize. Looking at Brookfield from a long-term perspective, the company benefits from its scale, access to capital and disciplined investment approach, which we believe will allow it to continue to deploy capital opportunistically and generate attractive returns across cycles.

Otsuka Holdings, a leading Japanese healthcare company, was also a top contributor to performance during the quarter. We have long admired the company’s robust and diversified product portfolio, which we believe is well-positioned to gain market share in various applications such as depression, schizophrenia and oncology. As awareness of major depressive disorders has continued to increase, Otsuka’s leading products, including Rexulti and Abilify Maintena, have exhibited strong prescription growth. In oncology, the heightened attention around colorectal cancer, which has spiked in adults under 55, has led to gains for the company’s leading cancer drug, Lonsurf. Furthermore, the company continues to invest in its “Next 8” pipeline, which complements its existing portfolio and supports its next phase of growth. Management has also continued to invest in external innovation, as demonstrated by its recently announced agreement to acquire Transcend Therapeutics, which strengthens its position in psychiatric and neurological disorders, including adding a late-stage candidate targeting PTSD. As the company continues to reinvest in innovation while simultaneously returning value to shareholders, as exemplified by its most recent ¥50 billion share buyback program, we remain confident that Otsuka will continue to deliver attractive long-term returns over time.

TotalEnergies, one of the world’s largest energy companies, was a primary contributor for the quarter. While oil prices increased during the period, driven by geopolitical tensions in the Middle East and disruptions to supply through the Strait of Hormuz, our focus remains on the company’s underlying operational execution across its diversified energy platform. As the fourth-largest major energy player in the world, the company operates across upstream, downstream, liquefied natural gas (LNG), and integrated power and renewable energy businesses. Within its upstream segment, TotalEnergies continues to deliver accretive growth, with new projects generating higher cash flow per barrel than its legacy portfolio, supporting both production growth and improving profitability. In the LNG segment, the company has started production in Angola, which will supply Europe and Asia with roughly two million tons of LNG per year, and has also signed an agreement with Glenfarne, the lead developer of the Alaska LNG project, to offtake two million tons of LNG annually for the next 20 years. We view LNG as a key structural driver of long-term growth, particularly given increasing demand for energy security in Asia and Europe. Lastly, within renewables, TotalEnergies and Masdar, an Abu Dhabi clean energy leader, formed a joint venture to accelerate renewable energy growth through onshore solar, wind and battery storage projects across Asia. In the U.S., the company has signed a long-term Power Purchase Agreement to provide 1 GW of solar capacity to power Google’s data centers in Texas for 15 years. These initiatives reflect the company’s strategy to build a more diversified and resilient energy platform over time. Overall, we believe TotalEnergies’ combination of disciplined capital allocation, low-cost operations and integrated business model positions it to generate attractive FREE cash flow across commodity cycles, with recent operational progress reinforcing its long-term investment case.

Recent Portfolio Activity

During the quarter, we invested in Techtronic Industries.

Techtronic Industries Co. Ltd.

Headquartered in Hong Kong, Techtronic Industries (“TTI”) is a global manufacturer of power tools, outdoor power equipment and related accessories. The company operates primarily through two flagship brands: Milwaukee, which serves professional tradespeople, and Ryobi, which targets the DIY and light professional market (including handymen and maintenance professionals whose needs fall between homeowners and full-time trades). Over the past decade, TTI has transformed itself into one of the leading players in the global power tool industry, driven by sustained innovation and disciplined brand investment.

Milwaukee has been the primary growth engine, expanding from approximately $450 million in sales in the early 2000s to roughly $10 billion today. The brand has gained meaningful share in professional trades through a focus on productivity, safety and battery-powered innovation. Ryobi remains a leading DIY platform, supported by a long-standing distribution relationship with Home Depot, TTI’s largest retail partner.

TTI continues to benefit from the long-term industry transition from corded, gas-powered and pneumatic tools toward battery-powered platforms. The company’s strategy of maintaining backward compatibility across battery generations has reinforced customer loyalty and created a durable installed base across both Milwaukee and Ryobi ecosystems.

