This is a marketing communication
For Professional Investors Only

YOUR GOALS,OUR COMMITMENT.

Future Quality Insights: healthcare offers
diversification from market hot spots
Investment Insights from the Global Equity Team

By Greig Bryson, Portfolio Manager
April 2024
Middle-aged Scottish men (of which there are a few in our office), tend to become subjects of good-natured ribbing.
Some of it, admittedly, is deserved. One of the shortcomings often noted is their reluctance to seek medical help in
the face of mounting evidence that it is the right thing to do. Unfortunately, this “head in the sand” tendency often
produces bad outcomes that could otherwise have been avoided.

Source: Shutterstock

Ignoring the healthcare sector has been easy to do over the last couple of years—even though the case for owning
it has never been stronger.
Part of the reason the healthcare sector has been overlooked is due to the financial volatility caused by the COVID19 pandemic. Some companies benefited from increased demand for their products and services during the darkdays of 2020–2021 and then lost out as (thankfully) the pandemic subsided. Others lost out and then benefitted, as
patients returned to their doctors for more routine healthcare needs. Over the last couple of years, many healthcarecompanies have been labelled as “too difficult” due to the challenges of determining their financial standing. This
includes assessing whether they were on the positive or negative side of the ledger, and predicting when “normal”
demand might re-emerge.

There can be no assurance that any performance will be achieved in any given market condition or cycle. Past performance or any prediction,
projection or forecast is not indicative of future performance.

FUTURE QUALITY INSIGHTSTime and patience have been necessary to reveal the answers. As we move into 2024, the fog of uncertainty isstarting to lift, providing a clearer perspective. It is now widely accepted that a fair picture of COVID-adjusted trend
growth can be obtained by combining two years of pre-pandemic growth rates, two years during the pandemic,
and two years post-pandemic. Even if the healthcare sector has endured a difficult 2022–2023, we will not be afraid
to add to our positions in areas where we believe that the trend growth looks strong and sustainable, and thevaluation attractive.
Our holdings in the life science tools subsector, such as Danaher and Bio-Techne, are good examples. Due tounprecedented post-pandemic destocking, a Chinese regulatory clamp down and a necessary return to more
focused investments by the biotech industry, 2022 and 2023 have been difficult years. However, we believe that weare only in the very early stages of a new wave in scientific/medical advances—one in which a greater
understanding of the human genome allows us to target new areas for medicines with artificial intelligence (AI)expediting the identification of treatments that are most likely to work. Consequently, the order books at bothcompanies could start to fill up quickly as we move into the second half of 2024.
A return to growth should allow the life sciences and tools subsector to recouple with (or even outperform) othergrowth sectors such as IT that consistently deliver high cash returns on investment. The IT sector quickly addressed
its own post-COVID demand growth blip through very assertive cost cutting and the rise of AI.
Chart 1: Life sciences and tools vs. IT
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Jan-2024

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Nov-2022

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May-2022

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Jan-2021

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Nov-2020

Jul-2020

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Jan-2020

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Nov-2019

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May-2019

9

MSCI ACWI Life Sciences Tools & Services Index/MSCI ACWI Index (LHS)
MSCI ACWI Information Technology Index/MSCI ACWI Index (RHS)
Source: Bloomberg as at 21 March 24

Why take an umbrella when it is sunny outside?
It is also fair to note that economic conditions have remained better than many observers expected. In particular,
labour markets have been tight—allowing positive real wages in many sectors and supporting consumer
confidence. Why increase your exposure to a relatively defensive sector like healthcare when the economy is purring,
the Fed is about to cut rates and we could enjoy the softest of soft landings?
We are far from economic doom mongers. In fact, we do not subscribe to any extreme economic viewpoints. We
would always prefer our stock selection to speak for itself, rather than require a bit of amplification frommacroeconomic conditions.
Given the optimism observable at present, in terms of stock market levels and financial conditions, we do think thata bit of insurance makes sense—just in case interest rates do not come down as quickly as expected or if emerging
pockets of economic softness grow in size.
It helps also that our most defensive holdings within healthcare all have stock-specific attractions that matter more
to us than their average beta of 0.7. Cencora, Elevance and Encompass Health are all expected to benefit fromsustained, demographics-led demand growth; they also offer services that will be indispensable in lowering the costof healthcare delivery.
Any reference to a particular security is purely for illustrative purpose only and does not constitute a recommendation to buy, sell or hold any security. Norshould it be relied upon as financial advice in any way. Any comparison to a reference index or benchmark may have material inherent limitations andtherefore should not be relied upon. Past performance or any prediction, projection or forecast is not indicative of future performance.

