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Manager Commentary

8 May 2019

Market Backdrop

Global equity markets rebounded strongly for the quarter after a major selloff in Q4 2018. While economic and earnings downgrades continued during Q1, equity markets appeared to be focused on a rebound in activity into the second half of the year. Weak first quarter data appeared to have been priced in the selloff of 2018 while an about face from the world’s two most important central banks provided a stimulus shot to the market. The Federal Reserve and the European Central Bank both retreated from signs of rising rates this year and both went a long way to fight over who was more dovish coming into the second quarter and second half of the year.

With the possibility of the start of green shoots with some data items in Europe and better China economic data arising, markets continue to need confirmation of improving conditions to maintain its current rally. Another set of possible good news could be in the U.S.-China trade negotiations as negotiators from both countries appear to be getting closer to a deal that would remove a major uncertainty for businesses. Commodities rose with oil prices following slower production in OPEC, Venezuela, and Iran and iron ore prices moving sharply higher on supply cuts in Brazil and Australia.

While the New York Federal Reserve’s recession indicator hit a 25% chance of a recession in the U.S., the highest level since the Global Financial Crisis, markets focused on the prospects of looser monetary conditions providing equity markets a boost. The dovish talk from central banks led to a sharp decline in bond yields with the German 10-year bond retreating below zero percent for the first time since 2016 and the U.S. 10-year bond plummeting below 2.5% for the first time since early 2018. The decline in the long bond and lack of a similar move in the front end of the yield curve led to an inverted yield curve at the 3m-10y level which spooked the market. A San Francisco Federal Reserve study from last year indicates an inversion at the 3m-10Y level is the best indicator of a recession one to two years out while other studies suggest the yield curve must remain inverted at least for one quarter for this indicator to work. The markets will be watching this development over the coming months. The lower yields pushed financial sector stocks down, in particular bank stocks, as lower yields and a flatter yield curve makes it much harder for them to earn reasonable rates of returns.

Large caps slightly underperformed small and mid-caps for the quarter while Growth outperformed Value for the quarter.  The best performing MSCI EAFE countries for the quarter were New Zealand, Belgium, and Hong Kong while the worst performing MSCI EAFE countries were Singapore, Japan, and Germany. The best performing emerging markets for the quarter were Colombia, China, and Egypt while the worst were Qatar, Turkey, and Poland.

Performance and Attribution

The Timothy Plan International Fund is off to a good start in 2019 as it outperformed the MSCI EAFE index for the quarter.  International equities bounced back after a rough finish to 2018 with the Fund increasing double digits for the quarter led by positive stock selection.  Stocks in the Industrials and Communications Services sectors performed best for the quarter while an overweight to the Technology sector helped as well.  From a country standpoint, Germany, Japan, and Hong Kong stocks performed best relative to the benchmark while any cash weight in a strong market and a void in Switzerland hurt relative performance.

Outlook

After a strong start to the year, we would not be surprised to see volatility rise in the 2nd half of the year as expectations have risen.  Investors have shunned European markets to start the year and are very underweight that region and we would expect a strong bounce in those markets if economic activity begins to stabilize and improve there as it appears to be doing so.  We have slightly reduced China exposure in the portfolio after a strong run in the 1st quarter as the rhetoric of US-China trade relations is likely to keep this topic in investor’s minds for some time to come.  The ECB and BoJ remain very supportive of their respective economies for the remainder of this year providing a tailwind for equity markets.

8 May 2019

Market Backdrop

Economic activity in Israel remains on a solid footing while the Bank of Israel (BoI) continues to support the economy with fairly dovish policy.  The Composite State of the Economy Index rose in March 2019 at a similar pace of the previous 12 months as the economy continued to perform well, supporting continued corporate earnings expansion.  The BoI’s research department forecasts GDP growth of 3.2% in 2019 and 3.5% in 2020 as a result of continued solid corporate investment.  One example of the attractiveness of investment in Israel is Intel’s announcement in January that it was planning to expand its manufacturing capacity in Israel and invest over US$11bn, creating thousands of jobs in the country.  The Bank of Israel expects inflation to remain slightly above the lower band of its expectations above 1% over the coming year, clearing a path to very gradual interest rate increase.  The Monetary Committee of the BoI stated in its latest decision to keep interest rates unchanged at 0.25% that it “…assesses that the rising path of the interest rate in the future will be gradual and cautious…”.  This accommodative stance from the BoI will continue to be supportive to Israeli equity markets.

Prime minister Benjamin Netanyahu appears to have cemented his reputation as a political survivor after the April national elections showed his Likud party in the driver’s seat to form a new coalition government.  President Reuven Rivlin has tasked the Likud party days to form the new government, likely to be made up of Likud and ultra-Orthodox and right leaning parties after Netanyahu’s Likud party and his coalition members won a majority of the Knesset seats in this election.  This, in spite of the likely outcome of the prime minister to be indicted on charges of corruption later this year. A new centrist party, Blue and White, could remain a formidable challenger to the ruling coalition in the future.

Performance and Attribution

Economic activity in Israel remains on a solid footing while the Bank of Israel (BoI) continues to support the economy with fairly dovish policy.  The Composite State of the Economy Index rose in March 2019 at a similar pace of the previous 12 months as the economy continued to perform well, supporting continued corporate earnings expansion.  The BoI’s research department forecasts GDP growth of 3.2% in 2019 and 3.5% in 2020 as a result of continued solid corporate investment.  One example of the attractiveness of investment in Israel is Intel’s announcement in January that it was planning to expand its manufacturing capacity in Israel and invest over US$11bn, creating thousands of jobs in the country.  The Bank of Israel expects inflation to remain slightly above the lower band of its expectations above 1% over the coming year, clearing a path to very gradual interest rate increase.  The Monetary Committee of the BoI stated in its latest decision to keep interest rates unchanged at 0.25% that it “…assesses that the rising path of the interest rate in the future will be gradual and cautious…”.  This accommodative stance from the BoI will continue to be supportive to Israeli equity markets.

Prime minister Benjamin Netanyahu appears to have cemented his reputation as a political survivor after the April national elections showed his Likud party in the driver’s seat to form a new coalition government.  President Reuven Rivlin has tasked the Likud party days to form the new government, likely to be made up of Likud and ultra-Orthodox and right leaning parties after Netanyahu’s Likud party and his coalition members won a majority of the Knesset seats in this election.  This, in spite of the likely outcome of the prime minister to be indicted on charges of corruption later this year. A new centrist party, Blue and White, could remain a formidable challenger to the ruling coalition in the future.

Outlook

The strong economy continues to support robust corporate earnings growth.  While the recent election, fighting in Gaza, and the upcoming likely indictment of prime minister Netanyahu lead to potential distractions that could lead to added volatility for equity markets. We remain constructive Israeli equities over the long term as the innovation of Israel corporates and the strong economic growth in the country supports equity prices.

