Dear Fellow Shareholders,The FPA Queens Road Small Cap Value Fund (“Fund”) returned 12.47% in the fourth quarter of 2022. This compares to an 8.42% return for the Russell 2000 Value Index in the same period. For the full year of 2022, the Fund returned -9.16% compared to -14.48% for the Russell 2000 Value Index. The Fund’s outperformance during this most recent downturn is in line with our expectations. During times of market weakness, the Fund has historically protected capital better than its benchmark and peers. We expect to outperform in down markets and trail somewhat in speculative markets as a result of our diligent, disciplined, patient process.Market CommentaryIt has been a tough year for asset prices with both stocks and bonds down significantly. Private assets are in the process of getting marked down and real estate prices are softening.2 Unless you had the foresight to be in commodities (and time your trades correctly), diversification did not protect against the broad market declines.In 2022, the market was preoccupied with inflation, the economy and the Fed.3 But we spend our time looking for high quality companies at attractive prices. We maintain a long-term view, focus on down-side protection and invest around normalized earnings with a sense of conservatism and reasonableness. And rather than take on these thorny macro issues ourselves, we invest in companies whose experienced management teams we think will successfully guide them through the uncertain future.There are typically three instances where we deal with the macro economy when doing our research. The first is when interest rates or commodity prices are an input to our models – think banks and interest rates (we don’t tend to do much with commodity dependent companies). That’s straight forward enough.Secondly, we like to find industries where supply and demand are out of whack, or where strange things are going on, and we can get our hands around it. And, in our opinion, there are still a couple of these opportunities lying around.Finally, like most value managers, we are students of business cycles. The economy slows down, earnings get depressed, the market dislikes or gets confused about lower earnings, price momentum turns negative, and we (hopefully) get trough multiples on trough earnings. Somewhere in there we start buying based on the assumption that the economy will turn around and earnings will normalize.At its most basic, our process compares a company’s current price to what we expect the business to look like three to five years out. We always want to be aware of near-term headwinds. But generally, it is lower current prices and a growing discrepancy to a company’s long-term economic prospects that provides us with a margin of safety. We look for quality companies that we are confident will be worth considerably more over that time horizon. And we are very comfortable buying from sellers who are afraid that the prices will fall further tomorrow.Quality and the Four Pillar ProcessWe think of our investment process having four pillars:
We have a preference for long-term compounders – i.e., high-quality franchises with strong balance sheets, proven management teams and attractive industry dynamics that we hope to own forever. Compounders don’t usually come cheap, and while we are valuation conscious, we are generally willing to pay a little bit more for higher quality. While virtually all financial assets were down last year, quality compounders generally held up better.4So what do we mean by quality? At its most basic, we think quality means that we can have confidence that a company’s earnings and cash flows will be larger in three to five years than they are today. Different investors look at different heuristics or quantitative metrics that describe quality. High returns on capital, high operating margins, organic growth, high cash conversion and low debt are all indicative of quality. But at the end of the day, we take a holistic look at our companies, look to identify the risks, try to remain conservative and judicious, and compare the current price to our confidence in the future. Our four pillars – balance sheet strength, valuation, management, and industry analysis – guide our assessment of quality.Historically, quality has been a large contributor to our outperformance during market downturns.5 Low leverage allows companies to survive and reinvest during recessions. Strong management teams can be trusted to shepherd the company through headwinds and find new opportunities. Entrenched competitive positions and industries with favorable economics and outlooks mean that the passage of time is our friend. In practice, it is never this easy. It is rare to find a company that sits cleanly atop each of the four pillars. And our view of the future is hazy at best. But when things get complicated and the future seems uncertain, the four pillars provide a framework for thinking through the next three to five years.Current EnvironmentCurrent valuations are more favorable for small caps than large caps with small and mid-cap stocks (the S&P 600 index) trading at the largest valuation discount to large cap stocks (the S&P 500 index) since the late 1990’s tech bubble.Trailing Twelve Months (TTM) Contributors
