HORIZON. Socially Responsible Strategies

Transcription

1 HORIZON INVESTMENT SERVICES Socially Responsible Strategies 4th Quarter 2017

2 SRI Assets Under Management Rise 1,264% According to US SIF The Forum for Sustainable and Responsible Investment s 2016 SRI Trends Report, the US sustainable, responsible, and impact (SRI) inves ng con nues to expand and has grown from $639 billion in 1995 to $872 trillion at the start of 2016 an increase in AUM of 1,264% and a compound annual growth rate of 1325% Nearly 22% of the $403 trillion in total assets under management tracked by Cerulli Associates is invested in assets engaged in sustainable, responsible, and impact inves ng prac ces Addi onally, the Report states that more than one out of every five dollars professionally managed in the US is u lizing Socially Responsible Inves ng strategies During the 2-year period of 2014 to 2016, SRI assets increased 33% Also, among separate account managers, strategies with $538 trillion incorporated Environmental, Social, and Governance (ESG) factors into investment management 2

3 Introducing Horizon Investment Services, LLC Formed in 1997, Horizon Investment Services ( Horizon ) is registered as an investment advisor with the Securi es and Exchange Commission with offices in Hammond, Indiana and Chicago, Illinois Horizon was established with the same high standards that are held by its sister company, Horizon Publishing Company, the publisher of Dow Theory Forecasts investment newsle er, which has been published every week since 1946 Stability as Demonstrated by Longevity of Top Management Chief Execu ve Officer Chuck Carlson and Chief Investment Officer Rich Moroney have both been with Horizon Investment Services since its incep on Our research staff includes five analysts who earned the Chartered Financial Analyst (CFA ) designa on Charles Carlson, CFA, Chief Execu ve Officer and Por olio Manager Mr Carlson has 35 years of investment experience with Horizon and its affiliates He holds an undergraduate degree from Northwestern University and an MBA from the University of Chicago with a concentra on in Finance Mr Carlson is the author of nine investment books including The Li le Book of BIG DIVIDENDS (John Wiley & Sons), Eight Steps to Seven Figures (Doubleday), The Smart Investor s Survival Guide (Random House), and Winning With The Dow s Losers (Harper/ Charles Carlson, CFA Collins) His comments have appeared in such newspapers and magazines as The Wall Street Journal, The New York Times, USA Today, Money, Forbes, and Barron s He frequently appears on television, including Bloomberg, CNBC, NBC s Today Show, Nightly Business Report, and Chicago s WBBM all-news radio Richard Moroney, CFA, Chief Investment Officer and Por olio Manager Mr Moroney has 28 years of investment experience with Horizon and its affiliates He holds an undergraduate degree from Northwestern University and an MBA from the University of Chicago with concentra ons in Finance and Accoun ng Mr Moroney is the architect and creator of Quadrix the quan ta ve stock-ra ng system used in Horizon s por olio management His comments have appeared in such publica ons as The Wall Street Journal, Barron s, The Washington Post, The Richard Moroney, CFA New York Times, Business Week, and USA Today Mr Moroney also appears on television, including CNBC, CNN, and Bloomberg Our SRI/BRI Investment Philosophy We believe there is the ability to generate alpha (a return that cannot be a ributed to the market) by applying a strong investment overlay to a universe of stocks chosen primarily for their SRI or Biblically Responsible Inves ng (BRI) characteris cs Horizon leaves the social screening for Environmental, Social, and Governance (ESG), or faith-based characteris cs, to the experts in the field such as MSCI or IW Financial (who vet stocks for the indexes or universes Horizon uses in its socially responsible strategies) Horizon performs the investment screening by taking an index or universe of SRI or BRI stocks and seeks to enhance it by applying a strong investment overlay to focus on what we believe are the best stocks in that index or universe from an investment perspec ve 3

4 Horizon Investment Services Socially Responsible Strategies Horizon currently offers four investment strategies in the SRI/BRI space: Enhanced Socially Responsible strategy an enhanced index strategy that applies quan ta ve overlays to the MSCI KLD 400 Social Index Enhanced SRI Fossil Fuel Free strategy an enhanced index strategy that applies quan ta ve overlays to the MSCI KLD 400 Social Index, with addi onal screens that are designed to eliminate companies with exposure to fossil fuels Enhanced Chris an Values strategy an enhanced index strategy that applies quan ta ve overlays to the MSCI USA Catholic Values Index Enhanced BRI strategy an all-equity strategy that applies quan ta ve overlays to a universe of stocks already screened and ve ed for Biblically Responsible Inves ng principles The Power of Quadrix The Cornerstone of Our Research We seek to enhance the SRI/BRI universes using Quadrix, our proprietary quan ta ve stock-ra ng system developed by Horizon s Chief Investment Officer, Rich Moroney Quadrix ranks roughly 5,000 stocks based on more than 90 different variables for each stock Quadrix allows us to explore any index or universe from which to find what we believe are a rac ve stocks A stock s Quadrix Overall score is determined by the individual scores of six categories Financial Strength, Value, Quality, Momentum, Earnings Es mates, and Performance Quadrix scores are percen le rankings (0-100) For example, a stock with an Overall score of 97 means that the stock scores be er than 97% of all stocks in the Quadrix universe of roughly 5,000 stocks On average, stocks with Overall scores of 80 and above (top quin le Group 1) have historically outperformed stocks with Overall scores of 60 to 80 (Group 2) Stocks in Group 2 have historically outperformed stocks in Group 3, and so on The chart shown here depicts the real- me performance of Quadrix since 2nd Quarter 2000 We believe a numerical ranking system like Quadrix can provide a strong investment overlay that can be applied to an SRI or BRI universe to enhance performance Because the system uses only quan fiable factors, it is designed to narrow the focus on companies achieving superior results QUADRIX TRACK RECORD * Performance of Quadrix Overall Score (for all stocks, 2nd Qtr 2000 through 4th Qtr 2017) Group 1 (scores of 80 to 100) Group 2 (scores of 60 to 80) Group 3 (scores of 40 to 60) Group 4 (scores of 20 to 40) Group 5 (scores of 0 to 20) Cumulative returns with quarterly rebalancing * The informa on above reflects the performance of our proprietary Quadrix stock-ra ng system and does not reflect the performance of any client account or composite Please see addi onal detailed Quadrix disclosure on page % 800% 700% 600% 500% 400% 300% 200% 100% 0% -100% 4