High-Quality Business 

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

• Leading positions in professional and DIY power tools through the Milwaukee and Ryobi brands, supported by strong brand equity, deep engagement with professional tradespeople and a track record of consistent product innovation;
• A powerful battery ecosystem strategy, with over 110 million M18 and 65 million M12 batteries in circulation and backward and forward compatibility across generations, creating switching costs and repeat purchases across hundreds of compatible tools;
• Ongoing investment in research and development, enabling consistent product innovation, market share gains and expansion into adjacent product categories; and
• Deep retail partnerships, particularly with Home Depot, reinforced by dedicated in-store sales representation and merchandising support.

Attractive Valuation 

We believe shares are attractively valued relative to our estimate of intrinsic value. Our analysis reflects the growing contribution of the Milwaukee franchise, which now represents the majority of operating profit, and the benefits of continued mix shift toward professional products, as well as stabilization of underperforming segments. In addition, as recent investment spending normalizes, we expect FREE cash flow to increase to levels that we believe are not fully reflected in the current share price.

Compelling Catalysts

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

• Continued mix shift toward the higher-margin Milwaukee brand, which has grown from 18% of total sales in 2010 to approximately two-thirds today;
• Geographic expansion of the Milwaukee brand outside the United States, where market share remains below North American levels, and introduction of the Ryobi platform into additional markets such as Latin America and Australia;
• Expansion into adjacent professional categories, including personal protective equipment and modular tool storage systems, thereby increasing wallet share within the professional customer base; and
• Improvement in operating profitability through turnaround of underperforming segments and greater cost discipline.

Conclusion

The current investment environment presents a wide range of competing narratives. In such periods, the temptation to react to near-term developments can be significant. At Aristotle Capital, we remain focused on what we believe to be more analyzable and enduring: the long-term fundamentals of individual businesses. When market returns are driven by momentum or shorter-term dynamics, it can be difficult for investors to remain disciplined. We believe such environments create opportunities for patient investors as the gap between price and intrinsic value widens. While political and geopolitical uncertainty remains elevated, our focus is unchanged. We continue to study businesses and invest with a long-term perspective, as we believe fundamentals ultimately determine share price outcomes.

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

Markets Review

Sources: CAPS CompositeHub^TM, Bloomberg
Past performance is not indicative of future results. Aristotle Global Equity WM Composite returns are presented pure gross and net of meximum wrap fee and include the reinvestment of income. Pure gross returns do not reflect the deduction of any trading costs or other fees and are supplemental to the net returns. Net returns are calculated by subtracting the highest applicable wrap/SMA fee, which includes trading costs and custodial fees, from the pure gross composite return. The highest applicable wrap/SMA fee is 2.00% on an annual basis, or 0.50% quarterly from inception to 12/31/2023 and 0.17% monthly from 1/1/2024 to present. Please see important disclosures at the end of this document.

Global equity markets pulled back in the first quarter, with the MSCI ACWI Index falling 3.20% during the period. Global fixed income markets also weakened, as the Bloomberg Global Aggregate Bond Index decreased 1.07%. From a style perspective, value stocks outperformed growth, with the MSCI ACWI Value Index exceeding the MSCI ACWI Growth Index by 8.85%.

Performance across global equity markets was mixed during the period, with gains in Latin America and Japan, while North America and Europe declined. On a sector basis, five out of the eleven sectors within the MSCI ACWI Index advanced, led by Energy, Utilities and Materials. Alternatively, Consumer Discretionary, Communication Services and Information Technology were the worst performers.

Geopolitical developments contributed to increased volatility during the quarter. Trade policy uncertainty persisted, as a Supreme Court ruling limited the U.S. government’s ability to impose certain tariffs, adding complexity for businesses navigating global supply chains. In addition, escalating conflict in the Middle East disrupted shipping activity through the Strait of Hormuz, a key route for global energy supply. The resulting supply uncertainty led to a significant increase in oil prices and heightened volatility across energy markets. In a March report, the OECD noted that the Middle East conflict was testing the resilience of the global economy but held its forecast for 2026 global growth at 2.9%.

