Wakefield Asset Management Large Cap Equity Quarterly Commentary Q1 2018 as of 3/31/2018 Gross Performance 1.57 23.28 S&P 500 0.76 13.99 Q1 2018 1 Year 3 Years 5 Years 10 Years 14.74 10.78 16.69 13.31 13.33 9.49 Since Incep on 12.14 7.87 Quarter In Review Following a rapid advance during the month of January, vola lity returned to the markets and the S&P 500 declined nearly 4% during February, eventually ending down marginally for the quarter. Higher interest rates and infla on expecta ons weighed on the markets, especially defensive sectors, with Consumer Staples and Telecommunica ons Services companies pos ng the worst declines. Despite regulatory and trade related concerns, technology stocks led all sectors during the vola le quarter. Earnings expecta ons for Q1 2018 remain strongly posi ve on the heels of tax reform passed in late 2017. According to data from FactSet, the first quarter saw the most companies issuing posi ve earnings guidance since they began tracking the data in 2006. That growth is being led by the Energy, Materials, Informa on Technology and Financial sectors. Year over year revenue growth also appears to be strong. Jerome Powell took over as Chair of the Federal Reserve in February. He and the Fed delivered the first of three expected rate increases this year as the FOMC looks to gradually ghten monetary policy with economic condi ons showing con nued improvement. First Quarter Performance Review The Por olio was posi ve for the quarter, with a return of 1.57% while the S&P 500 finished down 0.76%. The outperformance came despite the por olio being more than 6% underweight technology stocks, the best performing sector in the market. Holdings in the Financials (6.40% versus 0.97% for the S&P 500), Health Care (8.57% versus 1.27% for the S&P 500) and Informa on Technology (3.23% versus 3.54% for the S&P 500) sectors contributed the most to returns. Estee Lauder was the best performing posi on in the por olio during the quarter. Shares advanced 18% as the company reported earnings of $1.52 vs. a $1.48 es mate and received numerous, upward revisions to future earnings expecta ons. Motorola Solu ons was the standout performer in the Informa on Technology sector, gaining 17.12% through quarter end. The communica ons equipment company easily beat earnings es mates and issued posi ve guidance. Boeing posted a 11.76% gain during the quarter, bes ng analyst earnings es mates while receiving numerous, upward revisions to future earnings following their earnings announcement in early February. The company was seen by most investors as a large beneficiary of record defense spending, increased geopoli cal tensions and changes to the tax code. Holdings in the Energy sector detracted the most from overall returns. Refining company Andeavor accounted for nearly all the nega ve return. The company was down 19.14% during the quarter a er repor ng earnings of $0.75 vs. a $1.11 es mate giving an underwhelming forward outlook. Andeavor was sold in February and replaced with Pioneer Natural Resources. During the quarter, the por olio held 33 companies that reported earnings. 30 of those companies exceeded Wall Street es mates, while only three missed expecta ons. The por olio s earnings beat rate of 90.91% was well ahead of the 74.85% beat rate for all companies in the S&P 500. The Estee Lauder Companies Inc Motorola Solu ons Inc Boeing Co Comerica Inc Align Technology Inc Intui ve Surgical Inc Total System Services Inc Moody's Corpora on Wynn Resorts Ltd Applied Materials Inc * Sold During the Quarter ^ Bought During the Quarter Top 10 Performers Symbol EL MSI BA CMA ALGN ISRG TSS MCO WYNN AMAT Return Contribu on 17.99 0.55 17.12 0.45 11.76 0.43 10.84 0.37 13.02 0.35 13.12 0.35 9.22 0.32 9.56 0.32 8.50 0.30 8.98 0.27 Andeavor * Dollar Tree Inc * General Motors Co Facebook Inc A McDonald's Corp Freeport McMoRan Inc Norfolk Southern Corp * Avery Dennison Corp Broadcom Inc NVIDIA Corp^ Bo om 10 Performers Symbol Return ANDV DLTR SMG FB MCD FCX NSC AVY AVGO NVDA Contribu on 19.14 0.66 12.01 0.35 10.45 0.31 9.45 0.29 8.56 0.29 7.33 0.27 7.36 0.23 7.13 0.22 7.62 0.21 4.36 0.14