Trailing Twelve Months (TTM) Detractors
Portfolio PositioningThe Fund holds cash as a residual of the investment process. When we cannot find companies that meet our stringent criteria, we will allow cash to build. Over a long time horizon, we would almost always want to own a diversified collection of quality companies (acquired at reasonable prices) instead of cash. But we weigh this against our reluctance to sacrifice margin of safety and risk the permanent impairment of capital. The Fund’s current cash allocation is 11.2%, down from 15.5% at the beginning of 2022.19During the year we added 6 new positions (2 of which we previously owned), added to 18 holdings, reduced 10 holdings, and eliminated 4 positions. Four of the Fund’s portfolio companies were bought out or announced mergers.Despite the recent volatility and opaque macro environment, we feel better about the Fund’s long-term prospects than we have in quite some time. We do not make short term predictions on market direction. But current valuations of the Fund’s holdings, competitive positions and track record of execution give us confidence that they will be worth more in three to five years than they are today.As always, and as significant co-investors in the Fund, we appreciate your trust in us to be good stewards of your capital. If you would like to discuss performance or the Fund’s portfolio holdings in greater detail, please let us know.Respectfully,Steve ScruggsPortfolio ManagerJanuary 17, 20231 As of December 31, 2022. Source: Morningstar Direct, FPA. Data shown for the FPA Queens Road Small Cap Value Fund – Investor Class (“Fund”). Inception of the Fund was June 13, 2002. The periods referenced above reflect Russell 2000 Value drawdowns 15% or greater and are calculated from that index’s peak and trough dates, (i.e., 6/14/2002-10/9/2002, 10/5/2007-3/9/2009, 5/10/2011-10/3/2011, 6/22/2015-2/11/2016, 9/20/2018-12/24/2018, 1/16/2020-3/23/2020, 11/8/2021-12/31/22). Please see page 1 for net performance of the Fund since inception. Please also see the end of this presentation for Important Disclosures and Definitions of key terms.2 Source: Wall Street Journal: Blackstone’s BREIT Highlights Looming Dangers of Private Funds; December 12, 2022 https://www.wsj.com/articles/blackstones-breit-highlights-looming-dangers-of-private-funds-11670847230 https://www.ft.com/content/c5a1818c-3153-4031-83d1-fa45747c71d53 Source: Bloomberg: Lockstep Stock Market is Forcing Everyone to be a Macro Trader; June 3, 2022 https://www.bloomberg.com/news/articles/2022-06-03/lockstep-stock-market-is-forcing-everyone-to-be-a-macro-trader4 Source: FTSE Russell: JP Morgan US Quality Factor Index; December 30, 2022; https://research.ftserussell.com/Analytics/Factsheets/Home/DownloadSingleIssue?issueName=JQUA&IsManual=false5 Please refer to the table on page 2 for performance of the Fund during 15% or greater downturns in the Russell 2000 Value Index.6 Source: Yardeni Research. Stock Market Briefing: Selected P/E Ratios; January 18, 2023; P/E=price to earnings. https://www.yardeni.com/pub/stockmktperatio.pdf. Weekly forward P/E ratios calculated by dividing the price by the 52-week forward consensus expected operating earnings per share. Note: Shaded pink areas are S&P 500 bear market declines of 20% or more. Yellow areas show bull markets. Source: I/B/E/S data by Refinitiv.7 Reflects the top contributors and top detractors to the Fund’s performance bas ed on contribution to return for the trailing twelve months (TTM). Contribution is presented gross of investment management fees, transactions costs, and Fund operating expenses, which if included, would reduce the returns presented. The information provided does not reflect all positions purchased, sold or recommended during the TTM. A copy of the methodology used and a list of every holding’s contribution to the overall Fund’s performance during the TTM is available by contacting [email protected]. It should not be assumed that recommendations made in the future will be profitable or will equal the performance of the securities listed. Totals may not sum due to rounding. ‘Percent of Portfolio’ reflects the average weight over the period.8 Source: South