1 May 2019

Macquarie Investment Management

US REIT • Client commentary • March 31, 2019

MARKET REVIEW

US equity markets bounced back from the dismal fourth quarter of 2018 — featuring the weakest December since 1931 — with the S&P 500® Index’s strongest first quarter since 1998. Global markets also were up, though not as much. In fact, risk assets around the globe, including bonds and commodities, were all strong in the first quarter of 2019.

The driving force behind the turnaround was the US Federal Reserve’s decision to forgo further rate hikes in 2019. In December, after raising rates for the fourth time in 2018, the Fed had stated it planned three additional hikes in 2019. Shortly before the first quarter closed, however, it backed off, saying there would be no further hikes in 2019. Additionally, the Fed said it would end its balance sheet reductions by September.

Although the decision was positive for global risk assets, it left investors to ponder just how data-dependent the central bank’s decision-making is, given that credit markets and macroeconomic indicators had been slowing throughout 2018. The Fed’s pivot was unprecedented, and many investors are now questioning the central bank’s mandate.

Nonetheless, the real estate investment trust (REIT) market clearly benefited from this course change, with the FTSE Nareit Equity REITs Index recording a 16.33% total return for the first quarter, which was higher than its cumulative return for 2016- 2018. Although fundamentals did not drastically change for the overall REIT group in the first quarter, the credit and interest rate environment improved, driving returns higher.

That raises the question: Do REITs only perform well in a declining rate environment? The answer is both yes and no. Economically sensitive sectors (apartments and industrial, for example) and stable sectors (like manufactured housing) can do well in rising markets while long-duration sectors (such as healthcare and shopping centers) may experience greater headwinds.

Data: Bloomberg.

Within the strategy

For the first quarter of 2019, the US REIT strategy (the “Strategy”) underperformed its benchmark, the FTSE Nareit Equity REITs Index.

Technology stock selection was positive as the Strategy’s weighting in cell towers outperformed. Cell towers generally have stable cash flow and are a basic oligopoly with only three major players. The Strategy owns one of them: American Tower Corp., up more than 20% for the first quarter. The company has predictable cash flow from long leases and low capital expenditures (capex) and stands to benefit as the industry transitions to 5G technology. The Strategy is underweight data centers, with Equinix Inc. as its only holding. Equinix serves the retail market and has a repeatable interconnection business that we believe is more attractive than the wholesale and hyperscale businesses of Digital Realty Trust Inc. and Cyrus One Inc. The Strategy has taken some profits in American Tower as it has become expensive, but we continue to hold Equinix.

The Strategy’s performance in the self-storage sector benefited from an underweight relative to the benchmark. The group is struggling with slowing street rates (leading to slowing rent growth) and rising expenses. Supply of self-storage facilities has risen four times over the past three years. Construction levels are at all-time highs and may peak this year. However, given that it typically takes 45 months to fully lease a new facility, the negative effect of oversupply could linger into 2020. The positive, in our view, is that this business requires low capex. Once rate deceleration stabilizes, net-operating-income (NOI) growth may improve. In addition, because expenses are higher this year due to real estate taxes, we may see better year-over-year comparisons next year. However, until we see signs of stabilization, we intend to maintain the Strategy’s underweight.

The Strategy outperformed in the specialty sector primarily due to strong stock selection, specifically Invitation Homes Inc. and EPR Properties. Both stocks rose more than 20% during the quarter. Invitation Homes benefited from the strong desire for home rentals, and we believe this should continue to drive strong internal growth. EPR Properties benefited from its exposure to long duration leases. As the bond market rallied, investors sought secure and growing income. We remain confident in these two stocks, as we feel stable income growth should be rewarded in the current market.

As was the case at the end of 2018, the Strategy’s underperformance in the first quarter was predominantly due to issues in the healthcare sector. Shares of Brookdale Senior Living Inc., the main detractor, declined for the quarter. Although the company gave guidance below analysts’ expectations, Brookdale Senior Living announced that senior housing fundamentals would bottom in the fourth quarter. We continue to believe in the company’s value proposition. The company has been an arduous holding for the Strategy, but we think 2019 will mark an inflection point. First, its real estate is undervalued by half. Second, the company has an ancillary business to which the market has assigned no value, but which we think is worth $250 million to $300 million. Given that the company’s market cap is only $1.2 billion, the market is assigning a value of just $900 million to Brookdale’s senior housing assets, grossly undervaluing the company, in our view. Yet there is a frenzy for senior housing assets as buyers expect that over the next five years, there could be strong upside from a demographic tailwind.

In the lodging sector, stock selection and an underweight allocation resulted in underperformance. The Strategy’s lack of exposure to Park Hotels & Resorts Inc., Gaming and Leisure Properties Inc., and Ryman Hospitality Properties Inc. hurt performance. We believe that although hotels have rallied with the market, from here on they will likely show minimal growth as valuations are stretched.

The diversified sector detracted from performance, as the Strategy’s lone holding in the sector, Vornado Realty Trust, rallied but lagged the broader market. The company owns a large amount of office and retail assets around Penn Station in New York City. The company’s current plans to redevelop the assets have caused near-term pressure on the stock; however, we believe the longer-term value creation will be substantial. We continue to like the Strategy’s exposure to the name.

Outlook

Since 2018’s fourth-quarter selloff, REITs have rallied strongly. With the Fed ruling out additional rate hikes this year, REITs now have the wind at their back. That may not last, however, if the market should sense that conditions are improving and that rates could rise in China, Europe, or the United States.

So far, the declining earnings growth rate for the S&P 500 Index has helped REIT shares. However, with REITs trading at a discount of just 1% to NAV and an adjusted funds from operations (AFFO) multiple of 21x, they are clearly more expensive now than they were at the end of 2018.

Given this backdrop and current valuations, we believe we are beyond the point of an “everything rally” due to the Fed’s pivot. As we await first-quarter earnings, and given the strong rally that has already taken place, the bar is now higher for companies to justify their valuations. We continue to overweight manufactured housing, apartments, and freestanding while underweighting malls, shopping centers, and data centers.

One technical aspect worth discussing is fund flows. The REIT industry is entering its fifth year of negative fund flows. This has occurred for several reasons. First, investors fled yield and gravitated toward growth when the Fed raised rates in 2017 and 2018. Second, after nearly an eight-year recovery, REITs have achieved full occupancies as rent growth has slowed in many sectors. Lastly, some of the outflow resulted from Japanese funds that were created by US REIT managers to enable retail investors in Japan to buy US REITs. The Japanese funds initially attracted $61 billion by promising yields of 25% to 30%. When the Japanese watchdog equivalent of the US Securities and Exchange Commission blew the whistle on this irresponsible promise, investors fled the funds, leaving just $30 billion. REIT investors bore the brunt of this bad behavior. Our firm never participated in this practice. We believe that an investment in our Strategy has the potential to provide a sustainable and stable dividend and steady cash flow growth. We seek to achieve 9% to 11% growth over the long term.

