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

Markets Review

As the two sides worked toward peace, global economies continued to feel the negative impact of the war. Due to the inflationary shock from the conflict, the European Central Bank raised interest rates during the quarter; however, concerns about stagflation increased on news that real GDP growth in the eurozone had contracted versus the previous quarter. Meanwhile, the Bank of England and U.S. Federal Reserve kept rates steady, despite elevated inflation in both countries. In Asia, the Bank of Japan raised rates, and South Korea’s government passed a $17.7 billion emergency supplementary budget to offset rising oil prices.

Despite the fragile global economic backdrop, earnings in Europe and Asia remained robust, supported by continued demand tied to AI infrastructure and strength in select commodity-linked industries. Beneath the surface, market leadership reflected a more risk-on environment globally, with high-beta stocks generally outperforming low-beta stocks. Companies tied to the buildout of AI-related infrastructure, including semiconductors, memory, power equipment, and other data center suppliers, were among the strongest performers, while more defensive and lower-volatility areas generally lagged.

Performance and Attribution Summary

For the second quarter of 2026, Aristotle Capital’s International Equity ADR WM Composite posted a total return of 7.55% pure gross of fees (7.03% net of fees), underperforming the MSCI EAFE Index, which returned 10.82%, and the MSCI ACWI ex USA Index, which returned 14.49%. Please refer to the table below for detailed performance.

Performance (%)	2Q26	YTD	1 Year	3 Years	5 Years	10 Years	Since Inception*
International Equity ADR WM Composite (pure gross)	7.55	3.90	12.67	13.38	7.18	9.22	8.79
International Equity ADR WM Composite (net)	7.03	2.88	10.47	11.17	5.06	7.06	6.45
MSCI EAFE Index (net)	10.82	9.44	20.23	16.44	9.05	9.66	8.59
MSCI ACWI ex USA Index (net)	14.49	13.68	27.66	18.82	8.79	9.93	8.24

Pan Pacific International Holdings, the Japanese discount retailer, was the largest detractor during the period. Shares declined as investors weighed the company’s acquisition of Tokyo metropolitan supermarket chain Olympic Group, the potential upfront costs associated with its new Robin Hood format, and broader concerns about gross margin sustainability in a competitive retail environment. Management also announced leadership changes at Gelson’s, its California-based premium grocery subsidiary, as the business works to improve operating performance amid a more challenging consumer backdrop. Nevertheless, we believe Pan Pacific’s long-term investment case remains intact. The company continues to benefit from differentiated store formats, decentralized merchandising, strong value positioning, as well as management’s experience improving acquired retail assets. Same-store sales in the discount store business remain strong, while private-label expansion, UNY margin improvement, and new concepts such as Robin Hood and Rail-side Donki extend the company’s domestic growth runway. We remain confident that Pan Pacific’s distinctive retail culture and disciplined execution position it well for long-term growth.

Accenture, the global provider of IT consulting and technology services, was a primary detractor during the quarter. Shares declined as investors reacted to weaker bookings, a lower revenue outlook, continued pressure on discretionary IT spending, and disruptions tied to the conflict in the Middle East, while also debating whether generative AI could reduce demand for traditional consulting services. Despite these near-term headwinds, Accenture remains a premier enterprise transformation partner, with advantages rooted in scale, deep industry expertise, broad technology partnerships, and long-standing client relationships. Management continued to highlight growing demand for large-scale AI reinvention programs as clients move from experimentation to production, with AI increasingly embedded in broader managed services contracts. The company also expanded its capabilities through the acquisitions of Dragos, runZero, and NetRise, building a leading operational technology cybersecurity platform with more software- and platform-oriented revenue streams. In addition, Accenture Edge, supported by Microsoft and Avanade, extends the company’s reach into the underpenetrated mid-market. We believe these initiatives reinforce Accenture’s ability to adapt to technology shifts and sustain its long-term competitive position.

Fast Retailing, the Japanese multinational apparel retailer and owner of UNIQLO, was a leading contributor during the quarter. Shares rose sharply after the company reported another strong quarter and raised full-year revenue and profit guidance, as strength across UNIQLO’s global business more than offset headwinds from higher sourcing costs and softer inbound tourism in Japan. Results were supported by continued demand for year-round LifeWear products, successful flagship store execution, operating efficiency gains, and improving performance in Greater China—where the company’s shift toward more localized, independent store management appears to be gaining traction. The quarter also reinforced several aspects of our quality thesis. UNIQLO’s differentiated model, focused on functional, high-quality everyday apparel at attractive prices, continues to benefit from scale, disciplined SKU management, long-standing supplier partnerships, and strong brand equity. These advantages have allowed the company to generate attractive returns while expanding globally from a Japanese retailer into one of the world’s leading apparel platforms. The results also demonstrated progress against catalysts we have identified, including the China turnaround, further global expansion of UNIQLO (particularly in North America and Europe) and improving execution at GU. We were also encouraged by evidence that the company’s U.S. success is being driven not simply by store openings, but by deeper brand building, localized management, and investment in training and culture, which may support a longer runway for profitable growth.

Techtronic Industries, the Hong Kong-based manufacturer of power tools, was a primary contributor during the period. We initiated our investment in the first quarter of 2026, attracted to the company’s Milwaukee and Ryobi brands, culture of product innovation, and battery ecosystems that create loyalty and repeat purchases across hundreds of compatible tools. Recent results highlight the company’s progress, with Milwaukee driving revenue growth through deeper penetration of professional trades, new product introductions, and expansion into additional geographies, while Ryobi remains a leading DIY platform with opportunities to expand beyond its core markets. The company has also improved the quality of its earnings base by shifting further toward Milwaukee, exiting lower-return areas such as HART and rationalizing underperforming product lines. Importantly, the business is increasingly broader than residential repair and remodel demand. Milwaukee is becoming embedded in the workflows of mechanical, electrical, and plumbing contractors working on data centers, grid infrastructure, and other complex non-residential projects, where productivity, safety, and uptime are critical. This is a natural extension of Techtronic’s strategy: expand the Milwaukee ecosystem around the jobsite, then deepen customer loyalty through batteries, accessories, personal protective equipment, storage, and service support that can make the platform more valuable over time.