In the U.S., macroeconomic conditions reflected a moderation in growth alongside continued inflationary pressures. The government reported a slowdown in real GDP growth, while inflation remained above the Federal Reserve’s 2% target. Against this backdrop, the Fed maintained its federal funds target range, citing elevated uncertainty surrounding the economic outlook.

Despite these headwinds, corporate earnings remained resilient, with S&P 500 companies reporting double-digit earnings growth for the fifth consecutive quarter. Information Technology led earnings growth, supported by continued investment in artificial intelligence. However, equity performance within the sector was mixed. Software was a notable area of weakness amid concerns regarding competitive dynamics and the potential impact of AI on traditional business models. More broadly, concerns around labor displacement, increased scrutiny of capital expenditures, resource constraints and private credit risk weighed on sentiment and tempered equity market performance during the period.

Performance and Attribution Summary

For the first quarter of 2026, Aristotle Capital’s Global Equity WM Composite posted a total return of -2.74% pure gross of fees (-3.22% net of fees), underperforming the MSCI ACWI Index, which returned -3.20%, and outperforming the MSCI World Index, which returned -3.57%. Please refer to the table below for detailed performance.

Source: FactSet
Past performance is not indicative of future results. Sector attribution shows how much of a portfolio’s overall return is directly attributable to stock selection and asset allocation decisions within the portfolio, highlighting which sectors contributed or detracted to the total return. Attribution includes the reinvestment of income. Attribution is presented pure gross of fees and does not include the deduction of all fees and expenses that a client or investor has paid or would have paid. Please refer to the gross and net composite returns included within to understand the overall impact of fees.

From a sector perspective, the portfolio’s underperformance relative to the MSCI ACWI Index can be attributed to security selection while allocation effects contributed. Security selection in Industrials, Information Technology and Materials detracted the most from the portfolio’s relative performance. Conversely, security selection in Health Care and Financials, as well as an overweight in Energy, contributed the most to relative performance.

Regionally, security selection was responsible for the portfolio’s underperformance relative to the MSCI ACWI Index, while allocation effects contributed. Security selection in Japan detracted the most from relative performance, while security selection in Asia/Pacific ex-Japan was the largest contributor.

Contributors and Detractors for 1Q 2026

Relative Contributors	Relative Detractors
TotalEnergies	MonotaRO
Cameco	Nemetschek
FirstCash	Capital One Financial
Otsuka Holdings	Sony
Oshkosh	Qualcomm

Relative contributors and detractors are based on attribution total effect and exclude benchmark securities not held in the portfolio.

MonotaRO, the Japanese business-to-business (B2B) e-commerce platform, was the largest detractor during the quarter. While results remained strong, the stock price was pressured by softer order trends in the enterprise business and a moderation in new customer additions following a period of unusually strong growth. Sentiment was also pressured by the company’s exposure to small and medium-sized enterprises in manufacturing and construction, cyclical and cost-sensitive end markets, particularly amid elevated input costs. Despite these near-term headwinds, profitability remained stable, with margin expansion supported by procurement efficiencies, reduced promotional discounting and higher royalty income. Enterprise business also grew more than 20% through newly connected corporations, expanding to approximately one-third of sales, highlighting its increasing importance within the business and reinforcing a key catalyst we originally identified. Management also announced a ¥10 billion share repurchase program, supporting shareholder returns and reflecting continued discipline in capital allocation. Over the longer term, we believe MonotaRO remains well-positioned to continue gaining share in Japan’s fragmented and underpenetrated MRO market. The company’s broad assortment, operating scale and growing enterprise presence, in our view, support a business that is becoming more embedded in customer procurement workflows over time.

