Terry Smith on Management Quality

Fundsmith LLP is authorised and regulated by the Financial Conduct Authority. Registered in England & Wales: OC354233. Registered office: 33 Cavendish Square, London, W1G 0PW. January 2026 Dear Fellow Investor, This is the eighth annual letter to owners of the Fundsmith Stewardship Fund (‘Fund’). The table below shows performance figures for the last calendar year and the cumulative and annualised performance since inception on 1st November 2017 and various comparators. % Total Return 1st Jan to 31st Dec 2025 Inception to 31st Dec 2025 Sortino Ratio6 Cumulative Annualised Fundsmith Stewardship Fund1 -6.0 +86.3 +7.9 0.31 Equities2 +12.8 +145.0 +11.6 0.49 IA Global Sector3 +10.8 +98.9 +8.8 0.35 UK Bonds4 +6.1 -1.2 -0.1 n/a Cash5 +4.2 +18.4 +2.1 n/a The Fund is not managed with reference to any benchmark, the above comparators are provided for information purposes only. 1 I Class Accumulation shares, net of fees, priced at noon UK time, source: Bloomberg. 2 MSCI World Index, £ net, priced at US market close, source: Bloomberg. 3 Source: Financial Express Analytics. 4 Bloomberg Series-E UK Govt 5-10 yr Bond Index, source: Bloomberg. 5 £ Interest Rate, source: Bloomberg. 6 Sortino Ratio is since inception to 31.12.25, 3.5% risk free rate, source: Financial Express Analytics. The table shows the performance of the I Class Accumulation shares which fell by 6.0% in 2025 and compares with a rise of 12.8% for the MSCI World Index (‘Index’) in sterling with dividends reinvested.

Active vs Passive Fund Share of US Equity Fund Assets Source: Research Affiliates, Data as at 31st Dec 2024 The financial services industry sometimes does not aid understanding with the labels it employs. Index funds and index ETFs are often labelled ‘passives’ in contrast with ‘active’ funds, like Fundsmith Stewardship Fund, which have a fund manager making investment decisions. The ‘passives’ mostly track the index they invest in by holding the stocks in proportion to their market value. Far from being passive in any normally accepted sense of the word, this makes them a momentum strategy. A momentum investment strategy is one in which the investor buys stocks which are performing strongly. If you redeem money from an active fund like Fundsmith and invest it in an S&P 500 Index tracker fund your new fund will buy the index stocks in proportion to their market value. Currently about 7% of it will go into Nvidia which we do not own. About 35% will go into the Magnificent Seven of which we own only three stocks — Alphabet, Meta and Microsoft. This gives added momentum to those stocks we do not own which are a major part of the index. John Bogle, the pioneer of index investing who founded Vanguard, the index fund manager, was asked at the 2017 Berkshire Hathaway annual meeting if there was a level of assets in index funds which would distort markets and he agreed that there was, although he had no method of determining that level. We may already have reached it.markets

Mettler Toledo has begun to bounce back for the effects of it its logistics problem in Europe and the downturn in China. We continue to apply a simple four step investment strategy: • Buy good companies • ESG screen • Don’t overpay • Do nothing I will review how we are doing against each of those in turn. As usual we seek to give some insight into the first and most important of these — whether we own good companies — by giving you the following table which shows what Fundsmith Stewardship Fund would be like if instead of being a fund it was a company and accounted for the stakes which it owns in the portfolio on a ‘look- through’ basis, and compares this with the market, in this case the FTSE 100 and the S&P 500 Index. This also shows you how the portfolio has evolved over time. Year ended Fundsmith Stewardship Fund Portfolio S&P FTSE 2019 2020 2021 2022 2023 2024 2025 2025 2025 ROCE 29% 23% 28% 31% 34% 32% 30% 17% 17% Gross Margin 65% 61% 61% 61% 60% 60% 60% 45% 43% Operating Margin 26% 21% 25% 26% 29% 27% 26% 18% 17% Cash Conversion 99% 102% 97% 88% 93% 92% 94% 89% 99% Interest Cover 17x 16x 20x 19x 20x 24x 34x 9x 8x Source: Fundsmith LLP/Bloomberg. ROCE (Return on Capital Employed), Gross Margin, Operating Margin and Cash Conversion are the weighted mean of the underlying companies invested in by the Fundsmith Stewardship Fund and mean for the FTSE 100 and S&P 500 Indices. The FTSE 100 and S&P 500 numbers exclude financial stocks. Interest Cover is median.

Sustainability Factsheets instead of the RepRisk data, as we think it provides a more accurate proxy of a company’s impact on society and the environment. Overall, the Fundsmith Stewardship Fund performs similarly to the MSCI World in ‘Knowledge’ and ‘Environment’ but significantly outperforms in ‘Health’, mainly due to our higher exposure to healthcare companies. The Fund slightly underperforms the index in ‘Society’, largely due to underperformance in the societal infrastructure subcategory. The main topics considered in societal infrastructure are energy, transportation, water and sanitation, and industrial infrastructure, areas in which we do not invest. The result is that our companies’ positive contribution to these areas is lower than that of the MSCI World, not because the companies in which we invest have a higher negative impact. Overall, the Fundsmith Stewardship Fund has a net impact ratio of 23% compared to 10% for the S&P 500 and 7% for the MSCI World, with the scores split by category as below: Net Impact Ratio Source: Data from Upright, as at 31st December 2025 The companies held in the Fundsmith Stewardship Fund also continue to show their commitment to reducing their contribution to climate change. At the end of 2025, companies which are responsible for 94% of the Fund’s emissions had already set 1.

this seems about as true as the now discredited view that Adobe and Intuit were AI beneficiaries. This view has driven the PE to <19x and it is still growing at c.5% p.a. with a ROIC of 18% and ROE of about 50%. We intend to continue holding a portfolio of good businesses in the hope and expectation that their strong fundamental returns will shine through into superior share price and fund performance over the long term and that in the interim our fund will prove relatively immune from any shocks which arise if or when the present extraordinary market conditions unwind. Finally, once more I wish you a happy New Year and thank you for your continued support for our Fund. Yours sincerely, Terry Smith CEO Fundsmith LLP Disclaimer: A Key Investor Information Document and an English language prospectus for the Fundsmith Stewardship Fund are available via the Fundsmith website or on request and investors should consult these documents before purchasing shares in the fund. Past performance is not necessarily a guide to future performance. The value of investments and the income from them may fall as well as rise and be affected by changes in exchange rates, and you may not get back the amount of your original investment. Fundsmith LLP does not offer investment advice or make any recommendations regarding the suitability of its products. This document is a financial promotion and is communicated by Fundsmith LLP which is authorised and regulated by the Financial Conduct Authority.

As you will be able to tell if you read our annual letter last year, we are far from enthusiastic about most shareholder activism nor are we shareholders in or fans of the Kraft Heinz business model. But we thought that Unilever’s management had a case to answer and we think that the ability to mount a hostile takeover is an important discipline in ensuring that our assets are properly managed. When the Chairman told us that he was never in favour of such actions, though he concurred that some companies were poorly managed, we were at best a bit confused about what mechanism he thought might be applied if such a change became necessary. Harsh language maybe? We did not take part in any public commentary about our voting intentions had the Unilever changes come to a vote and please note that we have not revealed that here, we have merely commented on the process. In our view achieving good stewardship of a business is not always a process best conducted through the media.