Alma Eikoh Japan Large Cap Equity Fund

Market Review and Outlook

The Topix index advanced for the fifth straight month in August, up 4.52% on a total return basis. While global equity markets also rose over the month, the
Japanese market outperformed, and several factors may have contributed to this: Further appreciation of merits of the 15% US tariff rate agreement made towards
the end of July; slightly better than expected Q1 results in aggregate; and speculation that Prime Minister Ishiba would resign and be replaced by a more pro-growth
leader. Foreigners remained heavy buyers of the market committing Y1.5trn over the month; on a year to date base foreign investors have invested a net Y2.7trn but
since April a huge Y7.5trn. Leading sectors in the market include non-ferrous metals lifted by data centre related stocks, utilities, real estate, construction and trading
houses. Laggards were shipping, pharmaceuticals, electrical appliances, machinery and services. Topix Value strongly outperformed Topix Growth for the second
month in a row, rising by 7.4% against 1.4%. On a year-to-date basis Topix Value has now outperformed Topix Growth by 8.9% with all this occurring during the last
two months.

First quarter results for all listed companies, showed sales growth of 0.8% and a decline in operating income of 6.0%, with the manufacturing sector posting a –
14.1% decline and non-manufacturing growth of +7.5%. A major factor behind the decline in manufacturing profits was the movement in the Yen/$ rate from 155.9 a
year ago to 144.5 in this quarter. Aggregate results were better than consensus estimates and revisions up to forecasts outnumbered revisions down by a factor of
3:2. Preliminary estimates for Q2 GDP indicated annualized growth of 1.0% QoQ, marking the fifth straight quarter of expansion. Growth was driven by exports and
capex, with tariff impact so far minor. The Economy Watchers Survey improved slightly in August rising from 45.5 to 46.3 with the outlook little changed at 46.7.
Turning to the US, weak private sector non-farm payroll data for both July and August, coupled with a significant revision down to previous estimates for May and
June, suggests a weaker economic backdrop and raised the likelihood of a cut in Fed rates.

The fallout from the loss of majority of the LDP in the Upper House election in July continues with the announcement in early September that Prime Minister Ishiba
will step down as leader of the LDP to take responsibility for the poor showing. The LDP has chosen a full-scale vote including a vote by party members to choose
their next leader and so it will not be until early October that the new LDP leader is decided and not until late October that an extraordinary Diet session to form a new
administration will be held. It is unlikely that the coalition will call a snap Lower House election following the election of the new LDP leader because of their low
standing in national opinion polls. The leading contenders for the leadership are the agriculture minister Shinjiro Koizumi and Sanae Takaichi the former economic
security minister. A new ruling coalition will need support from other parties to get legislation passed and the price of this is likely to be stimulatory in nature, this
might include cutting the consumption tax which has been widely discussed. In terms of differences between the candidates, Takaichi is seen as hawkish on
diplomacy but dovish on fiscal and monetary policy while Koizumi’s instincts are closer to those of the current administration while being a keen supporter of market
friendly moves to support green energy and labour deregulation.

The global economic environment remains very mixed with pockets of strength such as AI investment offset by weakness in many other areas including the auto
sector. While the US has been a resilient source of growth so far, recent employment data and the impact of tariffs throws the sustainability of this performance into
doubt. Conditions in Japan are mixed but recent developments have been positive. The 15% tariff rate leaves Japan no worse off than any of its competitors in the
US market and better than some. Many Japanese companies operating in the US have built substantial local manufacturing and supply chains and appear in a
strong position relative to other foreign companies and in a similar position to US competitors. The resignation of Ishiba will cause a policy vacuum for the next
couple of months, however it seems very likely that the administration that follows will have a pro-growth stimulatory agenda reflecting the need to win the support of
possible coalition partners. The fund holds a broadly balanced economic exposure with overweights in technology sectors balanced by an underweight position in
Capital Goods and the underweight in Insurance counterbalancing the overweight in Banks and Other Financials. The fund’s largest overweights are in Technology
Hardware & Equipment, Healthcare Equipment, Financial Services, Pharmaceuticals, Semiconductors, and Banks. The largest underweight positions are held in
Capital Goods, Telecommunication Services, Media & Entertainment, Insurance, and Transportation. Stock specific risk accounts for a high 77% of tracking error.
Having met with all portfolio constituents recently we are confident that they are in a good position to take advantage of the current environment including the recently
fixed US tariffs and we expect a strong fundamental performance from portfolio companies through 2025 and 2026. Net currency exposure is small, and the portfolio
exhibits a modest growth tilt which reflects the relatively low valuation that many growth stocks now trade on. Within factor risk, the negative exposure to momentum
is the most significant element followed by residual volatility and Earnings yield. The wider market continues to look attractively valued, trading on 16.9x prospective
PER, 1.58x PBR and 2.24% dividend yield. Japanese companies continue to pay greater attention to balance sheet efficiency, the unwinding of cross-holdings and
return of excess capital to shareholders is ongoing. Share buybacks rose from Y9.45trn to a record Y16.4trn in fiscal 2024 and so far, this year are running at ahead
of this pace.

