Fund Performance

Royce International Premier Fund advanced 9.4% in 2025, trailing its benchmark, the MSCI ACWI ex USA Small Cap Index, which was up 29.3% for the same period.

What Worked… and What Didn’t

Eight of the portfolio’s nine equity sectors made a positive impact on calendar year performance, led by Information Technology, Health Care, and Financials. The only negative impact came from Real Estate. At the industry level, health care providers & services (Health Care), professional services (Industrials), and software (Information Technology) contributed most, while trading companies & distributors (Industrials), electrical equipment (Industrials), and health care equipment & supplies (Health Care) were the largest detractors. Japan, the U.K., and France contributed most on a country level in 2025; Belgium, the Netherlands, and Lithuania were the largest detractors.

Listed in Poland, Asseco Poland was the Fund’s top contributor at the position level in 2025. Asseco is one of Europe’s leading providers of proprietary IT software and services, with a focus on Central & Eastern Europe (CEE), where it serves major financial institutions, public administration, and telco/utilities customers. The company also owns a stake in Formula Systems, a Nasdaq-listed, Israeli holding company which in turn owns three listed software businesses, including Sapiens, a leading global provider of IT for the insurance industry. Asseco provides mission-critical software and services to a diversified customer base of over 100,000 customers, the largest of which makes up just 2% of sales. These customers rarely leave (the top 5 customers have a 20-year tenure) and pay Asseco predictable, mostly recurring revenues. The company benefits from favorable structural tailwinds, namely the trend to greater digitalization. In fact, the vast majority of the least digitalized countries in Europe are in CEE or Southern Europe, according to the European Commission. With this as a backdrop, the company has produced a strong record, including nearly 20% ROIC, a minimal net debt balance sheet, and a 5-year revenue compound annualized growth rates of approximately 10%. Moreover, Asseco has taken advantage of its still fragmented end-markets via an M&A-forward strategy through which it has made over 140 acquisitions since 2004.

Asseco’s shares advanced on sustained interest after Topicus—a Canadian-listed software company spun out of Constellation Software—built a stake just under 25%. The association with Constellation, a long-tenured, disciplined acquirer and operator of vertical market software businesses, broadened institutional sponsorship and improved the company’s visibility with global investors. That sentiment was underpinned by fundamentals: the company reported strong third quarter results in December, with net income above consensus, an order backlog rising 12% year-over-year, a strong acquisition pipeline, and an agreement to sell a majority stake in Sapiens (held by Formula Systems), with the expectation this would positively impact group results.

CVS Group, listed in the U.K., is a leading global provider of veterinary healthcare in the U.K. The company’s more than 450 vet practices offer high-quality primary care and, to a lesser degree, more advanced specialist treatments. The company also operates an online retail store, diagnostic laboratories, and crematoria, offering a “cradle to grave” value proposition to its customers. A diversified customer base that has proven to be both extremely loyal and price inelastic is one of the elements that attracted us to CVS. The company serves over a million pets annually. And while its services cost pet owners a few hundred pounds a year, they consider the health of their companion animals to be well worth the price since pets are typically treated as a part of the family. CVS’s customer loyalty, which has been described as “near absolute,” is underpinned by strong emotional switching costs which are further supported by various studies pointing to the immense recession-resilience of the space. CVS has also long been a consolidator of its industry. With corporate ownership of the U.K. vet industry having increased from under 20% in 2009 to 60% today, CVS has now set its sights on the rest of the world, having recently expanded into Australia, another sizeable market where corporate ownership is still just 15%.

