wb international growth fund 20q2rvw · 6/30/2020 · the fund’s returns will vary, and you...

International Growth Fund Portfolio Review

June 2020

Simon Fennell, Partner Kenneth J. McAtamney, Partner Portfolio Managers

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William Blair International Growth Fund Important Disclosures June 2020

Risks: The views expressed in this report and the information about the holdings are as of the date of this material, unless otherwise noted, and are subject to change. Information about the Fund’s holdings should not be considered investment advice. There is no guarantee that the Fund will continue to hold any one particular security or stay invested in any one particular sector. Holdings are subject to change at any time. The Fund’s returns will vary, and you could lose money by investing in the Fund. International investing involves special risk considerations, including currency fluctuations, lower liquidity, economic and political risk. Investing in emerging markets can increase these risks, including higher volatility and lower liquidity. Investing in smaller and medium capitalization companies involves special risks, including higher volatility and lower liquidity. Small and mid-cap stocks are also more sensitive to purchase/sale transactions and changes in the issuer’s financial condition. The Fund invests most of its assets in equity securities of international growth companies where the primary risk is that the value of the equity securities it holds might decrease in response to the activities of those companies or market and economic conditions. Diversification does not ensure against loss. Performance cited represents past performance. Past performance does not guarantee future results and current performance may be lower or higher than the data quoted. Results shown are average annual returns, which assume reinvestment of dividends and capital gains. Investment returns and principal will fluctuate with market and economic conditions and you may have a gain or loss when you sell shares. For the most current month end performance information, please call 1‐877‐962‐5247, or visit our Web site at www.williamblairfunds.com. Class N shares are available to the general public without a sales load. Class I and Class R6 shares are available only to investors who meet certain eligibility requirements. This content is for informational and educational purposes only and is not intended as investment advice or a recommendation to buy or sell any security. Investment advice and recommendations can be provided only after careful consideration of an investor’s objectives, guidelines and restrictions. Most recent month-end performance information for the Fund is available by visiting the William Blair Funds Web site at www.williamblairfunds.com, or by calling the William Blair Funds at 1-800-742-7272. Please carefully consider the Fund’s investment objectives, risks, charges, and expenses before investing. This and other information is contained in the Fund’s prospectus and summary prospectus, which you may obtain by calling +1 800 742 7272. Read the prospectus and summary prospectus carefully before investing. Investing includes the risk of loss. Copyright © 2020 William Blair & Company, L.L.C. “William Blair” is a registered trademark of William Blair & Company, L.L.C. Distributed by William Blair & Company, L.L.C., member FINRA/SIPC.

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William Blair International Growth Fund Summary & Outlook June 2020

Market Review Global equities rebounded strongly and market volatility moderated in the second quarter as the MSCI ACWI IMI advanced 19.83%—recovering a significant portion of the pandemic-induced selloff during March. While concerns over the economic impact of the coronavirus remain, investors were encouraged by the massive stimulus measures from governments and central banks. Significant monetary and fiscal responses coupled with the gradual resumption of business activity led to a broad equity rally across both developed and emerging markets. U.S. equities strengthened during the second quarter (MSCI USA IMI +22.10%) despite the precipitous decline in economic activity, which included a significant rise in unemployment claims. The U.S. unemployment rate reached a record high in April of 14.7% before falling back to 11.1% as of June 30 amid the gradual reopening of businesses across the country. Despite the extraordinary amount of monetary firepower unleashed by the Fed, Chairman Powell maintained his commitment not to follow the path of other central banks and introduce negative policy rates. European equities advanced during the quarter (MSCI Europe ex-UK IMI +18.45%) with major countries indicating progress towards lowering the rate of new coronavirus infections. German equities surged (+26.75%) on the announcement from Chancellor Angela Merkel that efforts were being made to inject a second stimulus package into the economy. Autos and other manufacturers rallied on the news. Across other primary developed markets, the UK (+8.77%) and Japan (+11.82%) were notable laggards during the quarter.

Emerging markets rebounded in the second quarter (MSCI EM IMI +18.93%), driven by strength in South Africa (+26.78%), Brazil (+23.83%) and Taiwan (+23.38%). After depreciating significantly in the first quarter, emerging market currencies such as the South African Rand and the Mexican Peso stabilized in the second quarter. China underperformed on a relative basis (+15.22%) amid a reescalation of political tensions with the U.S., as the Senate passed legislation that would potentially ban Chinese companies from listing on American exchanges. Performance Second quarter outperformance of the International Growth Fund (Class N) versus the MSCI AC ex US IMI index was primarily driven by positive stock selection across most sectors. The Information Technology, Communication Services and Industrials sectors were the most significant sources of relative return. Within Information Technology, wireless chip maker Mediatek propelled relative results as revenue growth reaccelerated on the back of mobile share gains, the continued balkanization between the U.S. and China’s telecom ecosystems, and an acceleration in internet of things, power management and connectivity. Mediatek’s more competitive cost position and the narrowing of the technological gap vs. industry rival Qualcomm, along with higher average selling prices in 5G, support an upward margin trajectory going forward. Sea Ltd, a South East Asian mobile gaming and e-commerce company within Communication Services, was an additional source of outperformance. Sea primarily operates in seven South East Asian markets, including Indonesia, Malaysia, the Philippines, Singapore, Thailand, Taiwan and Vietnam. More recently, it has expanded its gaming operations to include India, Russia and Latin America. The company is the market leader in both gaming