5 Transparent, Rules-Based Methodology At Horizon, we believe in focusing our a en on on what we believe we do best stock selec on and por olio management using our proprietary Quadrix stock-ra ng system Our rules-based enhanced index investment process is transparent We start with an index or universe of stocks that an expert has ve ed for their Environmental, Social, and Governance (ESG) or faith-based characteris cs We winnow down those stocks to 30 to 40 based on Overall Quadrix scores Then we apply certain constraints (market-cap screen, sector constraint, equal weigh ng, and tac cal alloca on plug when appropriate) to create the final por olio The Enhanced SRI Fossil Fuel Free strategy has addi onal screens that Environmental are designed to eliminate companies with exposure to fossil fuels We typically maintain the por olio for 12 months, and then re-evaluate the por olio by running the methodology again Hold for 12 months Apply Cash Plug based on market SRI/BRI Screened Index or Universe Why Work With Horizon? Outstanding performance record across a variety of strategies Stability of organiza on Longevity of por olio management team Quadrix Consistent, disciplined approach to inves ng Experienced research team Average tenure is more than 20 years Strong opera ons team Seven professionals dedicated to service, trading, & compliance Addi onal Informa on Member US SIF The Forum for Sustainable and Responsible Investment Past Par cipant SRI Conference on Sustainable, Responsible, Impact Inves ng Past Par cipant and Corporate Partner Kingdom Advisors Past Kingdom Sponsor Na onal Associa on of Chris an Financial Consultants (NACFC) Past Exhibitor Par cipant Resource Center for Religious Ins tutes (RCRI) Conference Past Subscriber and Sponsor GreenMoneyJournalcom For more informa on about the methodology used by MSCI for ve ng stocks visit: h ps://wwwmscicom/eqb/methodology/meth_docs/msci_kld_400_social_index_methodology_sep2017pdf h ps://wwwmscicom/eqb/methodology/meth_docs/msci_usa_catholic_values_index_methodology_may_2016pdf Informa on on the US Conference of Catholic Bishops SRI Guidelines is available at: h p://wwwusccborg/about/financial-repor ng/socially-responsible-investment-guidelinescfm Governance For more informa on about the Carbon Underground 200 list for ve ng fossil fuel companies visit: h p://gofossilfreeorg/top-200/ For addi onal Fact Sheets on all Horizon Investment Services strategies, please visit wwwhorizoninvestmentcom Social Quadrix (less bo om 2% Market Cap) Screen 30 to 40 highest Overall Equal Weight Por olio Quadrix scorers Apply 25% Sector Constraint 5

6 Inception Date: 10/31/2008 Number of Equity Holdings: 40 Benchmark: MSCI KLD 400 Social Index Performance Summary As of December 31, Annualized Cum Since Since YTD 1 Yr 3 Yr 5 Yr Incept Inception EnhSocResp (Gross) N/A 202% 83% 151% 138% 2268% EnhSocResp (Net) N/A 187% 70% 137% 124% 1918% S&P 500 N/A 218% 114% 158% 142% 2367% Benchmark N/A 216% 108% 159% 139% 2295% Cumulative Return History Growth of $100 since inception 10/31/ Oct 2008 Dec 2009 Dec 2011 Dec 2013 Dec 2015 Dec 2017 Enh Soc Resp (Gross) $32683 Enh Soc Resp (Net) $29176 S&P 500 Index $33674 Benchmark $32948 Portfolio Allocations Sector Consumer Discretionary Financials Health Care Industrials Information Technology % Equity Assets 30% 27% 14% 14% 15% Market Capitalization % Equity Assets Large Cap 40% Midcap 43% Small Cap 17% Annualized Statistics (since inception) Standard Deviation Sharpe Ratio EnhSocResp (Gross) 135% 101 EnhSocResp (Net) 135% 091 S&P % 103 Benchmark 136% 101 Risk Analysis (vs Benchmark since inception) Alpha Beta R 2 Capture Up Down Capture Info Ratio EnhSocResp (Gross) 13% % 97% 97% -002 EnhSocResp (Net) 01% % 94% 100% -026 S&P % % 99% 98% 015 Benchmark 00% % 100% 100% See important disclosures on pages 14 through 18