1 May 2019

Macroeconomic Update

The U.S. economy is decelerating, with Gross Domestic Product (GDP) expected to have softened in 04. The Atlanta Federal Reserve’s GDPNow™ estimates 04 2018 growth at 2.6%; this compares with 3.4% growth in 03, and 4.2% in 02. On the supply side, business confidence deteriorated as 04 came to a close. Although both the Institute for Supply Management Manufacturing and Non-Manufacturing (services) indices (December 2018 Report On Business® ) registered continuing expansion readings, both indices were below expectations In fact, the ISM® Manufacturing index fell to its lowest level in two years The New Orders, Production and Order Backlog components fueled the index decline as continuing trade uncertainties and slowing of growth in key industrial countries negatively impacted the sector outlook. The ISM® Non-Manufacturing (services) index, while softening, held on better into quarter end with the pace of new orders remaining firm. On the demand side, strong employment gains in the quarter, an acceleration in average hourly earnings, and increasing labor participation rates showed that consumers are on a solid ground

As we noted in our last quarterly piece, the above-trend growth in the second and third quarters of 2018 was unsustainable, fueled by a dramatic increase in government spending, particularly in military/defense spending A higher level of business investment, driven by the recent 2016 tax cuts, also had an impact Whether that level of spending can be sustained is uncertain. A return to more moderate, on-trend growth is anticipated in the near term. While we do not see any apparent upside risks to our outlook, there are downside risks lurking

Overly aggressive Federal Reserve interest rate hikes, an extended government shutdown or a particularly messy United Kingdom exit from the European Union could bite into our near term growth outlook.

Q1 2019 Performance Update

Equity markets saw significant gains in 01 2019, with most domestic equity indices delivering double-digit returns. While growth stocks handily beat value stocks, market capitalization was not a significant factor for generating alpha However in the growth space, smaller names beat out larger names by about 100 bps Each sector in the Russell 1000 Growth had positive returns for the quarter, but Technology was the stand out, delivering 19.7% and comprising 1/3 of the index. Health Care had the lowest return at 7.2%. The Large/Mid Growth Portfolio returned 15.4% for the quarter, just shy of the Russell 1000 Growth at 16.1%. The portfolio slightly beat our model portfolio by about 30 bps7 When returns are as strong as they were this quarter, any amount of cash will drag performance versus a benchmark, and underperformance to the benchmark is easily attributed to cash, which averaged 5%.

Contributors

Rapid 7, RPD, (2 4%, +62 4%) 2 produces software that helps enterprises assess their vulnerabilities, detect and respond to attacks, and gather and analyze security related data across their network. They reported a phenomenal 04, with revenues, bookings and earnings easily exceeding expectations Their guidance for full year 2019 was surprisingly strong as well.

Service Now, NOW (2 2%; +38 4%) provides enterprise cloud computing solutions. Its customers are in the fields of Health Care, Education, Government, and Financial Institutions. The company has put together a stellar record of growth, and yet it is widely believed that a significant runway remains for both growth and additional margin expansion in a $60B+ total addressable market Remarkably, according to some analysts, NOW could achieve durable organic growth of 20%+ for several years without hiring a new sales person, as a significant portion of new volume comes from up-sells Fourth quarter adjusted subscription billings increased 39% and beat the consensus by $50 million, by far the largest beat in 2018.

Detractors

Intercontinental Exchange, ICE (2 3%; +15%) is a global exchange and data services company In its 04 earnings report, the company introduced 2019 guidance for the first time. Data revenue guidance came in at constant-currency growth of 4-6%, a deceleration from the expected growth rate previously expressed by management ICE’s 2019 guidance reflects the reality that data services ultimately posted 5% organic growth in 2018 due to headwinds in desktops/connectivity that are expected to persist into 2019. Additionally, transaction volumes were below previous forecasts, especially trading on interest rates and energy futures.

Henry Schein, HSIC (16%, -2 3%) is an international dental and medical products distributor. Unfortunately dental utilization trends in the US, which is Henry Schein’s largest market, continue to be quite anemic; therefore while Henry Schein is outperforming its competitors, the overall market growth is disappointing We have sold the position because we find more attractive investment opportunities elsewhere.

Market Outlook

The strong equity market returns in 01 rewarded investors that were able to patiently endure the surprising selloff in 04 2018. The investor psychology has shifted significantly, with most investors now interpreting every datapoint with a ‘glass half full’ perspective Given the dramatic psychology swings that we have witnessed over the past year, we are careful to avoid being overly influenced by the most recent data point, or the most recent market swing Staying objective and unemotional has become critical when making investment decisions. We continue to find compelling investment opportunities; there is not any one specific theme, instead we are finding unique companies that are experiencing exceptional growth We remain focused on generating alpha and producing the strongest investment results we can for you over the long run. We thank you for your continuing support and investment.

The securities identified and described 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. The Index returns are provided to show an example of alternate return potential during the relevant time periods; however, indices may possess different investment attributes that may make comparisons difficult such as volatility, liquidity, market capitalization, and security types. The statistical data regarding the indices has been obtained from Bloomberg and the returns are calculated assuming all dividends are reinvested. The indices are not subject to any of the fees or expenses to which the portfolios are subject. This report assumes the reader has sophisticated knowledge of investing and the markets. If you require more information about the information presented, including the portfolio characteristics and risk statistics, please contact us.

Manager views expressed herein were current as of the date indicated above and are subject to change. It should not be assumed that recommendations made in the future will be profitable or will equal the performance of the securities in this commentary. A copy of the calculation methodology and the full list of recommendations made in the preceding year is available upon request. The performance data quoted represents past performance and does not guarantee future results. Performance returns quoted are gross of fees which were calculated on a time weighted basis and do not give effect to investment advisory fees, which would reduce such returns. Please see Chartwell’s Form ADV, Part II for a complete description of investment advisory fees. The following statement demonstrates the compound effect advisory fees have on investment returns: For example, if a portfolio’s annual rate of return is 15% for 5 years and the annual advisory fee for a client is 100 basis points or 1.00%, the gross cumulative 5 year return would be 101.1% and the five year return net of fees would be 92.5%. Actual fees charged to portfolios may be different due to various conditions including account size, calculation method and frequency, and the presence of a performance or incentive fee. The deduction of performance and incentive based fees will have similar, yet often larger, impacts to performance and account values than standard management fees. To receive a complete list and description of Chartwell Investment Partners’ composites, performance attribution for all securities, and/or a presentation that adheres to the GIPS® standards, please contact Lynette Treible by phone (610)407-4870, email treible@chartwellip.com, or by mail to 1205 Westlakes Drive, Suite 100, Berwyn, PA 19312.