Recent Portfolio Activity

Buys	Sells
Magnum Ice Cream	Unilever

During the quarter, we sold our position in Unilever and invested in Magnum Ice Cream.

We first invested in Unilever, the global consumer staples company, in the second quarter of 2013. We have long been attracted to the company’s broad portfolio of leading personal care and food brands (such as Dove, Knorr, and Axe), global scale, significant emerging markets exposure, and strong position across everyday use categories. Over our more than decade-long holding period, Unilever strengthened and simplified its portfolio, divesting lower-growth food assets, improving efficiency, increasing focus behind its largest brands, and shifting the business toward faster-growing, higher-margin beauty, wellbeing, personal care, and home care categories. More recently, the separation of the ice cream business and continued reshaping of the food portfolio have further narrowed Unilever’s strategic focus. While we continue to view the remaining Unilever franchise as high quality, we believe the more compelling opportunity now resides in the independent ice cream business, where dedicated management and a category-specific strategy should provide a clearer path to value creation. We therefore elected to exit Unilever and redeploy the proceeds into Magnum Ice Cream, discussed in greater detail below.

The Magnum Ice Cream Company N.V.

Headquartered in Amsterdam, the Netherlands, Magnum Ice Cream is the world’s largest dedicated ice cream manufacturer. The company was formed following its separation from Unilever in 2025 and owns a portfolio of leading global, regional, and local brands, including Magnum, Ben & Jerry’s, Cornetto, Wall’s, Breyers, Klondike, Popsicle, Talenti, and Yasso. Collectively, these brands generate more than €8 billion in annual revenue, are sold across roughly 80 countries, and span a wide range of price points, formats, and consumption occasions.

Magnum sells products through both at-home and away-from-home channels. The at-home business includes pints, tubs, and multipacks sold through grocery, club, and other retail stores, while the away-from-home business consists primarily of single-serve products sold through a global network of approximately three million freezer cabinets. Supporting this distribution model is one of the most extensive cold-chain networks in the consumer staples industry, including more than 30 manufacturing facilities, 200 warehouses, and over 2,000 distributors. Following its separation from Unilever, Magnum is now focused exclusively on frozen desserts, allowing management to optimize sales, marketing, innovation, and supply chain decisions around the unique dynamics of the ice cream category.

High-Quality Business 

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

• The global market leader in ice cream, with approximately 21% market share and ownership of four of the five largest ice cream brands worldwide;
• A portfolio of iconic brands that benefit from strong consumer recognition, pricing power and customer loyalty;
• A premium-oriented portfolio, with approximately 80% of revenue generated from premium products and pricing that is roughly 2.5x higher per kilogram than private label competitors;
• A difficult-to-replicate global cold-chain distribution network, including three million freezer cabinets that improve product availability and support impulse purchases in the away-from-home channel; and
• Strong returns on invested capital, supported by leading market positions, premium products, and significant scale advantages across procurement, manufacturing, and distribution.

Attractive Valuation 

Historically, the ice cream business operated within Unilever’s broader portfolio, where it lacked a dedicated sales force and was supported by a supply chain optimized for a diverse mix of consumer products rather than the unique requirements of frozen desserts. This contributed to lower factory utilization, underinvestment in certain markets, and suboptimal retailer negotiations. In addition, one-time separation costs and transitional service agreements have weighed on current profitability following the company’s separation from Unilever.

At approximately 11x our estimate of normalized earnings, we believe shares do not fully reflect Magnum’s leading global market position, premium brand portfolio, and ability to generate attractive returns on invested capital.

Compelling Catalysts

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

• Expansion of its global freezer cabinet fleet, improving product availability, and supporting market share gains in the attractive away-from-home channel;
• Continued premiumization of its portfolio through innovation, new product formats, and increased penetration of higher-value brands such as Magnum, Ben & Jerry’s, and Yasso;
• Expansion into new formats, including Yasso handhelds, Ben & Jerry’s handhelds, and Magnum BonBons, which should increase consumption occasions and support mix improvement;
• Supply chain optimization initiatives, including a transition toward more localized manufacturing and distribution, which should improve operating margins and capacity utilization;
• Increased focus and investment following its separation from Unilever, including a dedicated sales force, category-specific retailer negotiations, and a commercial strategy designed specifically for frozen desserts; and
• Market share recovery opportunities in key geographies, including India, where Magnum acquired a majority stake in Kwality Wall’s. The business had previously lost meaningful share due to poor management, insufficient manufacturing and distribution investment, pricing missteps, and the removal of dairy from certain products.

Conclusion

As we look ahead, the global backdrop remains complex. Geopolitical developments, central bank decisions and changes in investor risk appetite can all influence returns over shorter periods, but these factors are difficult to forecast with consistency. Rather than position the portfolio around macro outcomes, we continue to focus on the businesses we own and the actions management teams are taking to increase value over time.

Our investment process centers on the three pillars of Quality, Valuation and Catalysts. We seek companies with strong competitive positions, capable management teams, financial resilience and identifiable opportunities to improve profitability and FREE cash flow. While markets can move quickly from one theme to the next, we believe owning high-quality businesses at attractive valuations remains the best way to create value for clients over the long term.

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

Markets Review

As the two sides worked toward peace, global economies continued to feel the negative impact of the war. Due to the inflationary shock from the conflict, the European Central Bank raised interest rates during the quarter; however, concerns about stagflation increased on news that real GDP growth in the eurozone had contracted versus the previous quarter. Meanwhile, the Bank of England and U.S. Federal Reserve kept rates steady, despite elevated inflation in both countries. In Asia, the Bank of Japan raised rates, and South Korea’s government passed a $17.7 billion emergency supplementary budget to offset rising oil prices.

Despite the fragile global economic backdrop, earnings in Europe and Asia remained robust, supported by continued demand tied to AI infrastructure and strength in select commodity-linked industries. Beneath the surface, market leadership reflected a more risk-on environment globally, with high-beta stocks generally outperforming low-beta stocks. Companies tied to the buildout of AI-related infrastructure, including semiconductors, memory, power equipment, and other data center suppliers, were among the strongest performers, while more defensive and lower-volatility areas generally lagged.