7 Zephyr StyleADVISOR Supplemental Information Zephyr StyleADVISOR: Horizon Investment Services, LLC Risk / Return November December 2017 (Single Computation) 18% 16% 14% 12% Return 10% 8% 6% 4% 2% 0% 0% 2% 4% 6% 8% 10% 12% 14% 16% 18% Standard Deviation HIS Enhanced Socially Responsible Gross HIS Enhanced Socially Responsible Net Calvert US Large Cap Core Responsible Index;I Domini Impact Equity Fund;R Green Century Equity Fund Neuberger Berman SocRespInvestor Fund Parnassus Fund Parnassus Core Equity Fund;Investor Contravisory: Ethical Equity (Gross) Janney Capital: All Cap Core (Gross) Los Angeles Cap: US All Cap Eq (Gross) OShaughnessy: All Cap Core (Gross) Parametric: CC Broad 1500 (Gross) Parametric: CC BroadCapValue (Gross) Pinnacle Assoc: All Cap Equity (Gross) Segall Bryant: All Cap (Gross) Russell 3000 Index S&P 500 Index Market Benchmark: MSCI KLD 400 Social Index Cash Equivalent: Citigroup 3-month T-bill Risk / Return Table Annualized Summary Statistics: November December 2017 Annualized Return Standard Deviation Population Std Dev Downside Risk Beta vs Market Alpha vs Market R-Squared vs Market Sharpe Ratio Tracking Error vs Market HIS Enhanced Socially Responsible Gross HIS Enhanced Socially Responsible Net Calvert US Large Cap Core Responsible Index;I Domini Impact Equity Fund;R Green Century Equity Fund Neuberger Berman SocRespInvestor Fund Parnassus Fund Parnassus Core Equity Fund;Investor Contravisory: Ethical Equity (Gross) Janney Capital: All Cap Core (Gross) Los Angeles Cap: US All Cap Eq (Gross) OShaughnessy: All Cap Core (Gross) Parametric: CC Broad 1500 (Gross) Parametric: CC BroadCapValue (Gross) Pinnacle Assoc: All Cap Equity (Gross) Segall Bryant: All Cap (Gross) Russell 3000 Index S&P 500 Index MSCI KLD 400 Social Index Created with Zephyr StyleADVISOR Manager returns supplied by: Lipper, Informa Investment Solutions, Inc(PSN) See important disclosures on pages 14 through 18 7

8 Inception Date: 3/31/2013 Number of Equity Holdings: 38 Benchmark: MSCI KLD 400 Social Index Performance Summary As of December 31, Annualized Cum Since Since YTD 1 Yr 3 Yr 5 Yr Incept Inception EnhFossil Fuel Free (Gross) N/A 188% 73% N/A 130% 790% EnhFossil Fuel Free (Net) N/A 174% 60% N/A 116% 687% S&P 500 N/A 218% 114% N/A 143% 883% Benchmark N/A 216% 108% N/A 138% 849% Cumulative Return History Growth of $100 since inception 3/31/ Mar 2013 Dec 2013 Dec 2014 Dec 2015 Dec 2016 Dec 2017 EnhFossil Fuel Free (Gross) $17903 EnhFossil Fuel Free (Net) $16875 S&P 500 Index $18831 Benchmark $18486 Portfolio Allocations Sector Consumer Discretionary Consumer Staples Financials Health Care Industrials Information Technology % Equity Assets 27% 2% 30% 15% 10% 16% Market Capitalization % Equity Assets Large Cap 49% Midcap 37% Small Cap 14% Annualized Statistics (since inception) Standard Deviation Sharpe Ratio EnhFossil Fuel Free (Gross) 117% 109 EnhFossil Fuel Free (Net) 117% 097 S&P % 147 Benchmark 97% 140 Risk Analysis (vs Benchmark since inception) Alpha Beta Capture Capture Ratio R 2 Up Down Info EnhFossFuel Free (Gross) -15% % 112% 131% -014 EnhFossFuel Free (Net) -28% % 107% 136% -041 S&P % % 98% 92% 030 Benchmark 00% % 100% 100% See important disclosures on pages 14 through 18