Qualcomm, a leading semiconductor and communications technology company, was one of the largest detractors for the quarter. Despite delivering record revenues during the period, the company guided to lower near-term results due to memory-related supply constraints. Results were impacted by higher memory prices, driven in part by strong demand for AI-related data center applications. This is constraining smartphone production despite otherwise healthy underlying demand and leading handset manufacturers to adopt more cautious production and inventory strategies, reducing near-term chip orders for Qualcomm. We view these headwinds as cyclical rather than structural. Qualcomm has retained its high market share in handsets, even as large clients (most notably Apple) continue to pursue insourcing initiatives, which we believe is a testament to its history of productive R&D spending and technological leadership. Qualcomm also continues to execute on its long-term strategy of evolving from a handset-centric company into a broader connected computing platform. Automotive, Internet of Things (IoT) and newer initiatives, such as AI-enabled PCs and edge inference processors, represent a growing portion of the company, with management targeting roughly half of chip revenue from non-handset applications by the end of the decade. We believe Qualcomm’s technologies will continue to benefit as connectivity expands across devices and as AI workloads increasingly shift from the cloud to on-device (the edge), supporting its ability to generate strong FREE cash flow over time.

TotalEnergies, one of the world’s largest energy companies, was the top contributor for the quarter. While oil prices increased during the period, driven by geopolitical tensions in the Middle East and disruptions to supply through the Strait of Hormuz, our focus remains on the company’s underlying operational execution across its diversified energy platform. As the fourth-largest major energy player in the world, the company operates across upstream, downstream, liquefied natural gas (LNG), and integrated power and renewable energy businesses. Within its upstream segment, TotalEnergies continues to deliver accretive growth, with new projects generating higher cash flow per barrel than its legacy portfolio, supporting both production growth and improving profitability. In the LNG segment, the company has started production in Angola, which will supply Europe and Asia with roughly two million tons of LNG per year, and has also signed an agreement with Glenfarne, the lead developer of the Alaska LNG project, to offtake two million tons of LNG annually for the next 20 years. We view LNG as a key structural driver of long-term growth, particularly given increasing demand for energy security in Asia and Europe. Lastly, within renewables, TotalEnergies and Masdar, an Abu Dhabi clean energy leader, formed a joint venture to accelerate renewable energy growth through onshore solar, wind and battery storage projects across Asia. In the U.S., the company has signed a long-term Power Purchase Agreement to provide 1 GW of solar capacity to power Google’s data centers in Texas for 15 years. These initiatives reflect the company’s strategy to build a more diversified and resilient energy platform over time. Overall, we believe TotalEnergies’ combination of disciplined capital allocation, low-cost operations and integrated business model positions it to generate attractive FREE cash flow across commodity cycles, with recent operational progress reinforcing its long-term investment case.

Otsuka Holdings, a leading Japanese healthcare company, was also a top contributor to performance during the quarter. We have long admired the company’s robust and diversified product portfolio, which we believe is well-positioned to gain market share in various applications such as depression, schizophrenia and oncology. As awareness of major depressive disorders has continued to increase, Otsuka’s leading products, including Rexulti and Abilify Maintena, have exhibited strong prescription growth. In oncology, the heightened attention around colorectal cancer, which has spiked in adults under 55, has led to gains for the company’s leading cancer drug, Lonsurf. Furthermore, the company continues to invest in its “Next 8” pipeline, which complements its existing portfolio and supports its next phase of growth. Management has also continued to invest in external innovation, as demonstrated by its recently announced agreement to acquire Transcend Therapeutics, which strengthens its position in psychiatric and neurological disorders, including adding a late-stage candidate targeting PTSD. As the company continues to reinvest in innovation while simultaneously returning value to shareholders, as exemplified by its most recent ¥50 billion share buyback program, we remain confident that Otsuka will continue to deliver attractive long-term returns over time.

Recent Portfolio Activity

During the quarter, we trimmed our position in Cameco for risk management purposes, sold our position in Sony Financial and purchased Chevron.