CVS’s stock rebounded strongly in 2025, closing up some 65% on improving sentiment and a positive outcome from the U.K. Competition Markets Authority (CMA) investigation into the U.K. vet industry initiated in September 2023. Market participants over the course of the year increasingly believed that U.K. initiatives to push a pro-growth agenda and prevent excessive regulation increased the odds of a favorable outcome of the CMA investigation. In October 2025, the CMA published a provisional result of its investigation, which was broadly more benign than anticipated and focused primarily on improved disclosures, which CVS estimates will have a negligible impact on its business. Concurrently, CVS also demonstrated an acceleration in organic growth, as well as a more positive outlook on acquisitions going forward, with particularly promising momentum in Australia. Despite the re-rating, CVS’s valuation multiple remains at a roughly 50% discount to prior peaks, which we believe is unwarranted given the improved risk/reward. We also see CVS as a prime take private candidate, as the vet space has been consolidating, with acquisitions often at multiples of 20x or even higher.

NICE Information Service is the “Equifax of South Korea” and the leading credit bureau in the country with a dominant, approximately 64% market share. The company provides consumers and financial institutions with a full range of solutions including credit scores, risk analytics, and corporate ratings. These are relatively low-cost but mission critical solutions as credit assessments are a necessary part of customers’ day-to-day operations. We are attracted to NICE for the extensive database it has built on consumers and corporations over the past 30 years, as well as for its proprietary risk models and analytics, all of which result in high barriers to entry that create formidable challenges for any competitors. The company today serves 3 million consumers and 3,000 corporations, none of which accounts for more than 5% of sales. These factors all combine to afford the company significant pricing power, with the NICE historically able to raise revenue per customer by 5-10% each year with minimal attrition.

NICE’s shares benefited from strong recent operational performance, with the company steadily growing revenues while doubling its margin from 2015-2024, maintaining a net cash balance sheet, and achieving ROIC in excess of 30%. Meanwhile, the company also announced a well-received mid-term plan in which it targets an accelerated growth rate of 9% annually over the next 3 years, a more shareholder friendly capital allocation policy prioritizing greater reinvestment of excess capital into bolt-on acquisitions, the return of capital to shareholders via dividends and buybacks, and improved English investor communication and outreach. NICE’s 4Q25 performance was especially robust. Its shares rallied some 19% in local currencies on the back of a new equity buyback plan and quarterly results that saw EPS in the high teens. Even with this positive re-rating, the stock still trades at just 8x EV/EBIT and 12x price-to-earnings, which we believe is attractive in light of the company’s strong and steady value creation.

Listed in Sweden, Norva24 is the European market leader of outsourced maintenance services for underground sewer systems. Municipalities and corporates such as property management firms and restaurants engage Norva24 to regularly clean, repair, and maintain underground pipes. This is a mission-critical activity since leaking or clogged sewers lead to lengthy and costly downtimes, reduced access to clean water, toilet backflow, and even government fines, and therefore The company’s 60,000 customers have little incentive to be price aggressive. Norva24 generates approximately 75% of revenue from recurring services carried out at periodic intervals under long-term contracts and repeat maintenance work typically mandated by regulations. The poor condition and aging of underground sewer systems in Europe (e.g., sewers in Norva24’s core markets are close to their life expectancy at 40 years old) is expected to increase demand for maintenance services long-term. The industry is also ripe for consolidation as there are natural economies of scale that would not otherwise be available to a small-scale service provider. Despite being the European market leader, we estimate Norva24 holds just a 6% market share in a highly fragmented market dominated by small, mom-and-pop players. Norva24 has successfully acquired 50 companies since 2015 at attractive multiples while management has identified a further 1,900 targets in its operating markets, indicating no shortage of acquisition opportunities. In March, Norva24 announced that it had received a take-out offer from private equity firm Apax Partners at a 59% premium to the pre-bid price. The bid was unanimously recommended by the board, while Apax had already received irrevocable undertakings from Norva24’s anchor shareholders who cumulatively represented 57% of the share capital. Given these circumstances, as well as the attractive premium on offer, we viewed the risk of a counter offer as limited and chose to exit our position.