9 Zephyr StyleADVISOR Supplemental Information Risk / Return April December 2017 (Single Computation) Zephyr StyleADVISOR: Horizon Investment Services, LLC 20% 18% 16% 14% 12% Return 10% 8% 6% 4% 2% 0% 0% 2% 4% 6% 8% 10% 12% 14% 16% Standard Deviation HIS Enhanced SRI Fossil Fuel Free Gross HIS Enhanced SRI Fossil Fuel Free Net Calvert Social Index Fund;A ClearBridge Inv: Multi Cap Gr ESG (Gross) Gabelli SRI Fund Inc;AAA GAMCO Asset: Gabelli ESG (Gross) Green Century Equity Fund Impax Asset Mgmt: Leaders (Gross) New Alternatives Fund;A Parnassus Endeavor Fund Pax ESG Beta Quality Fund;Individual Investor Portfolio 21 Global Equity Fund;Retail Rockefeller & Co: Global S&I (Gross) Shelton Green Alpha Fund Trillium Asset: FFFC (Gross) Trillium Asset: SustainableOpp (Gross) Russell 3000 Index S&P 500 Index Market Benchmark: MSCI KLD 400 Social Index Cash Equivalent: Citigroup 3-month T-bill Risk / Return Table Annualized Summary Statistics: April December 2017 Annualized Return Standard Deviation Population Std Dev Downside Risk Beta vs Market Alpha vs Market R-Squared vs Market Sharpe Ratio Tracking Error vs Market HIS Enhanced SRI Fossil Fuel Free Gross HIS Enhanced SRI Fossil Fuel Free Net Calvert Social Index Fund;A ClearBridge Inv: Multi Cap Gr ESG (Gross) Gabelli SRI Fund Inc;AAA GAMCO Asset: Gabelli ESG (Gross) Green Century Equity Fund Impax Asset Mgmt: Leaders (Gross) New Alternatives Fund;A Parnassus Endeavor Fund Pax ESG Beta Quality Fund;Individual Invest Portfolio 21 Global Equity Fund;Retail Rockefeller & Co: Global S&I (Gross) Shelton Green Alpha Fund Trillium Asset: FFFC (Gross) Trillium Asset: SustainableOpp (Gross) Russell 3000 Index S&P 500 Index MSCI KLD 400 Social Index Created with Zephyr StyleADVISOR Manager returns supplied by: Lipper, Informa Investment Solutions, Inc(PSN) See important disclosures on pages 14 through 18 9

10 Inception Date: 11/30/2008 Number of Equity Holdings: 40 Benchmark: MSCI USA Catholic Values Index Performance Summary As of December 31, Annualized Cum Since Since YTD 1 Yr 3 Yr 5 Yr Incept Inception EnhChrstVal (Pure Gross) N/A 188% 65% 126% 137% 2220% EnhChristian Val (Net) N/A 173% 51% 112% 123% 1865% S&P 500 N/A 218% 114% 158% 152% 2628% Benchmark N/A 226% 111% 160% 154% 2668% Cumulative Return History Growth of $100 since inception 11/30/ Nov 2008 Dec 2009 Dec 2011 Dec 2013 Dec 2015 Dec 2017 Enh Christian Values (Gross) $32200 Enh Christian Values (Net) $28645 S&P 500 Index $36277 Benchmark $36683 Portfolio Allocations Sector Consumer Discretionary Financials Health Care Industrials Information Technology Materials % Equity Assets 30% 27% 11% 14% 15% 3% Market Capitalization % Equity Assets Large Cap 40% Midcap 43% Small Cap 17% Annualized Statistics (since inception) Standard Deviation Sharpe Ratio EnhChristian Values (Pure Gross) 138% 098 EnhChristian Values (Net) 138% 088 S&P % 113 Benchmark 138% 110 Risk Analysis (vs Benchmark since inception) Alpha Beta R 2 Capture Up Down Capture Info Ratio EnhChrstVal (Pure Gross) 01% % 91% 96% -026 EnhChristian Val (Net) -12% % 87% 99% -050 S&P % % 97% 96% -007 Benchmark 00% % 100% 100% See important disclosures on pages 14 through 18

11 Zephyr StyleADVISOR Supplemental Information Zephyr StyleADVISOR: Horizon Investment Services, LLC Risk / Return December December 2017 (Single Computation) 18% 16% 14% 12% Return 10% 8% 6% 4% 2% 0% 0% 2% 4% 6% 8% 10% 12% 14% 16% Standard Deviation HIS Enhanced Christian Values Pure Gross HIS Enhanced Christian Values Net Ave Maria Catholic Values Fund Dana Investment: Catholic Equity (Gross) LKCM Aquinas Value Fund Praxis Growth Index Fund;A Praxis Value Index Fund;A Timothy Plan Large/Mid-Cap Growth Fund;A Timothy Plan Strategic Growth Fund;A S&P 500 Index Cash Equivalent: Citigroup 3-month T-bill Russell 3000 Index Risk / Return Table Annualized Summary Statistics: December December 2017 Market Benchmark: MSCI USA Catholic Values Index Annualized Return Standard Deviation Population Std Dev Downside Risk Beta vs Market Alpha vs Market R-Squared vs Market Sharpe Ratio Tracking Error vs Market HIS Enhanced Christian Values Pure Gross HIS Enhanced Christian Values Net Ave Maria Catholic Values Fund Dana Investment: Catholic Equity (Gross) LKCM Aquinas Value Fund Praxis Growth Index Fund;A Praxis Value Index Fund;A Timothy Plan Large/Mid-Cap Growth Fund;A Timothy Plan Strategic Growth Fund;A S&P 500 Index Russell 3000 Index MSCI USA Catholic Values Index Created with Zephyr StyleADVISOR Manager returns supplied by: Lipper, Informa Investment Solutions, Inc(PSN) See important disclosures on pages 14 through 18 11