We received shares of Sony Financial Group following its spinoff from our long-term holding, Sony Group, in October 2025. Sony Financial is a Japan-based financial services company with operations in life insurance, banking and digital payments. While we view Sony Financial as an attractive, well-managed business, we already have meaningful exposure to the global insurance industry through holdings such as AIA Group and Munich Re. Given our existing positioning, we elected to sell the shares received in the spinoff.

Chevron Corporation

Headquartered in Houston, Texas, Chevron is one of the world’s largest integrated energy companies, with operations spanning upstream exploration and production, downstream refining and marketing, and chemicals. The company traces its roots back to the 1911 breakup of Standard Oil and today produces approximately four million barrels of oil equivalent per day.

While Chevron operates across the full value chain, roughly 85% of earnings are generated from upstream operations, reflecting its oil-leveraged portfolio. This upstream concentration is intentional and supported by a portfolio of low-cost, long-lived assets. The asset base includes deepwater production in the Gulf of America and Guyana, a large and advantaged Permian Basin position, long-lived conventional production in Kazakhstan, and liquefied natural gas projects in Australia. Chevron also maintains a presence in Venezuela, though it remains a relatively small part of the portfolio.

Under CEO Mike Wirth (appointed in 2018), Chevron has emphasized capital discipline, portfolio optimization and shareholder returns. This strategy has included both targeted acquisitions and meaningful divestitures to high-grade the portfolio. Consistent with this approach, Chevron completed the acquisition of Hess in 2025, increasing its exposure to the Stabroek block offshore Guyana—one of the lowest-cost and highest-return oil developments globally. This transaction enhances Chevron’s long-term production visibility and strengthens the quality of its upstream portfolio with a high-margin, long-duration asset base.

High-Quality Business

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

• A low-cost, oil-leveraged upstream portfolio anchored by advantaged positions in the Permian Basin and Guyana;
• A royalty-advantaged Permian position, where approximately 75% of acreage carries low or no royalty burden, providing structural cost advantages and attractive returns; 
• A diversified downstream and chemicals portfolio, which provides cash flow resilience across commodity cycles; and
• Demonstrated capital discipline under current leadership, including measured acquisitions (Noble, PDC, Hess) and continued portfolio optimization.

Attractive Valuation

At current levels, we believe shares reflect conservative commodity assumptions and do not fully capture the company’s normalized earnings power and strengthening FREE cash flow profile as major capital projects transition from investment to production and capital spending moderates. Combined with a competitive dividend yield and ongoing share repurchases, we believe Chevron offers attractive total return potential over our three- to five-year investment horizon.

Compelling Catalysts

Catalysts we have identified for Chevron, which we believe could drive appreciation over our three- to five-year investment horizon, include:

• Completion and ramp-up of the Tengiz expansion in Kazakhstan, materially increasing FREE cash flow following a multi-year capital investment phase;
• Successful integration of Hess, expanding Chevron’s ownership in the high-return Guyana Stabroek development and strengthening long-term production visibility;
• Permian Basin development transitioning toward a capital-efficient, cash-generative phase, supported by advantaged mineral ownership and reduced unit costs;
• Continued operating discipline under CEO Mike Wirth, including structural cost control and moderated capital intensity; and
• Ongoing capital returns to shareholders through dividend growth and share repurchases.

Conclusion

The current investment environment presents a wide range of competing narratives. In such periods, the temptation to react to near-term developments can be significant. At Aristotle Capital, we remain focused on what we believe to be more analyzable and enduring: the long-term fundamentals of individual businesses. When market returns are driven by momentum or shorter-term dynamics, it can be difficult for investors to remain disciplined. We believe such environments create opportunities for patient investors as the gap between price and intrinsic value widens. While political and geopolitical uncertainty remains elevated, our focus is unchanged. We continue to study businesses and invest with a long-term perspective, as we believe fundamentals ultimately determine share price outcomes.