Performance and Attribution Summary

For the second quarter of 2026, Aristotle Capital’s Global Equity WM Composite posted a total return of 6.92% pure gross of fees (6.40% net of fees), underperforming the MSCI ACWI Index, which returned 14.93%, and the MSCI World Index, which returned 13.76%. Please refer to the table below for detailed performance.

Performance (%)	2Q26	YTD	1 Year	3 Years	5 Years	10 Years	Since Inception*
Global Equity WM Composite (pure gross)	6.92	3.99	13.22	12.14	6.96	11.31	10.38
Global Equity WM Composite (net)	6.40	2.97	11.01	9.95	4.84	9.10	8.19
MSCI ACWI Index (net)	14.93	11.25	23.67	19.70	10.98	12.78	10.68
MSCI World Index (net)	13.76	9.69	21.34	19.24	11.47	13.14	11.37

Munich Re, the world’s largest reinsurance company, was a detractor during the quarter. Although the company reported strong operating results, supported by lower-than-expected catastrophe losses and disciplined underwriting, shares declined as investors focused on continued pricing pressure in portions of the global reinsurance market and weaker investment results driven by capital market volatility. We view these pressures as part of the normal insurance cycle rather than a change in the quality of the franchise. Munich Re provides balance sheet capacity and risk expertise to insurers around the world across property and casualty, life and health, cyber, and other complex risks—areas where scale, data, underwriting judgment, and long-standing client relationships are critical. The company’s diversified business mix, including its growing primary insurance operations through ERGO, can help reduce reliance on any single product line or geography, while its strong capital position provides flexibility to absorb catastrophe losses, support clients when capacity is most valuable, and return capital to shareholders. In addition, management continues to differentiate Munich Re through investments in technology, data, and R&D, which should improve underwriting, claims handling, and efficiency over time. We believe these advantages, together with opportunities for share gains in specialty lines such as cyber and in underpenetrated markets such as Asia, position the company to generate attractive returns across insurance cycles.

Martin Marietta, a leading supplier of construction aggregates and building materials, was a detractor during the quarter. Shares modestly declined as investors remained focused on the pace of recovery in residential and private nonresidential construction activity, despite continued strength in infrastructure, energy, and data center-related demand. While the stock underperformed during the period, it remains a strong performer over the past 12 months. We continue to believe Martin Marietta’s irreplaceable aggregates reserves, disciplined pricing strategy, and strategically located asset base position the company to benefit from long-term infrastructure investment and population growth while generating attractive FREE cash flow over time. In addition, the announced acquisition of Lhoist North America further broadens the company’s portfolio into attractive industrial markets and, if executed successfully, should enhance its long-term earnings power and cash flow generation.

Qualcomm, a leading semiconductor and communications technology company, was among the largest contributors for the quarter. Shares recovered as management indicated that the inventory adjustments and production constraints resulting from higher memory costs were progressing largely as expected and that handset revenues from Chinese customers were expected to reach a bottom. As we noted last quarter, we believed these headwinds to be cyclical rather than structural and did not alter our long-term investment thesis. The company also continued to make progress on its long-term strategy of evolving from a handset-centric company into a broader provider of connected computing technologies. Automotive revenue reached another record high, while Internet of Things (IoT) and newer businesses such as AI-enabled PCs, industrial applications, and data center computing continue to represent a growing portion of the company and remain central to its long-term diversification strategy. We believe Qualcomm’s technologies will continue to benefit as connectivity expands across devices and AI workloads increasingly extend from the cloud to the edge, supporting Qualcomm’s ability to generate strong levels of FREE cash flow in the long run.

Jazz Pharmaceuticals, a biopharmaceutical company focused on neuroscience and oncology, was among the largest contributors during the quarter. Shares appreciated as the company delivered strong commercial execution across its portfolio, reinforcing the durability of its neuroscience franchise and the growing contribution from oncology. First-quarter revenue increased by 19% year over year, led by Xywav, Epidiolex, Zepzelca, and Modeyso, while reaffirming its full-year financial guidance. Results also highlighted several catalysts we have previously identified, including the expansion of Zepzelca into front-line maintenance treatment for extensive-stage small cell lung cancer, ongoing growth of Epidiolex in rare epilepsies, and continued uptake of Xywav for narcolepsy and idiopathic hypersomnia (IH), where it remains the only FDA-approved therapy. Management also continued preparations for the launch of Ziihera in a significantly larger cancer indication, which has the potential to meaningfully expand the company’s oncology business.  We continue to believe Jazz’s portfolio of differentiated therapies, expanding oncology franchise, and disciplined approach to business development position the company to create long-term value. The company has successfully evolved from a business primarily focused on sleep disorders into a more diversified rare disease and oncology company, supported by strong cash flow generation and continued investment in both its pipeline and strategic acquisitions.

Recent Portfolio Activity

Buys	Sells
Techtronic Industries	Danaher
Wal-Mart de Mexico	Dolby Laboratories
	Tokyo Century

During the quarter, we sold our positions in Danaher, Dolby Laboratories, and Tokyo Century and purchased Techtronic Industries and Wal-Mart de Mexico.

We first invested in Danaher, a company focused on biotechnology, life sciences and diagnostics, in the first quarter of 2016, attracted by its disciplined capital allocation, differentiated operating culture, and consistent FREE cash flow generation. The business is distinguished by a portfolio of market-leading franchises and a high mix of recurring consumables revenue tied to a large installed base. Its differentiated operating culture, anchored by the Danaher Business System (DBS), has historically enabled the company to be a highly effective acquirer, consistently integrating new businesses, expanding margins, and driving strong FREE cash flow generation. Over our decade-long holding period, Danaher successfully transformed itself from a diversified industrial company into a more focused healthcare business. This evolution included the spinoffs of Fortive, Envista, and Veralto, as well as the acquisition and integration of key assets such as Pall, Cepheid, and Cytiva. The company also increased the contribution from recurring revenue and workflow-based solutions embedded in customer operations, which contributed to the durability and predictability of the business.