12 As of December 31, 2017 Inception Date: 7/31/2015 Performance Summary Number of Equity Holdings: 39 Benchmark: S&P 400 Index Annualized Cum YTD 1 Yr 3 Yr 5 Yr Since Incept Since Inception Enhanced BRI (Gross) N/A 280% N/A N/A 131% 348% Enhanced BRI (Net) N/A 264% N/A N/A 118% 308% Benchmark N/A 163% N/A N/A 120% 316% Cumulative Return History Growth of $100 since inception 7/31/15 80 Jul 2015 Dec 2015 Dec 2016 Dec 2017 Enhanced BRI (Gross) $13477 Enhanced BRI (Net) $13080 Benchmark $13159 Portfolio Allocations Sector Consumer Discretionary Financials Health Care Industrials Information Technology Materials Utilities % Equity Assets 29% 25% 5% 7% 22% 10% 2% Market Capitalization % Equity Assets Large Cap 11% Midcap 68% Small Cap 21% Annualized Statistics (since inception) Standard Deviation Sharpe Ratio Enhanced BRI (Gross) 115% 110 Enhanced BRI (Net) 115% 098 Benchmark 118% 098 Risk Analysis (vs Benchmark since inception) Alpha Beta R 2 Capture Up Down Capture Info Ratio Enhanced BRI (Gross) 23% % 93% 79% 022 Enhanced BRI (Net) 11% % 88% 83% -006 Benchmark 00% % 100% 100% See important disclosures on pages 14 through 18

13 Zephyr StyleADVISOR Supplemental Information Risk / Return August December 2017 (Single Computation) Zephyr StyleADVISOR: Horizon Investment Services, LLC 20% 15% Return 10% 5% 0% 0% 2% 4% 6% 8% 10% 12% 14% 16% 18% Standard Deviation Enhanced BRI (Gross) Enhanced BRI (Net) Boston Common: Catholic Intl (Gross) Camelot Excalibur Small Cap Income Fund;A Camelot Premium Return Fund;A Eventide Gilead Fund;A LKCM Aquinas Value Fund Pacific Financial Faith & Values Based Moderate;Investor Praxis Growth Index Fund;A Praxis Value Index Fund;A Thrivent Mid Cap Stock Fund;A Timothy Plan Aggressive Growth Fund;A Timothy Plan Large/Mid-Cap Growth Fund;A Timothy Plan Large/Mid-Cap Value Fund;A S&P 500 Index Russell 2000 Index Market Benchmark: S&P 400 Index Cash Equivalent: Citigroup 3-month T-bill Risk / Return Table Annualized Summary Statistics: August December 2017 Annualized Return Standard Deviation Population Std Dev Downside Risk Beta vs Market Alpha vs Market R-Squared vs Market Sharpe Ratio Tracking Error vs Market Enhanced BRI (Gross) Enhanced BRI (Net) Boston Common: Catholic Intl (Gross) Camelot Excalibur Small Cap Income Fund;A Camelot Premium Return Fund;A Eventide Gilead Fund;A LKCM Aquinas Value Fund Pacific Financial Faith & Values Based Mode Praxis Growth Index Fund;A Praxis Value Index Fund;A Thrivent Mid Cap Stock Fund;A Timothy Plan Aggressive Growth Fund;A Timothy Plan Large/Mid-Cap Growth Fund;A Timothy Plan Large/Mid-Cap Value Fund;A S&P 500 Index Russell 2000 Index S&P 400 Index Created with Zephyr StyleADVISOR Manager returns supplied by: Lipper, Informa Investment Solutions, Inc(PSN) See important disclosures on pages 14 through 18 13