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

Markets Review

Sources: CAPS CompositeHubTM, Bloomberg
Past performance is not indicative of future results. Aristotle International Equity ADR Composite returns are presented gross and net of investment advisory fees and include the reinvestment of all income. Gross returns will be reduced by fees and other expenses that may be incurred in the management of the account. Net returns are calculated by subtracting a model fee of 0.50% on an annual basis or 0.04167% on a monthly basis, which includes trading costs and the revinvestment of all income. Please see important disclosures at the end of this document.

Global equity markets pulled back in the first quarter, with the MSCI ACWI Index falling 3.20% during the period. Global fixed income markets also weakened, as the Bloomberg Global Aggregate Bond Index decreased 1.07%. From a style perspective, value stocks outperformed growth, with the MSCI ACWI Value Index exceeding the MSCI ACWI Growth Index by 8.85%.

The MSCI EAFE Index fell 1.24% during the period, while the MSCI ACWI ex USA Index declined 0.71%. Within the MSCI EAFE Index, the U.K. and Asia were the strongest performers, while the United States and Europe & Middle East lagged. On a sector basis, eight out of the eleven sectors within the MSCI EAFE Index posted negative returns, with Consumer Discretionary, Financials and Communication Services performing the worst. Conversely, Energy, Utilities and Materials were the only sectors with positive returns.

Geopolitical developments contributed to increased volatility during the quarter. Trade policy uncertainty persisted, as a Supreme Court ruling limited the U.S. government’s ability to impose certain tariffs, adding complexity for businesses navigating global supply chains. In addition, escalating conflict in the Middle East disrupted shipping activity through the Strait of Hormuz, a key route for global energy supply. The resulting supply uncertainty led to a significant increase in oil prices and heightened volatility across energy markets. In a March report, the OECD noted that the Middle East conflict was testing the resilience of the global economy but held its forecast for 2026 global growth at 2.9%.

Given these dynamics, central banks maintained a cautious stance, with the Federal Reserve, Bank of England, European Central Bank and Bank of Japan holding policy rates steady amid elevated uncertainty.

Performance and Attribution Summary

For the first quarter of 2026, Aristotle Capital’s International Equity ADR Composite posted a total return of -3.47% gross of fees (-3.59% net of fees), underperforming the MSCI EAFE Index, which returned -1.24%, and the MSCI ACWI ex USA Index, which returned -0.71%. Please refer to the table below for detailed performance.

Source: FactSet
Past performance is not indicative of future results. Sector attribution shows how much of a portfolio’s overall return is directly attributable to stock selection and asset allocation decisions within the portfolio, highlighting which sectors contributed or detracted to the total return. Attribution includes the reinvestment of income. Attribution is presented gross of fees and does not include the deduction of all fees and expenses that a client or investor has paid or would have paid. Please refer to the gross and net composite returns included within to understand the overall impact of fees.

From a sector perspective, the portfolio’s underperformance relative to the MSCI EAFE Index can be attributed to security selection while allocation effects contributed. Security selection in Industrials, Energy and Materials detracted most from the portfolio’s relative performance. Conversely, security selection in Health Care and Consumer Discretionary, as well as an overweight in Energy, contributed to relative returns.

Regionally, both security selection and allocation effects were responsible for the portfolio’s underperformance. Security selection in Asia and Europe & Middle East detracted most from relative performance, while exposure to Emerging Markets and Canada contributed.

Contributors and Detractors for 1Q 2026

Relative Contributors	Relative Detractors
Cameco	MonotaRO
Credicorp	Accenture
Otsuka Holdings	Sony
TotalEnergies	Brookfield
GSK	Experian

Relative contributors and detractors are based on attribution total effect and exclude benchmark securities not held in the portfolio.