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revenues and e-commerce, and current game success coupled with a robust pipeline are driving higher revenue growth and profitability expectations, and e-commerce operating metrics continue to be strong. Within the Industrials sector, DSV Panalpina helped relative returns after its share price completely recovered from its significant first quarter decline driven by the global COVID-19 pandemic. DSV is a large air and sea freight forwarding company whose business is to provide transport and logistics solutions to customers. Its asset light business model allows it to generate high levels of ROIC with minimal ongoing capex needs that in turn powers market share gains and rising free cash flow. Partially offsetting these effects was the underweight allocation to the Materials sector coupled with below average stock selection in the sector. Within Materials, the metals and mining industry significantly outperformed the benchmark due to expectations for a strong recovery and easy monetary policy across the globe. Due to the commodity nature of these businesses and lack of a compelling long-term growth drivers, we have no exposure to this industry, resulting in underperformance in the sector. Positioning During the second quarter, Information Technology exposure was increased through the purchases of STMicroelectronics, Atlassian, and Silergy. STMicroelectronics is a global, diversified semiconductor company with improved corporate performance that has been underappreciated by the market. The gap vs. peers should close with an inflection in automotive penetration given its strength in emerging technologies and strong customer and regulatory support. Atlassian is a software company that produces tools to help developers, IT service professionals, and others track issues and projects, and collaborate more efficiently. These tools

enable more efficient and faster digital transformation. Broadening growth and a diversified customer base support the durability and longer-term duration of its competitive advantage. Lastly, fabless analog semiconductor company Silergy is having success penetrating higher end SKUs, in part driven by the trade war which is pushing customers in China away from Texas Instruments. We believe Silergy could continue to gain market share in the next couple years due to accelerated China semiconductor localization trends and its product line expansion into 5G smartphone, automotive, cloud computing, and AI applications. Industrials exposure was also increased during the quarter through the purchases of Ashtead Group and IMCD. These increases were offset primarily by reductions to Financials and Health Care due to better risk/reward opportunities in other sectors. From a geographic perspective, notable adjustments were increases to Developed Europe, offset by decreases to Emerging Asia and the U.K. The portfolio's weighting in Emerging Markets was unchanged at approximately 25% at the end of the period. Outlook Following the peak of the pandemic and related lock-down, economic activity accelerated strongly in June in China, Europe and the U.S., including both manufacturing and services. Our preferred supply side indicator—orders in excess of inventories— registered double-digit improvement in the Euro Area and is already back to positive territory in the U.S. Crucially, a rebound in new orders drove the improvement. Unprecedented fiscal support efforts, combined with healthy corporate and household balance sheets at the start of the pandemic-induced recession, point to a continued strong sequential recovery, although we do not expect either

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GDP or corporate profits to recover to pre-pandemic levels this year. China, Europe and the U.S. followed somewhat different approaches to containing the spread of the virus. These differences may impact the recovery trajectory and speed in each of these major global demand centers, with the U.S. lagging and likely to continue to fall behind given the resurgence of cases. The market recovery we have seen has been driven by liquidity. Major central banks acted early and decisively, such that periods of funding stress typical in acute and sudden recession were fleeting. Domestic financial conditions are normalizing rapidly and both the U.S. Fed and Europe’s ECB have assured the markets that they will remain committed to eliminating pockets of funding stress wherever necessary. In China, the PBoC has aggressively increased liquidity provisions, such that the total credit impulse in the economy is now among the strongest we have seen in a decade. Importantly, funding conditions remain adequate for the vast majority of Emerging Market economies, supported by ample dollar liquidity and lower oil prices. From a corporate performance perspective, new economy digital business models proved more defensive and more resilient amid the pandemic-induced collapse in economic activity. While the majority of S&P 500 companies saw year-on-year revenue declines in excess of 10%, the fastest growers clocked in double digit gains. This widening performance differential is particularly interesting to us as investors in industry leading growth companies. While valuation multiples appear inflated due to depressed earnings, this is largely consistent with historical recovery environments. Looking forward, however, successful containment of the virus, combined with improving prospects

for an effective vaccine, are likely to pave the way for a broadening of market leadership to include more traditional cyclical companies as their earnings begin to stabilize and reaccelerate. This will be the ultimate catalyst to see a style reversal in the market, where the valuation differentials of high growth companies relative to all others will likely compress. We are monitoring this closely. Given that backdrop and this period of high uncertainty, we are focused on understanding the durability of the competitive advantage of those “digital winners”, trying to understand the nature of the acceleration of their growth; and how much of that future success is priced into the stocks. Electronic payments are a key focus area in that context. On the other hand, we are also interested in some of the more compelling structural growth companies in cyclical industries who have been particularly impacted by the economic slowdown. While there may be limited visibility in sight, many of these stocks remain quite depressed and may represent a significant valuation as well as growth opportunity when activity normalizes. Air travel and aerospace manufacturing companies are good examples. Some additional detail on electronic payments and aerospace opportunities are summarized below. Electronic Payments The adoption of digital, electronic and cashless payments is not a new story. It has been a decades-long phenomena, pre-dating e-commerce. But online shopping has been a massive catalyst, as have mobile penetration, availability of better and easier payment solutions, and evolving consumer habits/preference. Not to mention cleanliness. All of which were in place long before COVID-19. Perhaps not surprisingly, 5 10662816


we have material exposure to the payments industry, both direct and indirect, in most of our investment strategies. Prior to this year, electronic payments growth and penetration had been steadily increasing, growing ~2x GDP in many major economies, including North America. McKinsey calculates that mobile transactions in China grew at a +123% CAGR from ’13-’18. During the pandemic-related closures, both consumers and merchants have increasingly adopted digital payments as they adjust to the realities of this new world. Mastercard reported “card-not-present” transactions as a percentage of total volumes in April moving from 40% last year to 50% this year. Visa reported that similar transactions were up +1200 bps in April as well. Interestingly, Paypal said there has not been a decline from elevated levels as economies have re-opened, and they have also observed new demographics moving online. Worldline believes that COVID-19 is a “true accelerator” of cashless trends. We have observed an acceleration in lower penetration categories (think of grocery, pharmacy, furniture, etc.); not to mention emergence of newer areas of the digital economy like education, healthcare, food delivery, gaming, and digital media. And the consumer experience is proving to be a positive one. Payment practices have historically proven to be sticky, so we believe this step change will create a new baseline. In fact, we believe the electronic payments penetration growth story has accelerated by up to 3 or 4 years. We expect card payments growth could increase by an additional 100 bps/yr. While these stocks have performed well in the face of altered consumer behavior, we think this industry is the beneficiary of accelerating structural growth, and they remain compelling.