1 May 2019

Macroeconomic Update

The U.S. economy continues to steadily grow at moderate rates, with the Atlanta Federal Reserve estimating first quarter 2019 growth of 2.1%. This follows the US GDP growth of 2.2% in 04 of 2018. It is worth noting however that the 04 GDP growth rate was a notable deceleration from the growth seen earlier in the year There were several issues that led to the deceleration lower business confidence from trade war concerns; dramatically slower growth in EU and China, and the government shutdown in January However, the Institute for Supply Management Manufacturing and Non-Manufacturing (services) indices [ISM] registered continuing economic expansion readings

On the demand side of the economy, consumers remain on solid ground as employment gains continue to be surprisingly healthy Despite an economic expansion that has lasted over nine years, the monthly employment data indicates that more workers are returning to the workforce. Wage growth continues to steadily improve as well. Concerns in the past of full employment leading to rampant wage inflation appear to have been overblown. The concerns that arose last quarter about the Federal Reserve continuing to raise interest rates during this recent economic slowdown have faded, as the Fed has signaled that interest rate policies are on hold for now While the markets now are pricing in a higher probability of interest rate reductions, we are doubtful that will occur. The investor psychology that was overly negative last quarter has been replaced by a more balanced perspective; while US growth is decelerating, that does not necessarily insure an imminent recession.

Ql 2019 Performance Update

Equity markets saw significant gains in 012019, with most domestic equity indices delivering double-digit returns. While growth stocks handily beat value stocks, market capitalization was not a significant factor for generating alpha However in the growth space, smaller names beat out larger names by about 100 bps7 Each sector in the Russell Mid Cap Growth had positive returns for the quarter, with most putting up 16% or more in gains.

The portfolio had strong returns in 01, delivering 16%. The benchmark, however rose by 19.6%. When markets are this strong, holding any amount of cash will drag alpha Because of the portfolio’s 6.1% average cash weight, we lost over 100 bps of return. Technology and Utilities stocks were particularly strong but the Consumer Discretionary sector underperformed, with Henry Schein and KAR Auction Services being the largest detractors. Combined, the cash drag and the underperformance of the Consumer Discretionary sector accounted for most of the fund’s underperformance to the Russell Mid Cap Growth Index.

Contributors
Rapid7 RPD, (2 4%, +62 4%) 2 produces software that helps enterprises assess their vulnerabilities, detect and respond to attacks, and gather and analyze security related data across their network. They reported a phenomenal fourth quarter, with revenues, bookings and earnings easily exceeding expectations Their guidance for full year 2019 was surprisingly strong as well.

RingCentral, RNG (4.2%, +308%) is a provider of software as a service solution for business communications. It is benefiting from the steady shift to Voice over IP telephony, which allows employees to communicate via voice, text, video and conferencing over a hosted IP platform RingCentral enjoyed revenue growth of 34% in 2018, and given the greater number of reselling partners, we expect the company to post another year of at least 30% growth in 2019.

Detractors

Grand Canyon Education, LOPE (11%, -4 2%) is in the midst of shifting its business model. In the past management was totally focused on growing its Arizona campus; now however it is making significant investments in operating online courses for other universities on a national scale. The acquisitions and investments are having a negative near-term impact on margins; unfortunately, the management team isn’t disclosing enough information to investors regarding this margin impact Therefore, while the company is undergoing this strategic shift we are stepping to the sidelines.

Henry Schein, HSIC (16%, -2 3%) is an international dental and medical products distributor. Unfortunately dental utilization trends in the US, which is Henry Schein’s largest market continue to be quite anemic; therefore while Henry Schein is outperforming its competitors, the overall market growth is disappointing We have sold the position because we find more attractive investment opportunities.

Market Outlook

The strong equity market returns in 01 rewarded investors that were able to patiently endure the surprising selloff in 04 2018. The investor psychology has shifted significantly, with most investors now interpreting every datapoint with a ‘glass half full’ perspective Given the dramatic psychology swings that we have witnessed over the past year, we are careful to avoid being overly influenced by the most recent data point or the most recent market swing Staying objective and unemotional has become critical when making investment decisions.

We continue to find compelling investment opportunities; there is not any one specific theme, instead we are finding unique companies that are experiencing exceptional growth We remain focused on generating alpha and producing the strongest investment results we can for you over the long run. We thank you for your continuing support and investment.

The securities identified and described 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. The Index returns are provided to show an example of alternate return potential during the relevant time periods; however, indices may possess different investment attributes that may make comparisons difficult such as volatility, liquidity, market capitalization, and security types. The statistical data regarding the indices has been obtained from Bloomberg and the returns are calculated assuming all dividends are reinvested. The indices are not subject to any of the fees or expenses to which the portfolios are subject. This report assumes the reader has sophisticated knowledge of investing and the markets. If you require more information about the information presented, including the portfolio characteristics and risk statistics, please contact us.

Manager views expressed herein were current as of the date indicated above and are subject to change. It should not be assumed that recommendations made in the future will be profitable or will equal the performance of the securities in this commentary. A copy of the calculation methodology and the full list of recommendations made in the preceding year is available upon request. The performance data quoted represents past performance and does not guarantee future results. Performance returns quoted are gross of fees which were calculated on a time weighted basis and do not give effect to investment advisory fees, which would reduce such returns. Please see Chartwell’s Form ADV, Part II for a complete description of investment advisory fees. The following statement demonstrates the compound effect advisory fees have on investment returns: For example, if a portfolio’s annual rate of return is 15% for 5 years and the annual advisory fee for a client is 100 basis points or 1.00%, the gross cumulative 5 year return would be 101.1% and the five year return net of fees would be 92.5%. Actual fees charged to portfolios may be different due to various conditions including account size, calculation method and frequency, and the presence of a performance or incentive fee. The deduction of performance and incentive based fees will have similar, yet often larger, impacts to performance and account values than standard management fees. To receive a complete list and description of Chartwell Investment Partners’ composites, performance attribution for all securities, and/or a presentation that adheres to the GIPS® standards, please contact Lynette Treible by phone (610)407-4870, email treible@chartwellip.com, or by mail to 1205 Westlakes Drive, Suite 100, Berwyn, PA 19312.

31 Mar 2019

Brandes Investment Partners Emerging Markets Equity Strategy Notes First Quarter 2019 (January 1 – March 31, 2019)

The Timothy Plan Mutual Fund Emerging Markets Fund returned 8.3% (gross of fees) in the first quarter, underperforming its benchmark, the MSCI Emerging Markets Index, which increased 9.9%.

Positive Contributors

Holdings in real estate and communication services drove performance.