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Cencora stands to benefit from improved distribution dynamics as US dollar 200 billion worth of US prescription
drugs lose patent protection over the coming five years, a change that will also benefit patients. Elevance has
embraced value-based care, tying the payments that they receive as healthcare insurers to the health benefit
received by patients (and replacing the old, less efficient fee-for-service model). Meanwhile, Encompass Health’s
inpatient rehabilitation facilities are increasingly recognised as providers of the best quality post-acute care forpatients. Often, they offer a more cost-effective solution compared to alternatives such as nursing homes or general
hospitals.

You don’t want all your eggs in one (AI) basket
By staying invested in healthcare, it is not just the possibility of an economic downturn that we are protecting ourclients’ capital against. The sector also offers welcome diversification from some of today’s most exciting parts ofthe market. To borrow a seasonal metaphor, we do not want all our (Easter) eggs in one (thematic) basket.

Source: Shutterstock

We are firm believers that the infrastructure for generative AI will be developed, even as we wait for the emergenceof pivotal applications. We do not have to wait, however, for healthcare’s socio-economic necessity to beestablished. We have long remained convinced that companies whose technology allows us to maximise our
economically-active years and minimise the cost of delivering these will enjoy the sustained, profitable growth thatis the hallmark of Future Quality.

There is gold in them there pills…
Admittedly, when gold assayer Matthew Fleming Stephenson made his famous remark in 1849, he was referring tohills, not pills. Indirectly quoted in Mark Twain’s novel The American Claimant, Stephenson declared, “There’s goldin them thar hills” in an attempt to slow the emigration of gold prospectors from his native Georgia to California 1.
Indianapolis and Denmark are not known for their hills, but the only gold that investors have uncovered inhealthcare in the last couple of years has been found there (in the form of Eli Lilly and Novo Nordisk). Their
reformulation of well-established diabetes agents into effective treatments for weight loss, and clever marketing,has created huge excitement.
A relatively little-known fact is that Scotland has had an important role to play in the creation of this craze. The music
for the “Oh Oh Ozempic” commercial which has become synonymous with these drugs in the US (Ozempic having
the same active ingredient as weight loss product Wegovy) is from a 1970s hit “Magic” by Edinburgh pop rock band
Pilot. The share price impact of these drugs has certainly been worthy of another Edinburgh-based creation, Harry
Potter.
Any reference to a particular security is purely for illustrative purpose only and does not constitute a recommendation to buy, sell or hold any security.
Nor should it be relied upon as financial advice in any way. There can be no assurance that any performance will be achieved in any given market conditionor cycle. Past performance or any prediction, projection or forecast is not indicative of future performance.
1 When the Georgia Gold Rush came to an end in the 1840s, many prospectors headed west to join the California Gold Rush. Stephenson did

not agree and is said to have proclaimed in a Georgia town square, "Why go to California? In that ridge lies more gold than man ever dreamt
of. There's millions in it".

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The parabolic increase in share prices for these two companies has seen them almost keep pace with the championsof generative AI. Similarly to AI, the science behind these new drugs is not as new as the stock market’s reaction
would have you believe. While it may not date back as far as the formative research on AI in the 1950s, GLP-1 wasdiscovered in 1986 and it has taken almost 40 years of scientific research to get to the current level of understanding.
It will take longer still to resolve several questions that remain outstanding regarding these drugs. How long will
patients need to take them for? Will weight be regained if they stop? How safe it is to lose up to 25% of your weightin one year? How much will they cost, in the long term? And can the supply of the drugs keep up with demand?
The most important questions in the long term, however, are: can the US healthcare system afford to pay for thesedrugs? Or, put another way, can it afford not to, given the high cost of treating many of these patients already being
borne by the system?
We are continuing to carefully research in this area, and that research extends beyond Lilly and Novo. It appears to
us that the most lucrative place to be in the long run could be among the providers of the “picks and shovels”
necessary for this seam to be successfully exploited. These picks and shovels span everything from active
pharmaceutical manufacturing and distribution to the glass vials and injectors used in sterile fill and finish.