More recently, as Danaher has shifted further into more complex, innovation-driven end markets, the application of DBS appears to be less differentiated than it was in Danaher’s traditional manufacturing-oriented businesses. Success in these new end markets is increasingly driven by scientific innovation, faster product cycles, and more specialized customer requirements. At the same time, increased scale and a more centralized organizational structure appear to be limiting flexibility at the business unit level, reducing the speed and effectiveness with which opportunities can be pursued. While we continue to view Danaher as a high-quality business, we believe much of our original investment thesis has now been realized, with fewer company-specific catalysts ahead. Accordingly, we elected to exit the position and redeploy the proceeds into what we view as more attractive opportunities.

We first invested in Dolby Laboratories, the creator and licensor of audio and imaging technologies, in the first quarter of 2022. We were attracted to Dolby’s asset-light licensing model, trusted brand, strong intellectual property portfolio, and deep relationships with both content creators and device makers. We believed Dolby would benefit from the growing demand for more immersive entertainment experiences, allowing the company to extend its technology into new use cases. During our ownership, Dolby executed well in several respects: increasing adoption across content and devices, expanding into newer end markets such as autos and gaming, adding to its patent portfolio, and maintaining the high-margin, cash-generative financial profile that first attracted us. However, adoption has not translated into the level of earnings growth we initially expected. As a result, while we continue to view Dolby as a high-quality franchise and will monitor its monetization efforts, we believe the remaining catalysts lack the visibility and timing we require, and exited the position.

We first invested in Tokyo Century, the Japan-based provider of leasing and specialty finance solutions, in the third quarter of 2024. The company benefits from a diversified platform across equipment leasing, specialty finance, automobility, and global financing, as well as its strategic relationships with partners such as NTT, Itochu, and CSI Leasing. We also saw attractive catalysts in aviation leasing through Aviation Capital Group, IT leasing through CSI Leasing, and data center-related investments. During our ownership, Tokyo Century continued to benefit from favorable aircraft leasing conditions, including tight aircraft supply, rising lease rates, and improved aircraft values, while its broader leasing franchise remained supported by scale, a strong balance sheet, and diversified revenue streams. However, as we reassessed the Global Equity portfolio, we concluded that a more direct investment in Itochu, which owns roughly 30% of Tokyo Century, together with a new investment in Techtronic, offered a more attractive use of capital. Given this overlap and the clearer catalysts we see in these opportunities, we elected to exit Tokyo Century and redeploy the proceeds.

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.

Wal-Mart de Mexico SAB de CV

Founded in 1952 and headquartered in Mexico City, Wal-Mart de Mexico (“Walmex”) is the largest retailer in Mexico and Central America and a key subsidiary of Walmart Inc., which retains a majority ownership stake. Walmex operates more than 3,800 stores across multiple formats—Bodega Aurrerá (discount stores and the company’s fastest-growing format), Walmart Supercenter (big-box retail), Sam’s Club (membership warehouse), Walmart Express (small supermarkets), and other discount outlets—giving it a uniquely diversified presence across the consumer landscape.

This multi-format approach serves a wide spectrum of customers and shopping occasions—from everyday essentials and large family baskets to convenience and premium purchases. Bodega Aurrerá, for example, has become a household name across Mexico and now represents roughly half of the company’s stores, while Sam’s Club caters to membership customers seeking bulk purchases and higher-ticket items. Together, these formats provide Walmex broad market coverage, geographic reach, and strong brand loyalty across urban centers, suburban communities, and regional towns.

In recent years, the company has significantly expanded its omnichannel ecosystem, investing in e-commerce, logistics, and digital services to enhance convenience and deepen customer engagement. E-commerce is ~8% of total sales, supported by strong growth in online grocery and third-party marketplace offerings. Complementary platforms, such as Cashi (digital payments), BAIT (mobile telecom), and Walmart Connect (digital advertising), extend Walmex’s reach into financial and digital services, strengthening customer ties and building new revenue streams.

High-Quality Business

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

• Dominant scale advantages with over 3,000 stores in Mexico, making it the clear market leader in food and general merchandise retail;
• Diversified and resilient revenue base, with a meaningful percentage of sales from grocery—providing recurring traffic and stable cash flow—complemented by general merchandise, fuel, pharmacy, and membership-based services;
• Strong returns on invested capital (~18%), supported by consistent execution and capital discipline; and
• Support from Walmart Inc., which provides access to global best practices, digital tools, and procurement efficiencies.

Attractive Valuation

We believe Walmex is attractively valued relative to its long-term normalized earnings power. In our view, the market underappreciates the company’s ability to grow revenue through ongoing store expansion and strengthen margins and FREE cash flow generation through efficiency gains, scale benefits and continued growth in higher-margin channels, such as private label and e-commerce.

Compelling Catalysts

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

• Expansion of private label penetration (from mid-teens to mid-20s), which should improve profitability and customer loyalty;
• Further development of the e-commerce platform, with Walmex aiming to become a one-stop shop by combining online grocery and a third-party marketplace, supported by digital tools adapted from Walmart U.S.;
• Disciplined store expansion, with current plans to add approximately 1,500 new stores across Mexico and Central America over the next five years, extending reach and scale advantages; and
• Leadership continuity, as newly appointed interim CEO Cristian Barrientos, a veteran Walmart executive with more than 25 years of experience, provides operational stability and maintains focus on profitable growth during the leadership transition.

Conclusion

As we look ahead, the global backdrop remains complex. Geopolitical developments, central bank decisions, and changes in investor risk appetite can all influence returns over shorter periods, but these factors are difficult to forecast with consistency. Rather than position the portfolio around macro outcomes, we continue to focus on the businesses we own and the actions management teams are taking to increase value over time.

Our investment process centers on the three pillars of Quality, Valuation, and Catalysts. We seek companies with strong competitive positions, capable management teams, financial resilience, and identifiable opportunities to improve profitability and FREE cash flow. While markets can move quickly from one theme to the next, we believe owning high-quality businesses at attractive valuations remains the best way to create value for clients over the long term.

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

Markets Review

As the two sides worked toward peace, global economies continued to feel the negative impact of the war. Due to the inflationary shock from the conflict, the European Central Bank raised interest rates during the quarter; however, concerns about stagflation increased on news that real GDP growth in the eurozone had contracted versus the previous quarter. Meanwhile, the Bank of England and U.S. Federal Reserve kept rates steady, despite elevated inflation in both countries. In Asia, the Bank of Japan raised rates, and South Korea’s government passed a $17.7 billion emergency supplementary budget to offset rising oil prices.

