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ES River and Mercantile UK Recovery Fund

Quarterly Report to 30 September 2020

UK Equity Unconstrained Fund I Monthly Report Month 2008

UK Recovery For unitholders only0 ES R&M UK Recovery Fund Quarter 3, 2020 Fund Objective

The investment objective of the Fund is to grow the value of your investment (known as “capital growth”) in excess of the MSCI United Kingdom Investable Market Index (IMI) Net Total Return (the “Benchmark”) over a rolling 5 year period, after the deduction of fees. Performance (net of fees)

B share class Benchmark Difference 3 Months -1.4% -3.6% 2.2% 1 Year -17.1% -18.5% 1.4% 3 Years p.a. -5.9% -4.1% -1.8% 5 Years p.a. 3.8% 3.0% 0.8% 10 Years p.a. 7.8% 4.6% 3.1% Since Inception p.a. 12.6% 7.9% 4.7%

20% 10% 0% -10% -20% -30% 3 Months 1 Year 3 Years 5 Years 10 Years Since Inception p.a. p.a. p.a. p.a.

ES R&M UK Recovery Fund B Shares MSCI UK IM Index

Performance (gross of fees)

Z class Z share class Benchmark Difference 3 Months -1.2% -3.6% 2.4% 1 Year -16.2% -18.5% 2.3% 3 Years p.a. -5.0% -4.1% -0.9% 5 Years p.a. 4.8% 3.0% 1.9% 10 Years p.a. 8.9% 4.6% 4.2% Source: River and Mercantile Asset Management LLP. Benchmark is the MSCI UK Investable Market index, net GBP. Fund performance shown is of B share class (income units) which is net of an annual management charge of 1.00% per annum, and the Z share class (accumulation units) which reflects the fund’s gross performance before any fees are deducted. Inception date of the B share class is 1 April 2009 and inception date of the Z share class is 17 July 2008. Fund performance is calculated using the midday published price. Please note that the benchmark performance is calculated using close of business mid-market prices. Other share classes may be available. Past performance is not a reliable indicator of future results. Portfolio Summary & Key Risk Characteristics

Fund AUM £139.3m P/E FY1 17.0 Strategy capacity £500m Dividend yield 2.7 % Inception date 17 July 2008 EV to Sales 1.17 Holdings (UK/Non-UK) 232/58 Price to Book 1.01 Largest holding Prudential 2.1 %

The Synthetic Risk and Reward Indicator (SRRI) is based on how much the returns of the shares have varied over the last five years, or since launch (whichever is the shorter period). The higher the rank the greater the potential reward but also the greater the risk of losing money. For more details please refer to the Key Investor Information Document.

UK Recovery 1

Investment commentary The information contained in this report does not constitute as investment advice and should not be treated as a recommendation to invest in any security. The information is based on the historical performance of the ES R&M UK Recovery Fund and may no longer be current. Any references to securities are for illustrative purposes only and these securities may no longer be held. The information should not be used as the basis for any investment decision. Any opinions expressed are opinions of the relevant portfolio manager and are given in good faith as of the date of the report but should not be considered operative at any date thereafter.

Following positive feedback from our clients we continue with our more condensed quarterly reports which will be supplemented from time to time by deeper thought pieces and more specific areas of communication, such as our Sustainable PVT white paper that will be distributed shortly.

Executive Summary There remain numerous extraordinarily undervalued companies in a world where many assets are clearly very expensive. A yield of close to zero for government bonds versus an earnings yield of c10% for the UK Recovery portfolio and a price to book (PB) of just over 1 times, and exposure to a group of companies that have historically grown profits by no less than the overall market and should be able to do better than that from here as economies recover. Decent companies, on very low valuations should, at some point, equal very strong returns, especially at a time when return expectations for many other assets are low. It has remained painful being a value or contrarian investor for much of this year as other investors have continued to focus on what has already been successful (Growth, Quality, Momentum) and companies that have been beneficiaries of social distancing measures. Well known UK based value investors continue to withdraw from the market, most recently Tom Dobell who put in 10 consecutive years of outperformance during the last pro-value cycle whilst managing the original Recovery focused fund. The thing is everyone is positioned in the same way, so what happens when they decide that this is no longer quite the right way to be positioned? What we get is a charge into all those stocks that they have been happy to dismiss as un-investable; just imagine the huge amount of capital looking to purchase all those unloved value stocks, most of which are now quite small in market cap terms! Economies around the world have been recovering strongly from the lockdown induced low earlier in the year. However, a second wave of Covid-19 cases has hit most countries, stalling re-openings and leading to the recovery in some segments of economies being put on hold and market sentiment becoming more cautious. However, to date the increase in cases has not led to a significant absolute increase in rates of hospitalisation, suggesting that this wave is more manageable than the first. Healthcare infrastructure has been able to cope.