Earnings Surprise Beat Comparison Holdings Repor ng Earnings in Q4 Earnings Beats Earnings Misses Earnings Met Earnings Beat % S&P 500 33 30 3 0 90.91% 505 378 122 5 74.85% Market Outlook Despite repeated calls for a slowdown, the U.S. economy con nues to show signs of strength with most economists expec ng GDP growth of more than 3% by this summer. Headline unemployment is also approaching sub 4%, the best level since late 2000. Ongoing concerns about labor market ghtness resul ng in rising wages and lower profit margins have yet to materialize. Tax cuts passed in late 2017 are finally being reflected in corporate earnings expecta ons. Most signs point to several quarters of growth ahead and the bull case for the economy remains largely intact. Time Period: 1/1/2018 to 3/31/2018 Cons. Discre onary Sector Return Rela ve to S&P 500 0.9 However, there are risks to the posi ve economic outlook and we have already seen those concerns manifest themselves in the form of equity market vola lity. We remarked in our yearend 2017 le er that we expected vola lity to return this year. By mid February, the S&P 500 had already exceeded the total number of 1% or greater moves in all of 2017. Concerns seem to be moun ng that policy mistakes from the FOMC could allow infla on to run above their 2% target, resul ng in ghter monetary condi ons and a subsequent economic slowdown. Markets also remain intensely focused on rhetoric from Washington, D.C. where President Trump s promise of America First have led to tariffs on steel and aluminum. The impact of the tariffs has been very limited, but there s concern a broader trade war could erupt and halt the synchronized global expansion. Finally, we can t ignore equity market valua ons, but the recent pause in the S&P 500 s advance coupled with higher earnings revisions have brought mul ples down from extreme to well above average levels. Our investment approach should perform well if we see a rota on out of the today s market leaders, including technology companies, over the coming quarters. Cons. Staples Energy Financials Health Care Industrials 0.2 1.0 1.1 0.9 0.4 Info Technology 0.3 Analyst Earnings Es mates Comparison Materials 0.3 Real Estate 0.1 Telecom Services 0.1 U li es 0.3 2.0 1.3 0.5 0.2 0.9 1.7 Past performance is not indica ve of future results. Holdings presented here represent a par al list of holdings in the Large Cap Equity model por olio during the me period indicated. Trades executed in actual accounts may differ from the model depending upon the size of the account, investment objec ves and restric ons, capital contribu ons and withdrawals, the amount of transac on and related costs, the incep on date of the account and other factors. It should not be assumed that investments in the securi es iden fied were or will be profitable or that recommenda ons made in the future will be profitable or will equal the performance of the securi es presented here. A complete list of securi es purchased and sold in the last 12 months in the Large Cap Equity por olio is available upon request. Top & Bo om performances are gross returns, with contribu on calculated on a asset weighted basis. Please send informa on requests to investorrela ons@wakefieldinc.com. This report is provided as general informa on only and should not be taken as investment advice. This report shall not be construed as a recommenda on to buy or sell any security or financial instrument, or to par cipate in any par cular trading or investment strategy. Some informa on in this report was generated based on informa on from a third party and is believed to be reliable. Wakefield makes no representa on as to the accuracy or completeness of the third party informa on provided in this report. Please refer to the a ached performance presenta on for net of fee composite returns, disclosures and further informa on about Wakefield Asset Management and our Large Cap Equity strategy. Forms ADV part 1 and 2 are available upon request. Data source: Morningstar Direct, Bloomberg.