Fund

The fund rose by +3.29% (JPY share class) In August, underperforming the Topix (dividends reinvested) by -1.23%.
Sector allocation was the key driver of negative relative fund performance in August, whilst stock selection was a smaller offsetting positive factor. The overweight
positions in Semiconductors & Semiconductor Equipment, Health Care Equipment & Services, and Household & Personal Products, as well as the underweights in
Telecommunication Services and Utilities, weighed on performance. This more than offset the value added by the overweight positions in Financial Services, Energy,
Banks, and Real Estate & Development, as well as the underweight in Capital Goods.

At the stock level the story was one of a mixture of positives and negatives. Looking at negatives first, semiconductor production equipment maker Tokyo Electron
fell sharply after an unexpected downward revision to its demand forecast for January–March 2026, IVD instruments and reagents maker Sysmex slumped after
reporting poor performance in China hit by government policies targeting medical spending and some one-off negative factors, synthetic film and fibre manufacturer
Kuraray was weak after cutting its forecast to reflect a tough economic environment across regions, and transaction service provider GMO Payment Gateway fell on
uncertainty over next year’s earnings growth as the expected major merchant exit will now impact next year rather than this one. Fund performance was also hurt by
not owning telecom and technology investment holding company SoftBank Group and semiconductor testing equipment maker Advantest, both of which rallied on AIrelated themes. On the positive side, construction company, Shimizu, rose as Q1 results revealed a rapid expansion in building construction margins, package
substrate maker Ibiden, jumped as Q1 results revealed the positive impact of strong sales to Nvidia AI-GPU servers, Fujifilm gained on better-than-expected results
across its imaging and electronic materials interests combined with improved CDMO outlook where new capacity is selling out quickly on attractive terms, and
sportswear specialist Asics rose on continued robust sales and margin expansion. Other outperformers included petrochemicals and specialty materials company
Sumitomo Chemical and Fujitsu.

During the month, we sold Tokyo Electron reflecting our concern over both the likely timing and degree of demand recovery it is now reasonable to expect in 2026
and potential damage to its relationship with key client TSMC which may be clouded by a recent spying incident centered around a former employee. We also sold
electronics conglomerate Panasonic, where restructuring efforts and strength in AI-driven data centre backup units may be overshadowed by risks in auto batteries
where they are dependent upon demand from TESLA and have just completed a major capital spending plan. We are also concerned about the potential for a
substantial goodwill impairment at Blue Yonder where growth and profitability remain modest. We bought gaming and entertainment company Sega Sammy – where
we expect game title unit sales to become stronger over time and look for expansion in high-margin licensing revenues. They have a solid pipeline with four major IP
launches planned for FY3/27. We think the stock’s cheap valuation has yet to discount the potential for gaming operations to scale further and for capital policy to
improve. We repurchased a small position in Daiichi Sangyo where the company continues to make solid progress with their antibody drug conjugate pipeline, most
recently securing FDA breakthrough therapy designation for extensive stage scall cell lung cancer, and the share price has continued to underperform. Reflecting
our confidence in long term prospects for their CDMO business we added significantly to our holding in FujiFilm.