Despite the fragile global economic backdrop, earnings in Europe and Asia remained robust, supported by continued demand tied to AI infrastructure and strength in select commodity-linked industries. Beneath the surface, market leadership reflected a more risk-on environment globally, with high-beta stocks generally outperforming low-beta stocks. Companies tied to the buildout of AI-related infrastructure, including semiconductors, memory, power equipment, and other data center suppliers, were among the strongest performers, while more defensive and lower-volatility areas generally lagged.

Performance and Attribution Summary

For the second quarter of 2026, Aristotle Capital’s International Equity ADR Composite posted a total return of 7.01% gross of fees (6.88% net of fees), underperforming the MSCI EAFE Index, which returned 10.82%, and the MSCI ACWI ex USA Index, which returned 14.49%. Please refer to the table below for detailed performance.

Performance (%)	2Q26	YTD	1 Year	3 Years	5 Years	10 Years	Since Inception*
International Equity ADR Composite (gross)	7.01	3.30	11.68	13.19	7.09	9.15	7.56
International Equity ADR Composite (net)	6.88	3.04	11.13	12.63	6.56	8.61	7.02
MSCI EAFE Index (net)	10.82	9.44	20.23	16.44	9.05	9.66	7.51
MSCI ACWI ex USA Index (net)	14.49	13.68	27.66	18.82	8.79	9.93	7.42

Pan Pacific International Holdings, the Japanese discount retailer, was the largest detractor during the period. Shares declined as investors weighed the company’s acquisition of Tokyo metropolitan supermarket chain Olympic Group, the potential upfront costs associated with its new Robin Hood format, and broader concerns about gross margin sustainability in a competitive retail environment. Management also announced leadership changes at Gelson’s, its California-based premium grocery subsidiary, as the business works to improve operating performance amid a more challenging consumer backdrop. Nevertheless, we believe Pan Pacific’s long-term investment case remains intact. The company continues to benefit from differentiated store formats, decentralized merchandising, strong value positioning, as well as management’s experience improving acquired retail assets. Same-store sales in the discount store business remain strong, while private-label expansion, UNY margin improvement, and new concepts such as Robin Hood and Rail-side Donki extend the company’s domestic growth runway. We remain confident that Pan Pacific’s distinctive retail culture and disciplined execution position it well for long-term growth.

Accenture, the global provider of IT consulting and technology services, was a primary detractor during the quarter. Shares declined as investors reacted to weaker bookings, a lower revenue outlook, continued pressure on discretionary IT spending, and disruptions tied to the conflict in the Middle East, while also debating whether generative AI could reduce demand for traditional consulting services. Despite these near-term headwinds, Accenture remains a premier enterprise transformation partner, with advantages rooted in scale, deep industry expertise, broad technology partnerships, and long-standing client relationships. Management continued to highlight growing demand for large-scale AI reinvention programs as clients move from experimentation to production, with AI increasingly embedded in broader managed services contracts. The company also expanded its capabilities through the acquisitions of Dragos, runZero, and NetRise, building a leading operational technology cybersecurity platform with more software- and platform-oriented revenue streams. In addition, Accenture Edge, supported by Microsoft and Avanade, extends the company’s reach into the underpenetrated mid-market. We believe these initiatives reinforce Accenture’s ability to adapt to technology shifts and sustain its long-term competitive position.

Fast Retailing, the Japanese multinational apparel retailer and owner of UNIQLO, was a leading contributor during the quarter. Shares rose sharply after the company reported another strong quarter and raised full-year revenue and profit guidance, as strength across UNIQLO’s global business more than offset headwinds from higher sourcing costs and softer inbound tourism in Japan. Results were supported by continued demand for year-round LifeWear products, successful flagship store execution, operating efficiency gains, and improving performance in Greater China—where the company’s shift toward more localized, independent store management appears to be gaining traction. The quarter also reinforced several aspects of our quality thesis. UNIQLO’s differentiated model, focused on functional, high-quality everyday apparel at attractive prices, continues to benefit from scale, disciplined SKU management, long-standing supplier partnerships, and strong brand equity. These advantages have allowed the company to generate attractive returns while expanding globally from a Japanese retailer into one of the world’s leading apparel platforms. The results also demonstrated progress against catalysts we have identified, including the China turnaround, further global expansion of UNIQLO (particularly in North America and Europe) and improving execution at GU. We were also encouraged by evidence that the company’s U.S. success is being driven not simply by store openings, but by deeper brand building, localized management, and investment in training and culture, which may support a longer runway for profitable growth.

Techtronic Industries, the Hong Kong-based manufacturer of power tools, was a primary contributor during the period. We initiated our investment in the first quarter of 2026, attracted to the company’s Milwaukee and Ryobi brands, culture of product innovation, and battery ecosystems that create loyalty and repeat purchases across hundreds of compatible tools. Recent results highlight the company’s progress, with Milwaukee driving revenue growth through deeper penetration of professional trades, new product introductions, and expansion into additional geographies, while Ryobi remains a leading DIY platform with opportunities to expand beyond its core markets. The company has also improved the quality of its earnings base by shifting further toward Milwaukee, exiting lower-return areas such as HART and rationalizing underperforming product lines. Importantly, the business is increasingly broader than residential repair and remodel demand. Milwaukee is becoming embedded in the workflows of mechanical, electrical, and plumbing contractors working on data centers, grid infrastructure, and other complex non-residential projects, where productivity, safety, and uptime are critical. This is a natural extension of Techtronic’s strategy: expand the Milwaukee ecosystem around the jobsite, then deepen customer loyalty through batteries, accessories, personal protective equipment, storage, and service support that can make the platform more valuable over time.

Recent Portfolio Activity

Buys	Sells
Magnum Ice Cream	Unilever

During the quarter, we sold our position in Unilever and invested in Magnum Ice Cream.