Aerospace Many of our portfolios have material exposure to the commercial aerospace industry because we think consumer demand, company (and product) quality, and industry structure have converged to be a very compelling long-term investment opportunity. There is certainly less cyclicality to their sales and profits now than in previous decades. Technological breakthroughs have changed the return profiles for the aerospace component manufactures materially. The last 20 years have seen an industry transformation: planes now run much more efficiently and longer, not to mention more safely; and consolidation of the industry has also helped profit growth. Many parts makers have shifted to consumption-based business models, and combined with lower competition and disruption, make for highly visible cash flows. On the demand side, growth of air travel has been an inexorable trend for decades. We still see very low penetration of air travel in most of the higher growth parts of the world, and aspirational consumption of travel is very real. Thus demand has steadily risen, while the cost per seat mile has declined in similar fashion. There remains a massive total addressable market (TAM) opportunity. This growth has clearly been disrupted by the pandemic, with global air traffic during the second quarter bottoming at just 10-15% of the January 2020 level. We have observed this to be coincident with pandemic-related death rates. Since then, China domestic travel has now recovered to 80% of prior peak levels, and Europe is likely to be there my mid-July. The U.S. probably has more near-term uncertainty, but even Southwest Airlines has been planning for resuming 100% of its capacity by year end. There is some visibility into 6 10662816


schedules and we believe that during the third quarter, global air traffic will be back to 40-50% of pre-existing capacity. That is the near-term story, and it won’t make that much of a difference to the industry’s financials or likely the stocks. We are focused here on the intermediate to long term. Importantly, the airlines around the world have not experienced many bankruptcies. They are better run, and in many cases have received government support, so we believe the risk to the manufacturers’ customer base is low. Thus, with some volatility expected, we believe the aerospace industry will recover back to pre-COVID levels by 2022. These stocks, however remain ~40-60% below their pre-COVID levels. Final Thoughts In this confusing period, visibility of growth is being bid up, while uncertainty is being punished. In reality, the actual stock risk/reward may be better where it is less visible, as we believe is the case here. Twelve months from now, we would expect either the gap in actual growth, or the gap in visibility of growth, to narrow. This presents a very compelling opportunity. As growth investors, the critical point of these two examples is that we strive to strike a balance between different types of growth in the portfolios such that we can deliver consistent performance through different economic backdrops and market environments.

Finally, on top of the COVID-19 crisis, the killing of George Floyd (and others) and the resultant Black Lives Matter movement have sparked some real attention in our society to the difficulties of being a minority in America. They have also brought to light the realities that a number of our work colleagues are confronted with, which may be very different than the experiences most of us enjoy. Within William Blair Investment Management, we have had an increased focus on attracting a diverse set of perspectives into our organization for the last several years, while also striving for a culture of inclusion. This is critical to the long term sustainability of our business—making sure we are building a team consisting of the best and the brightest, and creating a workplace and a culture that allows those different perspectives and voices to thrive. We are reminded that this has been an essential element of our success, and will increasingly be a focus for our organization moving forward.

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Market Performance June 2020

AC World (DM+EM) 19.8 -7.1 26.4 -10.1Developed Markets (DM) 19.9 -6.7 27.5 -9.4Pacific ex JP 22.3 -12.4 18.3 -11.2Japan 11.8 -7.6 19.6 -13.5Europe ex UK 18.4 -9.2 25.0 -15.7UK 8.8 -23.9 23.2 -15.0Canada 23.0 -12.6 27.9 -17.6USA 22.1 -3.6 30.4 -5.7Emerging Markets (EM) 18.9 -10.1 17.6 -15.0Asia 18.7 -3.7 17.8 -15.9EMEA 19.4 -21.3 15.8 -16.8Latin America 20.1 -35.5 19.4 -7.2Frontier Markets (FM) 14.1 -15.7 13.8 -16.6Large Cap 18.6 -5.5 26.7 -8.6Small Cap 24.8 -12.8 24.7 -14.4Communication Svcs 19.9 -0.3 24.2 -10.9Discretionary 29.8 -0.9 26.8 -9.8Staples 9.7 -6.0 20.8 -10.5Energy 19.1 -34.9 11.6 -14.9Financials 12.4 -23.7 22.9 -15.7Healthcare 16.6 2.6 23.2 1.2Industrials 18.4 -13.9 26.7 -15.5IT 30.3 11.2 46.5 -6.2Materials 26.7 -8.7 20.0 -17.3Real Estate 11.3 -17.6 24.6 -7.8Utilities 6.7 -9.7 21.3 0.9Quality -4.8 1.9 5.6 13.9Valuation -1.4 -12.8 -0.1 2.4Etrend -2.1 4.5 5.2 5.4Momentum 2.0 13.3 4.9 3.4Growth -1.3 6.7 4.1 -3.0Composite -4.5 -2.8 4.3 11.9

QTD YTD 2019 2018

Regi

ons

Styl

eSi

zeSe

ctor

s

Past performance is not a reliable indicator of future results Regional performance is based on IMI region/country indexes. Sector and style values are based on the MSCI ACWI IMI Index. Size values are based on the MSCI ACWI Index. Style values reflect the Quintile 1 minus Quintile 5 spread of William Blair’s proprietary quantitative models. Sectors are based on Global Industry Classification (GICS) sectors. Large Cap and Small Cap based on MSCI Global Investable Market Index Methodology. Data in blue reflects the top 20% (highest) values by region, country, sector, and style. Data in red reflects the bottom 20% (lowest) values by region, country, sector, and style. A direct investment in an unmanaged index is not possible. Name change from Telecommunication Services to Communication Services effective after close of business on 9/28/18; industry and subindustry reclassifications effective 10/1/18.