Listed in Italy, Carel is a global leader in the manufacture of niche electronic components such as controllers, sensors, and software for OEMs in the HVAC and refrigeration sectors. The company’s products help air conditioners, humidifiers, and heat exchangers work smarter and more effectively, resulting in improved energy efficiency and lower total cost of ownership. Further, Carel’s solutions are designed into customers’ end-products over multi-year development cycles, resulting in high switching costs and enduring customer relationships. Carel’s share price rebounded strongly in 2025 on the back of strong operating momentum. After a challenging 2024, in which revenues fell on the back of exceptional headwinds in its heat pumps business, 2025 saw a sequential reacceleration of organic growth, which reached 14% in 3Q25. This recovery was broad based, with notable strength in data centers, commercial, and refrigeration, where Carel continues to gain market share. Meanwhile, its EBITDA margin hit the highest level seen in the last seven years, reflecting operating leverage, favorable raw material trends, and a contribution from Kiona, the Norwegian SaaS business acquired in 2023. Carel continues to be a long-term beneficiary of the trend toward greater energy efficiency, with management flagging additional “upside risk” from favorable regulations and the ongoing shift to higher-margin software and services.

The top-detracting position in 2025 was U.K. listed Ashtead Technology Holdings, which is the leading independent provider of rental equipment to the offshore oil & gas and wind industries. Its fleet of close to 20,000 items supports vessel operators across the full project life cycle, from site characterization through construction, operations & maintenance, and decommissioning, all complemented by value-added services, including system design, training, technical consultancy, testing, and calibration. Ashtead’s niche equipment and services fill critical gaps in customers’ internal fleets, enabling offshore operations while minimizing costly vessel downtime. It serves a diversified base of more than 1,000 customers who typically charge out hundreds of thousands of dollars per day and operate in high-value/high-risk, capital-intensive projects where unavailable or faulty equipment is unacceptable. With Ashtead’s equipment representing less than 1% of total charge-out rates and paid from operating budgets, customers prioritize quality and availability over price, supporting consistent and meaningful rental price increases over time. Ashtead benefits from strong retention—having worked with 8 of its top 10 customers for more than a decade—and often operates under multi-year framework agreements. This loyalty is driven by its scale advantage (broadest product assortment and a global one-stop-shop offering) and deep embeddedness in customer operations, alongside technical consultancy and the know-how customers often lack in-house. The company also has a large, long-lived secular growth opportunity: approximately 60% of the subsea equipment fleet remains customer owned, but the propensity to rent is rising as customers rein in CapEx and reduce headcount, eroding in-house operating know-how. Despite its leadership position, Ashtead’s market share remains well below 10%, leaving substantial runway for industry consolidation. It should also benefit from sustained renewable energy demand and a geopolitical shift toward energy diversification and security—particularly as offshore wind capacity is expected to grow by more than 20% per year over the intermediate term.

Ashtead’s stock was hurt by the company’s July trading update in which it flagged lower-than-expected organic sales growth due to proactive reductions in lower margin sales as well as geopolitical headwinds, particularly in the U.S., where heightened uncertainties are resulting in some customer deferrals. Despite these deferrals, the company’s business fundamentals are robust, and its intermediate-term growth prospects remain intact. The company expects to achieve mid- to high-single digit organic growth over the next couple of years, underpinned by record customer backlogs and supplemented by selective bolt-on acquisitions. During a call with the company’s CFO in November, we were encouraged to learn that the company does not anticipate additional profit warnings and sees a “busy” outlook in the next couple of years thanks to recent large job awards. With insiders buying and multiples at record lows (6x EBIT), we continue to see a positive mid-term risk/reward.

