28 FEBRUARY 2021 ES River and Mercantile UK DYNAMIC EQUITY FUND CLASS B GBP (Accumulation)

PAST PERFORMANCE INVESTMENT OBJECTIVE The chart and tables below show the performance of the fund’s GBP B (Acc) share class To grow the value of your investment since the launch of the share class on 21 November 2012. (known as "capital growth") in excess of the Source: River and Mercantile Asset Management LLP. Fund performance is calculated using midday published MSCI United Kingdom Investable Market prices. Benchmark performance is calculated using close of business mid-market prices. Index (IMI) net total return (the Past performance is not a reliable guide to future results. "Benchmark") over a rolling 5-year period, after the deduction of all fees. PERFORMANCE SINCE INCEPTION PORTFOLIO MANAGER 140% William Lough 120% PORTFOLIO & RISK 100% CHARACTERISTICS 80% Number of Holdings 55 60% Fund Volatility 15.2% 40% Benchmark Volatility 14.3% 20% Beta 0.99 0% Active Money 77.8% Nov 2012 Nov 2013 Nov 2014 Nov 2015 Nov 2016 Nov 2017 Nov 2018 Nov 2019 Nov 2020 ES R&M UK Dynamic Equity Fund B share class MSCI UK IM Index KEY FACTS Fund launch date 22/03/2007 CUMULATIVE PERFORMANCE Share class launch date 21/11/2012 Since Benchmark MSCI UK Investable 1 Month % 3 Months % 1 Year % 3 Years % 5 Years % inception % Markets Index IA sector UK All Companies B share class (Acc) 2.6 4.4 8.4 3.4 40.3 103.0 Total fund size £77.7m MSCI UK IM Index 2.2 5.1 1.7 0.7 29.4 58.3 Domicile UK Fund type UK UCITS DISCRETE 12 MONTH PERFORMANCE SEDOL B7H1R58 12 months to 12 months to 12 months to 12 months to 12 months to ISIN GB00B7H1R583 28/02/2017 28/02/2018 28/02/2019 29/02/2020 28/02/2021 Bloomberg RIVMERB B share class (Acc) 25.4% 8.2% -3.7% -1.0% 8.4% Distribution type Accumulation MSCI UK IM index 23.2% 4.3% 1.5% -2.4% 1.7% FEES & CHARGES TOP 5 PERFORMANCE TOP 5 OVERWEIGHTS & Initial charge Up to 5.25% CONTRIBUTORS & DETRACTORS UNDERWEIGHTS AMC 0.75% Ongoing charge (including AMC) 0.93% The best and worst contributors to the The securities in which the portfolio portfolio’s performance relative to the weight differs most from that of the DEALING INFORMATION benchmark benchmark Dealing frequency Daily Whitbread (+) 888 Holdings Dealing cut-off time 12pm (UK) AstraZeneca (-) Valuation point 12pm (UK) Whitbread Natwest Group (+) Settlement T+4 Capital & Counties (+) IMI GlaxoSmithKline (-) Minimum investment £1000 BHP ( -) 'A' (-) SYNTHETIC RISK & REWARD Lancashire Holdings (+) Rio Tinto INDICATOR (SRRI) HSBC Holdings (-) HSBC Holdings Barrick Gold Corp (+) AstraZeneca

-0.6% -0.4% -0.2% 0.0% 0.2% 0.4% 0.6% -5 0 5 Contribution + Overweight - Underweight Active Weight (%) Source: River and Mercantile Asset Management LLP Source: River and Mercantile Asset Management LLP