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William Blair International Growth Fund Performance June 2020

Periods ended 6/30/2020 June Quarter YTD 1 Year 3 Year 5 Year 10 Year Since

Inception* International Growth Fund (WBIGX) – Class N 5.49% 25.20% 0.27% 9.49% 6.54% 4.78% 7.38% -- International Growth Fund (BIGIX) – Class I 5.54% 25.26% 0.40% 9.82% 6.88% 5.10% 7.70% -- International Growth Fund (WBIRX) – Class R6 5.57% 25.30% 0.46% 9.92% -- -- -- 10.42% MSCI AC World ex US IMI (net) 4.36% 16.96% -11.24% -4.74% 0.96% 2.30% 5.11% -4.08%Class N inception: 10/1/1992 Class I inception: 10/1/1999 *Class R6 inception: 5/2/2019Performance cited represents past performance. Past performance does not guarantee future results and current performance may be lower or higher than the data quoted. Results shown are average annual returns, which assume reinvestment of dividends and capital gains. Investment returns and principal will fluctuate with market and economic conditions and you may have a gain or loss when you sell shares. For the most current month end performance information, please call 1‐877‐962‐5247, or visit our Web site at www.williamblairfunds.com. Class N shares are available to the general public without a sales load. Class I and Class R6 shares are available only to investors who meet certain eligibility requirements. International Growth Fund Expense Ratios: Gross Class N Shares 1.45% Class I Shares 1.14% Class R6 Shares 1.06% Expenses shown are as of the most recent prospectus.

A direct investment in an index is not possible. The MSCI All Country World ex-US IMI Index is a free float-adjusted market capitalization index that is designed to measure equity market performance in the global developed and emerging markets, excluding the US.

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William Blair International Growth Fund Performance Analysis (by sector) June 2020

The table below shows the calculated sector attribution of the International Growth Fund vs. its benchmark. International Growth Fund vs. MSCI AC World ex US IMI (net)

04/01/2020 to 06/30/2020 International Growth Fund MSCI AC World ex US IMI (net) Attribution Analysis

GICS Sector

Average Weight

Total

Return

Contrib to

Return

Average Weight

Total

Return

Contrib to

Return

Allocation

Effect

Issue Selection

Effect

Total Effect Communication Services 5.0% 45.2% 2.1% 7.1% 18.2% 1.3% 0.0% 1.2% 1.2% Consumer Discretionary 13.1% 22.7% 3.1% 12.1% 20.8% 2.5% 0.1% 0.3% 0.3% Consumer Staples 6.1% 16.6% 1.1% 9.8% 10.7% 1.1% 0.2% 0.4% 0.6% Energy 1.6% 33.3% 0.5% 4.8% 10.5% 0.5% 0.2% 0.4% 0.6% Financials 9.4% 14.2% 1.4% 17.3% 11.7% 2.1% 0.4% 0.2% 0.6% Health Care 13.1% 21.2% 2.8% 10.5% 17.3% 1.8% 0.0% 0.5% 0.5% Industrials 21.0% 24.3% 5.0% 12.3% 18.5% 2.3% 0.1% 1.2% 1.3% Information Technology 23.9% 34.6% 7.9% 10.8% 25.8% 2.7% 1.2% 2.0% 3.2% Materials 2.5% 18.3% 0.5% 7.8% 27.0% 2.0% -0.5% -0.2% -0.7% Real Estate 2.5% 16.7% 0.4% 4.1% 9.0% 0.4% 0.1% 0.2% 0.3% Utilities 1.2% 12.1% 0.1% 3.6% 12.3% 0.5% 0.1% 0.0% 0.1% Cash 0.6% - 0.0% 0.0% 0.0% 0.0% -0.1% 0.0% -0.1%

Total 100.0% 24.9% 24.9% 100.0% 17.0% 17.0% 1.8% 6.1% 7.9% Past performance does not guarantee future results. Performance cited represents past performance and current performance may be lower or higher than the data quoted. Gross investment performance assumes reinvestment of dividends and capital gains, is gross of investment management fees and net of transaction costs. Attribution by segment is based on estimated returns of equities held within the segments listed. All stocks held during a measurement period, including purchases and sales, are included. Cash is not allocated among segments. Calculations are for attribution analysis only and are not intended to represent simulated performance history. The actual returns may be higher or lower. We calculate attribution using our proprietary attribution system. Our proprietary attribution system runs transactions-based attribution, taking into account all trading activity. Interaction effect is reallocated into Selection effect. Sectors are based on Global Industry Classification (GICS) Sectors. International investing involves special risk considerations, including currency fluctuations, lower liquidity, economic and political risk.

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William Blair International Growth Fund Performance Analysis (by region) June 2020

The table below shows the calculated regional attribution of the International Growth Fund vs. its benchmark. International Growth Fund vs. MSCI AC World ex US IMI (net)

04/01/2020 to 06/30/2020 International Growth Fund MSCI AC World ex US IMI (net) Attribution Analysis

Region

Average Weight

Total

Return

Contrib to

Return

Average Weight

Total

Return

Contrib to

Return

Allocation

Effect

Issue Selection

Effect

Total Effect Pacific Ex Japan 4.0% 11.5% 0.5% 7.6% 22.0% 1.6% -0.1% -0.5% -0.6% Japan 13.1% 23.1% 3.0% 17.8% 11.8% 2.2% 0.2% 1.5% 1.8% Europe+ME Ex U.K. 41.0% 25.8% 10.7% 31.3% 18.0% 5.6% 0.2% 3.2% 3.3% U.K. 11.8% 13.8% 1.7% 9.5% 10.0% 1.0% -0.2% 0.5% 0.3% W Hemisphere 4.5% 29.8% 1.2% 6.5% 22.9% 1.4% -0.1% 0.3% 0.2% EM Asia 22.6% 30.2% 6.7% 21.4% 18.9% 4.0% 0.0% 2.5% 2.4% EMEA 0.5% 49.6% 0.2% 3.6% 19.1% 0.7% -0.1% 0.1% 0.1% Latin America 1.8% 55.6% 0.9% 2.3% 20.1% 0.5% 0.0% 0.6% 0.5% Cash 0.6% - 0.0% 0.0% 0.0% 0.0% -0.1% 0.0% -0.1%