Listed in Belgium, Azelis is a globally leading distributor of specialty chemicals. The company sits between 2,700 suppliers of specialty chemicals selling over 110,000 unique products to 59,000 customers ranging from industrial to life sciences and consumer goods companies. Azelis enjoys longstanding and often exclusive relationships with suppliers who view Azelis as an extension of their salesforce, serving the tens of thousands of customers that they otherwise find uneconomical to sell to directly. Customers, on the other hand, view Azelis as a “one-stop-shop” for all their needs, offering not only a reliable supply of specialty chemicals but also value-added services such as product formulation support. Because specialty chemicals account for a low percentage of the cost of the end-product but determine the product’s key characteristics, they are very rarely switched out once designed into a formulation, resulting in sticky customer relationships. Its shares were weak in 2025 due to softening macroeconomic conditions that depressed organic growth. In addition, tariff uncertainty resulted in customers postponing orders, which, combined with the low visibility in the business, saw management striking a cautious tone for the year and initiating cost savings. The lack of obvious green shoots and uncertainty over the timing on reaccelerated organic growth led to a sell-off that was particularly pronounced in a momentum-driven environment. We decided to exit Azelis during the fourth quarter, simplifying the portfolio by consolidating our exposure to the specialty chemicals area with IMCD, which we view as the better business due to its status as the market leader.

Listed in the Netherlands, IMCD is another global leader in the specialty chemicals distribution space. The company is positioned between 3,000 suppliers and sells over 50,000 unique products to 68,000 customers with a similarly wide range as Azelis, was well as longstanding, often exclusive, relationships with suppliers. It too acts as a “one-stop-shop” for its customers’ needs, offering not only a reliable supply of specialty chemicals but also value-added services such as product formulation support. IMCD’s shares were weak in 2025 for the same reasons as those of Azelis: A softening macro conditions weighed on organic growth and tariff-related uncertainty led customers to defer orders. The limited visibility on the timing of a growth reacceleration drove a sharp sell-off, amplified by a market environment dominated by momentum. We added to our stake in IMCD on this share price weakness, reflecting our higher conviction in the durability of its business model and the breadth of its long-term reinvestment runway.

Listed in Sweden, Vitec Software Group is a leading provider of vertical market software (VMS) in the Nordics and Netherlands. VMS refers to software that is purpose built for specific sectors and therefore addresses a much more limited market, which makes competition less intense and supports low customer churn, stability, and pricing power. Vitec primarily grows through acquisitions with the aim to be a perpetual owner of VMS businesses that are market leaders in their niche, highly profitable, and generate high levels of recurring revenue. The company today serves 24,600 customers across 40 businesses and generates 85% recurring revenues with annual churn rates below 1% due to the high switching costs and mission-critical nature of its solutions. The European VMS market is large and fragmented, split into numerous local markets differentiated by local languages, legislation, and business practices. Vitec estimates there are some 1,000 potential targets in the Nordics and an additional 1,000 in the Netherlands alone, indicating ample growth runway.

Its shares mainly fared poorly in 2025 as macro uncertainty led customers to take a wait-and-see approach to discretionary IT spending, as well as tough year-on-year comparisons in one specific business unit. This was then amplified by broader investor worries that AI would disrupt software companies. We view these pressures as largely temporary. Vitec’s core subscription revenues continue to grow organically at a high-single-digit rate and now make up more than 70% of total revenue while the weaker business unit also appears to have bottomed. We also believe concerns around AI are overstated. Vitec provides vertical market software that is tailored and deeply embedded in customers’ day-to-day workflows, making switching both costly and, in our view, unlikely. Operationally, the company continued to execute in a difficult market, including the completion of an acquisition in Poland, a new geography that opens up a broader M&A pipeline. We also like that management look advantage of the share price dislocation by buying back shares.

Listed in the U.K. but operating in Lithuania, Baltic Classifieds Group (BCG) is the leading classifieds platform in the Baltics, operating a portfolio of 14 online marketplaces in Lithuania, Estonia, and Latvia. The company enables sellers such as car dealers and real estate agents to advertise online for a fee and holds dominant positions across its core verticals, with relative market share versus the nearest competitor ranging from 5x to 48x based on time spent. BCG’s portals attract approximately 56 million visits per month, implying an average Baltic resident engages with a BCG portal roughly 10 times each month. This scale supports a powerful two-sided network effect, reinforced by strong brand recognition and trust, where buyers attract sellers and vice versa. The company today serves a highly fragmented customer base of over 10,000 sellers, many of whom lack meaningful standalone online reach, making BCG an essential and low-cost sales channel. This dynamic has supported consistent, double-digit average revenue per customer growth through price increases and product up-selling. Despite its entrenched position, BCG remains early in its monetization journey relative to its European peers, with current take rates of 1-3% in autos and 2-3% in real estate versus peer levels of 4-9%, implying meaningful long-term upside.