CONTACT DETAILS SECTOR WEIGHTS TOP 10 HOLDINGS Telephone 0345 603 3618 Portfolio weightings within specific The ten largest positions by weight held in Email [email protected] industrial sectors. the portfolio. Energy 4.2 Weight (%) Materials 13.9 3.5 Industrials 20.7 3.2 Consumer Disc 11.9 Consumer Staples 6.0 Prudential 3.1 Health Care 7.9 Whitbread 3.1 Financials 17.0 Electrocomponents 2.9 Info Technology 5.1 Comms Svcs 5.2 888 Holdings 2.9 Utilities 1.0 IMI 2.8 Real Estate 6.2 Anglo American 2.7 0 10 20 30 2.7 Weight (%) Lancashire Holdings 2.6 Source: River and Mercantile Asset Management LLP Source: River and Mercantile Asset Management LLP MARKET CAPITALISATION CATEGORIES OF POTENTIAL Comparison of portfolio and benchmark weightings across a range of The weighting of the portfolio across the four categories of potential, sizes based on company value. related to stages of a company’s life cycle. Fund Benchmark Active Growth 18.3% Mega Cap £20bn + 28.5% 56.1% -27.6% Quality 47.3% Large Cap £4bn - £20bn 23.9% 28.4% -4.5%

Mid Cap £2bn - £4bn 6.5% 7.5% -1.0% Recovery 21.3% Small Cap £100m - £2bn 40.2% 8.0% 32.2% Asset-backed 13.0% Micro Cap £0m - £100m 0.0% 0.0% 0.0%

Source: River and Mercantile Asset Management LLP 0.0% 10.0% 20.0% 30.0% 40.0% 50.0% Source: River and Mercantile Asset Management LLP, excludes cash.

PORTFOLIO STYLE SKYLINE This chart shows the Style Tilts of the portfolio against the benchmark as calculated by StyleAnalytics.

1.9 0.8 0.8 0.9 1.1 0.3 0.2 0.1

-0.3 -0.1 -0.4 -0.4 -0.5 -0.7 -0.8 -1.1 -1.5

-2.9 -3.3

Source: StyleAnalytics

FUND RATINGS OTHER INFORMATION Authorised Corporate Equity Trustees Fund Services Limited Director Investment manager River and Mercantile Asset Management LLP Depositary The Bank of New York Mellon (International) Limited This fund was renamed on 1 January 2016 and was previously known as the R&M UK Equity Unconstrained Fund. MANAGER’S REVIEW