Total 100.0% 24.9% 24.9% 100.0% 17.0% 17.0% -0.3% 8.2% 7.9% Past performance does not guarantee future results. Performance cited represents past performance and current performance may be lower or higher than the data quoted. Gross investment performance assumes reinvestment of dividends and capital gains, is gross of investment management fees and net of transaction costs. Attribution by segment is based on estimated returns of equities held within the segments listed. All stocks held during a measurement period, including purchases and sales, are included. Cash is not allocated among segments. Calculations are for attribution analysis only and are not intended to represent simulated performance history. The actual returns may be higher or lower. We calculate attribution using our proprietary attribution system. Our proprietary attribution system runs transactions-based attribution, taking into account all trading activity. Interaction effect is reallocated into Selection effect. International investing involves special risk considerations, including currency fluctuations, lower liquidity, economic and political risk

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William Blair International Growth Fund Top Contributors/Detractors June 2020

The tables below show the top contributors and detractors for the International Growth Fund vs. its benchmark. Top Five Contributors (%) for the Period: 04/01/2020 to 06/30/2020 Issuer Sector Country Contribution To

Relative Return Sea Ltd Communication Services Thailand 0.51 MediaTek Inc Information Technology Taiwan 0.50 Adyen NV Information Technology Netherlands 0.44 Lululemon Athletica Inc Consumer Discretionary Canada 0.34 Wix.com Ltd Information Technology Israel 0.31 Top Five Detractors (%) for the Period: 04/01/2020 to 06/30/2020 Issuer Sector Country Contribution To

Relative Return Compass Group PLC Consumer Discretionary United Kingdom -0.24 AIA Group Ltd Financials Hong Kong -0.16 Ping An Insurance Group Co of Financials China -0.14 China Merchants Bank Co Ltd Financials China -0.12 Enel SpA Utilities Italy -0.11 Index: MSCI AC World ex US IMI (net) Past performance does not guarantee future results. Performance cited represents past performance and current performance may be lower or higher than the data quoted. Gross investment performance assumes reinvestment of dividends and capital gains, is gross of investment management fees and net of transaction costs. Performance results will be reduced by the fees incurred. Attribution by is based on estimated returns of all equities held during a measurement period, including purchases and sales. We calculate attribution using our proprietary attribution system. Our proprietary attribution system runs transactions-based attribution, taking into account all trading activity. Sectors are based on Global Industry Classification (GICS) Sectors. Individual securities listed in this report are for informational purposes only. Holdings are subject to change at any time. This information does not constitute, and should not be construed as, investment advice or recommendations with respect to the securities listed. Specific securities identified and described do not represent all of the securities purchased, sold, or recommended and you should not assume that investments in the securities identified were or will be profitable

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William Blair International Growth Fund Positioning June 2020

Regional Exposure Sectoral Exposure

3.812.7

42.711.7

4.321.9

0.52.2

0.3

7.617.2

31.59.2

6.522.0

3.62.3

--

Asia Ex-JapanJapan

Europe+ME Ex U.K.United Kingdom

Western HemisphereEM Asia

EMEALatin America

Cash & EquivalentsInternational Growth Fund MSCI AC World ex US IMI (net)

-0.4-0.5

2.3-0.8-0.4-0.9-0.2

0.80.0

-1.30.1

2.5-1.9-1.4

4.7-0.5-0.7

-1.5Portfolio Diff Prev QTRPortfolio Diff YTD

5.4 13.15.51.7 8.111.8 22.526.52.32.20.7--0.3

7.112.59.54.5 17.110.412.411.27.93.93.5----

Communication ServicesConsumer DiscretionaryConsumer StaplesEnergyFinancialsHealth CareIndustrialsInformation TechnologyMaterialsReal EstateUtilitiesOtherCash & EquivalentsInternational Growth Fund MSCI AC World ex US IMI (net)

0.60.3-1.3 0.1-2.9-2.3 2.44.7-0.2-0.5-1.0 0.00.0

1.90.0-0.7 0.1-6.9 0.80.4 7.5-0.4-0.4-0.8 0.0-1.5Portfolio Diff Prev QTRPortfolio Diff YTD

Source: William Blair. Cash & Equivalents includes: cash and dividend accruals.

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William Blair International Growth Fund Top Holdings by Market Cap June 2020

The table below shows the International Growth Fund’s largest holdings as of 6/30/2020 by market cap as well as the sub-totals by market cap for the portfolio and index. The stocks are listed by country and by the sector that defines each one’s role in the portfolio. Country Sector

% of Total Net Assets in

Portfolio

% of Total Net Assets in

Index* Large Cap(>$15b) 63.0% 55.6% Tencent Holdings Ltd China Communication Services 2.5% 1.6% Alibaba Group Holding Ltd China Consumer Discretionary 2.1% 1.7% ASML Holding NV Netherlands Information Technology 2.0% 0.7% Keyence Corp Japan Information Technology 1.9% 0.3% Atlas Copco AB Sweden Industrials 1.7% 0.2% Mid Cap($4-15b) 28.2% 23.8% MTU Aero Engines AG Germany Industrials 1.1% 0.0% Omron Corp Japan Information Technology 1.1% 0.1% Halma PLC United Kingdom Information Technology 0.8% 0.0% Teleperformance France Industrials 0.7% 0.1% Worldline SA/France France Information Technology 0.7% 0.1% Small Cap(<$4b) 8.8% 20.6% Centre Testing International G China Industrials 0.3% 0.0% KION Group AG Germany Industrials 0.3% 0.0% AVEVA Group PLC United Kingdom Information Technology 0.3% 0.0% Indutrade AB Sweden Industrials 0.3% 0.0% Rotork PLC United Kingdom Industrials 0.3% 0.0%

*Index: MSCI AC World ex US IMI (net) Market cap calculations are based on the free float adjusted market cap and exclude cash equivalents. Sectors are based on Global Industry Classification (GICS) Sectors. Individual securities listed in this report are for informational purposes only. Holdings are subject to change at any time. This information does not constitute, and should not be construed as, investment advice or recommendations with respect to the securities listed. Specific securities identified and described do not represent all of the securities purchased, sold, or recommended and you should not assume that investments in the securities identified were or will be profitable.