Jersey Industries press release, South Jersey Industries, Inc. Enters into Agreement to be Acquired by theInfrastructure Investments Fund; February 24, 2022: https://www.globenewswire.com/en/news-release/2022/02/24/2391259/0/en/South-Jersey-Industries-Inc-Enters-into-Agreement-to-be-Acquired-by-the-Infrastructure-Investments-Fund.html; Note: The share price change noted may not equate with the performance of the holding in the Fund.9 The Combined Ratio measures the money flowing out of an insurance company in the form of dividends, expenses and losses and divides that by premiums collected. A ratio below 100% indicates the company is making an underwriting profit, while a ratio above 100% means it is paying out more money in claims than its receiving from premiums. Return on Equity (ROE) is a measure of a company’s financial performance that shows the relationship between a company’s profit and the investor’s return.10 Source: RLI Q3 earnings, October 19, 2022; https://investors.rlicorp.com/newsroom/news-details/2022/RLI-Reports-Third-Quarter-2022-Results/default.aspx11 Source: AEL Investor Symposium, Dec 7, 2022; https://ir.american-equity.com/events/event-details/american-equity-investor-symposium-presentation12 Source: New Jersey Resources fiscal Q4 2022 earnings: https://investor.njresources.com/financials/quarterly-results/default.aspx13 For more information, see the Q4 2021 Commentary at www.fpa.com; https://fpa.com/docs/default-source/funds/fpa-queens-road-small-cap-value-fund/literature/fpa-queens-road-small-cap-value-fund-commentary-2021-q4.pdf?sfvrsn=601e909d_414 Source: MassDevice; Owens & Minor completes $1.6B acquisition of Apria; March 29, 2022 https://www.massdevice.com/owens-minor-completes-1-6b-acquisition-of-apria/15 Source: Owens and Minor Q3 2022 Financial Results, November 2, 2022; https://investors.owens-minor.com/news-releases/news-release-details/owens-minor-reports-third-quarter-2022-financial-results16 Source: PVH Corp, Nov 30, 2022; https://www.pvh.com/news/press-releases/PVH-Corp-Extends-Licenses-With-GIII-Apparel-Group-Ltd-as-Part-of-a-MultiYear-Transition-to-Bring-Cor
17 Source: Factset. Cumulative average growth rate is based on diluted earnings per share for year ends 2012-2021.18 Source: Factset: ServiceFirstBank 2022 total return was -17.92%, IiShares Regional Bank ETF (“IAT”) 2022 total return was - 20.63%. IAT seeks to track the investment results of an index composed of U.S. equities in the regional banks sector.19 Portfolio composition will change due to ongoing management of the Fund.This Commentary is for informational and discussion purposes only and does not constitute, and should not be construed as, an offer or solicitation for the purchase or sale of any securities, products or services discussed, and neither does it provide investment advice. Any such offer or solicitation shall only be made pursuant to the Fund’s Prospectus, which supersedes the information contained herein in its entirety. This Commentary does not constitute an investment management agreement or offering circular.The statements contained herein reflect the opinions and views of the portfolio managers as of the date written, is subject to change without notice, and may be forward-looking and/or based on current expectations, projections, and/or information currently available. Such information may not be accurate over the long-term. These views may differ from other portfolio managers and analysts of the firm as a whole and are not intended to be a forecast of future events, a guarantee of future results or investment advice.Portfolio composition will change due to ongoing management of the Fund. References to individual securities or sectors are for informational purposes only and should not be construed as recommendations by the Fund, the portfolio manager, the Adviser, the Sub-Adviser or the distributor. It should not be assumed that future investments will be profitable or will equal the performance of the security or sector examples discussed. The portfolio holdings as of the most recent quarter-end may be obtained at www.fpa.com.Future events or results may vary significantly from those expressed and are subject to change at any time in response to changing circumstances and industry developments. The information and data contained herein has been prepared from sources believed reliable, but the accuracy and completeness of the information cannot be guaranteed and is not a complete summary or statement of all available data.The information contained herein is not complete, may change, and is subject to, and is qualified in its entirety by, the more complete disclosures, risk factors, and other information contained in the Fund’s Prospectus and Statement