International Small CapSecond Quarter 2020

COMMENTARY

Global Value Advisors is an investment boutique specializing in long-only international and global equities. GVA is a valueinvestor and its research shows that companies that generate positive Free Cash Flow and return capital to shareholdersoutperform the market. GVA uses a disciplined methodology to isolate an advantaged subset of the universe and then appliesfundamental research to identify companies with sustainable Free Cash Flows to maintain their assets, finance their growth andreturn capital to shareholders.

CONTINUED >>

1

Total Returns (Net of Fees) Q2

GVA International Small Cap 15.5%

MSCI All Country World ex-USA Small Cap Index 22.8%

Value Added -7.3%

MSCI All Country World ex-USA Small Cap Value Index 18.1%

MSCI All Country World ex-USA Small Cap Growth Index 27.2%

Regional Indices Q2

MSCI Japan Small Cap 12.8%

MSCI United Kingdom Small Cap 14.8%

MSCI Emerging Markets Small Cap 27.1%

MSCI Europe ex UK Small Cap 24.5%

MSCI Pacific ex Japan Small Cap 35.7%

During the second quarter, global financial markets recovered from the dismal performance they had recorded in

the first quarter of 2020. This rebound was mainly driven by the massive injection of liquidity by central banks andtheir commitment to do more if necessary: $18.5 trillion in global stimulus (in particular $8.0tn of central bank assetbuying) which has, so far, prevented widespread bankruptcies and defaults in the current recession, despitesignificantly higher debt in the system than during the 2008 great financial crisis.

The rebound was also driven by the investors’ belief that, once the pandemic is contained, growth should normalize.This was certainly backed by early data observed in countries that were the first ones to re-open their economies likeChina or Germany.

Value stocks had another disappointing quarter, as market participants kept inflating the growth driven bubble. Thefollowing graph illustrates the relative performance of Growth versus Value across different universes:

0%

10%

20%

30%

40%

50% FAANG stocks vs MSCI ACWI Value

MSCI ACWI Growth vs MSCI ACWI Value

ACWI ex USA Small Growth vs ACWI ex USA Small Value

MSCI EM Growth vs MSCI EM Value

Relative Performance of Growth Versus Value Across Different Universes

Source: Factset

International Small CapSecond Quarter 2020

COMMENTARY

CONTINUED >>

In our Q1 2020 letter, we described once-in-a-generation valuation spreads between Growth and Value styles. Thesespreads have widened further and now exceed those achieved during the TMT bubble, producing an unparalleledopportunity for value investors.

These market dynamics created significant headwinds to our three strategies, which delivered negative relativeperformance over the quarter. Even though the weakness of the value factor was the main driver of ourunderperformance, our strategies were also negatively impacted by the junk rally unleashed by the central banks’interventions.

Ironically, owning well capitalized, cash generative businesses has not helped performance so far in this crisis, as theresilience they exhibited in early March lost its potency as soon as the central banks’ bailouts were announced. A goodillustration of that can be found in our international small cap universe: over the second quarter 2020, companies thatgenerated negative free cash flows and had to raise capital (equity or debt) to finance their operations returned +33%while the pool of superior companies we invest in (companies with positive free cash flow and positive return to theshareholders) returned +21%. The emerging market universe showed an even wider performance spread between thehaves and the have nots: +31% quarterly return for the negative cash generators that rely on external capital to operate,versus +16% for the cash generating, internally financed, dividend payers.

We’ve studied similar market dynamics in the past and found that they are typically short lived. Once the effects of abailout fade or the euphoria calms down, fundamentals regain traction and cash draining businesses revert to theirtypical status as structural underperformers. The following graph illustrates this pattern over the last 17 years andcorresponds to the period of our International Small Cap model analysis:

2

-110%

-90%

-70%

-50%

-30%

-10%

10%

30%

50%

70%

90%

110%

-30%

-20%

-10%

0%

10%

20%

30%

MSCI ACWI ex USA Small universe

Positive FCF Yield and Positive Shareholder Yield Underperforms

Positive FCF Yield and Positive Shareholder Yield Outperforms

Universe Return Trailing 12 Mos. Superior Cos. minus Cash Drainers

Source: Factset

GVA International

Small Cap

MSCI ACWI Ex-US Small Cap Index

Price/Earnings (FY1) 10.0 16.9

Free Cash Flow Yield 13.4% 5.3%

Shareholder Yield1 8.8% 1.6%

Dividend Yield (LTM) 5.1% 2.5%

Net Debt to Equity (ex-financials) 10.8% 49.2%

Return on Equity 15.9% 10.8%

International Small CapSecond Quarter 2020

COMMENTARY

CONTINUED >>

The yellow line represents the rolling 12 months relative return of the superior companies versus the group of cashdraining companies. Portfolios are equally weighted and rebalanced monthly. This graph has three main takeaways:

1. Long term, the cash generators outperform the cash drainers by 12% annually. Only three times (or 10% of theperiod illustrated) has the pool of superior companies underperformed over the study period.

2. When markets fall significantly, the cash generators’ staying power is typically rewarded by investors and the grouptends to outperform the cash bleeders (the yellow line moves up as the blue line goes down).

3. When markets move up sharply, the negative free cash flow generators outperform, which was the case this pastquarter. Despite the pain that it creates in the short term, we observe that this pattern tends to lose steam ratherquickly.

Our portfolios are fully invested in the pool of superior companies because relying on internal financing to operate abusiness typically leads to better profitability and lower financial leverage. We select value stocks within this advantagedgroup of companies as we believe that value wins over time.

3

Top 3 Performers in Q2 2020

African Rainbow Minerals (ARI-JSE)African Rainbow Minerals (ARM) is a diversified South African miner with exposure to iron ore, nickel, coal and variousother commodities. The share price has recovered all of its COVID losses, due primarily to an improving demand picturein China. Consensus is looking for ARM’s EPS to decline only 9% in FY20 (FY ends in June) and then rebound 19% inFY21. The company’s fundamentals are solid, with ZAR2.6bn of net cash on the balance sheet or 8% of the market capat the end of FY19. Cash continues to pile up, as the company generates an 18% FCF yield. Management has a 50%dividend payout ratio policy in place, equating to an 8% dividend yield. Shareholder Yield is 10% and 1 year forward PEis 7x.

Handsome Corp (020000-KR)Handsome Corp is a retailer and wholesaler of clothing and accessories in Korea. The company licenses several brands,including Juicy Couture. The share price is back above pre-COVID levels, due to higher clarity on the macroenvironment. Despite having temporary store closures, consensus is looking for Handsome’s EPS to grow 1% in2020. Korea has done a good job containing its COVID outbreak, with its curve essentially flattened to less than 100daily cases since mid-March. Retail stores reopened in early May. Handsome ended 2019 with 118bn Won of net cashon the balance sheet, or 15% of the market cap. FCF Yield is 9%, dividend yield is 2%, and 1 year forward PE is 9x.

We see the current depressed valuationsin our advantaged subset of the universeas a tremendous opportunity goingforward. Our International Small CapStrategy is positioned to capitalize on areversion to normalcy like never before.

International Small CapSecond Quarter 2020

COMMENTARY

CONTINUED >>

Betsson AB (BETS.B-OM)Betsson is based in Sweden and operates an online gaming platform across most of Europe. The company’s focus ononline gaming has benefited Betsson through COVID shutdowns. Q1 20 EPS reported in late April, was 13% ahead ofconsensus estimates. Betsson is on track to grow EPS roughly 5% in 2020, despite facing regulatory headwinds. Thebalance sheet is strong with net debt/equity at 5%. FCF Yield is 15%, Shareholder Yield is 7%, and 1 year forward PE is11x.

Bottom 3 Performers in Q2 2020

Whitehaven Coal (WHC-ASX)Whitehaven Coal is a coal miner based in Australia. Whitehaven reported weak fiscal Q3 20 results in mid-April. Thermal coal prices have been under pressure due to the global economic slowdown. Whitehaven also had someone-time production issues at one of its key assets in the quarter. Management expects to see a production rebound inQ4 and reiterated its volume guidance for FY20. Margin pressure, however, will weigh heavily on EPS in FY20. Thebalance sheet is in good shape with net debt/equity at 21%. FCF Yield is 22%, Shareholder Yield is 28%, and P/B is 0.6x.