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William Blair International Growth Fund Top Portfolio Changes June 2020

Top Portfolio Changes During the Period: 04/01/2020 to 06/30/2020 Security Name Country Sector

New

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China Merchants Bank-H China Financials Canadian Pacific Railway Ltd Canada Industrials Enel Spa Italy Utilities China Mengniu Dairy Co China Consumer Staples Victrex Plc United Kingdom Materials Sectors are based on Global Industry Classification (GICS) Sectors. Individual securities listed in this report are for informational purposes only. Holdings are subject to change at any time. This information does not constitute, and should not be construed as, investment advice or recommendations with respect to the securities listed. Specific securities identified and described do not represent all of the securities purchased, sold, or recommended and you should not assume that investments in the securities identified were or will be profitable.

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William Blair International Growth Fund Characteristics June 2020

International Growth Fund MSCI AC World ex US IMI (net) Difference Quality Return on Equity (%) 18.0 13.2 36% Cash Flow ROIC (%) 18.7 15.6 20% Debt/Equity (%) 61.2 90.9 -33% Growth Long-Term Growth (%) 11.9 9.0 32% 5-Year Historic EPS Growth (%) 13.1 8.2 59% Reinvestment Rate (%) 12.8 7.8 64% Earnings Trend EPS Revision Breadth (%) -3.0 -4.5 1.5 Valuation P/E (next 12 months) 30.4 16.4 85% Other Float Adjusted Weighted Average Market Cap ($m) 50,218 52,061 -4% Number of Holdings 180 6,442 Active Share (%) 83 --

Characteristics have been calculated by William Blair. Please refer to the ‘Important Disclosures’ section of this document for further information on investment risks and returns.

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William Blair International Growth Fund Holdings June 2020

As of 6/30/2020. Information about the Fund’s holdings should not be considered investment advice. There is no guarantee that the Fund will continue to hold any one particular security or stay in any one particular sector. Holdings are subject to change at any time. Cash includes cash equivalents and accruals.

Portfolio Portfolio Portfolio Weight Weight Weight Pacific Ex Japan 3.76 Japan (continued) Europe+ME Ex UK (continued)

Australia 2.23 Japan (continued) France (continued) Csl Ltd 0.69 Sushiro Global Holdings Ltd 0.18 Kering 0.80 Atlassian Corp Plc-Class A 0.64 Meitec Corp 0.11 Teleperformance 0.74 Aristocrat Leisure Ltd 0.53 Ns Solutions Corp 0.11 Worldline SA 0.73 Goodman Group 0.37 Europe+ME Ex UK 42.68 Hermes International 0.41 Hong Kong 1.54 Belgium 0.33 Sartorius Stedim Biotech 0.35 Aia Group Ltd 1.54 Warehouses De Pauw Sca 0.20 Orpea 0.25

Japan 12.70 Melexis NV 0.13 Rubis 0.14 Japan 12.70 Denmark 5.34 Germany 5.76 Keyence Corp 1.91 Dsv Panalpina A/S 1.47 Infineon Technologies AG 1.17 Smc Corp 1.43 Novo Nordisk A/S-B 1.00 Mtu Aero Engines AG 1.10 Daikin Industries Ltd 1.09 Genmab A/S 0.76 Sap Se 1.04 Omron Corp 1.07 Orsted A/S 0.60 Vonovia Se 0.70 Shiseido Co Ltd 0.78 Coloplast-B 0.56 Puma Se 0.54 Hoya Corp 0.71 Chr Hansen Holding A/S 0.42 Teamviewer AG 0.54 Terumo Corp 0.62 Netcompany Group As 0.21 Kion Group AG 0.29 Disco Corp 0.58 Royal Unibrew 0.20 Carl Zeiss Meditec Ag - Br 0.22 Nomura Research Institute Lt 0.55 Tryg A/S 0.13 Hellofresh Se 0.16 Nihon M&A Center Inc 0.53 Faroe Islands 0.14 Ireland 1.94 Asahi Intecc Co Ltd 0.44 Bakkafrost P/F 0.14 Kingspan Group PLC 0.70 Monotaro Co Ltd 0.41 Finland 0.85 Icon PLC 0.67 Tis Inc 0.40 Neste Oyj 0.85 Kerry Group Plc-A 0.57 Shimadzu Corp 0.30 France 9.82 Israel 0.72 Misumi Group Inc 0.29 Lvmh Moet Hennessy Louis Vui 1.34 Wix.Com Ltd 0.51 Gmo Payment Gateway Inc 0.28 Safran SA 1.16 Cyberark Software Ltd/Israel 0.21 Harmonic Drive Systems Inc 0.25 Airbus Se 1.15 Italy 0.50 Persol Holdings Co Ltd 0.23 L'Oreal 1.06 Amplifon Spa 0.21 Technopro Holdings Inc 0.22 Capgemini Se 0.88 Moncler Spa 0.16 Benefit One Inc 0.21 Dassault Systemes SA 0.82 Brunello Cucinelli Spa 0.13

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Portfolio Portfolio Portfolio Weight Weight Weight Europe+ME Ex UK (continued) Europe+ME Ex UK (continued) UK (continued)