This graph shows hospital admissions in Spain, the country that has seen the most dramatic 2nd wave

Source: Bank of America

UK Recovery 2

Equity markets continued to rally early in the third quarter, but this faded later in the period, with September quite weak. This coincided with the economic uncertainty associated with the 2nd wave of the virus and increased focus on an uncertain US Presidential election. The latter is likely to be closer than polls, which put Biden ahead. A victory for the Democrats is likely to be more inflationary and supportive of value stocks. Our key investment factor, Value had another muted quarter. It is highly unusual for Value to underperform during economic recovery periods, so this remains a very significant anomaly that needs some explaining. Suffice to say that Growth and Quality have benefitted from falling interest rates, relatively strong corporate fundamentals through the Covid crisis and better positioning regarding sustainability and flows of liquidity. Value has not benefitted from these. However, Value will be back. As I just mentioned, Value nearly always does well in an economic recovery period, especially if that recovery happens at a time when Value is relatively attractively priced, which it most definitely is today. What is likely to happen at some point over the next few quarters is this: global economies will continue to recover through 2021, especially if there is confidence that we are finally through the worst of the virus, perhaps catalysed by a vaccine or just post 2nd wave maturation of the pandemic; the massive monetary and fiscal stimulus will continue to positively impact; deflation will turn to reflation; bond yields will bottom-out; Growth and Quality stocks’ relative fundamentals will peak as more cyclical Value stocks start to see profits recover and brought forward digital spending struggles to preserve the momentum embedded in many growth and quality stock share prices; and finally, liquidity and passive investing may change direction as momentum shifts from deflation to reflation beneficiaries. Indeed repeating my person from Mars test, if all you had was a deep set of data on factor returns and economic and profit cycles over the last 100 years (since proper equity markets began) and you ask yourself the ten key tests on whether now was the time to invest in Value, Recovery and Multi-Cap stocks, then the answer to all those questions would be very supportive. It remains, at least according to the data, the best time to invest in Value, Recovery and Multi-Cap that I have seen in my career. Previous economic recovery periods during my career (1992/3, 2002/3, 2009/10, 2012/13) saw my funds produce very strong absolute and relative returns. I believe that this is still to come in this cycle.

Market returns and performance Equity Markets were strong early in the quarter but gave some of this back in September. Technology (Nasdaq +11.2%) continued to lead the way and banks (DJStoxx 600 Banks -12.1%) remained the laggards. Emerging markets outperformed, supported by a weak USD. US equities remained robust, led by their growth stocks. European equities were lacklustre, perhaps held back by a strong Euro. Commodities continued to be quite strong, but not oil; the reflation trade seems to be benefitting the scarcer commodities in particular, led by precious metals. Government bonds produced a modest positive total return. The UK equity market was a notable laggard, with risk premiums moving up as the possibility of a hard Brexit increased and the UK Government continued to be lacklustre in its handling of the pandemic; in addition the UK is underweight large cap tech and overweight value sectors, such as banks and energy. However, going against the above sterling did manage to rally during the quarter though much of this was USD weakness. The MSCI UK IMI (GBP) returned -3.6%, the MSCI ACWI (GBP) +3.4%, the MSCI World (GBP) +3.2% and MSCI EM (GBP) +4.9%. The MSCI UK Enhanced Value Index returned -8.9% and the MSCI ACWI Enhanced Value Index (USD) only +0.1% compared to the MSCI World (USD) return of +7.9%.

UK Recovery 3

Total Return Performance of Major Global Financial Assets in Q3 (in local currency)

Source: Deutsche Bank, Bloomberg Finance LP, Mark-It Value Factors were weak, Momentum, Growth and Quality particularly strong:

ACWI Style Factors Relative Performance

Source: MSCI, Morgan Stanley Research

Our other key factors were broadly neutral: smaller companies in the UK outperformed, led by growth small cap (MSCI UK Small +1.8%) but not in the tech mega-cap heavy US index. Recovery stocks were mixed, some rallied pretty hard as they started to beat earnings expectations, while others, like interest rate sensitive stocks (Banks) and those negatively impacted by the extension of social distancing measures, were poor. Regional equity performance was more nuanced, led by the US but also well supported by some Emerging Markets. Despite the Value headwind we had a reasonable quarter for relative performance, as for much of the anti-value period since the GFC (until 2018) we managed to offset value headwinds with some robust multi-cap investing and exposure to companies that were demonstrably going to increase shareholder value, either from a low point for recovery stocks or through on-going structural growth delivered by the good value growth stocks in the portfolio. The UK Recovery Fund returned -1.2% (gross, Z shares) and -1.4% (net, B shares), an outperformance of +2.4% During the relatively short-lived periods when value did well during the quarter, often when bond yields moved up a few basis points and other investors were prepared to look beyond the most reliable stocks, we performed very strongly indeed. Our medium-term returns have been negatively impacted by the post 2017 period, during which all our factors have struggled at the same time: namely value, recovery, multi-cap and regional diversification. This has been a difficult period of performance for which I remain very sorry. Our long term and since PVT inception returns are strong, especially versus value benchmarks and peers. Over the last 10 years and since inception the Fund has been over 4% p.a. ahead of the

UK Recovery 4

benchmark. My 25-year track record continues to annualise at almost 4% p.a. ahead of peers and the benchmark.