Conclusion
We remain very strong supporters of the healthcare sector. In addition to the well-known demographic drivers(ageing societies, rising prevalence of chronic illness etc), innovation is enabling structural changes in healthcaredelivery and in our view these changes will confer years of strong organic growth opportunities if we choose theright companies.
Mark Zuckerberg famously encouraged his employees to “move fast and break things”. However, breaking things
can lead to severe consequences in a clinical setting; furthermore, it is not in keeping with one of the core principlesof the Hippocratic oath: “first do no harm”. As a result, change happens more slowly in healthcare than in othersectors. The changes underway at present, however, are profound, and we believe it will play out longer than inother areas.
When you need medical attention, waiting seldom makes things better. It normally just means that a more assertive
intervention is needed when the time comes. Similarly, waiting to invest in the secular growth on offer in thehealthcare sector, whilst putting all your bets on an economic soft landing and/or the eternal rise of AI may lead toa bad outcome.
Any reference to a particular security is purely for illustrative purpose only and does not constitute a recommendation to buy, sell or hold any security.
Nor should it be relied upon as financial advice in any way. There can be no assurance that any performance will be achieved in any given market conditionor cycle. Past performance or any prediction, projection or forecast is not indicative of future performance.

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FUTURE QUALITY INSIGHTS

Source: MSCI ESG Research, NAM Research 29 February 2024. Underlying score is the MSCI ESG Quality Score. Carbon Footprint is Weighted
Average Carbon Intensity. The above is a representative account of the Nikko AM Global Equity Strategy. Benchmark is the MSCI ACWI Net
Total Return Index. Data is subject to change without notice. Any comparison to reference index or benchmark may have material inherent
limitations and therefore should not be relied upon.

Global Equity strategy composite performance to February 2024200%
187.1%
180%
160%
140%
120%
117.4%
100%
80%
60%
40%
20%
0%
-20%
Sep-14 Apr-15 Nov-15 Jun-16 Jan-17 Aug-17 Mar-18 Oct-18 May-19 Dec-19 Jul-20 Feb-21 Sep-21 Apr-22 Nov-22 Jun-23 Jan-24
Nikko AM Global Equity
MSCI ACWI Net Total Return Index *GrossAnnualised(USD) %

Returns

1 year

2 Years

3 years

5 years

Since
Inception

Global Equity Strategy Composite

21.29

5.64

4.90

12.36

11.85

MSCI ACWI Net Total Return Index *

23.15

6.29

6.79

10.51

8.60

Active Return

-1.86

-0.65

-1.90

1.85

3.25

Past performance is not a guide to future returns.
*The benchmark for this composite is MSCI ACWI Net Total Return Index. The benchmark was the MSCI ACWI ex AU since inception of thecomposite to 31 March 2016. Inception date for the composite is 01 October 2014. Returns are based on Nikko AM’s (hereafter referred to as the“Firm”) Global Equity Strategy Composite returns. Returns for periods in excess of 1 year are annualised. The Firm claims compliance with the
Global Investment Performance Standards (GIPS ®) and has prepared and presented this report in compliance with the GIPS. GIPS® is a registeredtrademark of CFA Institute. CFA Institute does not endorse or promote this organization, nor does it warrant the accuracy or quality of the content
contained herein. Returns are US Dollar based and are calculated gross of advisory and management fees, custodial fees and withholding taxes,
but are net of transaction costs and include reinvestment of dividends and interest. Copyright © MSCI Inc. The copyright and intellectual rights tothe index displayed above are the sole property of the index provider. Any comparison to a reference index or benchmark may have material
inherent limitations and therefore should not be relied upon. To obtain a GIPS Composite Report, please contact GIPS_inquiry@nikkoam.com.
Data as of 31 October2023.