of Additional Information. The information is furnished as of the date shown. No representation is made with respect to its completeness or timeliness. The information is not intended to be, nor shall it be construed as, investment advice or a recommendation of any kind.Certain statements contained in this presentation may be forward-looking and/or based on current expectations, projections, and information currently available. Actual events or results may differ from materially those we anticipate, or the actual performance of any investments described herein may differ from those reflected or contemplated in such forward-looking statements, due to various risks and uncertainties. We cannot assure future results and disclaim any obligation to update or alter any forward-looking statements, whether as a result of new information, future events, or otherwise. Such statements may or may not be accurate over the long-term. Statistical data or references thereto were taken from sources which we deem to be reliable, but their accuracy cannot be guaranteed.The reader is advised that the Fund’s investment strategy includes active management with corresponding changes in allocations from one period of time to the next. Therefore, any data with respect to investment allocations as of a given date is of limited use and may not be reflective of the portfolio manager’s more general views with respect to proper geographic, instrument and /or sector allocations. The data is presented for indicative purposes only and, as a result, may not be relied upon for any purposes whatsoever.In making any investment decision, you must rely on your own examination of the Fund, including the risks involved in an investment. Investments mentioned herein may not be suitable for all recipients and in each case, potential investors are advised not to make any investment decision unless they have taken independent advice from an appropriately authorized advisor. An investment in any security mentioned herein does not guarantee a positive return as securities are subject to market risks, including the potential loss of principal. You should not construe the contents of this document as legal, tax, investment or other advice or recommendations.Fund performance presented is calculated on a total return basis, which includes the reinvestment of all income, plus realized and unrealized gains/losses, if applicable. Unless otherwise indicated, performance results are presented on a net of fees basis and reflect the deduction of, among other things: management fees, brokerage commissions, operating and administrative expenses, and accrued performance fee/allocation, if applicable.The information provided in this presentation is based upon data existing as of the date(s) of the report and has not been audited or reviewed. While we believe the information to be accurate, it is subject in all respects to adjustments that may be made after proper review and reconciliation.Investments, including mutual fund investments, carry risks and investors may lose principal value. Capital markets are volatile and can decline significantly in response to adverse issuer, political, regulatory, market, or economic developments. Small and mid-cap stocks involve greater risks and they can fluctuate in price more than larger company stocks. Short-selling involves increased risks and transaction costs. You risk paying more for a security than you received from its sale. Groups of stocks, such as value and growth, go in and out of favor which may cause certain funds to underperform other equity funds. The value of an individual security can be more volatile than the market as a whole and can perform differently than the value of the market as a whole.
- Balance Sheet Strength –Seek companies with strong balance sheets. We are not comfortableowning companies that have significant liabilities (e.g., debt, legal, regulatory, pension or something inherent in the business model) that could cause insolvency concerns when there’s an economic, financial, or other type of crisis. We want to make sure we are invested in companies that have staying power.
- Valuation –Normalize economic earnings over full market cycles. Primarily using free cash flowdiscount valuation models. Demand a margin of safety.
- Management – Evaluate management’s track record of laying out a long-term strategy andexecuting to achieve their stated objectives.
- Sector and Industry Analysis –We want to own companies in growing industries with stablecompetitive dynamics and favorable economics. We seek to avoid commodity industries, overly competitive industries. We prefer to invest in companies that compete in industries that have long - term growth expectations.