We first invested in Unilever, the global consumer staples company, in the second quarter of 2013. We have long been attracted to the company’s broad portfolio of leading personal care and food brands (such as Dove, Knorr, and Axe), global scale, significant emerging markets exposure, and strong position across everyday use categories. Over our more than decade-long holding period, Unilever strengthened and simplified its portfolio, divesting lower-growth food assets, improving efficiency, increasing focus behind its largest brands, and shifting the business toward faster-growing, higher-margin beauty, wellbeing, personal care, and home care categories. More recently, the separation of the ice cream business and continued reshaping of the food portfolio have further narrowed Unilever’s strategic focus. While we continue to view the remaining Unilever franchise as high quality, we believe the more compelling opportunity now resides in the independent ice cream business, where dedicated management and a category-specific strategy should provide a clearer path to value creation. We therefore elected to exit Unilever and redeploy the proceeds into Magnum Ice Cream, discussed in greater detail below.

The Magnum Ice Cream Company N.V.

Headquartered in Amsterdam, the Netherlands, Magnum Ice Cream is the world’s largest dedicated ice cream manufacturer. The company was formed following its separation from Unilever in 2025 and owns a portfolio of leading global, regional, and local brands, including Magnum, Ben & Jerry’s, Cornetto, Wall’s, Breyers, Klondike, Popsicle, Talenti, and Yasso. Collectively, these brands generate more than €8 billion in annual revenue, are sold across roughly 80 countries, and span a wide range of price points, formats, and consumption occasions.

Magnum sells products through both at-home and away-from-home channels. The at-home business includes pints, tubs, and multipacks sold through grocery, club, and other retail stores, while the away-from-home business consists primarily of single-serve products sold through a global network of approximately three million freezer cabinets. Supporting this distribution model is one of the most extensive cold-chain networks in the consumer staples industry, including more than 30 manufacturing facilities, 200 warehouses, and over 2,000 distributors. Following its separation from Unilever, Magnum is now focused exclusively on frozen desserts, allowing management to optimize sales, marketing, innovation, and supply chain decisions around the unique dynamics of the ice cream category.

High-Quality Business 

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

• The global market leader in ice cream, with approximately 21% market share and ownership of four of the five largest ice cream brands worldwide;
• A portfolio of iconic brands that benefit from strong consumer recognition, pricing power and customer loyalty;
• A premium-oriented portfolio, with approximately 80% of revenue generated from premium products and pricing that is roughly 2.5x higher per kilogram than private label competitors;
• A difficult-to-replicate global cold-chain distribution network, including three million freezer cabinets that improve product availability and support impulse purchases in the away-from-home channel; and
• Strong returns on invested capital, supported by leading market positions, premium products, and significant scale advantages across procurement, manufacturing, and distribution.

Attractive Valuation 

Historically, the ice cream business operated within Unilever’s broader portfolio, where it lacked a dedicated sales force and was supported by a supply chain optimized for a diverse mix of consumer products rather than the unique requirements of frozen desserts. This contributed to lower factory utilization, underinvestment in certain markets, and suboptimal retailer negotiations. In addition, one-time separation costs and transitional service agreements have weighed on current profitability following the company’s separation from Unilever.

At approximately 11x our estimate of normalized earnings, we believe shares do not fully reflect Magnum’s leading global market position, premium brand portfolio, and ability to generate attractive returns on invested capital.

Compelling Catalysts

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

• Expansion of its global freezer cabinet fleet, improving product availability, and supporting market share gains in the attractive away-from-home channel;
• Continued premiumization of its portfolio through innovation, new product formats, and increased penetration of higher-value brands such as Magnum, Ben & Jerry’s, and Yasso;
• Expansion into new formats, including Yasso handhelds, Ben & Jerry’s handhelds, and Magnum BonBons, which should increase consumption occasions and support mix improvement;
• Supply chain optimization initiatives, including a transition toward more localized manufacturing and distribution, which should improve operating margins and capacity utilization;
• Increased focus and investment following its separation from Unilever, including a dedicated sales force, category-specific retailer negotiations, and a commercial strategy designed specifically for frozen desserts; and
• Market share recovery opportunities in key geographies, including India, where Magnum acquired a majority stake in Kwality Wall’s. The business had previously lost meaningful share due to poor management, insufficient manufacturing and distribution investment, pricing missteps, and the removal of dairy from certain products..

Conclusion

As we look ahead, the global backdrop remains complex. Geopolitical developments, central bank decisions and changes in investor risk appetite can all influence returns over shorter periods, but these factors are difficult to forecast with consistency. Rather than position the portfolio around macro outcomes, we continue to focus on the businesses we own and the actions management teams are taking to increase value over time.

Our investment process centers on the three pillars of Quality, Valuation and Catalysts. We seek companies with strong competitive positions, capable management teams, financial resilience and identifiable opportunities to improve profitability and FREE cash flow. While markets can move quickly from one theme to the next, we believe owning high-quality businesses at attractive valuations remains the best way to create value for clients over the long term.

Recent advances in diagnostics, therapies, and data availability have resulted in personalized health moving from an emerging theme to a core driver of health care.

Personalized Health’s Growing Share of Approvals

Note: Personalized health has remained a durable share of new drug innovation for more than a decade, accounting for at least one-quarter of new drug approvals in each year since 2015 and more than one-third in most recent years.
Source: Personalized Medicine at FDA: The Scope & Significance of Progress in 2025. Companion Diagnostics | FDA. Shield -P230009 | FDA.

Recent headwinds to Value Equity have reflected multiple expansion within a narrowly led benchmark, while portfolio fundamentals remain strong. We believe this creates a compelling opportunity.

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

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

Markets Review

As the two sides worked toward peace, global economies continued to feel the negative impact of the war. Due to the inflationary shock from the conflict, the European Central Bank raised interest rates during the quarter; however, concerns about stagflation increased on news that real GDP growth in the eurozone had contracted versus the previous quarter. Meanwhile, the Bank of England and U.S. Federal Reserve kept rates steady, despite elevated inflation in both countries. In Asia, the Bank of Japan raised rates, and South Korea’s government passed a $17.7 billion emergency supplementary budget to offset rising oil prices.