Mexico-based Fideicomiso PLA Administradora Industrial (known as Terrafina), Fibra Uno and Fibra Macquarie Mexico lifted returns as these income-oriented securities benefited from the U.S. Federal Reserve’s hints that there may be no further interest rate hikes in 2019.

Among our communication services holdings, notable contributors included Indonesian XL Axiata and Chilean Empresa Nacional de Telecomunicaciones (Entel). Investors welcomed XL’s encouraging earnings growth and favorable outlook. Similarly, Entel’s shares rose on strong 2018 results driven by improved profitability and margins in Chile and Peru.

Select financial holdings also aided performance, namely Panama-based Banco Latinoamericano, Russian Sberbank, Colombia’s Grupo Aval and information technology services provider Chinasoft International.

Performance Detractors

Positive sentiment shift regarding trade negotiations between China and the United States boosted Chinese stocks in general. Consequently, while the majority of our China-based holdings appreciated in the quarter, our underweight allocation to companies in the country hurt relative returns.

Meanwhile, tightening financial conditions combined with heightened uncertainty surrounding local elections weighed on our holdings in Turkey. Our allocation there remains measured to three companies: banks Akbank and Garanti Bankasi, as well as real estate firm Emlak Konut.

Other detractors included India-based electric utility Reliance Infrastructure, Slovenian bank Nova Ljubljanska Banka, which gave back some of its strong returns from the fourth quarter of 2018, Mexican cement producer Cemex, and Brazil-based regional jet manufacturer Embraer.

Embraer has received sign-off for its deal with Boeing from most of the required stakeholders, including the Brazilian government and shareholders. The deal is expected to close by the end of this year, assuming anti-trust regulators approve it. In the quarter, Embraer’s shares declined as the company missed revenue and net income forecasts. Nevertheless, our valuation thesis remains positive. As we have shared in the past, we view the deal favorably as it crystalizes the value of Embraer’s commercial segment ahead of any need for regional jet volume recovery, partially mitigating the risks related to the capital expenditure cycle of airlines (Embraer’s customers). The deal also offsets the competitive threat from Airbus/Bombardier and provides a closer relationship with Boeing, which we believe creates an upside potential for both Embraer’s defense and business jet segments.

Select Activity in the First Quarter

The Emerging Markets Investment Committee initiated new positions in companies that we know very well as we have owned them in the past, namely Latin American airline Copa Holdings and Austria-domiciled Erste Group Bank, which operates mainly in emerging European countries.

The investment committee exited the strategy’s positions in Russian Lukoil and India-based Reliance Infrastructure.

A number of recent developments led to a reconsideration of our investment thesis for Reliance Infrastructure and our eventual divestment. Most notably, during the second half of 2018, Reliance sold its Mumbai utility to Adani Transmission. The utility had been Reliance’s main earnings contributor and was sold to pay down debt. Prior to the sale, our investment case for Reliance Infrastructure was supported by the valuation of its electricity assets, including its stake in publicly listed Reliance Power. We also anticipated some upside potential from its significant balance of financial assets. However, the disposal of the Mumbai utility meaningfully reduced Reliance’s earnings power and led to a deterioration in the quality of its net asset value (NAV), which now consists primarily of financial holdings and contingent assets.

Furthermore, the company went into a technical default on a small portion of its debt for a few weeks until it received the proceeds from the utility sale, raising immediate concerns about the liquidity and recoverability of its remaining financial assets. Our loss of confidence in the company, combined with its poor transparency, triggered our decision to exit the position.

Current Positioning

Continuing the trend from the second half of 2018, we trimmed a number of our positions in Brazil given their strong performance. For the first time in over five years, Brazilian companies did not represent the strategy’s largest country weighting at quarter end, with South Korea taking over the position. The strategy maintained major underweights in China, Taiwan and India.

Changes to the Global Industry Classification Standards (GICS) undertaken by MSCI in the fourth quarter of 2018 affected our relative weightings from a sector/industry basis. As has been the case for a number of years, we remained underweight the information technology sector as of March 31, although our underweight was not as significant as before, due to the reclassification of large technology companies (e.g., Alibaba, Tencent, Baidu) into the communication services sector. Our allocations to the consumer discretionary and real estate sectors continued to represent notable overweights.

At quarter end, the strategy’s largest sector weighting was in financials, although we were underweight the benchmark because of our lower exposure to banks in China, Brazil and India.

As a firm, we continue to see significant value potential in emerging markets equities, as we believe valuations remain appealing from both an absolute and a relative standpoint. Our enthusiasm for the asset class is highlighted by our allocation to emerging markets businesses in our Brandes global strategies, which—as of March 31—was at or near the peak levels achieved over the past decade.

Thank you for your continued trust.

Net Asset Value: A company’s total assets minus its liabilities, divided by the number of outstanding shares.

The MSCI Emerging Markets Index with net dividends captures large and mid cap representation of emerging market countries. Data prior to 2001 is gross dividend and linked to the net dividend returns.

MSCI has not approved, reviewed or produced this report, makes no express or implied warranties or representations and is not liable whatsoever for any data in the report. You may not redistribute the MSCI data or use it as a basis for other indices or investment products.

The foregoing Quarterly Commentary reflects the thoughts and opinions of Brandes Investment Partners® exclusively and is subject to change without notice. The information provided in the commentary should not be considered a recommendation to purchase or sell any particular security. It should not be assumed that any security transactions, holdings or sectors discussed were or will be profitable, or that the investment recommendations or decisions we make in the future will be profitable or will equal the investment performance discussed herein. International and emerging markets investing is subject to certain risks such as currency fluctuation and social and political changes; such risks may result in greater share price volatility. There is no assurance that any securities discussed herein will remain in an account’s portfolio at the time you receive this report or that the securities sold have not been repurchased. The actual characteristics with respect to any particular account will vary based on a number of factors including but not limited to: (i) the size of the account; (ii) investment restrictions applicable to the account, if any; and (iii) market exigencies at the time of investment. Unlike bonds issued or guaranteed by the U.S. government or its agencies, stocks and other bonds are not backed by the full faith and credit of the United States. Stock and bond prices will experience market fluctuations. Please note that the value of government securities and bonds in general have an inverse relationship to interest rates. Bonds carry the risk of default, or the risk that an issuer will be unable to make income or principal payment. There is no assurance that private guarantors or insurers will meet their obligations. The credit quality of the investments in the portfolio is not a guarantee of the safety or stability of the portfolio. Investments in Asset Backed and Mortgage Backed Securities include additional risks that investors should be aware of such as credit risk, prepayment risk, possible illiquidity and default, as well as increased susceptibility to adverse economic developments. Securities of small companies generally experience more volatility than mid and large sized companies. Although the statements of fact and data in this report have been obtained from, and are based upon, sources that are believed to be reliable, we cannot guarantee their accuracy, and any such information may be incomplete or condensed. Strategies discussed are subject to change at any time by the investment manager in its discretion due to market conditions or opportunities. The Brandes investment approach tends to result in portfolios that are materially different than their benchmarks with regard to characteristics such as risk, volatility, diversification, and concentration. Please note that all indices are unmanaged and are not available for direct investment. Past performance is not a guarantee of future results. No investment strategy can assure a profit or protect against loss. Market conditions may impact performance. The performance results presented were achieved in particular market conditions which may not be repeated. Moreover, the current market volatility and uncertain regulatory environment may have a negative impact on future performance. The margin of safety for any security is defined as the discount of its market price to what the firm believes is the intrinsic value of that security. The declaration and payment of shareholder dividends are solely at the discretion of the issuer and are subject to change at any time.