We have a preference for long-term compounders – i.e., high-quality franchises with strong balance sheets, proven management teams and attractive industry dynamics that we hope to own forever. Compounders don’t usually come cheap, and while we are valuation conscious, we are generally willing to pay a little bit more for higher quality. While virtually all financial assets were down last year, quality compounders generally held up better.4So what do we mean by quality? At its most basic, we think quality means that we can have confidence that a company’s earnings and cash flows will be larger in three to five years than they are today. Different investors look at different heuristics or quantitative metrics that describe quality. High returns on capital, high operating margins, organic growth, high cash conversion and low debt are all indicative of quality. But at the end of the day, we take a holistic look at our companies, look to identify the risks, try to remain conservative and judicious, and compare the current price to our confidence in the future. Our four pillars – balance sheet strength, valuation, management, and industry analysis – guide our assessment of quality.Historically, quality has been a large contributor to our outperformance during market downturns.5 Low leverage allows companies to survive and reinvest during recessions. Strong management teams can be trusted to shepherd the company through headwinds and find new opportunities. Entrenched competitive positions and industries with favorable economics and outlooks mean that the passage of time is our friend. In practice, it is never this easy. It is rare to find a company that sits cleanly atop each of the four pillars. And our view of the future is hazy at best. But when things get complicated and the future seems uncertain, the four pillars provide a framework for thinking through the next three to five years.Current EnvironmentCurrent valuations are more favorable for small caps than large caps with small and mid-cap stocks (the S&P 600 index) trading at the largest valuation discount to large cap stocks (the S&P 500 index) since the late 1990’s tech bubble.Trailing Twelve Months (TTM) Contributors
- South Jersey Industries (SJI, Financial) stock price rose 40% on Feb. 24, 2022 on news that Infrastructure InvestmentFund, a private investment vehicle advised by J.P. Morgan Investment Management, Inc., would take the company private. We are expecting the deal to close imminently.8
- RLI (RLI, Financial) is a high-quality specialty insurer with a collection of niche and arcane lines across property &casualty (P&C). RLI has an attractive combined ratio and return on equity,9 a conservative underwriting culture and growth opportunities. Despite its full price, we continue to hold RLI because of its high quality and our reluctance to trade in and out. The insurance sector as a whole performed well last year, but RLI got a boost from strong Q3 2022 earnings and the sale of its equity stake in sunglass manufacturer Maui Jim.10
- Fabrinet (FN, Financial) is a contract manufacturer of optical communications sensors and equipment. The companyhas a niche in hard to replicate precision manufacturing technologies and an enviable track record of execution. The majority of sales goes into the optical communications OEMs (original equipment manufacturing), but Fabrinet has been successfully diversifying into the industrial, auto and medical end markets. The stock has performed well due to strong results all year.
- American Equity Investment Life Holding Company (“AEL”) (AEL, Financial) is a leading writer of fixed index The company is benefitting from an ambitious plan by CEO Anant Bhalla to diversify into alternatives and move assets off balance sheet, creating a fee income stream and freeing up capital for buybacks (AEL 2.0 Strategy). We are warily watching, but so far, results have been good. As of Q3 2022, AEL had 18% of its balance sheet in private assets.11
- New Jersey Resources (NJR, Financial) is a regulated gas utility for Southern New Jersey. The company has slowlyand prudently diversified into midstream, solar, marketing and services while continuing to grow the core utility. Shares performed well on the back of successive strong earnings reports and improved guidance.12
Trailing Twelve Months (TTM) Detractors
- Synaptics (SYNA, Financial) is a developer of human interface (HMI) hardware and software that has diversified intohigher margin internet of things (IoT) products. Synaptics was a top five contributor for the Fund in 2021 and we significantly trimmed the position due to valuation.13 The shares are back down this year with concerns about consumer technology volumes. We have been incrementally buying back shares at lower prices.
- Owens and Minor (OMI, Financial) makes and distributes medical and surgical supplies including masks, gowns andgloves (the Halyard Health S&IP business acquired in 2018). They over earned and paid down debt during COVID but re-levered up to acquire Apria, a manufacturer of home health equipment at the beginning of 2022.14 Results have been coming in weaker and Q3 2022 was a miss.15 The market is currently penalizing companies with deteriorating fundamentals and high debt loads.
- Interdigital (IDCC, Financial) is a research and development organization that develops and acquires wireless and videopatents across key technologies. The company has a history of strong financial performance, opportunistically buys back shares and pays a modest dividend. Shares were down in 2022 with the declining expectations for smartphone volumes and chip demand.