Despite the fragile global economic backdrop, earnings in Europe and Asia remained robust, supported by continued demand tied to AI infrastructure and strength in select commodity-linked industries. Beneath the surface, market leadership reflected a more risk-on environment globally, with high-beta stocks generally outperforming low-beta stocks. Companies tied to the buildout of AI-related infrastructure, including semiconductors, memory, power equipment, and other data center suppliers, were among the strongest performers, while more defensive and lower-volatility areas generally lagged.

Performance and Attribution Summary

For the second quarter of 2026, Aristotle Capital’s Global Equity Composite posted a total return of 9.07% gross of fees (8.94% net of fees), underperforming the MSCI ACWI Index, which returned 14.93%, and the MSCI World Index, which returned 13.76%. Please refer to the table below for detailed performance.

Performance (%)	2Q26	YTD	1 Year	3 Years	5 Years	10 Years	Since Inception*
Global Equity Composite (gross)	9.07	5.96	16.01	12.71	7.13	11.44	10.36
Global Equity Composite (net)	8.94	5.70	15.44	12.15	6.60	10.89	9.81
MSCI ACWI Index (net)	14.93	11.25	23.67	19.70	10.98	12.78	10.46
MSCI World Index (net)	13.76	9.69	21.34	19.24	11.47	13.14	11.15

Munich Re, the world’s largest reinsurance company, was a detractor during the quarter. Although the company reported strong operating results, supported by lower-than-expected catastrophe losses and disciplined underwriting, shares declined as investors focused on continued pricing pressure in portions of the global reinsurance market and weaker investment results driven by capital market volatility. We view these pressures as part of the normal insurance cycle rather than a change in the quality of the franchise. Munich Re provides balance sheet capacity and risk expertise to insurers around the world across property and casualty, life and health, cyber, and other complex risks—areas where scale, data, underwriting judgment, and long-standing client relationships are critical. The company’s diversified business mix, including its growing primary insurance operations through ERGO, can help reduce reliance on any single product line or geography, while its strong capital position provides flexibility to absorb catastrophe losses, support clients when capacity is most valuable, and return capital to shareholders. In addition, management continues to differentiate Munich Re through investments in technology, data, and R&D, which should improve underwriting, claims handling, and efficiency over time. We believe these advantages, together with opportunities for share gains in specialty lines such as cyber and in underpenetrated markets such as Asia, position the company to generate attractive returns across insurance cycles.

Martin Marietta, a leading supplier of construction aggregates and building materials, was a detractor during the quarter. Shares modestly declined as investors remained focused on the pace of recovery in residential and private nonresidential construction activity, despite continued strength in infrastructure, energy, and data center-related demand. While the stock underperformed during the period, it remains a strong performer over the past 12 months. We continue to believe Martin Marietta’s irreplaceable aggregates reserves, disciplined pricing strategy, and strategically located asset base position the company to benefit from long-term infrastructure investment and population growth while generating attractive FREE cash flow over time. In addition, the announced acquisition of Lhoist North America further broadens the company’s portfolio into attractive industrial markets and, if executed successfully, should enhance its long-term earnings power and cash flow generation.

Samsung Electronics, the South Korean technology conglomerate, was the largest contributor. Shares advanced as memory pricing continued to ramp sharply, driven by tight supply and accelerating demand from data centers and AI infrastructure. While Samsung is often viewed through the lens of smartphones and consumer electronics, the company’s earnings power is increasingly tied to memory, particularly DRAM, where Samsung remains one of the global leaders and where we have long identified memory and smartphones as the two core profit drivers. Importantly, the current strength in the share price seems to reflect more than simply higher spot pricing. Samsung is shifting its portfolio toward higher-value products such as HBM4, server DDR5 and enterprise SSDs, while longer-term supply agreements should provide better visibility through the cycle. After trailing peers in earlier generations of high-bandwidth memory, the company has improved its competitive position, supported by renewed investment focus, DRAM line conversion and HBM4 progress. Beyond memory, Samsung continues to benefit from its scale and manufacturing expertise across displays, image sensors, smartphones, consumer electronics, and custom semiconductor manufacturing. We remain mindful of memory cyclicality, Chinese competition, and the capital intensity required to remain at the leading edge. However, Samsung’s improving product mix, disciplined capacity allocation, and broader component opportunities should support higher normalized earnings and FREE cash flow over our investment horizon.

Qualcomm, a leading semiconductor and communications technology company, was among the largest contributors for the quarter. Shares recovered as management indicated that the inventory adjustments and production constraints resulting from higher memory costs were progressing largely as expected and that handset revenues from Chinese customers were expected to reach a bottom. As we noted last quarter, we believed these headwinds to be cyclical rather than structural and did not alter our long-term investment thesis. The company also continued to make progress on its long-term strategy of evolving from a handset-centric company into a broader provider of connected computing technologies. Automotive revenue reached another record high, while Internet of Things (IoT) and newer businesses such as AI-enabled PCs, industrial applications, and data center computing continue to represent a growing portion of the company and remain central to its long-term diversification strategy. We believe Qualcomm’s technologies will continue to benefit as connectivity expands across devices and AI workloads increasingly extend from the cloud to the edge, supporting Qualcomm’s ability to generate strong levels of FREE cash flow in the long run.

Recent Portfolio Activity

Buys	Sells
Techtronic Industries	Danaher
Wal-Mart de Mexico	Dolby Laboratories
	Tokyo Century

During the quarter, we sold our positions in Danaher, Dolby Laboratories, and Tokyo Century and purchased Techtronic Industries and Wal-Mart de Mexico.

We first invested in Danaher, a company focused on biotechnology, life sciences and diagnostics, in the first quarter of 2016, attracted by its disciplined capital allocation, differentiated operating culture, and consistent FREE cash flow generation. The business is distinguished by a portfolio of market-leading franchises and a high mix of recurring consumables revenue tied to a large installed base. Its differentiated operating culture, anchored by the Danaher Business System (DBS), has historically enabled the company to be a highly effective acquirer, consistently integrating new businesses, expanding margins, and driving strong FREE cash flow generation. Over our decade-long holding period, Danaher successfully transformed itself from a diversified industrial company into a more focused healthcare business. This evolution included the spinoffs of Fortive, Envista, and Veralto, as well as the acquisition and integration of key assets such as Pall, Cepheid, and Cytiva. The company also increased the contribution from recurring revenue and workflow-based solutions embedded in customer operations, which contributed to the durability and predictability of the business.