Key performance contributors Positive: PVT stock picks, smaller companies in particular (MPAC, ASOS, 888); some recovery stocks start to bounce (William Hill, including a bid, Xaar), underweight oil majors (Royal Dutch Shell), underweight HSBC. Negative: Growth and Quality stocks continue to outperform Value (AstraZeneca, LSE and Ocado underweights); individual stock disappointments (Premier).

Activity and positioning

The portfolio continues to have a very clear value bias, with strong absolute valuation support including a 1x price to book valuation and double-digit normalised earnings and cashflow yields. Historic growth is not less than the market. There is a robust multi-cap bias, including an overweight position in undiscovered smaller growth stocks.

Style Skyline

Source: StyleAnalytics

Portfolio allocation to Value and Growth stocks by size and versus benchmark

Source: StyleAnalytics We combine stocks with traditional value characteristics (such as banks and specialist financials), with attractively valued and currently out of favour Quality and Growth franchises (such as Glaxo, Sage, Booking, AB Foods, Walt Disney, Boku, Unilever and GVC), many high scoring MoneyPenny recovery stocks (Card Factory, , , Baidu, G4S, John Wood, Hunting, Senior), classic global cyclicals but with a focus on those with leading franchises (Owens Corning, RHI Magnesita, Johnson Controls, , Hunting, Anglo American) and UK domestic stocks that are temporarily disliked (Capital & Counties, Wimpey, Premier Miton, JD Wetherspoon). We are overweight stocks that would benefit from a vaccine discovery i.e. those that have been negatively impacted by social distancing requirements

UK Recovery 5

(Restaurant Group, SSP); the survivors here will be able to strengthen their market positions and medium term economics. Our activity over the last quarter has focused on adding to the above, with significant purchases of Johnson Controls, Glaxo, Card Factory, Owens Corning, Indivior, IP Group, IMI, GVC, , Hunting, Boohoo, Naked Wines and Fidelity China Special Situations. In addition, we are aggressively rebuilding our position in Somero, lowly valued again and with its order book bottoming out. Sales have included taking full profits where our PVT thesis has been delivered, including JD Sports and Sunrise Communications, top slicing into relative strength (ASOS, Reckitt Benckiser, Antofagasta) or re-focusing capital towards higher conviction ideas (Morrison, TI Fluid).

Are we following our PVT philosophy and process and a consistently articulated style and factor bias? Yes. The portfolio remains clearly skewed towards high scoring MoneyPenny stocks; it has a clear Value bias; it has exposure to all four of our categories of Potential but with a greater tilt to Recovery and Asset-backed due to the richer anomaly set in this part of the market; it is a multi-cap portfolio.

Team and investment philosophy updates In previous reports, we have mentioned continued investment in the PVT team despite the Value headwinds. This is now very much in place, with James Sym (we have now launched our European Equity Strategy to support our Global franchise), Alexander Stout (Global Analyst) and Laura Corbetta (Quantitative Analyst) all having started in June. As a team (led by Gary Dowsett), we have spent a considerable amount of time formalising our own core sustainability beliefs to act as a long-term foundation for this now key part of investing. The key pillars of our sustainability Philosophy are People, Innovation and Environment. Sustainable PVT, as we call it, is now fully incorporated into all our company research and investment decision making. Please do ask if more detail is required (we will be sending out a white paper detailing this approach later in the quarter).

Outlook Looking at equity markets from a PVT perspective: Potential: The profit cycle has now moved early cycle, with return on equity (shown below) around the world quite depressed. This provides a base for attractive levels of profits growth from here as returns normalise. Recovery stocks, in particular, should see strong profits growth. UK returns are at a cycle low.

Global Return on Equity

Source: Morgan Stanley Research

UK Recovery 6

UK Returns over time (ROA, ROE, ROI)

Source: Morgan Stanley Research Valuation: Equities remain attractively valued versus other assets, government bonds, in particular. Within equity markets there are quite a few that look attractively valued from an absolute, as well as relative perspective – this would clearly include the UK, and also much of Europe and Asia. US equities continue to look expensive in absolute terms, and trade at significant premium to other regions but are supported by low government bond yields. Global Price to Book

Source: MSCI, IBES, Morgan Stanley Research

Global Shiller PE

Source: MSCI, Haver, Morgan Stanley Research The UK market is valued on a very modest Shiller PE of 12.8 times, right at the bottom of the last 30-year range, and half that of the US equity market (for example).