- G-III Apparel Group, Ltd. (“G-III”) (GIII, Financial) is an apparel manufacturer that licenses the Tommy Hilfiger and Calvin Klein women’s and other categories in the U.S. and owns the Donna Karan, Karl Lagerfeld and a stable of smaller brands globally. Shares collapsed after Q3 2022 earnings when the company announced that Tommy and Calvin’s owner, PVH (which the Fund also owns), was in sourcing the licensing arrangement.16 We had considered this possibility and owned G-III in smaller size. G-III remains cheap but with lingering questions about the license transition, bloated inventory and the quality of the fully owned brands.
- ServiceFirst Bank (SFBS, Financial) is a conservatively run lending franchise helmed by Tom Broughton. Tom hireslocal bankers but doesn’t build branches – this allows for best-in-class efficiency metrics while maintaining a strong and conservative lending culture. Return on equity (ROE) and average earnings per share growth have been near 20% for the last 10 years through year-end 202117 – very attractive in our opinion for a conservative, vanilla commercial lender. ServiceFirst declined following disappointing Q3 2022 numbers but has outperformed the iShares U.S. Regional Bank ETF18 for the year.
Portfolio PositioningThe Fund holds cash as a residual of the investment process. When we cannot find companies that meet our stringent criteria, we will allow cash to build. Over a long time horizon, we would almost always want to own a diversified collection of quality companies (acquired at reasonable prices) instead of cash. But we weigh this against our reluctance to sacrifice margin of safety and risk the permanent impairment of capital. The Fund’s current cash allocation is 11.2%, down from 15.5% at the beginning of 2022.19During the year we added 6 new positions (2 of which we previously owned), added to 18 holdings, reduced 10 holdings, and eliminated 4 positions. Four of the Fund’s portfolio companies were bought out or announced mergers.Despite the recent volatility and opaque macro environment, we feel better about the Fund’s long-term prospects than we have in quite some time. We do not make short term predictions on market direction. But current valuations of the Fund’s holdings, competitive positions and track record of execution give us confidence that they will be worth more in three to five years than they are today.As always, and as significant co-investors in the Fund, we appreciate your trust in us to be good stewards of your capital. If you would like to discuss performance or the Fund’s portfolio holdings in greater detail, please let us know.Respectfully,Steve ScruggsPortfolio ManagerJanuary 17, 20231 As of December 31, 2022. Source: Morningstar Direct, FPA. Data shown for the FPA Queens Road Small Cap Value Fund – Investor Class (“Fund”). Inception of the Fund was June 13, 2002. The periods referenced above reflect Russell 2000 Value drawdowns 15% or greater and are calculated from that index’s peak and trough dates, (i.e., 6/14/2002-10/9/2002, 10/5/2007-3/9/2009, 5/10/2011-10/3/2011, 6/22/2015-2/11/2016, 9/20/2018-12/24/2018, 1/16/2020-3/23/2020, 11/8/2021-12/31/22). Please see page 1 for net performance of the Fund since inception. Please also see the end of this presentation for Important Disclosures and Definitions of key terms.2 Source: Wall Street Journal: Blackstone’s BREIT Highlights Looming Dangers of Private Funds; December 12, 2022 https://www.wsj.com/articles/blackstones-breit-highlights-looming-dangers-of-private-funds-11670847230 https://www.ft.com/content/c5a1818c-3153-4031-83d1-fa45747c71d53 Source: Bloomberg: Lockstep Stock Market is Forcing Everyone to be a Macro Trader; June 3, 2022 https://www.bloomberg.com/news/articles/2022-06-03/lockstep-stock-market-is-forcing-everyone-to-be-a-macro-trader4 Source: FTSE Russell: JP Morgan US Quality Factor Index; December 30, 2022; https://research.ftserussell.com/Analytics/Factsheets/Home/DownloadSingleIssue?issueName=JQUA&IsManual=false5 Please refer to the table on page 2 for performance of the Fund during 15% or greater downturns in the Russell 2000 Value Index.6 Source: Yardeni Research. Stock Market Briefing: Selected P/E Ratios; January 18, 2023; P/E=price to earnings. https://www.yardeni.com/pub/stockmktperatio.pdf. Weekly forward P/E ratios calculated by dividing the price by the 52-week forward consensus expected operating earnings per share. Note: Shaded pink areas are S&P 500 bear market declines of 20% or more. Yellow areas show bull markets. Source: I/B/E/S data by Refinitiv.7 Reflects the top contributors and top detractors to the Fund’s