14 Horizon Investment Services, LLC Annual Disclosure Presenta ons Enhanced Socially Responsible Composite Enhanced Socially Responsible Composite contains fully discre onary Enhanced Socially Responsible commission and bundled fee-paying accounts and, for comparison purposes, is measured against the MSCI KLD 400 Social Index The Enhanced Socially Responsible strategy is an all-equity enhanced index strategy Horizon believes its Enhanced Socially Responsible strategy can achieve outperformance by applying quan ta ve overlays to the MSCI KLD 400 Social Index, an index that is selected largely on qualita ve characteris cs The 40 highest-scoring stocks in the index in terms of Quadrix Overall score (excluding the bo om 2% of index components based on market cap) typically make it into the por olio Ini al individual posi ons are approximately equal-weighted and typically held for 12 months, at which me the equity por olio is rebalanced and recons tuted depending on the results of Horizon s quan ta ve methodology Changes to the equi es may occur more frequently than annually in the event of takeovers or other corporate ac ons For the ini al investment selec on, no sector can account for more than 25% of the total por olio While the por olio may be 100% invested in stocks, cash and fixed-income investments may be held depending on macro market condi ons The MSCI KLD 400 Social Index is a free float-adjusted market capitaliza on-weighted total-return index designed to provide exposure to US companies that have posi ve Environmental, Social and Governance (ESG) characteris cs The MSCI KLD 400 Social Index consists of 400 companies selected from the MSCI USA Investable Market Index (IMI) The Enhanced Socially Responsible Composite was created October 31, 2008 Enhanced SRI Fossil Fuel Free Composite Enhanced SRI Fossil Fuel Free Composite contains fully discre onary Enhanced SRI Fossil Fuel Free commission and bundled fee-paying accounts and, for comparison purposes, is measured against the MSCI KLD 400 Social Index The Enhanced SRI Fossil Fuel Free strategy is an all-equity enhanced index strategy Horizon believes its Enhanced SRI Fossil Fuel Free strategy can achieve outperformance by applying quan ta ve overlays to the MSCI KLD 400 Social Index, an index that is selected largely on qualita ve characteris cs, with addi onal screens that are designed to eliminate companies with exposure to fossil fuels The 40 highest-scoring stocks in the index in terms of Quadrix Overall score (excluding the bo om 2% of index components based on market cap) are then screened against the Carbon Underground 200 list removing listed companies Horizon applies an addi onal subjec ve screen removing companies that associate with, contribute to, or consume substan al by-products of the fossil fuel industry such as auto, trucking, airline, and steel industries Ini al individual posi ons are approximately equal-weighted and typically held for 12 months, at which me the equity por olio is rebalanced and recons tuted depending on the results of Horizon s quan ta ve methodology Changes to the equi es may occur more frequently than annually in the event of takeovers or other corporate ac ons For the ini al investment selec on, no sector can account for more than 25% of the total por olio While the por olio may be 100% invested in stocks, cash and fixed-income investments may be held depending on macro market condi ons The MSCI KLD 400 Social Index is a free float-adjusted market capitaliza on-weighted total-return index designed to provide exposure to US companies that have posi ve Environmental, Social and Governance (ESG) characteris cs The MSCI KLD 400 Social Index consists of 400 companies selected from the MSCI USA Investable Market Index (IMI) The Enhanced SRI Fossil Fuel Free Composite was created March 31,

15 Enhanced Chris an Values Composite Enhanced Chris an Values Composite contains fully discre onary Enhanced Chris an Values commission and bundled fee-paying accounts and, for comparison purposes, is measured against the MSCI USA Catholic Values Index The Enhanced Chris an Values strategy is an allequity enhanced index strategy Horizon believes its Enhanced Chris an Values strategy can achieve outperformance by applying quan ta ve overlays to the MSCI USA Catholic Values Index, an index that is selected largely on qualita ve characteris cs The 40 highest-scoring stocks in the index in terms of Quadrix Overall score (excluding the bo om 2% of index components based on market cap) typically make it into the por olio Ini al individual posi ons are approximately equal-weighted and typically held for 12 months, at which me the equity por olio is rebalanced and recons tuted depending on the results of Horizon s quan ta ve methodology Changes to the equi es may occur more frequently than annually in the event of takeovers or other corporate ac ons For the ini al investment selec on, no sector can account for more than 25% of the total por olio While the por olio may be 100% invested in stocks, cash and fixed-income investments may be held depending on macro market condi ons The MSCI USA Catholic Values Index is a free float-adjusted, market capitaliza on-weighted totalreturn index designed to be used as a US equity benchmark for Catholic investors who seek equity ownership in alignment with the moral and social teachings of the Church The MSCI USA Catholic Values Index consists of 400 companies selected from the MSCI USA Investable Market Index (IMI) The Enhanced Chris an Values Composite was created November 30, 2008 Enhanced BRI Composite Enhanced BRI Composite contains fully discre onary Enhanced BRI commission accounts and, for comparison purposes, is measured against the S&P 400 Index The Enhanced BRI strategy is an all-equity strategy Horizon believes its enhanced BRI strategy can achieve outperformance by applying quan ta ve overlays to a universe of stocks already screened and ve ed for BRI principles BRI screening is done by IW Financial, a leader in social and faith-based investment screening The highest-scoring stocks from the screened universe in terms of Quadrix Overall score typically make it into the por olio Ini al individual posi ons are approximately equal-weighted and typically held for 12 months, at which me the equity por olio is rebalanced and recons tuted depending on the results of Horizon s quan ta ve methodology Changes to the equi es may occur more frequently than annually in the event of takeovers or other corporate ac ons For the ini al investment selec on, no sector can account for more than 25% of the total por olio While the por olio may be 100% invested in stocks, cash and fixed-income investments may be held depending on macro market condi ons The S&P 400 Index is an unmanaged index that measures the performance of 400 mid-sized company stocks weighted by market capitaliza on The Enhanced BRI Composite was created July 31, 2015 Horizon Investment Services, LLC claims compliance with the Global Investment Performance Standards (GIPS ) and has prepared and presented this report in compliance with the GIPS standards Horizon Investment Services, LLC has been independently verified for the periods September 1, 2000 through December 31, 2017 A copy of the verifica on report is available upon request Verifica on assesses whether (1) the firm has complied with all the composite construc on requirements of the GIPS standards on a firm-wide basis and (2) the firm s policies and procedures are designed to calculate and present performance in compliance with the GIPS standards Verifica on does not ensure the accuracy of any specific composite presenta on The Enhanced Socially Responsible composite has been examined for the periods October 31, 2008 through December 31, 2017 The performance examina on report is available upon request 15