United States: Issued by Brandes Investment Partners, L.P., 11988 El Camino Real, Suite 600, San Diego, CA 92130.

Singapore/Asia: FOR INSTITUTIONAL/ACCREDITED INVESTOR USE ONLY. Issued by Brandes Investment Partners (Asia) Pte Ltd., Asia Square Tower, 12 Marina View #23-10, Singapore 018961. Company Registration Number 201212812M. ABRN:164 952 710. This document is for “institutional investors” or “accredited investors” as defined under the Securities and Futures Act, Chapter 289 of Singapore and may not be distributed to any other person. This document is being provided for information purposes only. Incorporated in Singapore in 2012, Brandes Investment Partners (Asia) Pte Ltd (Brandes Asia) provides portfolio management services to clients in Asia (as permitted under local law). Brandes Investment Partners, L.P., a U.S. registered investment adviser and a sister entity to Brandes Asia, provides research, portfolio construction and other support to Brandes Asia.

Ireland/Europe: FOR PROFESSIONAL INVESTOR USE ONLY. Issued by Brandes Investment Partners (Europe) Limited (Brandes Europe), 36 Lower Baggot Street, Dublin 2, Ireland. Registered in Ireland Number 510203. Authorised and regulated by the Central Bank of Ireland. This report is being provided for information purposes only, no representation or warranty is made, whether express or implied as to the accuracy or completeness of the information provided. To the fullest extent permitted by law Brandes Europe shall not be liable for any loss or damage suffered by any person as a result of the receipt of this report. Recipients of this report should obtain their own professional advice. The distribution of this report may be restricted by law. No action has been or will be taken by Brandes Europe to permit the possession or distribution of this report in any jurisdiction where action for that purpose may be required. Accordingly, this report may not be used in any jurisdiction except under circumstances that will result in compliance with any applicable laws and regulations. Persons to whom this report is communicated should inform themselves about and observe any such restrictions. This information is being issued only to, and/or is directed only at (i) persons who have professional experience in matters relating to investments or (ii) are persons falling within Article 49(2)(a) to (d) (“high net worth companies, unincorporated associations etc”) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 or to whom it may otherwise lawfully be communicated (all such persons together being referred to as “Relevant Persons”). This communication must not be acted on or relied on by persons who are not Relevant Persons. Any investment or investment activity to which this communication relates is available only to Relevant Persons and will be engaged in only with Relevant Persons. This report is a confidential communication to, and solely for the use of, the persons to whom it is distributed to by Brandes Europe.

31 Mar 2019

First Quarter 2019

 

Market Commentary:

Looking back, the S&P 500 reversed course from the end of the year and rallied for one of the best first quarters to start the year in two decades. The major worries of the market that pressured shares turned into tailwinds. Fears over growth were placated for the majority of companies when they reported earnings. While some areas remain challenged, most companies continue to ascribe to the view that the U.S. economic backdrop is supportive for another year of positive growth. This optimism drove small cap stocks to outpace large caps and growth stocks to rally over value stocks. The next headwind-turned-tailwind was the major pivot by the Federal Reserve, as their dot plot forecast removed any further interest rate hikes in 2019. Investors shifted their expectations to now believe the likely next action is a rate cut, with an increasing probability of that occurring into 2020, rather than a rate hike. Optimism also rose for a potential trade deal with China, as some progress appears to have been made which helped bolster both domestic and global markets during the quarter.

Looking forward to 2019, corporate earnings growth remains the most likely outcome for the full-year, though the next quarterly set of reports could be more challenged on difficult comparisons from 2018. While some companies may report slight declines in year-over-year earnings as a result, the majority of companies are expected to remain positive. Consumer strength remains a driver for continued economic growth as labor markets remain tight even amidst these macroeconomic uncertainties. Corporate investments continue to face headwinds from the global uncertainty, and investors remain keenly focused on the behavior of companies regarding their uses of cashflow, whether for long-term capital expenditures, returning it to shareholders, or reducing their leverage. These issues we believe will further separate those businesses with pricing power and higher- quality models as those decisions are key to creating long-term shareholder value. We remain vigilant in assessing absolute risk in the securities we invest in and striving to protect client capital during these times for potential volatility from the uncertainty.

Timothy Plan Small Cap Value Fund Q1 2019 Commentary

Index Drivers:

During the first quarter, the Russell 2000 Index saw all sectors post positive returns, with Information Technology and Energy gaining the most and Consumer Staples and Financials the least.

Performance Drivers:

The portfolio’s relative performance benefitted from favorable stock selection in Materials and Utilities. ProPetro posted a strong quarter as their relationships in the shale basins, particularly the Permian, helped offset broader industry pressures. Installed Building Products gained after allaying fears regarding pricing power in the insulation installation business with tailwinds from improving housing sentiment. Innospec beat earnings handily driven by better sales and margins in their fuel specialties and oil field segments. Novanta rallied on solid organic growth and better margins as their focus on higher-growth end markets that began several years ago continues to pay dividends. Omnicell beat expectations as issues with a product transition appear to be fully resolved and execution remains good.

The portfolio’s relative performance was negatively impacted by unfavorable stock selection in Financials and an underweight to Information Technology. Penn Virginia declined after their plan to merge with another energy producer was abandoned. Columbia Banking System moved lower after missing expectations as slowing loan growth combined with higher expenses pressured their earnings. Gentherm suffered from weaker automobile volumes, leading to lower near-term guidance but management maintained their long-term guidance. Lattice Semiconductor, a recent purchase, moved modestly lower in sympathy with the market. Continental Building Products posted solid results but saw investor concerns over potential weakening in wallboard prices send shares lower as the quarter came to a close.