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FUTURE QUALITY INSIGHTS

Nikko AM Global Equity: Capability profile and available vehicles(as at February 2024)
Available strategies

Global ACWI, Global EAFE, Global Developed, Global ex specificcountry, Sharia, Dividend

Available vehicles

UCITS-SICAV, Country domiciled mutual funds, unit trusts, investment
trusts and segregated accounts

Key Features of Global ACWI Current Positioning
Investment Objective

Guidelines+3% vs MSCI AC World

No. of holdings

40

40-50

Active share

86.1%

90-95%

Cash

0.7%

0-3%

Target return is an expected level of return based on certain assumptions and/or simulations taking into account the strategy’s risk components.
There can be no assurance that any stated investment objective, including target return, will be achieved and therefore should not be relied upon.
Any comparison to a reference index or benchmark may have material inherent limitations and therefore should not be relied upon.
Past performance is not indicative of future performance. This is provided as supplementary information to the performance reports preparedand presented in compliance with the Global Investment Performance Standards (GIPS®). GIPS® is a registered trademark of CFA Institute. Nikko
AM Representative Global Equity account. Source: Nikko AM, FactSet.

Nikko AM Global Equity Team

This Edinburgh based team provides solutions for clients seeking global exposure. Their unique approach, acombination of Experience, Future Quality and Execution, means they are continually “joining the dots” acrossgeographies, sectors and companies, to find the opportunities that others simply don’t see.
There are four key areas that make our strategy different:–a focus on Future Quality companies – a different and clear philosophy–

a distinctive team culture – a tight-knit team with a process built on openness and respect–

unique execution, including rigorous team challenge of every idea–

differentiated portfolios, with a strong track record in stock-picking and ESG integration

Future Quality companies
We believe that companies with superior long-term returns on investment will deliver better performance. We callthese Future Quality companies, and it is only these companies that make it into client portfolios. We search for Future
Quality through analysis and financial modelling of companies that we expect to deliver over the next five years, andbeyond. This approach is supported by academic evidence that businesses with high and improving returns on
invested capital provide superior compound performance over the long term. With this investment time horizon, thesustainability of returns is a crucial ingredient of our Future Quality approach. We have found that companies
developing solutions to ESG issues and management teams providing value to all stakeholders are more likely to be
successful at sustaining high returns on invested capital over the long-term.

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FUTURE QUALITY INSIGHTSDistinctive team structure and culture
We believe that our collective knowledge and experience are powerful tools for delivering investment performance.
Since 2011, we have operated a team-based approach to uncovering Future Quality investment ideas and havefostered a strong group dynamic. Individually, each Portfolio Manager is an expert investor with a broad skillset andexperience of many market cycles.
We work in a flat structure, where all our Portfolio Managers have a dual role that combines investment analysis andinvestment management responsibilities. With individual analytical coverage split along industry lines, each Portfolio
Manager is a specialist in the stocks and sectors they cover.
We all actively challenge the ideas and analysis of colleagues throughout the investment process, in an open
atmosphere of vigorous and constructive debate. Portfolio Analysts work alongside Portfolio Managers, typicallyresearching thematic trends that could influence and uncover future investment opportunities.
We take collective responsibility for approving stocks for the portfolio, and therefore there is joint accountability for
performance. As such, it is in everyone’s interest to ensure that the investment analysis is thorough and that no stone
is left unturned in the search for Future Quality.
We believe that the broad experience of our Portfolio Managers and distinctive team-based approach that sees
everyone contributing to the strategy, increases the probability of successfully uncovering Future Quality.

Unique execution
Our tight-knit team approach and flat structure enable us to execute in a transparent way, including a rigorous teamchallenge of every idea. By using our strict Future Quality standards, we can identify long-term winners from thebroader universe, to narrow down a comprehensive watch list and around 100 deep dive researched ideas. This iswithin a unique framework of individual accountability for the underlying analysis and company research, combinedwith the collective challenging of assumptions at the team level. Our proprietary ranking tool creates a disciplined
process to compare and rank attractive opportunities and ensures that at the portfolio construction phase, only ourbest-ranked ideas receive the most committed weights in client portfolios. We believe our culture is key, and thecollective ownership of our research process brings the best portfolio outcomes for clients.