16 The Enhanced Chris an Values Composite has been examined for the periods November 30, 2008 through March 31, 2017 The performance examina on report is available upon request Horizon Investment Services, LLC is registered as an investment adviser with the Securi es and Exchange Commission The firm maintains a complete list of composite descrip ons, which is available upon request The composite performance returns include all fully discre onary ac ve and terminated commission and bundled fee-paying accounts for the strategy and exclude any accounts with significant client-imposed investment restric ons Prior to January 1, 2010, composite policy required the temporary removal of any por olio incurring a client ini ated significant cash inflow or ou low of 30% or more of por olio assets Beginning January 1, 2010, there has been no significant cash flow removal policy where accounts are re-valued in instances of a 30% or more large flow The US Dollar is the currency used to express performance All composite performance returns include the reinvestment of all income Gross composite performance returns for the Enhanced Socially Responsible and Enhanced SRI Fossil Fuel Free strategies are asset-weighted totalreturn figures reduced by brokerage commissions paid or the highest asset-based brokerage fee of 020%, applied monthly; which include brokerage commissions and custodial service fees, but do not reflect the payment of management fees Pure gross composite performance returns for the Enhanced Chris an Values strategy are asset-weighted total-return figures and are shown as supplemental informa on to net returns Pure gross performance for the Enhanced Chris an Values strategy bundled accounts is gross of all fees and transac on costs and pure gross performance for non-bundled accounts is reduced by commissions Gross composite performance returns for the Enhanced BRI strategy are asset-weighted total-return figures a er brokerage commissions, but do not reflect the payment of management fees Net composite performance returns for the Enhanced Socially Responsible, Enhanced SRI Fossil Fuel Free, and Enhanced BRI strategies are further reduced by the highest applicable management fee of 125%, applied monthly Net composite performance returns for the Enhanced Chris an Values strategy are further reduced by the highest applicable bundled fee of 130%, applied monthly Bundled accounts pay a fee based on a percentage of assets under management which includes all charges for trading costs, por olio management, custody, and other administra ve fees The annual composite dispersion presented for all strategies is equal-weighted standard devia on calculated for the accounts in the composite the en re year Policies for valuing por olios, calcula ng performance, and preparing compliant presenta ons are available upon request The investment management fee schedule for the Enhanced Socially Responsible composite, the Enhanced SRI Fossil Fuel Free composite, the Enhanced Chris an Values, and the Enhanced BRI commission accounts is 125% on the first $2 million, 110% on the next $2 million, 095% on the next $2 million and 080% on the remainder The investment management fee schedule for the Enhanced Chris an Values bundled program is 130% Actual investment advisory fees incurred by clients may vary depending on fee schedule and por olio size Management fee schedules are available upon request or may be found in Part 2A of Horizon Investment Services Form ADV Each me a new account is ini ated, the quan ta ve methodology of the Enhanced Socially Responsible, Enhanced SRI Fossil Fuel Free, Enhanced Chris an Values, and the Enhanced BRI strategies is applied to create a por olio of 30 to 40 stocks Because of this, individual por olio performance may differ materially because different stocks may be selected from the universe Past performance is no guarantee of future results No formula or other device being offered can, in and of itself, be used to determine which securi es to buy or sell An investment in these strategies involves the risk of loss Investment return and principal value will fluctuate so that the investment, when redeemed, may be worth more or less than the original investment *QUADRIX: The informa on and chart on page 4 reflects the performance of our proprietary Quadrix system and does not reflect the performance of any client account or composite The informa on is calculated as follows: Quadrix ranks roughly 5,000 stocks based on over 90 different variables Each stock in the Quadrix system is then assigned a percen le ranking from for example, a score of 90 means that the stock scored be er in our Quadrix system than 90% of the other stocks Quadrix analyzes We then separate the stocks into deciles, and view the quarterly performance of each of the deciles The decile scores are then averaged to arrive at quin le scores, which are reflected on the chart We then track the performance of each stock contained in the quin le on a quarterly basis, star ng over again each quarter to reflect a quarterly rebalancing of the stocks contained in each quin le The returns for each quarter are linked to the previous quarter The Quadrix returns reflect the reinvestment of dividends and other earnings There are no transac on costs or HIS management fees reflected in the calcula on of Quadrix performance, and the performance does not reflect HIS management of a client account or composite Because Horizon client por olios hold a significantly smaller number of stocks, performance of HIS client accounts may be materially different than performance portrayed in the Quadrix chart The Quadrix performance also does not reflect the impact that material economic and market factors might have had on HIS decision-making if HIS were actually managing client assets From me to me HIS may change the weigh ngs of the various metrics that go into compu ng Quadrix scores 16