Past performance is not indicative of future results. Portfolio returns reflect the reinvestment of dividend and interest income. All information provided is for informational purposes only and is not intended to be, and should not be interpreted as, an offer, solicitation, or recommendation to buy or sell or otherwise invest in any of the securities/sectors/countries that may be mentioned. A description of the methodology used to calculate the attribution analysis or a complete list of each holding’s contribution to overall performance during the measurement period may be obtained by contacting info@westwoodgroup.com. Benchmark Data Source:  © 2019 FactSet Research Systems Inc. All Rights Reserved. Russell Investment Group is the owner of the trademarks, service marks, and copyrights related to its indexes, which have been licensed for use by Westwood.

31 Mar 2019

Q1019

First Quarter 2019

 

Market Commentary:

Looking back, the S&P 500 reversed course from the end of the year and rallied for one of the best first quarters to start the year in two decades. The major worries of the market that pressured shares turned into tailwinds. Fears over growth were placated for the majority of companies when they reported earnings. While some areas remain challenged, most companies continue to ascribe to the view that the U.S. economic backdrop is supportive for another year of positive growth. This optimism drove small cap stocks to outpace large caps and growth stocks to rally over value stocks. The next headwind-turned-tailwind was the major pivot by the Federal Reserve, as their dot plot forecast removed any further interest rate hikes in 2019. Investors shifted their expectations to now believe the likely next action is a rate cut, with an increasing probability of that occurring into 2020, rather than a rate hike. Optimism also rose for a potential trade deal with China, as some progress appears to have been made which helped bolster both domestic and global markets during the quarter.

Looking forward to 2019, corporate earnings growth remains the most likely outcome for the full-year, though the next quarterly set of reports could be more challenged on difficult comparisions from 2018. While some companies may report slight declines in year-over-year earnings as a result, the majority of companies are expected to remain positive. Consumer strength remains a driver for continued economic growth as labor markets remain tight even amidst these macroeconomic uncertainties. Corporate investments continue to face headwinds from the global uncertainty, and investors remain keenly focused on the behavior of companies regarding their uses of cashflow, whether for long-term capital expenditures, returning it to shareholders, or reducing their leverage. These issues we believe will further separate those businesses with pricing power and higher- quality models as those decisions are key to creating long-term shareholder value. We remain vigilant in assessing absolute risk in the securities we invest in and striving to protect client capital during these times for potential volatility from the uncertainty.

Timothy Plan Large/Mid Cap Value Fund Q1 2019 Commentary

Index Drivers:

Within the S&P 500 Index, every sector posted positive returns during the first quarter, with Information Technology and Real Estate rallying the most while Health Care and Financials rose the least.

Performance Drivers:

The portfolio’s relative performance was aided by strong stock selection in Health Care and Materials. KLA-Tencor rallied on strong results as management indicated results should trough in the next quarter for their semiconductor business. Union Pacific saw their first quarter with precision scheduled railroading help drive productivity improvements with pricing also strong. J.M. Smucker saw positive organic growth as they continue to look for their investment spend and new products to boost topline growth in the coming years. Eagle Materials moved higher after reporting earnings as optimism for the spring construction season increased and an activist investor became involved in shares. PerkinElmer posted strong results ahead of expectations led by their diagnostics segment where topline growth exceeded 10 percent.

Unfavorable stock selection in Information Technology and Financials weighed on relative performance. Given the sharp rally in the markets, only two securities detracted from performance for the quarter. Amdocs declined despite an inline quarter on a negative research report that pressured shares. Everest Re also detracted modestly from performance due to missing estimates from elevated catastrophic losses and the ongoing remixing of their business.

Past performance is not indicative of future results. Portfolio returns reflect the reinvestment of dividend and interest income. All information provided is for informational purposes only and is not intended to be, and should not be interpreted as, an offer, solicitation, or recommendation to buy or sell or otherwise invest in any of the securities/sectors/countries that may be mentioned. A description of the methodology used to calculate the attribution analysis or a complete list of each holding’s contribution to overall performance during the measurement period may be obtained by contacting info@westwoodgroup.com. Benchmark Data Source:  © 2019 FactSet Research Systems Inc. All Rights Reserved. Russell Investment Group is the owner of the trademarks, service marks, and copyrights related to its indexes, which have been licensed for use by Westwood.

26 Nov 2018

The Brandes Emerging Markets Equity Strategy slightly outperformed its benchmark, the MSCI Emerging Markets Index, which fell 1.1%.

Positive Contributors

Highlighting how volatility is often part and parcel of emerging markets investing, two of this period’s major positive contributors were detractors to returns in the second quarter. Brazilian Petrobras and Argentinian YPF rebounded sharply as short-term concerns that weighed on their shares last quarter abated. As with our other oil & gas holdings, both companies continued to benefit from improved earnings and cash flows in a higher oil-price environment.

Holdings in Mexico also aided returns, led by real estate investment trusts (REITs) PLA Administradora Industrial (Terrafina) and Macquarie Mexico Real Estate Management. Investors seemed to welcome the prospect of the new trade deal between the United States and Mexico, which lifted some uncertainty regarding future relations between the two countries.

Additionally, our underweight to China helped relative performance.

Performance Detractors

The strategy’s exposure to Turkey, most notably our commercial bank holdings, hurt performance amid the country’s currency crisis. President Erdogan’s interference in monetary policy and the appointment of his son-in-law as treasury and finance minister shook investor confidence. Furthermore, weakened diplomatic relations with western partners added fuel to the lira’s tumbling. While fears of contagion momentarily spread throughout emerging markets, they have since dissipated.

As the risks of investing in the country intensified, we exited our position in bank Vakif Bankasi, especially given the company’s direct government control. We continuously monitor the situation in Turkey and maintain measured positions in Akbank, Garanti Bankasi and REIT Emlak Konut.

Holdings in Brazil also declined as the country’s upcoming election led to increased volatility. Notable detractors included food producer Marfrig Global Foods, regional jet manufacturer Embraer, health insurer Hapvida Participacoes and payment processor Cielo.

In early July, Boeing and Embraer released a non-binding agreement to establish a new joint venture (JV) for commercial aircraft. The deal values Embraer’s commercial aircraft business unit, which will be fully transferred to the new JV, at $4.75bn. Based on the proposed terms, Boeing will own an 80% stake in the JV, while Embraer will hold the remaining 20%. Embraer will also retain control of its defense and business jet operations. The deal is expected to close by the end of 2019, subject to regulatory clearance.

Embraer’s shares fell as many investors appeared unsatisfied with the offered price. However, in our opinion, the price was adequate, especially considering the other terms outlined in the agreement. Through its 20% stake, Embraer will be able to participate in the potential synergies that may materialize within the JV. Additionally, as the commercial aviation segment has faced increased competition, particularly from Chinese, Russian and Japanese newcomers, we believe the deal actually “neutralizes” a major long-term business threat for Embraer.