Differentiated portfolios
We deliver a high-conviction Global Equity strategy for clients that is not constrained by benchmarks. As such, Future
Quality can be sourced from listed businesses across any geography or sector. And, in a world awash with investment
prospects, our disciplined, accountable and transparent process helps us to focus solely on building portfolios fromcompanies that best meet our specific Future Quality criteria.
In terms of balancing risk and reward, our track record shows that we consistently deliver attractive returns on a lower
risk-adjusted basis compared with peers and the global reference benchmark. The high active share and concentrated
number of holdings help ensure that our Future Quality stock-selection process delivers differentiated portfolios.

About Nikko Asset Management
With USD 228.6 billion* under management, Nikko Asset Management is one of Asia’s largest asset managers,
providing high-conviction, active fund management across a range of Equity, Fixed Income, Multi-Asset andAlternative strategies. In addition, its complementary range of passive strategies covers more than 20 indices andincludes some of Asia’s largest exchange-traded funds (ETFs).
*Consolidated assets under management and sub-advisory of Nikko Asset Management and its subsidiaries as of 29
February 2024.

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Risks
Emerging markets risk - the risk arising from political and institutional factors which make investments in emerging
markets less liquid and subject to potential difficulties in dealing, settlement, accounting and custody.
Currency risk - this exists when the strategy invests in assets denominated in a different currency. A devaluation of
the asset's currency relative to the currency of the strategy will lead to a reduction in the value of the strategy.
Operational risk - due to issues such as natural disasters, technical problems and fraud.
Liquidity risk - investments that could have a lower level of liquidity due to (extreme) market conditions or issuerspecific factors and or large redemptions of shareholders. Liquidity risk is the risk that a position in the portfolio
cannot be sold, liquidated or closed at limited cost in an adequately short time frame as required to meet liabilities of
the Strategy.
If you intend to invest in the UCITS Fund, please refer to the Fund Prospectus in order to identify whether the SubFund will manage sustainability factors within the meaning of the SFD Regulation (EU) 2019/2088: an article 6(limited to analysing sustainability risk as part of its risk management process), an article 8 (which also promotes
certain environmental and social characteristics) or article 9 (which has sustainable investment as its primaryobjective).
For Professional Investors only. This is a marketing communication. Please refer to the UCITS prospectus and to the
KIID before making any final investment decisions

Contact us
EMEA – Nikko Asset Management Europe Ltd.
Level 5, City Tower, 40 Basinghall Street, London, EC2V 5DE, U.K.
Phone:
Email:+44 (0) 20 7796 9866
EMEAenquiries@nikkoam.com

Americas – Nikko Asset Management Americas, Inc.
605 Third Avenue, 38th Floor, New York, NY 10158, U.S.A.
Phone:
Fax:
Email:+1-212-610-6100+1-212-610-6140
USsalesinquiries@nikkoam.com