VTech Holdings (303-HK)Vtech Holdings is based in Hong Kong and manufactures consumer electronics products. The company posted solidFY20 results in mid-May, with flat sales growth and net profit up 11% year-over-year. However, the share price hasremained under pressure due to a weak demand picture for FY21 due to the negative impact from COVID-19. Management acknowledged the difficult trading environment, but gave no guidance for the rate of revenue declinein FY21. The company is responding by cutting costs. EPS is on track to decline double digits in FY21. Vtech’s balancesheet is well positioned to weather the downturn, with $600m HKD in net cash or 5% of the market cap. FCF Yield is11%, Shareholder Yield is 11%, and 1 year forward PE is 12x.

Babcock International Group (BAB-LON)Babcock International is based in the UK and provides engineering support services to the defense, power, rail andnuclear sectors. It also owns Avincis, which offers helicopter rental services in the UK and overseas. The companyreported FY20 results in early June that were in-line with market expectations. Investors were disappointed that FY21targets were dropped without any new guidance provided, due to COVID uncertainties. Consensus is now looking forEPS to decline 21% in FY21. Babcock has sufficient balance sheet liquidity (£1.35bn) to weather the COVID-19lockdowns and associated economic recession. FCF Yield is 8%, Shareholder Yield is 15%, and 1 year forward PE is 6x.

Please feel free to contact us with any questions or comments. Thank you for your interest in Global Value Advisors. Welook forward to updating you again next quarter.

Sincerely,

4

Phillippe RollandCIO, Portfolio Manager

Todd Bassion, CFAPortfolio Manager

Matthew MarottaInvestment Research

Portfolio Implementation

Phone(781) 639-2750

Fax(781) 639-2751

18 Sewall StreetMarblehead, MA 01945

OFFICE CONTACT

International Small CapSecond Quarter 2020

COMMENTARY

Endnotes:1. Shareholder Yield = Dividends + Net Buy Backs + Change in Debt

Disclosures

The information provided in this report should not be considered a recommendation to purchase or sell any particular security. There is no assurance that anysecurities discussed herein will remain in an account’s portfolio at the time you receive this report or that securities sold have not been repurchased. The securitiesdiscussed do not represent an account’s entire portfolio and in the aggregate may represent only a small percentage of an account’s portfolio holdings. It should not beassumed that any of the securities transactions or holdings discussed were or will prove to be profitable, or that the investment recommendations or decisions wemake in the future will be profitable or will equal the investment performance of the securities discussed herein. A complete list of all securities recommended duringthe preceding year is available upon request. Past performance is not indicative of future results. The calculation methodology for the contributions to performanceand a list showing all holdings’ contribution to the overall strategy’s performance during the measurement period is available upon request atinformation@globalvalueadv.com or by calling (781)-639-2750.

For comparison purposes, the GVA International Small Cap strategy performance is measured against the MSCI All Country World ex-US Small Cap.

Past performance is no guarantee of future results. Returns are presented gross and net of management fees and include the reinvestment of all income. Moreinformation about such fees and expenses applicable to a client’s investment are generally available in the Form ADV Part 2A of Moody Aldrich Partners, LLC, which ispublicly available and upon request and provided to every client (along with Form ADV Part 2B) prior to investment. Actual returns may vary from the performanceinformation presented. All performance numbers are expressed in US Dollars. This product does not use leverage, derivatives or short positions in its portfolio.

The information contained in this document is subject to updating and verification and may be subject to amendment. No representation or warranty is expressed asto the accuracy of the information contained and no liability is given by Global Value Advisors as to the accuracy of the information contained in this document and noliability is accepted for any such information. This document and the information contained within it are confidential and intended solely for the use of the individualor entity to whom they are addressed. If you are not named addressee you should not disseminate, distribute or copy this document or any of the informationcontained within it.

If you are not the intended recipient you are notified that disclosing, copying, distribution or taking any action in reliance on the contents of this information is strictlyprohibited.

5