17 The Quadrix stock-ra ng system is a proprietary product wholly-owned by Horizon Publishing Company, Horizon Investment Services sister company Horizon Investment Services has contracted with Horizon Publishing Company to use the Quadrix stock-ra ng system for its stock-screening processes No formula or other device being offered can, in and of itself, be used to determine which securi es to buy or sell The Carbon Underground 200 is an annually updated lis ng of the top 100 public coal companies globally and the top 100 public oil and gas companies globally, ranked by the poten al carbon emissions content of their reported reserves For more informa on about the Carbon Underground 200 list for ve ng fossil fuel companies visit: h p://gofossilfreeorg/top-200/ FACT SHEETS: Number of Equity Holdings and Por olio Alloca ons are based on the equity holdings of an actual representa ve client account invested in the strategy The remainder of the account is comprised of fixed-income and money market funds Other account holdings may differ as a result of market condi ons, client restric ons, and any number of other factors Por olio Alloca ons (Sector and Market Capitaliza on) may not add up to 100% due to rounding The S&P 500 Index is presented solely because it is a widely followed index The S&P 500 Index is an unmanaged total-return index that measures the performance of 500 large company stocks weighted by market capitaliza on Informa Investment Solu ons (IIS)/Zephyr StyleADVISOR is a so ware program that uses returns-based style analysis to quickly seek to ascertain a manager s style and creates a unique style benchmark that seeks to reflect that style Source: wwwstyleadvisorcom StyleADVISOR annualized returns may differ immaterially from Horizon returns due to rounding Compe tor returns are supplied by Zephyr StyleADVISOR via Informa Investment Solu ons PSN SMA database, Lipper Mutual Fund database, and/or other databases supplied to Horizon by IIS/Zephyr via subscrip on IIS PSN/Zephyr returns for Separately Managed Account managers are gross returns Lipper Funds are total return performance gross of tax but net of charges Compe tors for a Horizon strategy are selected using a series of filters which seek to iden fy strategies most similar to the Horizon strategy Filter criteria include but are not limited to: performance beginning and end dates, asset class of domes c equity, same market capitaliza on, and same investment style Addi onal compe tors may be chosen on a discre onary basis at the request of prospects, clients, or Horizon marke ng personnel to be er represent common compe tors encountered for the strategy IW Financial is a leading provider of objec ve research and technology solu ons that help financial professionals evaluate the environmental, social, and governance (ESG) performance of companies CFA and Chartered Financial Analyst are registered trademarks owned by CFA Ins tute HORIZON INVESTMENT SERVICES 7412 Calumet Avenue Hammond, IN wwwhorizoninvestmentcom Copyright 2018 by Horizon Investment Services, LLC All rights reserved 17

18 Glossary of Statistics Alpha measures nonsystematic return, or the return that cannot be attributed to the market Thus, it can be thought of as how the manager performed if the market has had no gain or loss In contrast, beta measures the return that it attributable to the market and is a measure of the portfolio s overall volatility If the market s return as measured by an index was equal to the risk-free rate, the manager s expected excess return would be alpha Annualized Return is the geometric mean of the returns with respect to one year Beta measures the risk level of the manager Beta measures the systematic risk, or the return that is attributable to market movements In contrast, alpha measures the nonsystematic return of the portfolio, and standard deviation measures the volatility of a portfolio s returns compared to the average return of the portfolio A beta equal to one indicates a risk level equivalent to the market Higher betas are associated with higher risk levels, while lower betas are associated with lower risk levels Beta is estimated by the slope of the best fit line based on the ordinary least squares regression using the market s quarterly return less the risk-free rate as the independent variable and the manager s quarterly return less the risk-free rate as the dependent variable Cumulative Return is the compound return of the series Down Capture is a measure of how badly the manager was affected by phases of negative benchmark returns Downside Risk The downside standard deviation, also referred to as downside risk, differs from the ordinary standard deviation insofar as the sum is restricted to those returns that are less than the mean To annualize the downside standard deviation, one multiplies by the square root of the number of periods in a year, just as in the case of the ordinary standard deviation Information Ratio of a manager series vs a benchmark series is the quotient of the annualized excess return and the annualized standard deviation of excess return Market Benchmark is defined by the user generally a common index chosen because its composition resembles that of the manager s portfolio or strategy Return series statistics are then calculated compared to the Market Benchmark or Style Benchmark Population Standard Deviation of return measures the average deviations of a return series (the entire population) from its mean (the square root of the population variance), and is often used as a measure of risk A large population standard deviation implies that there have been large swings in the return series of the manager R-Squared is a statistic that measures the reliability of alpha and beta in explaining the return of a manager as a linear function of the market It is produced by regression analysis If you are searching for a manager with a particular style, for example a growth manager, you would expect that manager to have an R-Squared that is high relative to a growth index if the manager has a diversified portfolio If the manager s return is explained perfectly, the R-Squared would equal 100, while an R-Squared of 0 would indicate that no relationship exists between the manager and the linear function Higher R-Squared values indicate more reliable alpha and beta statistics and are useful in assessing a manager s investment style Sharpe Ratio is one of two alternative, yet similar, methods of measuring excess return per unit of risk In the case of the Sharpe Ratio, risk is measured using the standard deviation of the returns in the portfolio The Sharpe Ratio relates the difference between the portfolio return and the risk-free rate to the standard deviation of that difference for a given time period Standard Deviation of return measures the average deviations of a return series (a sample of the population) from its mean (the square root of the variance), and is often used as a measure of risk A large standard deviation implies that there have been large swings in the return series of the manager Tracking Error is a measure of the volatility of excess returns relative to a benchmark Up Capture is a measure of how well a manager was able to replicate or improve on phases of positive benchmark returns 18

19 Notes 19

20 HORIZON INVESTMENT SERVICES IKBQRSRI4-A8