BCG’s share price was most impacted in 2025 by a weak fourth quarter, in which the company published first-half of 2026 results that met expectations with both revenue and adjusted EBITDA up roughly 7%, and the balance sheet moving to a net cash position. However, the market found issue with management’s outlook, which implied high single-digit revenue growth for the full year compared to consensus expectations of low double digits, and lower EBITDA margins in the mid-70s (compared to the previous year’s 78%) due to lower growth, mostly tied to a one-off tax change in Estonia and ongoing investments in headcount. Objectively, a move from 78% margins to the mid-70s is not a large cut, nor does it simply any structural change to the business model or long-term growth prospects. Still, given the fragile sentiment around classifieds today amid AI concerns, the guidance clearly unsettled the market. We viewed the share price pullback as understandable given reduced near-term growth, but the magnitude of the drop looked disproportionate to BCG’s fundamentals. We decided to top-up our exposure as BCG is the cheapest it has ever been at 13x next year’s EV/EBITDA, trading even below levels seen during the depths of the Ukraine war and in line with other classifieds despite faster growth and being in the early stage of its monetization journey.

The Fund’s disadvantage versus the benchmark was mostly attributable to stock selection in 2025, most impactfully in Industrials and Information Technology, as well as a combination of stock selection and a lower weighting in Materials. However, this needs to be contextualized: much of the Fund’s underperformance was due to the fact the portfolio is generally underweighted in the industries that dominated the benchmark’s 2025 performance. For example, we had no exposure to eight of the benchmark’s top 10 performing industries, including top contributors metals & mining (which contributed more than 5% of the benchmark’s performance) and banks. Conversely, our substantially lower weighting in Consumer Discretionary, a lack of exposure to Consumer Staples, and a much lower weighting in Real Estate contributed most to relative results in 2025.

Current Positioning and Outlook

Throughout 2025, market leadership favored lower-quality, more cyclical businesses and other highly levered balance sheet profiles, all of which are structurally underrepresented in our quality-focused approach. At the same time, a choppy interest-rate backdrop and intermittent spikes in bond-yield volatility pressured longer-duration, higher-multiple assets, pushing investors toward value stocks and short-term earnings momentum over durable, compounding cash flows. The largest non-U.S. stocks also outperformed, penalizing our smaller-cap profile. We see these style headwinds as creating a more attractive opportunity set, rather than undermining our quality-centric approach. Valuation and currency discounts across high-quality international small-caps remain elevated, particularly in overweight markets such as the U.K., even as our companies continue to deliver superior and rising returns on invested capital, net cash balance sheets, and double-digit median earnings per share growth over the past three years, well ahead of the benchmark. Several catalysts could help close this gap: steadier or declining bond yields that lessen the penalty on long-duration cash flows; broader market leadership away from narrow, momentum-driven themes toward greater dispersion and stock selection; and a softer macro environment in which strong balance sheets, pricing power, and recurring revenues are rewarded. A reversion to more historically typical small cap leadership after an unusually long and concentrated large cap cycle would further allow valuation discipline and fundamentals to reassert themselves. Against this backdrop, we remain focused on owning a concentrated portfolio of durable, high return franchises that can compound value across cycles rather than chasing short term style trends. Volatility continues to create opportunities to upgrade into businesses with strong competitive positions, long secular growth runways, and compelling entry prices. With resilient operating performance, wider valuation discounts, and clear potential catalysts, we believe the foundation for attractive multi-year returns is arguably stronger today than at any point in the Strategy’s history.

Average Annual Total Returns Through 12/31/25 (%)

Annual Operating Expenses: Gross 1.64 Net 1.44

¹ Not annualized.

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