Performance and Transactions:

The fund underperformed its benchmark index in June, Q2 and year to date. In US$ terms, the MSCI All Country World Index fell -8.6% in June and has now fallen -20.9% this year. This is the worst first half of a calendar year in the 34-year history of the MSCI index. In June, every region and every global sector posted a negative return, with the best performing sectors year to date being hit the hardest. Inflation reached 40-year highs in many parts of the world, prompting central banks to hike interest rates more than expected, which focused investors’ attention on the prospects of a global recession. Consensus earnings growth forecasts remained surprisingly resilient year to date (which stopped us from getting bearish) so potential broad cuts to earnings expectations have the potential to weigh on equities in the second half and prompt a change in leadership from value/cyclical stocks to those growth/quality stocks whose earnings will be more resilient during the economic and earnings slowdown.

During the month, quarter and year to date we have underperformed for three main reasons. 1) Our investment process did not get defensive enough, so the beta of the portfolio was too high, 2) the ongoing growth to value factor rotation, which is a significant headwind for us as our investment process is 2/3rds growth/momentum and 1/3rd valuation, 3) underweight energy and overweight technology, particularly semiconductors.

What are we doing about it? 1) In Q2 we followed our top-down scorecard which increased healthcare and reduced technology. 2) We followed our sell process and “weeded out the losers.” 3) We are looking for new opportunities during this crisis (eg biotech and China are beginning to recover). Most of our semiconductor holdings had reported excellent earnings in Q1, but then started to lower future revenue and earnings guidance in Q2, so we followed our investment process and started selling these ‘cyclical growth stocks’ (eg Applied Materials, Mediatek, NXP, Wolfspeed) to purchase some new ‘stable growth stock’ in the healthcare sector (eg Elevance Health, Regeneron, Vertex), and ‘recovery growth stocks’ in the Chinese technology sector (eg Alibaba, Tencent). We also ‘weeded out the losers’ in Japan as several of our holdings became what we call ‘good houses in a bad neighborhood’ (eg Recruit, SBI Holdings).

Outlook and strategy:

Our evidence-based probability-adjusted investment process did not get defensive enough. We went from 70% bullish (30% bearish) to 60% bullish (40% bearish) at the beginning of the year as we thought inflation would peak in Q1, but we were wrong - not helped by the war in Ukraine and then the China lockdowns. In hindsight, we got oil wrong, which meant we got inflation and interest rates wrong.

We now assess a 50% probability of equity markets continuing their fall with healthcare our favorite low beta (defensive) sector; a 35% probability of markets rallying with some of the older ‘growth’ leaders such as large-cap profitable biotech and China technology stocks now our favorite high beta (offensive) recovery stocks; and a 15% probability of markets rallying with some of the newer ‘value’ leaders with commodity (not consumer or financial) stocks our favorite in this area.

Yes, we are in a bear market, but will it be a small, medium or big bear market? Small bear markets (Ursa Minor) are usually monetary tightening ‘valuation’ driven and average around -20%. Medium bear markets are usually recessionary ‘earnings’ driven and average around -30%. This is what the current bear market has evolved into at the end of Q2. Big bear markets (Ursa Major) are usually banking crisis driven and average around -50%, but we do not think this bear market will turn into a banking crisis. So our base case is now an earnings recession but not a banking crisis (ie -30% not -50% bear market).

We think the second half of this year will be very different from the first half, as markets are now on recession watch instead of inflation watch. We believe this bear market is now moving from the P to the E of the P/E ratio, and historically that is when our process usually performs better. For example, in 2019-2020 the negative earnings revisions got us defensive, but in 2022 earnings revisions remained positive until just a few weeks ago. Now that earnings revisions have only just turned negative, we expect significant earnings downgrades during the second half of 2022, and so we are focusing on quality compounders with rock solid balance sheets that we think can withstand the threats of rising interest rates, rising input costs, broken supply chains and slowing earnings growth.

Sources for all data: JOHCM/Bloomberg (unless otherwise stated).

The performance data quoted represents past performance; past performance does not guarantee future results. The investment return and principal value of an investment will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. The Fund's current performance may be lower or higher than the performance data quoted. Investors may obtain performance information current to the most recent month-end, within 7 business days at www.johcm.com or by calling 866-260-9549 or 312-557-5913.

Returns shown, unless otherwise indicated, are total returns, with dividends and income reinvested. Returns for periods of less than one year are not annualized. Fee waivers are in effect; if they had not been in effect performance would have been lower.

The MSCI All Country World Index (ACWI) is a market-capitalization-weighted index composed of over 2,000 companies, and is representative of the market structure of 48 developed and emerging market countries in North and South American, Europe, Africa, and the Pacific Rim. The index is calculated with net dividends reinvested in U.S. dollars. Indexes mentioned are unmanaged statistical composites of stock market performance. Investing in an index is not possible. Source: MSCI. MSCI makes no express or implied warranties or representations and shall have no liability whatsoever with respect to any MSCI data contained herein. The MSCI data may not be further redistributed or used as a basis for other indices or any securities or financial products. This report is not approved, reviewed or produced by MSCI.

*Expense ratios as stated in the latest prospectus. JOHCM (USA) Inc. has contractually agreed to waive fees and reimburse expenses so that the Net Total Operating Expenses do not exceed the stated amounts until January 28, 2023.

Fund holdings, sector allocation, regional allocation and top 10 countries are subject to change without notification.

The performance data quoted represents past performance; past performance does not guarantee future results. The investment return and principal value of an investment will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. The Fund's current performance may be lower or higher than the performance data quoted. Investors may obtain performance information current to the most recent month-end, within 7 business days at www.johcm.com or by calling 866-260-9549 or 312-557-5913.

Returns shown, unless otherwise indicated, are total returns, with dividends and income reinvested. Returns for periods of less than one year are not annualized. Fee waivers are in effect; if they had not been in effect performance would have been lower.

The MSCI All Country World Index (ACWI) is a market-capitalization-weighted index composed of over 2,000 companies, and is representative of the market structure of 48 developed and emerging market countries in North and South American, Europe, Africa, and the Pacific Rim. The index is calculated with net dividends reinvested in U.S. dollars. Indexes mentioned are unmanaged statistical composites of stock market performance. Investing in an index is not possible. Source: MSCI. MSCI makes no express or implied warranties or representations and shall have no liability whatsoever with respect to any MSCI data contained herein. The MSCI data may not be further redistributed or used as a basis for other indices or any securities or financial products. This report is not approved, reviewed or produced by MSCI.

*Expense ratios as stated in the latest prospectus. JOHCM (USA) Inc. has contractually agreed to waive fees and reimburse expenses so that the Net Total Operating Expenses do not exceed the stated amounts until January 28, 2023.