Luxembourg 0.38 Switzerland (continued) United Kingdom (continued) Eurofins Scientific 0.38 Temenos Ag - Reg 0.58 Big Yellow Group PLC 0.19 Netherlands 3.73 Logitech International-Reg 0.47 Renishaw PLC 0.17 Asml Holding NV 1.96 Tecan Group Ag-Reg 0.28 Softcat PLC 0.15 Adyen NV 1.12 Vat Group AG 0.26 Trainline PLC 0.13 Euronext NV 0.24 Belimo Holding Ag-Reg 0.21 Abcam PLC 0.12 Be Semiconductor Industries 0.21 Softwareone Holding AG 0.21 W Hemisphere 4.31 Imcd NV 0.20 Sig Combibloc Group AG 0.16 Canada 4.31 Norway 0.40 UK 11.69 Canadian Natl Railway Co 1.34 Tomra Systems Asa 0.40 United Kingdom 11.69 Lululemon Athletica Inc 0.95 Spain 0.98 Experian PLC 1.20 Brookfield Asset Manage-Cl A 0.71 Amadeus It Group SA 0.98 London Stock Exchange Group 1.00 Alimentation Couche-Tard -B 0.70 Sweden 4.79 Diageo PLC 0.89 Kinaxis Inc 0.27 Atlas Copco Ab-A Shs 1.69 Compass Group PLC 0.81 Enghouse Systems Ltd 0.19 Hexagon Ab-B Shs 1.14 Halma PLC 0.81 Toromont Industries Ltd 0.14 Evolution Gaming Group 0.57 Rentokil Initial PLC 0.71 EM Asia 21.88 Nibe Industrier Ab-B Shs 0.30 Relx PLC 0.71 China 14.42 Indutrade AB 0.29 Segro PLC 0.63 Tencent Holdings Ltd 2.53 Lifco Ab-B Shs 0.21 Spirax-Sarco Engineering PLC 0.63 Alibaba Group Holding Ltd 2.12 Nolato Ab-B Shs 0.20 Ashtead Group PLC 0.60 Tal Education Group- Adr 1.13 Fabege AB 0.14 Intertek Group PLC 0.46 Ping An Insurance Group Co-H 1.10 Vitrolife AB 0.12 Croda International PLC 0.39 Netease Inc-Adr 0.90 Aak AB 0.12 Intermediate Capital Group 0.36 Kweichow Moutai Co Ltd-A 0.59 Switzerland 7.02 Avast PLC 0.33 Meituan Dianping-Class B 0.59 Lonza Group Ag-Reg 1.32 3i Group PLC 0.30 Silergy Corp 0.54 Sika Ag-Reg 1.20 Aveva Group PLC 0.29 Li Ning Co Ltd 0.51 Partners Group Holding AG 0.86 Rotork PLC 0.27 Country Garden Services Hold 0.43 Stmicroelectronics NV 0.80 Boohoo Group PLC 0.27 Wuxi Biologics Cayman Inc 0.41 Straumann Holding Ag-Reg 0.67 Greggs PLC 0.26 Hangzhou Tigermed Consulti-A 0.39

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Portfolio Portfolio Weight Weight

EM Asia (continued) EM Asia (continued) China (continued) Taiwan (continued) Centre Testing Intl Group-A 0.34 Globalwafers Co Ltd 0.19 Aier Eye Hospital Group Co-A 0.34 Thailand 0.98 Foshan Haitian Flavouring -A 0.32 Sea Ltd-Adr 0.83 Shenzhou International Group 0.30 Airports Of Thailand Pcl-For 0.15 Topchoice Medical Corporat-A 0.26 EMEA 0.50 Shenzhen Mindray Bio-Medic-A 0.24 Russia 0.50 Naura Technology Group Co-A 0.24 Yandex Nv-A 0.50 Wuxi Apptec Co Ltd-A 0.22 Latin America 2.16 Offcn Education Technology-A 0.20 Argentina 0.80 A-Living Services Co Ltd-H 0.20 Mercadolibre Inc 0.54 Tencent Music Entertainm-Adr 0.15 Globant SA 0.26 Ak Medical Holdings Ltd 0.15 Brazil 1.20 Will Semiconductor Ltd-A 0.13 B3 Sa-Brasil Bolsa Balcao 0.48 Vitasoy Intl Holdings Ltd 0.10 Magazine Luiza SA 0.35 India 1.51 Notre Dame Intermed Par SA 0.25 Reliance Industries Ltd 0.80 Lojas Renner S.A. 0.12 Hdfc Bank Limited 0.37 Mexico 0.16 Pidilite Industries Ltd 0.16 Grupo Aeroportuario Sur-Adr 0.16 Ipca Laboratories Ltd 0.15 Cash 0.32 Reliance Industries-Partly P 0.03 Total 100.00 Indonesia 0.96 Bank Central Asia Tbk Pt 0.96 South Korea 0.95 Samsung Sdi Co Ltd 0.50 Kakao Corp 0.45 Taiwan 3.07 Taiwan Semiconductor-Sp Adr 1.61 Mediatek Inc 1.26