In August, Marfrig announced that it would sell about 90% of its stake in Keystone, a fully owned subsidiary, to Tyson Foods. Keystone supplies protein to fast food chains mostly in the United States and Asia. The deal is expected to close by year-end at an enterprise value of $2.4bn, which was below the market’s initial expectations. Nevertheless, we believe Marfrig remains undervalued. We are encouraged by the company’s continued balance sheet improvements and its efforts to streamline its business model.

Select Activity in the Third Quarter

The investment committee added X5 Retail Group to the strategy.

X5 is Russia’s largest food retailer by revenue, with an approximately 9% market share in food retailing and a strong footprint in big cities such as Moscow and St. Petersburg. The company operates in three retail formats, namely proximity/convenience stores (78% of 2017 sales), supermarkets (15% of sales) and hypermarkets (7% of sales). The company has a vertically integrated supply chain and delivers over 90% of the items sold in its stores from internal distribution centers.

A number of factors have weighed on X5’s shares, including an increasing pressure on margins (an industry-wide challenge), a recent move of management personnel to a main competitor and the potential impact of further sanctions against Russia. We believe these concerns have been more than reflected in the current share price. Despite the pressure on margins, the food retailing industry in Russia is still underpenetrated relative to developed countries, with fewer grocery stores per 1,000 inhabitants.

Trading at less than 10x forward earnings and offering a dividend yield of 5.5% as of September 30, X5 represents an appealing investment opportunity to us.

Year-to-Date 2018 Briefing

The Brandes Emerging Markets Equity Strategy underperformed the MSCI Emerging Markets Index, which fell 7.7% for the nine months ended September 30, 2018.

Similar to what happened in the quarter, holdings in Turkey and Brazil detracted from year-to-date returns. Turkish Akbank, Vakif Bankasi and Emlak Konut performed poorly, as did Brazil’s Marfrig Global Foods and Embraer.

Other detractors included Indian electric utility Reliance Infrastructure and Argentinian oil & gas firm YPF.

We saw positive contributions from our oil & gas holdings, specifically Lukoil, Surgutneftegas and Petrobras. Retailers with exposure to China—namely Lifestyle International, Bosideng and Luk Fook Holdings—also helped performance. Additionally, Indian technology company Infosys aided returns.

Current Positioning

We have increasingly found investment opportunities in China amid the country’s trade war with the United States, coupled with increased market volatility.

The strategy’s exposures have been relatively unchanged, as Brazil, Russia and Mexico continue to represent overweight positions. We also maintained higher allocations to consumer discretionary and telecommunication services companies than the benchmark.

China remained one of our largest underweights at quarter end, along with Taiwan. From a sector perspective, we held material underweight allocations to information technology and financials.

We remain convinced that the current positioning of the Brandes Emerging Markets Equity Strategy, which results from our careful bottom-up stock selection, bodes well for the long term.

Thank you for your continued trust.

Cash Flow: The amount of cash generated minus the amount of cash used by a company in a given period.

Dividend Yield: Dividends per share divided by price per share.

Enterprise value: Market capitalization plus debt, minority interest and preferred shares, minus total cash and cash equivalents.

Forward Earnings: Sell-side analysts’ consensus earnings estimates for the next fiscal year.

Forward Price/ Earnings: Price per share divided by earnings estimates for the next fiscal year.

The declaration and payment of shareholder dividends are solely at the discretion of the issuer and are subject to change at any time.

The MSCI Emerging Markets Index with net dividends captures large and mid cap representation of emerging market countries. Data prior to 2001 is gross dividend and linked to the net dividend returns.

MSCI has not approved, reviewed or produced this report, makes no express or implied warranties or representations and is not liable whatsoever for any data in the report. You may not redistribute the MSCI data or use it as a basis for other indices or investment products.

The foregoing Quarterly Commentary reflects the thoughts and opinions of Brandes Investment Partners® exclusively and is subject to change without notice. The information provided in the commentary should not be considered a recommendation to purchase or sell any particular security. It should not be assumed that any security transactions, holdings or sectors discussed were or will be profitable, or that the investment recommendations or decisions we make in the future will be profitable or will equal the investment performance discussed herein. International and emerging markets investing is subject to certain risks such as currency fluctuation and social and political changes; such risks may result in greater share price volatility. There is no assurance that any securities discussed herein will remain in an account’s portfolio at the time you receive this report or that the securities sold have not been repurchased. The actual characteristics with respect to any particular account will vary based on a number of factors including but not limited to: (i) the size of the account; (ii) investment restrictions applicable to the account, if any; and (iii) market exigencies at the time of investment. Unlike bonds issued or guaranteed by the U.S. government or its agencies, stocks and other bonds are not backed by the full faith and credit of the United States. Stock and bond prices will experience market fluctuations. Please note that the value of government securities and bonds in general have an inverse relationship to interest rates. Bonds carry the risk of default, or the risk that an issuer will be unable to make income or principal payment. There is no assurance that private guarantors or insurers will meet their obligations. The credit quality of the investments in the portfolio is not a guarantee of the safety or stability of the portfolio. Investments in Asset Backed and Mortgage Backed Securities include additional risks that investors should be aware of such as credit risk, prepayment risk, possible illiquidity and default, as well as increased susceptibility to adverse economic developments. Securities of small companies generally experience more volatility than mid and large sized companies. Although the statements of fact and data in this report have been obtained from, and are based upon, sources that are believed to be reliable, we cannot guarantee their accuracy, and any such information may be incomplete or condensed. Strategies discussed are subject to change at any time by the investment manager in its discretion due to market conditions or opportunities. The Brandes investment approach tends to result in portfolios that are materially different than their benchmarks with regard to characteristics such as risk, volatility, diversification, and concentration. Please note that all indices are unmanaged and are not available for direct investment. Past performance is not a guarantee of future results. No investment strategy can assure a profit or protect against loss. Market conditions may impact performance. The performance results presented were achieved in particular market conditions which may not be repeated. Moreover, the current market volatility and uncertain regulatory environment may have a negative impact on future performance. The margin of safety for any security is defined as the discount of its market price to what the firm believes is the intrinsic value of that security. The declaration and payment of shareholder dividends are solely at the discretion of the issuer and are subject to change at any time.

United States: Issued by Brandes Investment Partners, L.P., 11988 El Camino Real, Suite 600, San Diego, CA 92130.

14 Nov 2018

“Bull markets don’t die of old age, they die of fright and are most afraid of recession.”  Sam Stoval, CFRA

 

“A noticeable period of monetary deceleration, now synchronized globally is consistent with lower, not higher, interest rates.” – Milton Friedman

“Even when conditions seem placid, squalls can appear quite suddenly.” – Randall Forsyth, Barron’s

“Have conviction in what you don’t own” – Barclays

“Given where we are in the cycle, I would rather have seniority.” – Krishna Memani, Oppenheimer

“We’re at the stage of the policy tightening cycle where history suggests a higher likelihood of accidents in financial markets.” – Deutsche Bank