Market Sector Update

• The third quarter of 2020 was a continuation of the strong equity markets experienced in the second quarter. While equity markets were hit hard early in the year as the global pandemic pressured economies around the world, global investors have remained surprisingly optimistic with most equity markets globally having rebounded sharply. A notable outperformer has been China who is a stand out in terms of having effectively controlled COVID-19 to the point that daily life is relatively close to normal. As we talk to management teams around the world, China is the one country where restaurant occupancy, hotel occupancy and traffic measures are nearly back to pre COVID-19 levels. Among developed markets, France, Spain, the U.K. and Japan underperformed, while the U.S., parts of Scandinavia and Germany all outperformed.
• The consumer discretionary, information technology, materials and industrials sectors all outperformed in the period. Energy was a standout underperformer and the only sector with negative performance (down more than 15% in the period). Growing supply and dwindling demand for crude oil due to lockdowns and lower economic output from COVID-19 has negatively impacted the industry. Other areas of underperforming sectors included financials, real estate, utilities and health care.

Portfolio Strategy

• The Portfolio outperformed the benchmark during the period primarily due to stock selection. Outperformance was driven by our holdings in energy and health care. In the case of energy, our largest holding in the sector is Reliance Industries, which benefited from continued margin recovery across multiple business units including retail, energy and telecom. In health care, our holdings in Abbott Laboratories and Thermo Fisher Scientific, Inc. both benefited from increased testing and measurement demand associated with COVID-19. HCA Holdings, Inc. also outperformed in the period and has been helped by an improvement in hospital volumes as the U.S. economy opened. Additional material positive contributors to performance for the quarter included Taiwan Semiconductor Manufacturing Co. Ltd., Alibaba Group Holding Ltd. and Ferguson plc. On the other hand, stock selection in information technology and industrials were a modest drag to performance. Top individual detractors included our exposure to underperforming Cisco Systems, Inc. and Citigroup, Inc.
• The Portfolio remains underweight the U.S. and Japan and overweight Europe and emerging markets given the perceived relative attractiveness of opportunities we see around the world. We are overweight consumer discretionary, information technology and industrials, while underweight consumer staples.
• During the quarter, we reduced our overweight in information technology (primarily U.S. technology) as we reduced and eliminated some positions where we felt valuations appeared stretched. We continue to focus our portfolio on sustainable growth businesses that we believe can benefit from long-term secular trends and have significant competitive moats around their business.

Outlook

• Coming off the sharpest recession in post-war history as a result of COVID-19, gross domestic product (GDP) growth has materially rebounded in most countries around the world on massive amounts of stimulus. However, we are expecting another wave of economic declines as a second wave of COVID-19 outbreaks has already begun to dampen economies around the world. Europe and the U.S. have seen a material spike in cases recently. We are expecting a material dampening of economic activity in Europe despite the sharp rebound to GDP growth as economies once again begin shutting down. The U.S. appears to have less of an appetite for aggressive shut-down measures but is also seeing COVID-19 cases rise across most of the country. Additional U.S. concerns include slowing payrolls, declining unemployment benefits as stimulus measures expire and uncertainty surrounding the upcoming U.S. Presidential election.
• In the current environment, areas of exposure include companies we believe will benefit from a rebound in demand as vaccines slowly make their way to the market in 2021. Areas like e-commerce, digital advertising and working-fromhome trends are all areas we think can continue to do well even as we position the portfolio for an environment that slowly returns to normal.

The opinions expressed are those of the Portfolio’s manager and are not meant as investment advice or to predict or project the future performance of any investment product. The opinions are current through September 30, 2020, 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.

Top 10 holdings as a percent of net assets as of 09/30/2020 include: Amazon.com, Inc. 5.0%, Microsoft Corp. 4.2%, Apple, Inc. 3.6%, Ferrari N.V. 2.9%, PayPal Inc. 2.8%, Alimentation Couche-Tard, Inc. Class B 2.6%, Reliance Industries Ltd. 2.5%, Schneider Electric S.A. 2.5%, Visa Inc. Class A 2.4% and Alibaba Group Holding Ltd. ADR 2.4%.

The impact of COVID-19, and other infectious illness outbreaks that may arise in the future, could adversely affect the economies of many nations or the entire global economy, individual issuers and capital markets in ways that cannot necessarily be foreseen. In addition, the impact of infectious illnesses in emerging market countries may be greater due to generally less established healthcare systems. Public health crises caused by the COVID-19 outbreak may exacerbate other pre-existing political, social and economic risks in certain countries or globally. The duration of the COVID-19 outbreak and its effects cannot be determined with certainty.

Risk factors: The value of the Portfolio's shares will change, and you could lose money on your investment. An investment in the Portfolio is not a bank deposit and is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. Prices of growth stocks may be more sensitive to changes in current or expected earnings than the prices of other stocks. Growth stocks may be more volatile or not perform as well as value stocks or the stock market in general. International investing involves additional risks including currency fluctuations, political or economic conditions affecting the foreign country, and differences in accounting standards and foreign regulations. These risks are magnified in emerging markets. The Portfolio typically holds a limited number of stocks (generally 50 to 70). As a result, the appreciation or depreciation of any one security held by the Portfolio may have a greater impact on the Portfolio’s net asset value than it would if the Portfolio invested in a larger number of securities. These and other risks are more fully described in the Portfolio's prospectus.

Annuities are long-term financial products designed for retirement purposes. Annuity and life insurance guarantees are based on the financial strength and claims-paying ability of the issuing insurance company. The guarantees have no bearing on the performance of a variable investment option. Variable investment options are subject to market risk, including loss of principal. There are charges and expenses associated with annuities and variable life insurance products, including mortality and expense risk charges, management fees, administrative fees, expenses for optional riders and deferred sales charges for early withdrawals. Withdrawals before age 59 1/2 may be subject to a 10% IRS tax penalty and surrender charges may apply.