performance bas ed on contribution to return for the trailing twelve months (TTM). Contribution is presented gross of investment management fees, transactions costs, and Fund operating expenses, which if included, would reduce the returns presented. The information provided does not reflect all positions purchased, sold or recommended during the TTM. A copy of the methodology used and a list of every holding’s contribution to the overall Fund’s performance during the TTM is available by contacting [email protected]. It should not be assumed that recommendations made in the future will be profitable or will equal the performance of the securities listed. Totals may not sum due to rounding. ‘Percent of Portfolio’ reflects the average weight over the period.8 Source: South Jersey Industries press release, South Jersey Industries, Inc. Enters into Agreement to be Acquired by theInfrastructure Investments Fund; February 24, 2022: https://www.globenewswire.com/en/news-release/2022/02/24/2391259/0/en/South-Jersey-Industries-Inc-Enters-into-Agreement-to-be-Acquired-by-the-Infrastructure-Investments-Fund.html; Note: The share price change noted may not equate with the performance of the holding in the Fund.9 The Combined Ratio measures the money flowing out of an insurance company in the form of dividends, expenses and losses and divides that by premiums collected. A ratio below 100% indicates the company is making an underwriting profit, while a ratio above 100% means it is paying out more money in claims than its receiving from premiums. Return on Equity (ROE) is a measure of a company’s financial performance that shows the relationship between a company’s profit and the investor’s return.10 Source: RLI Q3 earnings, October 19, 2022; https://investors.rlicorp.com/newsroom/news-details/2022/RLI-Reports-Third-Quarter-2022-Results/default.aspx11 Source: AEL Investor Symposium, Dec 7, 2022; https://ir.american-equity.com/events/event-details/american-equity-investor-symposium-presentation12 Source: New Jersey Resources fiscal Q4 2022 earnings: https://investor.njresources.com/financials/quarterly-results/default.aspx13 For more information, see the Q4 2021 Commentary at www.fpa.com; https://fpa.com/docs/default-source/funds/fpa-queens-road-small-cap-value-fund/literature/fpa-queens-road-small-cap-value-fund-commentary-2021-q4.pdf?sfvrsn=601e909d_414 Source: MassDevice; Owens & Minor completes $1.6B acquisition of Apria; March 29, 2022 https://www.massdevice.com/owens-minor-completes-1-6b-acquisition-of-apria/15 Source: Owens and Minor Q3 2022 Financial Results, November 2, 2022; https://investors.owens-minor.com/news-releases/news-release-details/owens-minor-reports-third-quarter-2022-financial-results16 Source: PVH Corp, Nov 30, 2022; https://www.pvh.com/news/press-releases/PVH-Corp-Extends-Licenses-With-GIII-Apparel-Group-Ltd-as-Part-of-a-MultiYear-Transition-to-Bring-Cor
17 Source: Factset. Cumulative average growth rate is based on diluted earnings per share for year ends 2012-2021.18 Source: Factset: ServiceFirstBank 2022 total return was -17.92%, IiShares Regional Bank ETF (“IAT”) 2022 total return was - 20.63%. IAT seeks to track the investment results of an index composed of U.S. equities in the regional banks sector.19 Portfolio composition will change due to ongoing management of the Fund.This Commentary is for informational and discussion purposes only and does not constitute, and should not be construed as, an offer or solicitation for the purchase or sale of any securities, products or services discussed, and neither does it provide investment advice. Any such offer or solicitation shall only be made pursuant to the Fund’s Prospectus, which supersedes the information contained herein in its entirety. This Commentary does not constitute an investment management agreement or offering circular.The statements contained herein reflect the opinions and views of the portfolio managers as of the date written, is subject to change without notice, and may be forward-looking and/or based on current expectations, projections, and/or information currently available. Such information may not be accurate over the long-term. These views may differ from other portfolio managers and analysts of the firm as a whole and are not intended to be a forecast of future events, a guarantee of future results or investment advice.Portfolio composition will change due to ongoing management of the Fund. References to individual securities or sectors are for informational purposes only and should not be construed as recommendations by the Fund, the portfolio manager, the Adviser, the Sub-Adviser