UK Recovery 7

FTSE All-Share – Shiller Price to Earnings (Latest = 12.8)

Source: FTSE, Global Financial Data, Morgan Stanley Research Notes: Shiller PE defined as inflation adjusted price to 10Y average EPS. Shiller DY defined as inflation adjusted average DPS to price.

Timing: Positive Timing indicators would include very supportive monetary and fiscal policy, positive cycle indicators such as PMIs, the economic and profit cycles moving into a recovery phase, unemployment above mid-cycle levels and house prices picking up (positive animal spirits). Regarding a move from deflation to reflation some indicators have turned positive, such as breakeven inflation expectations (shown below):

Breakeven Inflation expectations (Europe and US)

Source: Bloomberg, Morgan Stanley Research Negative Timing indicators would focus on recovery being disrupted by the 2nd wave of Covid cases and geo- political uncertainties, notably the US Presidential election. The former is probably the key: the market needs a vaccine type event to provide the certainty that we can move to a post-Covid world. In conclusion, this portfolio is very modestly valued and has a well-diversified exposure to companies that will be able to grow profits and cash flow robustly from this current low point. This should allow for attractive absolute and relative returns. Previous economic recovery periods during my career (1992/3, 2002/3, 2009/10, 2012/13) saw my funds produce very strong absolute and relative returns, particularly our recovery strategies. I believe that this is still to come in this cycle.

Thank you for your continued support and patience.

Hugh Sergeant Head of Value and Recovery Strategies, PVT Equities October 2020

UK Recovery 8 Fund holdings and portfolio weight

Holding Weight (%) Holding Weight (%)

Prudential 2.05 Hyundai Mobis 0.44 Anglo American 1.88 South32 0.43 Royal Dutch Shell 'B' 1.78 Tremor International 0.43 Rio Tinto 1.77 Persimmon 0.43 BHP 1.75 Cegedim 0.43 HSBC Holdings 1.71 Volex 0.43 Lloyds Bank 1.61 Johnson Controls 0.43 1.35 IG Holdings 0.43 BP 1.17 Siemens 0.42 GlaxoSmithKline 1.03 Chemring 0.42 Boku 0.97 Sony Corp 0.42 Standard Chartered 0.91 Melrose 0.41 0.83 Tadano 0.41 British American Tobacco 0.83 First Derivatives 0.41 GVC Holdings 0.76 Associated British Foods 0.40 Unilever 0.74 Fukuda Denshi 0.40 Eckoh 0.74 3i Group 0.40 0.73 RHI Magnesita 0.40 Somero Enterprises 0.72 Nitto Denko 0.40 Gresham House 0.69 IMI 0.39 MPAC Group 0.67 Owens Corning 0.38 ASOS Holdings 0.66 Learning Technologies 0.38 Xaar 0.64 Pearl Abyss 0.37 Playtech 0.63 St Ives 0.37 Vodafone 0.62 Impax Asset Management 0.37 Diageo 0.62 0.36 Capital Drilling 0.62 Legal & General 0.36 Purplebricks 0.60 Smart Metering Systems 0.36 Flutter Entertainment 0.58 Zotefoams 0.36 ULS Technology 0.58 0.36 0.58 boohoo.com 0.35 Group 0.53 Halfords 0.35 Premier Miton Group 0.52 Blancco 0.35 Kingfisher 0.51 Science In Sport 0.35 Imperial Brands 0.49 Vicat 0.35 Johnson Matthey 0.49 Codemasters Group 0.35 IQE 0.49 GEA Group 0.35 Antofagasta 0.48 B&M 0.35 Baidu 0.48 Fevertree Drinks 0.35 Tesco 0.48 0.35 G4S 0.47 Banca Farmafactoring 0.35 0.47 TOA Oil 0.34 Reckitt Benckiser 0.47 Walt Disney Company 0.34 Strix 0.46 Aviva 0.34 Devro 0.46 Shangri-La Asia 0.34 Volvo 0.45 Fourlis Holdings 0.34 Gocompare.com 0.45 The Weir Group 0.34 Ping an Insurance 0.45 Northbridge 0.34 NCC Group 0.44 Anima 0.34 Hargreaves Lansdown 0.44 SBI Group 0.34 SDL 0.44 Foxtons Group 0.33

Source: River and Mercantile Asset Management LLP

UK Recovery 9 Fund holdings and portfolio weight (continued)

Holding Weight (%) Holding Weight (%)