MonotaRO, the Japanese business-to-business (B2B) e-commerce platform, was the largest detractor during the quarter. While results remained strong, the stock price was pressured by softer order trends in the enterprise business and a moderation in new customer additions following a period of unusually strong growth. Sentiment was also pressured by the company’s exposure to small and medium-sized enterprises in manufacturing and construction, cyclical and cost-sensitive end markets, particularly amid elevated input costs. Despite these near-term headwinds, profitability remained stable, with margin expansion supported by procurement efficiencies, reduced promotional discounting and higher royalty income. Enterprise business also grew more than 20% through newly connected corporations, expanding to approximately one-third of sales, highlighting its increasing importance within the business and reinforcing a key catalyst we originally identified. Management also announced a ¥10 billion share repurchase program, supporting shareholder returns and reflecting continued discipline in capital allocation. Over the longer term, we believe MonotaRO remains well-positioned to continue gaining share in Japan’s fragmented and underpenetrated MRO market. The company’s broad assortment, operating scale and growing enterprise presence, in our view, support a business that is becoming more embedded in customer procurement workflows over time.

Brookfield, one of the world’s largest and most diversified real asset investors and alternative asset managers, was a detractor for the quarter. Shares of alternative asset managers came under pressure during the period, driven in part by investor concerns around private credit and less-liquid strategies. We believe these concerns are less applicable to Brookfield given the breadth of its platform and its focus on real assets, including infrastructure, renewable power and real estate, rather than any concentrated exposure to a single strategy. The company continues to execute on several key initiatives, including scaling its insurance platform, which provides a growing source of permanent capital to support its investment activities. It is also seeing improving performance in its real estate portfolio, where underlying fundamentals remain strong, with high occupancy levels and positive leasing spreads across its portfolio of large-scale, well-located properties. In addition, Brookfield is building a pipeline of asset sales supported by ongoing development and repositioning of assets, with monetization activity expected to increase as capital markets continue to normalize. Looking at Brookfield from a long-term perspective, the company benefits from its scale, access to capital and disciplined investment approach, which we believe will allow it to continue to deploy capital opportunistically and generate attractive returns across cycles.

Otsuka Holdings, a leading Japanese healthcare company, was also a top contributor to performance during the quarter. We have long admired the company’s robust and diversified product portfolio, which we believe is well-positioned to gain market share in various applications such as depression, schizophrenia and oncology. As awareness of major depressive disorders has continued to increase, Otsuka’s leading products, including Rexulti and Abilify Maintena, have exhibited strong prescription growth. In oncology, the heightened attention around colorectal cancer, which has spiked in adults under 55, has led to gains for the company’s leading cancer drug, Lonsurf. Furthermore, the company continues to invest in its “Next 8” pipeline, which complements its existing portfolio and supports its next phase of growth. Management has also continued to invest in external innovation, as demonstrated by its recently announced agreement to acquire Transcend Therapeutics, which strengthens its position in psychiatric and neurological disorders, including adding a late-stage candidate targeting PTSD. As the company continues to reinvest in innovation while simultaneously returning value to shareholders, as exemplified by its most recent ¥50 billion share buyback program, we remain confident that Otsuka will continue to deliver attractive long-term returns over time.

TotalEnergies, one of the world’s largest energy companies, was a primary contributor for the quarter. While oil prices increased during the period, driven by geopolitical tensions in the Middle East and disruptions to supply through the Strait of Hormuz, our focus remains on the company’s underlying operational execution across its diversified energy platform. As the fourth-largest major energy player in the world, the company operates across upstream, downstream, liquefied natural gas (LNG), and integrated power and renewable energy businesses. Within its upstream segment, TotalEnergies continues to deliver accretive growth, with new projects generating higher cash flow per barrel than its legacy portfolio, supporting both production growth and improving profitability. In the LNG segment, the company has started production in Angola, which will supply Europe and Asia with roughly two million tons of LNG per year, and has also signed an agreement with Glenfarne, the lead developer of the Alaska LNG project, to offtake two million tons of LNG annually for the next 20 years. We view LNG as a key structural driver of long-term growth, particularly given increasing demand for energy security in Asia and Europe. Lastly, within renewables, TotalEnergies and Masdar, an Abu Dhabi clean energy leader, formed a joint venture to accelerate renewable energy growth through onshore solar, wind and battery storage projects across Asia. In the U.S., the company has signed a long-term Power Purchase Agreement to provide 1 GW of solar capacity to power Google’s data centers in Texas for 15 years. These initiatives reflect the company’s strategy to build a more diversified and resilient energy platform over time. Overall, we believe TotalEnergies’ combination of disciplined capital allocation, low-cost operations and integrated business model positions it to generate attractive FREE cash flow across commodity cycles, with recent operational progress reinforcing its long-term investment case.