or the distributor. It should not be assumed that future investments will be profitable or will equal the performance of the security or sector examples discussed. The portfolio holdings as of the most recent quarter-end may be obtained at www.fpa.com.Future events or results may vary significantly from those expressed and are subject to change at any time in response to changing circumstances and industry developments. The information and data contained herein has been prepared from sources believed reliable, but the accuracy and completeness of the information cannot be guaranteed and is not a complete summary or statement of all available data.The information contained herein is not complete, may change, and is subject to, and is qualified in its entirety by, the more complete disclosures, risk factors, and other information contained in the Fund’s Prospectus and Statement of Additional Information. The information is furnished as of the date shown. No representation is made with respect to its completeness or timeliness. The information is not intended to be, nor shall it be construed as, investment advice or a recommendation of any kind.Certain statements contained in this presentation may be forward-looking and/or based on current expectations, projections, and information currently available. Actual events or results may differ from materially those we anticipate, or the actual performance of any investments described herein may differ from those reflected or contemplated in such forward-looking statements, due to various risks and uncertainties. We cannot assure future results and disclaim any obligation to update or alter any forward-looking statements, whether as a result of new information, future events, or otherwise. Such statements may or may not be accurate over the long-term. Statistical data or references thereto were taken from sources which we deem to be reliable, but their accuracy cannot be guaranteed.The reader is advised that the Fund’s investment strategy includes active management with corresponding changes in allocations from one period of time to the next. Therefore, any data with respect to investment allocations as of a given date is of limited use and may not be reflective of the portfolio manager’s more general views with respect to proper geographic, instrument and /or sector allocations. The data is presented for indicative purposes only and, as a result, may not be relied upon for any purposes whatsoever.In making any investment decision, you must rely on your own examination of the Fund, including the risks involved in an investment. Investments mentioned herein may not be suitable for all recipients and in each case, potential investors are advised not to make any investment decision unless they have taken independent advice from an appropriately authorized advisor. An investment in any security mentioned herein does not guarantee a positive return as securities are subject to market risks, including the potential loss of principal. You should not construe the contents of this document as legal, tax, investment or other advice or recommendations.Fund performance presented is calculated on a total return basis, which includes the reinvestment of all income, plus realized and unrealized gains/losses, if applicable. Unless otherwise indicated, performance results are presented on a net of fees basis and reflect the deduction of, among other things: management fees, brokerage commissions, operating and administrative expenses, and accrued performance fee/allocation, if applicable.The information provided in this presentation is based upon data existing as of the date(s) of the report and has not been audited or reviewed. While we believe the information to be accurate, it is subject in all respects to adjustments that may be made after proper review and reconciliation.Investments, including mutual fund investments, carry risks and investors may lose principal value. Capital markets are volatile and can decline significantly in response to adverse issuer, political, regulatory, market, or economic developments. Small and mid-cap stocks involve greater risks and they can fluctuate in price more than larger company stocks. Short-selling involves increased risks and transaction costs. You risk paying more for a security than you received from its sale. Groups of stocks, such as value and growth, go in and out of favor which may cause certain funds to underperform other equity funds. The value of an individual security can be more volatile than the market as a whole and can perform differently than the value of the market as a whole.