More recently, as Danaher has shifted further into more complex, innovation-driven end markets, the application of DBS appears to be less differentiated than it was in Danaher’s traditional manufacturing-oriented businesses. Success in these new end markets is increasingly driven by scientific innovation, faster product cycles, and more specialized customer requirements. At the same time, increased scale and a more centralized organizational structure appear to be limiting flexibility at the business unit level, reducing the speed and effectiveness with which opportunities can be pursued. While we continue to view Danaher as a high-quality business, we believe much of our original investment thesis has now been realized, with fewer company-specific catalysts ahead. Accordingly, we elected to exit the position and redeploy the proceeds into what we view as more attractive opportunities.

We first invested in Dolby Laboratories, the creator and licensor of audio and imaging technologies, in the first quarter of 2022. We were attracted to Dolby’s asset-light licensing model, trusted brand, strong intellectual property portfolio, and deep relationships with both content creators and device makers. We believed Dolby would benefit from the growing demand for more immersive entertainment experiences, allowing the company to extend its technology into new use cases. During our ownership, Dolby executed well in several respects: increasing adoption across content and devices, expanding into newer end markets such as autos and gaming, adding to its patent portfolio, and maintaining the high-margin, cash-generative financial profile that first attracted us. However, adoption has not translated into the level of earnings growth we initially expected. As a result, while we continue to view Dolby as a high-quality franchise and will monitor its monetization efforts, we believe the remaining catalysts lack the visibility and timing we require, and exited the position.

We first invested in Tokyo Century, the Japan-based provider of leasing and specialty finance solutions, in the third quarter of 2024. The company benefits from a diversified platform across equipment leasing, specialty finance, automobility, and global financing, as well as its strategic relationships with partners such as NTT, Itochu, and CSI Leasing. We also saw attractive catalysts in aviation leasing through Aviation Capital Group, IT leasing through CSI Leasing, and data center-related investments. During our ownership, Tokyo Century continued to benefit from favorable aircraft leasing conditions, including tight aircraft supply, rising lease rates, and improved aircraft values, while its broader leasing franchise remained supported by scale, a strong balance sheet, and diversified revenue streams. However, as we reassessed the Global Equity portfolio, we concluded that a more direct investment in Itochu, which owns roughly 30% of Tokyo Century, together with a new investment in Techtronic, offered a more attractive use of capital. Given this overlap and the clearer catalysts we see in these opportunities, we elected to exit Tokyo Century and redeploy the proceeds.

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.

Wal-Mart de Mexico SAB de CV

Founded in 1952 and headquartered in Mexico City, Wal-Mart de Mexico (“Walmex”) is the largest retailer in Mexico and Central America and a key subsidiary of Walmart Inc., which retains a majority ownership stake. Walmex operates more than 3,800 stores across multiple formats—Bodega Aurrerá (discount stores and the company’s fastest-growing format), Walmart Supercenter (big-box retail), Sam’s Club (membership warehouse), Walmart Express (small supermarkets), and other discount outlets—giving it a uniquely diversified presence across the consumer landscape.

This multi-format approach serves a wide spectrum of customers and shopping occasions—from everyday essentials and large family baskets to convenience and premium purchases. Bodega Aurrerá, for example, has become a household name across Mexico and now represents roughly half of the company’s stores, while Sam’s Club caters to membership customers seeking bulk purchases and higher-ticket items. Together, these formats provide Walmex broad market coverage, geographic reach, and strong brand loyalty across urban centers, suburban communities, and regional towns.

In recent years, the company has significantly expanded its omnichannel ecosystem, investing in e-commerce, logistics, and digital services to enhance convenience and deepen customer engagement. E-commerce is ~8% of total sales, supported by strong growth in online grocery and third-party marketplace offerings. Complementary platforms, such as Cashi (digital payments), BAIT (mobile telecom), and Walmart Connect (digital advertising), extend Walmex’s reach into financial and digital services, strengthening customer ties and building new revenue streams.

High-Quality Business 

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

• Dominant scale advantages with over 3,000 stores in Mexico, making it the clear market leader in food and general merchandise retail;
• Diversified and resilient revenue base, with a meaningful percentage of sales from grocery—providing recurring traffic and stable cash flow—complemented by general merchandise, fuel, pharmacy, and membership-based services;
• Strong returns on invested capital (~18%), supported by consistent execution and capital discipline; and
• Support from Walmart Inc., which provides access to global best practices, digital tools, and procurement efficiencies.

Attractive Valuation 

We believe Walmex is attractively valued relative to its long-term normalized earnings power. In our view, the market underappreciates the company’s ability to grow revenue through ongoing store expansion and strengthen margins and FREE cash flow generation through efficiency gains, scale benefits and continued growth in higher-margin channels, such as private label and e-commerce.

Compelling Catalysts

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

• Expansion of private label penetration (from mid-teens to mid-20s), which should improve profitability and customer loyalty;
• Further development of the e-commerce platform, with Walmex aiming to become a one-stop shop by combining online grocery and a third-party marketplace, supported by digital tools adapted from Walmart U.S.;
• Disciplined store expansion, with current plans to add approximately 1,500 new stores across Mexico and Central America over the next five years, extending reach and scale advantages; and
• Leadership continuity, as newly appointed interim CEO Cristian Barrientos, a veteran Walmart executive with more than 25 years of experience, provides operational stability and maintains focus on profitable growth during the leadership transition.

Conclusion

As we look ahead, the global backdrop remains complex. Geopolitical developments, central bank decisions, and changes in investor risk appetite can all influence returns over shorter periods, but these factors are difficult to forecast with consistency. Rather than position the portfolio around macro outcomes, we continue to focus on the businesses we own and the actions management teams are taking to increase value over time.

Our investment process centers on the three pillars of Quality, Valuation, and Catalysts. We seek companies with strong competitive positions, capable management teams, financial resilience, and identifiable opportunities to improve profitability and FREE cash flow. While markets can move quickly from one theme to the next, we believe owning high-quality businesses at attractive valuations remains the best way to create value for clients over the long term.