Gresham House Strategic 0.33 The Gym Group 0.27 Shaftesbury 0.33 Int'l Cons. Airlines 0.27 Telit Communication 0.33 Meggitt 0.27 Ebiquity 0.33 Shanks 0.27 0.32 WH Smith 0.27 0.32 Vesuvius 0.27 Coats 0.32 Majedie Investments 0.26 Avast 0.32 Grainger 0.26 Berkerley Group Holdings 0.32 Orange Belgium 0.26 Capital & Counties 0.32 TP ICAP 0.26 Compass Group 0.31 Signature Aviation 0.26 0.31 KDDI 0.26 Citigroup 0.31 Mortgage Advice Bureau 0.26 SuperGroup 0.31 Stock Spirits Group 0.25 Raytheon Technologies 0.31 LSL Property Services 0.25 Jumbo 0.31 Serica Energy 0.25 Auto Trader 0.31 ConvaTec Group 0.25 ING Group 0.31 Provident Financial 0.25 Sage 0.30 Hunting 0.25 William Hill 0.30 Nintendo 0.25 DP Eurasia 0.30 Mondi 0.25 Next 0.30 Hyve Group 0.25 Flowtech Fluidpower 0.30 Easyjet 0.25 Reach 0.30 0.25 Mercia Asset Management 0.30 IP Group 0.24 McKesson 0.30 Bayer 0.24 DX Group 0.30 Exor 0.24 Int'l Personal Finance 0.29 ITV 0.24 PageGroup 0.29 China Telecom Corp 0.24 BT 0.29 0.24 Koninklijke Philips 0.29 Breedon Group 0.24 Filtronic 0.29 Rightmove 0.24 0.29 0.24 TT Electronics 0.29 Burberry Group 0.23 Next Fifteen Comms. 0.29 Resideo Technologies 0.23 0.29 0.23 Morgan Advanced Materials 0.29 0.23 Diversified Gas & Oil 0.29 Bango 0.23 PZ Cussons 0.29 Enquest 0.23 Van Lanschot 0.28 Fidelity China Special 0.23 OPG Power Ventures 0.28 Inchcape 0.23 Ryanair 0.28 De La Rue 0.23 Trinity E&P 0.28 Henry Boot 0.23 Renold 0.28 Intercontinental Hotels 0.22 0.28 Taylor Wimpey 0.22 ABB Ltd 0.28 Tachi-S Co 0.22 Prada 0.28 Card Factory 0.22 Seplat Petroleum Development C 0.28 Sansei Technologies 0.22 DFS Furniture 0.28 Smiths 0.22 Swire 0.28 Mind Gym 0.22 0.28 Indivior 0.22

Source: River and Mercantile Asset Management LLP

UK Recovery 10 Fund holdings and portfolio weight (continued)

Holding Weight (%) Holding Weight (%)

Majestic Wine 0.22 James Fisher & Sons 0.16 Prosus 0.21 Subsea 7 0.16 CRH 0.21 0.16 Carnival 0.21 Tyman 0.16 0.21 0.16 TKH Group 0.21 0.15 Virgin Money 0.21 Holdings 0.15 Speedy Hire 0.21 Ralph Lauren 0.15 British Land 0.21 0.15 0.21 0.15 Tekmar Group 0.21 Cambria Automobiles 0.14 Ibstock 0.21 Lagonda 0.14 0.20 Premier Oil 0.14 0.20 Facebook 0.13 JPMorgan Indian Investment Trust 0.20 Driver Group 0.13 SSP Group 0.20 UNITE Group 0.13 Euromoney Instl. Invest. 0.20 Kier 0.13 Central Asia Metals 0.20 Norcros 0.12 Cenkos Securities 0.20 Blue Prism 0.11 Porsche Automobil 0.20 Fresnillo 0.11 Dart Group 0.20 Rank Group 0.11 Drax 0.20 Johnson Service 0.08 Polar Capital 0.19 Aberforth Smaller Co's Trust 0.07 Secure Trust Bank 0.19 Accesso Technology Group 0.06 JD Wetherspoon 0.19 Schroder UK Public Private 0.06 0.19 Alfa Financial Software 0.06 0.19 Aukett Swanke 0.06 Hostelworld Group 0.19 Menzies (John) 0.05 Keller 0.19 Hutchison China Meditech 0.05 SIG 0.19 Siemens Energy 0.04 Old Mutual 0.19 ADVFN 0.04 Ricardo 0.19 Angling Direct 0.04 Booking Holdings 0.19 Rangers International FC 0.03 0.19 Temple Bar Investment Trust 0.03 Marks & Spencer 0.19 Int'l. Ferro Metals 0.00 JKX Oil & Gas 0.19 Cash -0.59 On the Beach Group 0.19 Total 100.00 Senior 0.18 0.18 Close Brothers 0.18 Development Securities 0.18 EFG Eurobank Ergasias 0.18 City Of Inv Trust 0.17 Time Out Group 0.17 AO World 0.17 Informa 0.17 Centaur Media 0.17 DMGT 0.17 Pendragon 0.16 UDG Healthcare 0.16 Scapa 0.16

Source: River and Mercantile Asset Management LLP

UK Recovery 11 Portfolio Style Skyline

This graph shows the Style TiltsTM of the fund against the benchmark as calculated by StyleAnalytics, highlighting stylistic differences between the fund and its benchmark.