While the overall market is efficient, pockets of inefficiency do exist. Wakefield Asset Management offers a unique investment strategy which we believe stands apart from the mainstream investment community. Focusing on proprietary investment techniques that not only iden fy market inefficiencies, but capture those inefficiencies over me. Wakefield uses a highly disciplined and technologically advanced process for research, security selec on, implementa on, and monitoring. The resul ng por olios exhibit a unique combina on of characteris cs with posi ve near term expecta ons that, in our view, will be rewarded by the market in the period ahead regardless of market direc on. In our management and research, our goals are Focus, Crea vity, Intellectual Honesty, and Con nuous Improvement. Returns (Gross of Fee) Return 26.0% 24.0% 23.3 22.0% 20.0% 18.0% 16.7 16.0% 14.7 14.0 14.0% 13.3 13.3 12.1 12.0% 10.8 10.0% 9.5 7.9 8.0% 6.0% 4.0% 2.0% 1.6 0.0% 2.0% 0.8 4.0% Q4 2017 1 Year 3 Years 5 Years 10 Years Since Incep on The informa on on this page is supplemental to the GIPS compliant disclosure presenta on on page 4 which also shows net performance returns. Page 1
Performance Rela ve to Peer Group Peer Group (5 95%): Separate Accounts/CITs U.S. Large Blend Calcula on Benchmark: Top Quar le 2nd Quar le 3rd Quar le Bo om Quar le 24.0% 22.0% 20.0% 18.0% Return 16.0% 14.0% 12.0% 10.0% 8.0% 6.0% 4.0% 1 Year 3 Years 5 Years 10 Years 15 Years Top Holdings Symbol Weight % Freeport McMoRan Inc FCX 3.3 Helmerich & Payne Inc Macy's Inc Tapestry Inc Michael Kors Holdings Ltd United Rentals Inc The Estee Lauder Companies Inc Class A Applied Materials Inc State Street Corpora on HP 3.3 M 3.2 TPR 3.2 KORS 3.2 URI 3.2 EL 3.1 AMAT 3.1 STT 3.1 GICS Sector Weigh ngs Energy Materials Industrials Consumer Discre onary Consumer Staples Healthcare Financials Informa on Technology Telecom Services U li es Real Estate 2.9% 0.0% 1.9% 0.0% 2.9% 2.8% 5.7% 6.1% 6.2% 9.3% 8.6% 7.7% 9.1% 10.2% 8.8% 12.7% 13.7% 15.2% 14.7% 18.0% 17.3% 24.9% CenterPoint Energy Inc CNP 3.1 Large Cap Equity Holdings as of March 31, 2018. Holdings are subject to change at any me. Posi ons, and posi on size, may vary from account to account. A full lis ng of investment decisions made in the past year is available upon request. It should not be assumed that recommenda ons made in the future will be profitable or will equal the preformance of the securi es presented here. This holdings list should not be considered a recommenda on to buy or sell any security. The informa on on this page is supplemental to the GIPS compliant disclosure presenta on on page 4 Page 2
Wakefield Large Cap % Giant 17.1 Large 54.4 Mid 28.5 Small 0.0 % Giant 56.3 Large 35.1 Mid 8.6 Small 0.0 Por olio Characteris cs # of Stock Holdings Average Market Cap (Mil) Median Market Cap (Mil) P/E Ra o (TTM) P/B Ra o (TTM) Dividend Yield Ac ve Share Wakefield LCE S&P 500 TR 33 505 53,894 46,724 29,254 20,741 21.32 20.84 3.40 3.10 1.71 2.03 92.43 Informa on Sta s cs - 5 Year Alpha Beta Sharpe Ra o R Squared Informa on Ra o Tracking Error Standard Devia on Ba ng Average 3.05 1.00 1.47 84.86 0.81 4.17 10.73 53.33 Capture Ra o - 5 Year Calcula on Benchmark: 130.0% 120.0% 110.0% 100.0% Up Capture Ra o 90.0% 80.0% 70.0% 70.0% 80.0% 90.0% 100.0% 110.0% 120.0% 130.0% Down Capture Ra o Investment Growth Time Period: 5/1/1997 to 3/31/2018 1,300.0 1,100.0 900.0 700.0 500.0 300.0 100.0 1998 2003 2008 2013 2018 The informa on on this page is supplemental to the GIPS compliant disclosure presenta on on page 4 which also shows net performance returns. Returns Above Benchmark Excess Return 9.8 9.3 9.0 8.3 7.5 6.8 6.0 5.3 4.5 4.3 4.0 3.8 3.8 3.4 3.0 2.3 1.5 0.8 0.0 1 Year 3 Years 5 Years 10 Years Since Incep on Page 3
Wakefield Asset Management claims compliance with the Global Investment Performance Standards (GIPS ) and has prepared this report in compliance with the GIPS standards. Wakefield Asset Management has been independently verified for the periods July 1, 2003 through June 30, 2017. 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. The composite has been examined for the periods July 1, 2003 through June 30, 2017. The verifica on and performance examina on reports are available upon request. Page 4