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Important information: This document is prepared by Nikko Asset Management Co., Ltd. and/or its affiliates (Nikko AM) and is for distribution
only under such circumstances as may be permitted by applicable laws. This document does not constitute personal investment advice or apersonal recommendation and it does not consider in any way the objectives, financial situation or needs of any recipients. All recipients arerecommended to consult with their independent tax, financial and legal advisers prior to any investment.
This document is for information purposes only and is not intended to be an offer, or a solicitation of an offer, to buy or sell any investments orparticipate in any trading strategy. Moreover, the information in this document will not affect Nikko AM’s investment strategy in any way. The
information and opinions in this document have been derived from or reached from sources believed in good faith to be reliable but have notbeen independently verified. Nikko AM makes no guarantee, representation or warranty, express or implied, and accepts no responsibility or
liability for the accuracy or completeness of this document. No reliance should be placed on any assumptions, forecasts, projections, estimates orprospects contained within this document. This document should not be regarded by recipients as a substitute for the exercise of their own
judgment. Opinions stated in this document may change without notice.
In any investment, past performance is neither an indication nor guarantee of future performance and a loss of capital may occur. Estimates of
future performance are based on assumptions that may not be realised. Investors should be able to withstand the loss of any principal investment.
The mention of individual securities, sectors, regions or countries within this document does not imply a recommendation to buy or sell.
Nikko AM accepts no liability whatsoever for any loss or damage of any kind arising out of the use of all or any part of this document, provided
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United Kingdom: This document is communicated by Nikko Asset Management Europe Ltd, which is authorised and regulated in the United
Kingdom by the Financial Conduct Authority (the FCA) (FRN 122084). This document constitutes a financial promotion for the purposes of the
Financial Services and Markets Act 2000 (as amended) (FSMA) and the rules of the FCA in the United Kingdom, and is directed at professional
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The contents of this document have not been reviewed by the Securities and Futures Commission or any regulatory authority in Hong Kong. Nikko
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Capital Markets Authority or any other relevant Kuwaiti government agency. The offering of the Strategy in Kuwait on the basis a private placement
or public offering is, therefore, restricted in accordance with Decree Law No. 7 of 2010 and the bylaws thereto (as amended). No private or public
offering of the Strategy is being made in Kuwait, and no agreement relating to the sale of the Strategy will be concluded in Kuwait. No marketingor solicitation or inducement activities are being used to offer or market the Strategy in Kuwait.
Kingdom of Saudi Arabia: This document is communicated by Nikko Asset Management Europe Ltd (Nikko AME), which is authorised and regulatedby the Financial Services and Markets Act 2000 (as amended) (FSMA) and the rules of the Financial Conduct Authority (the FCA) in the United
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Nikko AME and its associates and/or its or their officers, directors or employees may have or have had positions or material interests, may at any
time make purchases and/or sales as principal or agent, may provide or have provided corporate finance services to issuers or may provide or
have provided significant advice or investment services in any investments referred to in this document or in related investments. Relevant
confidential information, if any, known within any company in the Nikko AM group or Sumitomo Mitsui Trust Holdings group and not available to

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Nikko AME because of regulations or internal procedure is not reflected in this document. The investments mentioned in this document may not
be eligible for sale in some states or countries, and they may not be suitable for all types of investors.
Oman: The information contained in this document nether constitutes a public offer of securities in the Sultanate of Oman as contemplated by
the Commercial companies law of Oman (Royal decree 4/74) or the Capital Markets Law of Oman (Royal Decree80/98, nor does it constitute anoffer to sell, or the solicitation of any offer to buy non-Omani securities in the Sultanate of Oman as contemplated by Article 139 of the Executive
Regulations to the Capital Market law (issued by Decision No. 1/2009). This document is not intended to lead to the conclusion of any contract ofwhatsoever nature within the territory of the Sultanate of Oman.
Qatar (excluding QFC): The Strategies are only being offered to a limited number of investors who are willing and able to conduct an independent
investigation of the risks involved in an investment in such Strategies. The document does not constitute an offer to the public and should not be
reproduced, redistributed, or sent directly or indirectly to any other party or published in full or in part for any purpose whatsoever without a priorwritten permission from Nikko Asset Management Europe Ltd (Nikko AME). No transaction will be concluded in your jurisdiction and any inquiries
regarding the Strategies should be made to Nikko AME.
United Arab Emirates (excluding DIFC): This document and the information contained herein, do not constitute, and is not intended to constitute,a public offer of securities in the United Arab Emirates and accordingly should not be construed as such. The Strategy is only being offered to alimited number of investors in the UAE who are (a) willing and able to conduct an independent investigation of the risks involved in an investment
in such Strategy, and (b) upon their specific request.
The Strategy has not been approved by or licensed or registered with the UAE Central Bank, the Securities and Commodities Authority or any
other relevant licensing authorities or governmental agencies in the UAE. This document is for the use of the named addressee only and should
not be given or shown to any other person (other than employees, agents or consultants in connection with the addressee's consideration thereof).
No transaction will be concluded in the UAE and any inquiries regarding the Strategy should be made to Nikko Asset Management Europe Ltd.
Republic of Korea: This document is being provided for general information purposes only, and shall not, and under no circumstances is, to beconstrued as, an offering of financial investment products or services. Nikko AM is not making any representation with respect to the eligibility ofany person to acquire any financial investment product or service. The offering and sale of any financial investment product is subject to theapplicable regulations of the Republic of Korea. Any interests in a fund or collective investment scheme shall be sold after such fund is registeredunder the private placement registration regime in accordance with the applicable regulations of the Republic of Korea, and the offering of suchregistered fund shall be conducted only through a locally licensed distributor.

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