PERFORMANCE REVIEW for the month ended 31 Dec 2018

Heightened geopolitical tensions and concerns of a broader slowdown in global economic growth pressured equity markets in December. International smaller capitalization (“cap”) equities, as measured by the MSCI ACWI ex USA Small Cap Index (“Index”), underperformed international large caps in December. Within international smaller cap equities, emerging markets stocks significantly outperformed developed markets stocks, almost eliminating their year-to-date underperformance. Emerging markets have thus far proven relatively resilient to the elevated market volatility recently. All eleven sectors within the Index posted negative returns for the month. Among them, the strongest performing sectors were utilities, real estate, and materials. Energy, information technology, and consumer discretionary were among the weakest performing sectors.

The Portfolio modestly outperformed with the Index during the month. To evaluate stocks in our investable universe, our multi-factor quantitative model employs four bottom-up factor categories – valuation, earnings growth, technical indicators, and quality – and two top-down factor categories assessing macroeconomic and country aggregate characteristics.

In December, value factors generated slightly positive returns and finished the year as one of the better performing factors, thanks to a strong fourth quarter. Earnings growth factors delivered positive returns in the month of December after significant headwinds in October and November. Technical factors delivered slightly negative returns in December and were the worst-performing bottom-up factor group in the fourth quarter as we witnessed a reversal in market sentiment away from many of the stocks that previously led the market. Some of 2018’s best-performing stocks through the third quarter (i.e., those with strong technical indicators) were subsequently hardest hit in the fourth quarter market sell-off. The quality factor group posted positive returns in December and was the best performing bottom-up factor group in the fourth quarter and in 2018. All bottom-up factor group returns are positive from the inception of the Portfolio to the end of December. Within our top-down factor groups, our macroeconomic factors posted positive returns in December as countries with superior macroeconomic metrics outperformed those exhibiting relatively weaker metrics. However, returns to our country aggregate factors were negative.

Portfolio holdings in the information technology, financials, and industrials sectors contributed the most to relative outperformance. Holdings in the consumer staples, communication services, and an underweight to the utilities sector offset a portion of the relative performance. Relative performance for the month can be mostly attributed to stock selection. The largest contributor to performance relative to the Index was lithium battery producer, Simplo Technology Co., Ltd. (Taiwan). Additional top contributors included gold miner, Harmony Gold Mining Co. Ltd. (South Africa), financial services provider, BinckBank NV (Netherlands), steel & iron distribution company, EVRAZ Plc (United Kingdom), and mining company, African Rainbow Minerals Ltd. (South Africa). The largest detractor to relative performance was construction company, Implenia AG (Switzerland). Additional top detractors included electronic component manufacturer, Taiyo Yuden Co., Ltd. (Japan), paper products manufacturer, Canfor Pulp Products (Canada), engineering and construction company, HASEKO Corp. (Japan), and integrated oil refiner & producer, Esso Thailand Public Co. Ltd.(Thailand).*

*The market commentary expresses the portfolio managers’ views as of the date of this report and should not be relied on as research or investment advice regarding any stock. These views and the fund holdings and characteristics are subject to change. There is no guarantee that any forecasts made will come to pass. Any securities identified and described in this report do not represent all of the securities purchased, sold or recommended for client accounts. The reader should not assume that an investment in the securities identified was or will be profitable. Diversification does not protect against market loss.