Investment Background I exited Wm Morrison Supermarkets to fund these positions. This was primarily due to opportunity cost and portfolio construction, Global equity markets were robust (MSCI All Country World with better risk/reward elsewhere as reflected in a modest score Index (ACWI) +2.4% total return in USD). Like January, February for in our quant screen, rather than a fundamental was a ‘game of two halves’, with the global benchmark peaking breakdown in the investment case. +6.6% intra-month and then witnessing a ~4% drawdown in the last couple of weeks. For equities, the month’s key feature was a Outlook notable divergence under the bonnet between the performance of the Value and Growth indices, with the former outperforming by Financial markets are starting to reflect that a regime shift may ~4.5% over the month and the latter suffering a ~7% drawdown. be underway to an environment where inflationary forces are The catalyst for this can be found in the bond markets, with US more well-balanced, at least, with the disinflationary forces 10 year yields rising 34 basis points () (+54bps at the highs) (demographics, technology, excess capacity in some parts of the to ~1.5% (the ‘real’ yield did most of the heavy lifting +24bps to economy) present for over a decade. We mentioned last month -0.75%) and yield curves steepening sharply. Commodities prices that valuations in pockets of the market looked excessive and continued to rally (Brent oil +18% and copper +15%), adding to the these were many of the worst hit areas in the sell-off. As such, narrative of a shift to a more inflationary environment. this appears a ‘well-behaved’ correction rather than anything more ominous at this stage – credit spreads have been stable and Strategy update looking at the internal dynamics of the stock market, what Stan Druckenmiller calls “the best economist I know”, cyclicals continued Performance to outperform defensives supported by superior earnings momentum. The fund returned 2.6%1 in February versus 2.2% by its comparator benchmark, the MSCI United Kingdom IMI index2 Large reflation-beneficiary sectors in the UK market – oil, miners and banks – have dominated market leadership so far in 20213. Beneficiaries of a re-opening economy, particularly those exposed While we are invested in companies across these sectors, and to the UK, contributed most positively. Whitbread (+0.4%), NatWest continue to assess the relative merits of the weighting of the (+0.4%), Capital & Counties (+0.3%) and Barclays (+0.2%) all rose companies we already own and the investment cases of those we over 20%. NatWest and Barclays both also reported strong results don’t, I prefer not to have ~30% of the portfolio’s capital allocated which were notably better than consensus expectations for loan to these three sectors alone. That is what would be required to losses, and which reiterated medium-term return on equity targets. match the benchmark exposure. The exciting opportunity set Barrick Gold (-0.4%) continued its recent weakness despite robust within the UK market is broader than this, allowing us to produce operational results. The gold price fell 6% in spite of its strong a well-balanced portfolio with a healthy blend across the Growth, record of protecting against inflation, historically. Specialty insurer Quality, Recovery and Asset-backed stages of the company lifecycle Lancashire responded poorly to results which demonstrated the and a range of end-market drivers. top line growth we had expected, but also guided to higher loss ratios than expected. Underweights in big oil (BP and Royal Dutch Shell), mining (Rio Tinto, BHP and ) and large banks (HSBC and Lloyds) cost the fund -1.6% in relative performance. Activity We started a new position in WPP, the holding company for a collection of market leading media agencies, such as Ogilvy, William Lough Finsbury and GroupM. We see a mispriced and under forecast Portfolio Manager cyclical Recovery opportunity with the possibility of a sustained March 2021 valuation re-rating if they deliver their targeted medium-term 3-4% organic sales growth and 15.5-16.0% operating margins. Our research suggests large agencies are structurally better positioned than the market currently credits – seen by brands as an essential partner with increasing value not just in media distribution but more so helping translate an increasingly challenging media landscape. An entry price at ~11x free cash flow provides a solid margin of safety against the risk that our more sanguine take on industry structural change is flawed. We participated in the IPO of , the market leading online card retailer in the UK (60% market share) and the Netherlands (65%). We expect Growth to be delivered from the increasing penetration of online cards within the overall market plus a growing contribution from gifting at Moonpig specifically. The opportunity for gifting is interesting as there is a high purchase intent – the user is already buying a card – with the added benefit that the data is informative, i.e. appropriate gifts can be recommended depending on the choice of card. Whilst the business has benefitted from lockdown, the short-term expectations were particularly conservative, as evidenced by the upgrade we have already seen, and we expect the company to successfully retain many of the additional customers they have acquired. More importantly, the medium-term expectations have also been cautiously set enabling us to build conviction in the valuation, particularly as the growth is delivered at high incremental return on capital.

1 B share class (GBP), mid-day to mid-day pricing. 2 Close-of-business to close-of-business pricing. 3 These three sectors are beating the benchmark by between 7% and 16% year-to-date. This document has been prepared and issued by River and Mercantile Asset Management LLP (“R&M”), registered in England and under Company No. OC317647, with its registered office at 30 Coleman Street, EC2R 5AL. R&M is authorised and regulated by the UK Financial Conduct Authority (FRN 45308) and 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 is the Authorised Corporate Director (the “ACD”) of the ES River and Mercantile Funds ICVC and of its sub-funds, including this fund. The ACD is authorised in the United Kingdom and regulated by the Financial Conduct Authority (FRN 227807) and has its registered office at Pountney Hill House, 4th floor, 6 Laurence Pountney Hill, London EC4R 0BL.

This document is intended for use by individuals who are familiar with investment terminology. Please contact your financial adviser if you need an explanation of the terms used. For further details of the specific risks and the overall risk profile of this fund; as well as the share classes within it, please refer to the Key Investor Information Documents and ES River and Mercantile Funds ICVC Prospectus which are available on our website www.riverandmercantile.com.

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