8.8

4.7 4.1 3.1 3.5 2.4 1.5 0.6 1.1

-0.3 -0.3 -1.2 -0.9

-3.8 -4.4 -5.1 -5.2 -5.1

-7.9

Source: StyleAnalytics

Industrial sector weights

This graph shows a comparison of fund and benchmark weightings across the industrial sectors classified by MSCI Global Industry Classification System (GICS).

Energy 6.8 7.3 Materials 11.3 10.0 Industrials 15.8 13.0 Consumer Disc 17.2 8.8 Consumer Staples 6.2 17.6 Health Care 3.4 13.0 Financials 19.7 16.5 Info Technology 8.1 2.6 Comms Svcs 8.0 4.3 Utilities 0.9 3.8 Real Estate 3.1 3.0

0 5 10 15 20 25

ES R&M UK Recovery Fund (%) MSCI UK IM Index (%)

Source: FactSet

UK Recovery 12 Market cap weights

This table shows the fund weightings across a range of company sizes/values.

Fund Mega Cap £20bn + 23.7% Large Cap £4bn - £20bn 19.6% Mid Cap £2bn - £4bn 6.6% Small Cap £100m - £2bn 42.3% Micro Cap £0m - £100m 8.4%

Source: River and Mercantile Asset Management LLP

Stock level performance attribution

This table shows the best and worst contributors to the fund’s performance relative to the benchmark. The average active weight highlights whether the fund held a larger or smaller position in a stock than the benchmark did, on average over the period. As performance is relative to the benchmark, outperformance of the benchmark can come from the fund holding a larger position than the benchmark in a stock that performs well, or a lower position than the benchmark (or even a zero holding) in a stock that performs poorly. The contribution to active return is the return that the position has contributed relative to the benchmark.

Greatest Positive Average Contribution to Contribution Active Weight Active Return

Royal Dutch Shell 'A' -2.73% 0.64% BP -1.85% 0.46% HSBC Holdings -2.23% 0.43% William Hill 0.28% 0.31% Xaar 0.55% 0.29% MPAC Group 0.61% 0.27% GlaxoSmithKline -3.55% 0.25% Purplebricks 0.48% 0.21% Vodafone -1.06% 0.20% 888 Holdings 0.46% 0.20%

Greatest Negative Average Contribution to Contribution Active Weight Active Return

Unilever -2.36% -0.33% AstraZeneca -6.41% -0.31% Premier Oil 0.22% -0.24% Ocado Group -0.61% -0.21% Ferguson -0.92% -0.19% Reckitt Benckiser -2.56% -0.16% London Stock Exchange -1.56% -0.16% Hunting 0.31% -0.13% Diageo -3.03% -0.13% Experian -1.47% -0.11%

Source: FactSet

UK Recovery 13 Environmental, Social and Governance (ESG) factor analysis

This report is designed to give a broad overview of the portfolio from the perspective of Environmental, Social and Governance factors. Whilst the portfolio is not run to be optimised with these factors in mind, we may expect to take major risks into consideration when analysing stocks.

Portfolio comparison to the benchmark

This compares the portfolio and benchmark asset weightings by value with data from MSCI ESG Research.

Portfolio Benchmark Assets covered by MSCI ESG Research 70.2% 99.9% Assets scoring in the bottom decile 0.8% 0.1%

The chart below illustrates how the portfolio and its benchmark compare on average Environmental, Social and Governance scores. Scores are based on a 1 to 10 scale, where 1 is the lowest/worst and 10 is the highest/best. 8 7 6 5 4 3 2 1 0 Environmental Factors Social Factors Govern ance Fact ors

Portfolio Benchmark

10 highest rated ESG Portfolio Benchmark Company Industry companies held by fund Weight Weight Rating Adjusted Score Diageo 0.6% 3.6% AAA 10.00 Kingfisher 0.5% 0.4% AAA 10.00 Johnson Matthey 0.5% 0.3% AAA 10.00 Johnson Controls 0.4% 0.0% AAA 10.00 Siemens 0.4% 0.0% AAA 10.00 Mondi 0.3% 0.5% AAA 10.00 ITV 0.2% 0.1% AAA 10.00 Travis Perkins 0.2% 0.2% AAA 10.00 Burberry Group 0.2% 0.4% AAA 10.00 CRH 0.2% 0.0% AAA 10.00

10 lowest rated ESG companies Portfolio Benchmark Company Industry held by fund Weight Weight Rating Adjusted Score Porsche Automobil 0.2% 0.0% CCC 0.00 Hyundai Mobis 0.4% 0.0% CCC 0.40 Carnival 0.2% 0.1% CCC 0.70 G4S 0.5% 0.2% B 1.50 Orange Belgium 0.3% 0.0% B 1.80 Tadano 0.4% 0.0% B 1.90 China Telecom Corp 0.2% 0.0% B 2.10 IQE 0.5% 0.0% B 2.30 Bank of Ireland 0.2% 0.0% BB 2.90 Pearl Abyss 0.4% 0.0% BB 3.00

Source: MSCI ESG Research, ©2019 MSCI ESG Research LLC. Reproduced by permission.

