Dear partners,

Your ongoing confidence and collaboration are deeply valued, forming the bedrock of our operations.

To be direct, the most recent quarter presented an extraordinary challenge, marking our second-toughest period relative to market performance. Our portfolio experienced a modest decline of just over 1%, while the broader market surged by 15%. This letter will be concise, as I intend to respect your time and offer no pretexts for the results. My response to the rapid advancements in agentic AI over the past six months was not swift enough. This delay, coupled with an overconcentration in software holdings and an insufficient allocation to semiconductor stocks, significantly hampered our performance. The critical lesson learned is the imperative to maintain exceptionally high standards for growth and quality, consistently balanced with valuation considerations. In retrospect, my focus on historical valuation metrics prevented me from fully grasping the dynamic shifts in the global landscape. While examining past financial ratios offers comfort, comprehending the present reality, rather than clinging to preferred past conditions, is far more demanding. This realization has led us to fundamentally rethink the fund's intrinsic value, now encapsulated by the concept of 'noumenon'. Derived from philosophy, ‘noumenon’ signifies the true, underlying essence of something, in contrast to ‘phenomenon,’ which pertains to perception. This Kantian ideal, though ultimately unknowable, serves as a guiding principle for astute investors—a relentless pursuit of a profound understanding of the world as it truly is, free from personal biases.

Refocusing on our portfolio, while we cannot alter past outcomes, our efforts are directed toward adapting to future dynamics. A thorough examination of underperforming assets consistently reveals a common thread: even minor compromises in our stringent quality criteria led to adverse results. Remarkably, the investment landscape is profoundly shaped by power laws. Our proprietary database, encompassing thousands of companies, informs our selection process, with the minimum threshold set for roughly the top 75 companies (representing the top 2%). Virtually every underperforming investment since the fund's inception originated from the lower half of this rigorous scoring system. Conversely, companies in the upper echelon have demonstrated exceptional resilience. A retrospective analysis, simulating an exclusive investment in only the top 10 companies from our system since inception, yielded an impressive annualized gross return of approximately 43%. While historical simulations inherently carry limitations, this exercise starkly highlighted how excessive trading has eroded value and underscored that compromising our investment standards is the root cause of these issues. My core strengths do not lie in tactical trading or macroeconomic forecasting. Instead, the fund's primary competitive advantage and inherent value stem from our distinctive qualitative and quantitative framework for identifying superior companies. Moving forward, my commitment is to elevate these standards even further and maintain an unwavering focus on this foundational principle. As I often reiterate: 'Our sole focus must be on controllable factors, diligently working to continuously enhance our benchmarks.' This quarter has unequivocally compelled us to elevate our standards. Both in investment and in life, adversity can either debilitate us or forge us anew. The choice is ours. I anticipate that, in the years to come, this quarter will be remembered as a pivotal juncture that propelled us to an unprecedented level of excellence. This is within our control, and we trust the results will naturally follow.

I am profoundly grateful for your partnership. Your trust and consistent support empower a long-term perspective, which constitutes our unique competitive edge.

The financial markets, much like life itself, are characterized by inherent fluctuations. Our strategy remains straightforward: to align with the most exceptional entrepreneurs guiding the fastest-growing, highest-quality enterprises available at the most compelling valuations. We commit to many more years of concentrating on these fundamental inputs, confident that the desired outcomes will manifest naturally.