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Glossary - Terms

1 Month EPS Revision Breadth: 1-month factor representing the trend in the direction of estimate changes. Range from -100% to +100%, it is calculated as the number of positive revisions minus the number of negative revisions divided by the total number of estimates. Active Share: A measure of the percentage of equity holdings in a portfolio that differ from the benchmark index. It is calculated by taking the sum of the absolute value of the differences of the weight of each holding in a portfolio versus the weight of each holding in the index and dividing by two. Alpha: A measure of a portfolio’s return in excess of the market return, after both have been adjusted for risk. It is a mathematical estimate of the amount of return expected from a portfolio above and beyond the market return at any point in time. For example, an alpha of 1.25 indicates that a stock is projected to rise 1.25% in price in a year over the return of the market, or the return when the market return is zero. When an investment price is low relative to its alpha, it is undervalued, and considered a good selection. Beta: A quantitative measure of the volatility of the portfolio relative to the overall market, represented by a comparable benchmark. A beta above 1 is more volatile than the overall market, while a beta below 1 is less volatile, and could be expected to rise and fall more slowly than the market. Cash Flow Return on Invested Capital (ROIC): A measure of how effectively a company generates cash flow based on legacy capital investment. Developed Markets: Using the Morgan Stanley Capital International (MSCI) geographic definition, this region includes: United Kingdom, Europe (Austria, Belgium, Denmark, Finland, France, Germany, Greece, Ireland, Italy, Netherlands, Norway, Spain, Sweden and Switzerland), Japan, Pacific Asia (Australia, Hong Kong, New Zealand, and Singapore) and the Western Hemisphere (Canada and other Americas). Debt to Total Capital Ratio: This figure is the percentage of each company’s invested capital that consists of debt. Companies with a high Debt to Total Capital level may be considered more risky. From a portfolio perspective, the portfolio Debt to Total Capital Ratio is a weighted average of the individual holdings' Debt to Total Capital Ratio. Emerging Markets: Using MSCI’s geographic definition, this region includes: Emerging Markets Asia (China, India, Indonesia, Malaysia, S Korea, Taiwan, and Thailand), Emerging Markets Europe, Mid-East and Africa (Czech Republic, Hungary, Poland, Russia, Turkey, Egypt, Morocco, and S Africa), and Latin America (Argentina, Brazil, Chile, Columbia, Mexico, Peru and Venezuela). EPS (Earnings Per Share) Growth Rate (Projected): This measure represents the weighted average of forecasted growth in earnings expected to be experienced by the stocks within the portfolio over the next 3-5 years. From a portfolio perspective, the portfolio P/E ratio and EPS Growth Rate are weighted averages of the individual holdings’ P/E ratios and EPS Growth Rates. Data calculated in FactSet. EPS Growth Rate - 5-Year Historic: The weighted average earnings per share growth for stock within the portfolio over the past 5 years. EV/EBITDA: (Enterprise Value / Earnings Before Interest, Taxes and Depreciation-Amortization): The EV/EBITDA ratio is useful for global comparisons because it ignores the distorting effects of individual countries' taxation policies. It's used to find attractive takeover candidates. Enterprise value is a better measure than market cap for takeovers because it takes into account the debt which the acquirer will have to assume. Therefore, a company with a low EV/EBITDA ratio can be viewed as a good takeover candidate. EV/IC: (Enterprise Value / Invested Capital) Ratio: Enterprise Value (EV), which is market capitalization minus cash plus debt divided by Invested Capital (IC), which is the sum of common stock, preferred stock and long-term debt. This number will get you a simple multiple. If it is below 1.0, then it means that the company is selling below book value and theoretically below its liquidation value.

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Glossary - Terms

Information Coefficient: A measure of the correlation between expected and actual returns. Information Ratio: A measure of risk-adjusted return. The annualized excess return of the portfolio relative to a respective benchmark, divided by the annualized tracking error relative to that same benchmark. The higher the measure, the higher the risk-adjusted return. PBV: (Price/Book Value) Ratio: The PBV Ratio measures the value of a company's common stock relative to its shareholder's equity. A price-to-book multiple above one means that the price of the company's common stock is higher than its common shareholder's equity. A price-to-book multiple below one means that the price of the company's common stock are less than its break-up value, and the shares may be undervalued. PCF: (Price/CashFlow): Some analysts favor the price/cash flow over the price-earnings (PE) ratio as a measure of a company’s value. Cash flow is a measure of a company's financial health. It equals cash receipts minus cash payments over a given period of time. P/E: (Price/Earnings) Ratio: This is the most common measure of how expensive a stock is. Simply, it is the cost an investor in a given stock must pay per dollar of current annual earnings. A high P/E generally indicates that the market is paying more to obtain the stock because it has confidence in the company’s ability to increase its earnings. Conversely, a low P/E often indicates that the market has less confidence that the company’s earnings will increase rapidly or steadily, and therefore will not pay as much for its stock. R-squared: A measurement of how closely the portfolio’s performance correlates with the performance of its benchmark, such as the MSC AC World Free ex US Index. In other words, it is a measurement of what portion of a portfolio’s performance can be explained by the performance of the overall market or index. Ranges from 0 to 1, where 0 indicates no correlation and 1 indicates perfect correlation. Risk (Standard Deviation): A measure of the portfolio’s risk. A higher standard deviation represents a greater dispersion of returns, and thus a greater amount of risk. The annualized standard deviation is calculated using monthly returns. Sharpe-Ratio: A risk-adjusted measure calculated using standard deviation and excess return (Portfolio return – Risk Free Rate) to determine reward per unit of risk. The higher the Sharpe ratio, the better the portfolio’s historic risk-adjusted performance. Tracking Error: Tracking Error measures the extent to which a portfolio tracks its benchmark. The tracking error of an index portfolio should be lower than that of an active portfolio. The tracking error will always be greater than zero if the portfolio is anything other than a replication of the benchmark. Trailing 1-Year Turnover: This figure reflects the portfolio’s trading activity by calculating the amount of the portfolio’s holdings bought or sold over the prior year, expressed as a percentage of the portfolio’s average market value. Turnover figures may be related to the amount of trading costs experienced by the portfolio. Weighted Average Market Capitalization: Market capitalization refers to the total market value of each company's outstanding shares. The Weighted Average Market Capitalization for a portfolio is calculated as the average market capitalization of the stocks within the portfolio, weighted by the amount of each stock owned. Weighted Median Market Capitalization: This calculation represents the median market capitalization of the stocks in the portfolio, weighted by the amount of each stock owned.

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wb international growth fund 20q2rvw · 6/30/2020 · the fund’s returns will vary, and you...

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