UK Recovery 14 Broker commissions analysis

Counterparty Total (£) Commission Paid (£)

Execution Only ABG SUNDAL COLLIER 0.00 0.00 ATLANTIC SECURITIES 1,374,437.54 824.67 BANCO ITAU 0.00 0.00 BARCAP 152,036.15 121.63 BERENBERG 440,756.26 352.59 BMO 626,258.76 375.76 BofA MERRILL LYNCH 84,284.01 50.57 BTG PACTUAL 0.00 0.00 CANACCORD ALGO 2,908,844.59 1,183.92 CANACCORD GENUITY 254,139.09 200.54 CENKOS 194,711.55 155.76 CITI PROG 281,848.56 112.74 CITIGROUP 200,012.26 142.89 CLSA 339,478.58 237.64 CREDIT SUISSE 58,148.16 34.89 EXANE 255,961.43 153.58 FINNCAP 458,622.27 366.99 GBM 0.00 0.00 GOODBODY 518,873.77 384.95 HSBC 1,129,882.65 863.83 ING 36,950.46 22.17 INSTINET 77,392.26 61.91 2,017,682.26 1,602.09 ITG 429,336.04 257.60 ITG ALGO 1,266,338.74 506.53 ITG EURO 35,000.00 28.00 J&E DAVY 158,878.25 127.11 JANE STREET 0.00 0.00 JEFFERIES 512,538.56 306.14 JEFFERIES ALGO 1,618,449.46 647.37 JPMORGAN CHASE 540,396.73 405.05 KEPLER CHEUVREUX 131,445.03 78.88 LIBERUM 385,183.53 308.14 LIQUIDNET 1,420,107.40 852.08 MEDIOBANCA 19,902.39 11.94 MIZUHO 308,923.53 185.36 MORGAN STANLEY 723,325.28 515.68 NORTHERN TRUST CORP 248,247.48 198.59 NPLUS1 SINGER 1,718,644.14 1,374.88 NUMIS 1,160,981.39 928.77 PANMURE GORDON 429,504.44 343.60 PEEL HUNT 3,846,653.32 3,065.49 RAYMOND JAMES 307,552.67 184.54 RBC 220,233.24 149.99 RBC ALGO 873,175.16 349.26 REDBURN 0.00 0.00 SANFORD BERNSTEIN 0.00 0.00 SANTANDER 0.00 0.00 SHORE CAPITAL 191,164.15 126.84 SOCIETE GENERALE 0.00 0.00 STIFEL EUROPE 69,385.83 55.51 STIFEL NICOLAUS 0.00 0.00 SUSQUEHANNA INTERNATIONAL 0.00 0.00 UBS 1,161,044.66 899.96 UBS PROG 23,961,267.15 9,588.24 WINTERFLOOD 1,573,883.91 1,259.10 FLOWTRADERS 0.00 0.00 CONFIRMED FUND PRICE 0.00 0.00 OPTIVER 0.00 0.00 BANK OF MONTREAL 0.00 0.00 BTIG 83,936.93 67.15 CITADEL INVESTMENT GROUP L 0.00 0.00 STIFEL FINANCIAL CORP 62,401.77 49.92 £ 54,868,221.79 £ 30,120.84

Firm Wide Comparators

All Equity Trading £ 951,308,993.71 £569,492.05 Trades: £ 54,868,221.79 £30,120.84 Average Firm-Wide Commission Rate (%) 0.06% : Average Commission Rate (%) 0.05%

Source: River and Mercantile Asset Management LLP UK Recovery 15 Fund Information

Launch date 17 July 2008 Fund manager: Hugh Sergeant IA sector: UK All Companies Benchmark: MSCI UK IM Index (Total Return) Tracking error range: N/A Strategy capacity: £500m (pooled & segregated) XD dates: 1 April & 1 October Dividend/Accumulation payment date: 31 May and 30 Nov

Share class: B S Z Launch price (shares): 250.00p 250.00p 500.00p Share classification: Asset Manager Asset Manager Institutional Type of shares: Income Income Accumulation Fund charges: Annual Management (AMC) 1.00% 0.75% As agreed* Initial (up to) 5.25% 5.25% 5.25% Ongoing Charge Figure (OCF) (incl. AMC) 1.11% 0.86% AMC* + 0.11% *AMC charged outside the Fund Minimum investment Initial £2.5 million £50 million £5 million Subsequent £25,000 £50,000 £50,000 Sedol B614J05 BG21HH8 B1YJFW6 ISIN GB00B614J053 GB00BG21HH88 GB00B1YJFW60 Bloomberg RMUKEBB LN RMUKELS LN RMUKELB LN

Note:

This fund was known as the River and Mercantile UK Equity Long Term Recovery Fund until 1 July 2018 when its name was changed to the River and Mercantile UK Recovery Fund.

