QUARTERLY COMMENTARY SMALL CAP VALUE STRATEGY

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1 SMALL CAP VALUE STRATEGY

2 *Prior to October 2009, index domestic equity ETF data included fewer than 7 actively managed domestic equity ETFs. Exchange Traded Fund (ETF) Source: Investment Company Institute, 2017 Investment Company Fact Book, Washington, DC. Data shows cumulative flows to and net share issuance of domestic equity mutual funds and index ETFs. Equity mutual fund flows include net new cash flow and reinvested dividends. Data excludes mutual funds that invest primarily in other mutual funds. 2

3 Russell 2000 Value Less Russell 2000 Growth Index 10-Year Annualized Rolling Returns Source: Furey Research Partners, LLC and Russell, 12/31/1978 to 12/31/2017, annualized return over rolling 10-year periods Economic predictions are based on estimates and are subject to change. Additional information for indices shown at end of material. All indices are unmanaged. It is not possible to invest directly in an index. Past performance does not guarantee future results. 3

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5 The inception date for the Small Cap Value Strategy is 10/1/1988. The US Dollar is the currency used to express performance. Returns are presented net of advisory fees and net of bundled fees and include the reinvestment of all income. Source: FactSet Research Systems Inc., Heartland Advisors, Inc. and Russell Shown as supplemental information. Past performance does not guarantee future results. The Small Cap Value Strategy seeks long-term capital appreciation by investing in micro- and small-cap companies, generally with market capitalizations of less than $2.5 billion at the time of purchase. The micro- and small-cap segment of the stock market is robust with thousands of publicly traded issues, many of which lack traditional Wall Street research coverage. Thus, we believe this market is often inefficient, mispricing businesses and offering opportunities for fundamental research-minded investors such as Heartland. The Small Cap Value Strategy invests in small companies selected on a value basis. Such securities generally are more volatile and less liquid than those of larger companies. Value investments are subject to the risk that their intrinsic values may not be recognized by the broader market. Heartland Advisors, Inc. (the Firm ) claims compliance with the Global Investment Performance Standards (GIPS ). The Firm is a wholly owned subsidiary of Heartland Holdings, Inc. and is registered with the Securities and Exchange Commission. For a complete list and description of Heartland Advisors composites and/or a presentation that adheres to the GIPS standards, contact Institutional Sales at Heartland Advisors, Inc. at the address listed below. As of 12/31/2017, Hudson Global, Inc., MGIC Investment Corporation, Tesla, Inc., and The Bancorp, Inc. represented 4.32%, 3.62%, 0.00%, and 4.02% of the Small Cap Value Composite, respectively. Statements regarding securities are not recommendations to buy or sell. Portfolio holdings are subject to change. Current and future holdings are subject to risk. The statements and opinions expressed in this article are those of the presenter(s). Any discussion of investments and investment strategies represents the presenter s views as of the date created and are subject to change without notice. The opinions expressed are for general information only and are not intended to provide specific advice or recommendations for any individual. The specific securities discussed above, which are intended to illustrate the advisor s investment style, do not represent all of the securities purchased, sold, or recommended by the advisor for client accounts, and the reader should not assume that an investment in these securities was or would be profitable in the future. Certain security valuations and forward estimates are based on Heartland Advisors calculations. Any forecasts may not prove to be true. Economic predictions are based on estimates and are subject to change. There is no guarantee that a particular investment strategy will be successful. Sector and Industry classifications as determined by Heartland Advisors may reference data from sources such as FactSet Research Systems Inc. or the Global Industry Classification Codes (GICS) developed by Standard & Poor s and Morgan Stanley Capital International. Heartland Advisors defines market cap ranges by the following indices: micro-cap by the Russell Microcap, small-cap by the Russell 2000, mid-cap by the Russell Midcap, large-cap by the Russell Top 200. Growth and value investing each have unique risks and potential for rewards and may not be suitable for all investors. A growth investing strategy emphasizes capital appreciation and typically carries a higher risk of loss and potential reward than a value investing strategy; a value investing strategy emphasizes investments in companies believed to be undervalued. Dividends are not guaranteed and a company s future ability to pay dividends may be limited. A company currently paying dividends may cease paying dividends at any time. Because of ongoing market volatility, performance may be subject to substantial short-term changes. Russell Investment Group is the source and owner of the trademarks, service marks and copyrights related to the Russell Indices. Russell is a trademark of the Frank Russell Investment Group. Data sourced from FactSet: Copyright 2018 FactSet Research Systems Inc., FactSet Fundamentals. All rights reserved

6 Additional Information for Indices in Chart (calendar year annual returns %): Russell 2000 Growth Index Russell 2000 Value Index Russell 2000 Growth Index Russell 2000 Value Index Russell 2000 Growth Index Russell 2000 Value Index Source: FactSet Research Systems Inc. and Russell Past performance does not guarantee future results. Definitions: Exchange Traded Fund (ETF): is a security that tracks an index, a commodity or a basket of assets like an index fund, but trades like a stock on an exchange. ETFs experience price changes throughout the day as they are bought and sold. Leverage is the amount of debt used to finance a firm's assets. A firm with significantly more debt than equity is considered to be highly leveraged. Momentum: is the rate of acceleration of a security's price or trade volume. Price/Earnings Ratio: of a stock is calculated by dividing the current price of the stock by its trailing or its forward 12 months earnings per share. Tangible Book Value: is the sum of all of a company s assets, minus its liabilities and intangible assets, such as goodwill. Total Debt/Total Capital Ratio: of a stock is calculated by dividing the short- and long-term debt obligations of the company by its total capital, which is represented by the company's debt and shareholders' equity, which includes common stock, preferred stock, minority interest and net debt. NASDAQ 100 Index includes 100 of the largest domestic and international non-financial companies listed on The NASDAQ Stock Market based on market capitalization. Russell 2000 Index: includes the 2000 firms from the Russell 3000 Index with the smallest market capitalizations. The Russell 2000 Growth and Value indices consist of stocks within the Russell 2000 index with respective value and growth characteristics as determined by Russell Investments. S&P 500 Index: is an index of 500 U.S. stocks chosen for market size, liquidity and industry group representation and is a widely used U.S. equity benchmark. All indices are unmanaged. It is not possible to invest directly in an index