Recent Portfolio Activity

During the quarter, we invested in Techtronic Industries.

Techtronic Industries Co. Ltd.

Headquartered in Hong Kong, Techtronic Industries (“TTI”) is a global manufacturer of power tools, outdoor power equipment and related accessories. The company operates primarily through two flagship brands: Milwaukee, which serves professional tradespeople, and Ryobi, which targets the DIY and light professional market (including handymen and maintenance professionals whose needs fall between homeowners and full-time trades). Over the past decade, TTI has transformed itself into one of the leading players in the global power tool industry, driven by sustained innovation and disciplined brand investment.

Milwaukee has been the primary growth engine, expanding from approximately $450 million in sales in the early 2000s to roughly $10 billion today. The brand has gained meaningful share in professional trades through a focus on productivity, safety and battery-powered innovation. Ryobi remains a leading DIY platform, supported by a long-standing distribution relationship with Home Depot, TTI’s largest retail partner.

TTI continues to benefit from the long-term industry transition from corded, gas-powered and pneumatic tools toward battery-powered platforms. The company’s strategy of maintaining backward compatibility across battery generations has reinforced customer loyalty and created a durable installed base across both Milwaukee and Ryobi ecosystems.

High-Quality Business 

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

• Leading positions in professional and DIY power tools through the Milwaukee and Ryobi brands, supported by strong brand equity, deep engagement with professional tradespeople and a track record of consistent product innovation;
• A powerful battery ecosystem strategy, with over 110 million M18 and 65 million M12 batteries in circulation and backward and forward compatibility across generations, creating switching costs and repeat purchases across hundreds of compatible tools;
• Ongoing investment in research and development, enabling consistent product innovation, market share gains and expansion into adjacent product categories; and
• Deep retail partnerships, particularly with Home Depot, reinforced by dedicated in-store sales representation and merchandising support.

Attractive Valuation 

We believe shares are attractively valued relative to our estimate of intrinsic value. Our analysis reflects the growing contribution of the Milwaukee franchise, which now represents the majority of operating profit, and the benefits of continued mix shift toward professional products, as well as stabilization of underperforming segments. In addition, as recent investment spending normalizes, we expect FREE cash flow to increase to levels that we believe are not fully reflected in the current share price.

Compelling Catalysts

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

• Continued mix shift toward the higher-margin Milwaukee brand, which has grown from 18% of total sales in 2010 to approximately two-thirds today;
• Geographic expansion of the Milwaukee brand outside the United States, where market share remains below North American levels, and introduction of the Ryobi platform into additional markets such as Latin America and Australia;
• Expansion into adjacent professional categories, including personal protective equipment and modular tool storage systems, thereby increasing wallet share within the professional customer base; and
• Improvement in operating profitability through turnaround of underperforming segments and greater cost discipline.

Conclusion

The current investment environment presents a wide range of competing narratives. In such periods, the temptation to react to near-term developments can be significant. At Aristotle Capital, we remain focused on what we believe to be more analyzable and enduring: the long-term fundamentals of individual businesses. When market returns are driven by momentum or shorter-term dynamics, it can be difficult for investors to remain disciplined. We believe such environments create opportunities for patient investors as the gap between price and intrinsic value widens. While political and geopolitical uncertainty remains elevated, our focus is unchanged. We continue to study businesses and invest with a long-term perspective, as we believe fundamentals ultimately determine share price outcomes.