Market Sector Update

• The U.S. economy continued its steady expansion during the second quarter with equity markets achieving new market highs, despite numerous external factors dominating the news.
• Amid a backdrop of legislative setbacks for the Trump administration and lingering geopolitical uncertainty, the equity markets appeared to be paying little attention, focusing instead on the underlying strength of the economy.
• The Federal Reserve (Fed) raised the key federal funds rate by a 0.25 percentage point in June, the third such increase in the past year. With rates still at historically low levels, the rate increases appear to have had little impact on consumers.

Portfolio Strategy

• For the quarter, the Fund had a positive return (before the effect of sales charges) but slightly underperformed the benchmark S&P 500 Dividend Aristocrats Index.
• From a sector allocation perspective, nine of the 11 sectors in the Index posted positive returns for the quarter led by health care, industrials, financials and information technology. Energy and telecommunication services were the only sectors to post negative returns.
• The Fund’s largest sector weights were consumer staples, industrials, health care and consumer discretionary. The Fund was underweight to energy, although two holdings beat the benchmark, which partially offset the negative sector impact.
• Holdings in health care, consumer discretionary and materials added the most to relative performance from an individual stock perspective. The Fund’s leading detractors included holdings in industrials and real estate.

Outlook

• Outside of some external variables or a significant slowdown in the macro environment, there is reason for optimism about the outlook for the next 12 months as it relates to the direction of the U.S. economy, consumer confidence and the equity markets.
• There is a strong possibility the earnings season will support equities prices as companies may convey messages of strength and optimism for the second half of the year. There could be some tempered outlooks from management teams due to the lack of anything “concrete” from Washington as it relates to tax reform, health care or infrastructure spending.
• With inflation below the Fed’s estimates, the pace of interest rates hikes will likely continue to be data dependent, rising gradually if the economic data comes in as expected.
• As a reminder, the Fund tracks the S&P 500 Dividend Aristrocrats Index, which focuses exclusively on high quality, large-cap companies with at least 25 consecutive years of dividend growth.

The opinions expressed are those of the Fund’s managers and are not meant as investment advice or to predict or project the future performance of any investment product. The opinions are current through June 30, 2017, are subject to change at any time based on market and other current conditions, and no forecasts can be guaranteed. This commentary is being provided as a general source of information and is not intended as a recommendation to purchase, sell, or hold any specific security or to engage in any investment strategy. Investment decisions should always be made based on an investor’s specific objectives, financial needs, risk tolerance and time horizon. Past performance is not a guarantee of future results.

The Fund is a passively managed index fund and does not invest in securities based on the managers’ view of the investment merit of a particular security or company, nor does it conduct conventional investment research or analysis or forecast market movement or trends, in managing the assets of the Fund. The Fund seeks to remain fully invested at all times in securities that, in combination, provide exposure to the Index without regard to market conditions, trends or direction.

The Fund entails other risks, including imperfect benchmark correlation and market price variance that may decrease performance. While the Fund attempts to track the performance of its stated index, there is no guarantee or assurance that the methodology used to create the Index will result in the Fund achieving high, or even positive, returns. The Index may underperform, and the Fund could lose value, while other indices or measures of market performance increase in value. An investment in the Fund is not a bank deposit and is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. These and other risks are more fully described in the Fund’s prospectus. Not all funds or fund classes may be offered at all broker/dealers.

The S&P 500® Dividend Aristocrats® Index measures the performance S&P 500 companies that have increased dividends every year for the last 25 consecutive years. The Index treats each constituent as a distinct investment opportunity without regard to its size by equally weighting each company. The S&P 500 Index is composed of 500 selected common stocks chosen for market size, liquidity, and industry grouping, among other factors. It is not possible to invest directly in an index.

Risk factors: The value of the Fund’s shares will change, and you could lose money on your investment. Large capitalization companies in which the Index and, by extension, the Fund are exposed may go in and out of favor based on market and economic conditions. The Fund’s emphasis on dividend-paying stocks involves the risk that such stocks may fall out of favor with investors and underperform non-dividend paying stocks and the market as a whole over any period of time. In addition, there is no guarantee that the companies in which the Fund invests will declare dividends in the future or that dividends, if declared, will remain at current levels or increase over time. The amount of any dividend the company may pay may fluctuate significantly. In addition, the value of dividend-paying common stocks can decline when interest rates rise as fixed-income investments become more attractive to investors. This risk may be greater due to the current period of historically low interest rates.