In the 2Q2026 earnings season, most of our underlying companies reported stellar top-line and bottom-line results, with some exceptions that are discussed further below. This gives strong fundamental momentum to the business environment of our portfolio holdings.

The macro environment has not materially changed. The Middle East is still at a stalemate, while energy prices have trended higher, pushing inflation up through fuel prices. The boogeyman headlines this quarter were the ever-higher government bond yields around the world. However, we are of the view that the dynamics behind these rising yields are not the same. The 10-year breakeven rates draw the distinction: the US breakeven has been stable, suggesting a growth-driven push in yields, whereas breakevens in Germany and Japan have moved up noticeably, suggesting an inflation-driven one.

Major indices were by and large mixed in 3Q2026, with the US market outperforming. Against that backdrop, the fund has achieved a year-to-date performance of 27.39%, outpacing most major indices again this quarter and validating our disciplined stock selection strategy.

We would like to highlight two noteworthy events this quarter: the AI security breach and the illicit use of frontier labs' AI models. We view the breach as both a testament to the capability of this powerful technology and a risk that cannot be brushed aside. The biggest risk would be a complete halt of AI development, which we see as very low probability event given the ongoing geopolitical contestation. However,  AI causing some sort of great damage remains the known unknown risk. Illicit use of frontier models by competitors, as highlighted by Anthropic and OpenAI, could also erode competitiveness. This risk is somewhat mitigated by the fact that compute capacity is still largely commanded by the frontier labs, and US government intervention is limiting it even further.

This quarter also saw a sharp reversal of the “SaaSpocalypse” rage of just a quarter ago. Our strategy of selectively but aggressively adding into the software space last quarter has paid off handsomely and, to our pleasant surprise, quickly. Cybersecurity and infrastructure software companies were the clear performance drivers. The major detractor was Roblox, which performed poorly on regulatory changes and platform adjustments. Pre-empting and navigating regulatory changes successfully has been the hallmark of Roblox’s management and we remain confident that they will emerge stronger for it.

Some notable adjustments to the portfolio are as follows. We completely exited PayPal after the M&A news was floated, and we did well there as the deal was reportedly suspended after just a few months. We are also building up a fresh position in Corning Inc which we view as well-positioned to capture the growing demand for fibre as AI requirements drive optical connectivity.

As the year comes to a close, we are encouraged by the various data points shared across the data centre supply chain: demand is becoming even more visible and stronger. This is best demonstrated by Nvidia’s guidance of FY2028 growth of 70%.

We enter the final stretch of the year with businesses that possess clear line of sight and are executing well. Headlines will come and go, but a firm understanding of businesses and their underlying dynamics will reward the enterprising investors who have done their homework.  Thank you for your continued trust and support.

Sep 2026