UK Recovery 16 Important disclosures

The information in this document has been prepared and issued by River and Mercantile Asset Management LLP (trading as “River and Mercantile” and “River and Mercantile Asset Management”) registered in England and Wales under Company No. OC317647, with its registered office at 30 Coleman Street, London EC2R 5AL. River and Mercantile Asset Management LLP is authorised and regulated by the Financial Conduct Authority (Firm Reference Number 453087), is registered with the U.S. Securities and Exchange Commission as an Investment Adviser under the Investment Advisers Act of 1940.

River and Mercantile Asset Management LLP is a subsidiary of River and Mercantile Group Plc which is registered in England and Wales under Company No. 04035248, with its registered office at 30 Coleman Street, London EC2R 5AL.

Equity Trustees Fund Services Ltd (the ACD for ES River and Mercantile Funds ICVC) is authorised and regulated in the UK by the Financial Conduct Authority (Firm Reference Number 227807).

This document is directed at professional and retail clients. The information in this document should not be relied on or form the basis of any investment decision. Retail clients requiring any information should seek the advice/assistance of a Financial Advisor. The information contained in this document is strictly confidential and must not be reproduced or further distributed.

The value of investments and any income generated may go down as well as up and is not guaranteed. An investor may not get back the amount originally invested. Past performance is not a reliable guide to future results. Changes in exchange rates may have an adverse effect on the value, price or income of investments. Please refer to the ES River and Mercantile Funds ICVC principal prospectus for further details of the financial commitments and risks involved in connection with an investment in this Fund. The information and opinions contained in this document are subject to updating and verification and may be subject to amendment. The information and opinions do not purport to be full or complete. No representation, warranty, or undertaking, express or limited, is given as to the accuracy or completeness of the information or opinions contained in this document by R&M, its partners or employees. No liability is accepted by such persons for the accuracy or completeness of any such information or opinions. As such, no reliance may be placed for any purpose on the information and opinions contained in this document.

Please note that individual securities named in this report may be held by the Portfolio Manager or persons closely associated with them and/or other members of the Investment Team personally for their own accounts. The interests of clients are protected by operation of a conflicts of interest policy and associated systems and controls which prevent personal dealing in situations which would lead to any detriment to a client.

The Global Industry Classification Standard ("GICS") was developed by and is the exclusive property and a service mark of MSCI Inc ("MSCI") and Standard & Poor's, a division of The McGraw-Hill Companies, Inc. ("S&P") and is licensed for use by River and Mercantile Asset Management LLP. Neither MSCI, S&P nor any third party involved in making or compiling the GICS or any GICS classifications makes any express or implied warranties or representations with respect to such standard or classification (or the results to be obtained by the use thereof), and all such parties hereby expressly disclaim all warranties of originality, accuracy, completeness, merchantability and fitness for a particular purpose with respect to any of such standard or classification. Without limiting any of the foregoing, in no event shall MSCI, S&P, any of their affiliates or any third party involved in making or compiling the GICS or any GICS classifications have any liability for any direct, indirect, special, punitive, consequential or any other damages (including lost profits) even if notified of the possibility of such damages.

Neither MSCI nor any other party involved in or related to compiling, computing or creating the MSCI data makes any express or implied warranties or representations with respect to such data (or the results to be obtained by the use thereof), and all such parties hereby expressly disclaim all warranties of originality, accuracy, completeness, merchantability or fitness for a particular purpose with respect to any such data. Without limiting any of the foregoing, in no event shall MSCI, any of its affiliates or any third party involved in or related to compiling, computing or creating the data have any liability for any direct, indirect, special, punitive, consequential or any other damages (including lost profits) even if notified of the possibility of such damages. No further distribution or dissemination of the MSCI data is permitted without MSCI’s express written consent.

Although River and Mercantile’s information providers, including without limitation, MSCI ESG Research LLC and its affiliates (the “ESG Parties”), obtain information from sources they consider reliable, none of the ESG Parties warrants or guarantees the originality, accuracy and/or completeness of any data herein. None of the ESG Parties makes any express or implied warranties of any kind, and the ESG Parties hereby expressly disclaim all warranties of merchantability and fitness for a particular purpose, with respect to any data herein. None of the ESG Parties shall have any liability for any errors or omissions in connection with any data herein. Further, without limiting any of the foregoing, in no event shall any of the ESG Parties have any liability for any direct, indirect, special, punitive, consequential or any other damages (including lost profits) even if notified of the possibility of such damages.

River and Mercantile Asset Management LLP 30 Coleman Street, London EC2R 5AL www.riverandmercantile.com

UK Recovery 17