Vident Core U.S. Bond Index (VUBDX) Quarterly Rebalance Review April 2017

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Vident Financial, a principles-based index provider, undergoes quarterly rebalance of their fixed income index strategy.

Vident Core U.S. Bond IndexTM (VUBDX) seeks to diversify interest rate and credit risks through the application of time-tested principles. In addition to diversifying across fixed income sectors, the strategy seeks to improve corporate bond exposures by screening for companies with stronger leadership, governance and creditworthiness factors.

Rebalance Goals:
The rules-driven objective quarterly reviews ensure the index continues to accurately reflect Vident’s principles-based methodology and form an essential component of the index management. The goal is to identify changes in the fixed income sector valuations for opportunity and risks. As well as, eliminate issuers with high risk of default and increase diversity by reducing concentrated positions. Rebalance changes and updates are driven by creditworthiness (composed of leadership, governance and financial distress factors), duration and yield of issuers.

Outcomes of Current Rebalance (as of 4/28/17):
Post-rebalance, interest rates remained range-bound and sectors of the bond market moved in sync with each other. Credit markets continued to perform better and the sector allocations remained the same as the previous quarter. There was one-sided turnover at 24% primarily from Treasury and High Yield sectors, helping maintain credit quality and duration of the index methodology. In addition, the portfolio yield* increased 0.06% from 2.80% to 2.86% and the effective duration** increased from 5.93 to 6.11 (full VUBDX sector allocation and data summary is attached).

*Yield to Worst - The lowest potential yield that can be received on a bond without the issuer defaulting.
** Effective Duration - Duration is a measure of the sensitivity of the price of a bond to the change in interest rates.

About Vident Financial
Vident Financial develops and licenses transparent investment market solutions (indices and funds) based on a distinct philosophy and rigorous global research. Their investment strategies are founded upon sound principles that help identify environments where capital is going to thrive long-term. Many investment strategies are constructed by simply measuring single-factors such as a company's market capitalization or dividend yield. Vident's strategies are considered Systematic Active--measuring dozens of different factors (human productivity, economic freedom, quality leadership, etc.) embedded within multiple process layers. Such a systematic, rules-based strategy helps to avoid emotional decision-making biases as they identify companies who exhibit higher levels of principles. Please visit http://www.videntfinancial.com for more information on Vident's indices.

All changes from this review will be implemented at the close of business Friday, April 28, 2017 and take effect from the start of trading on Monday, May 1, 2017. Bloomberg is the source for all index data. The inception date of the VUBDX Index was 11/30/15. All information is provided for information purposes only.

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Avery Beaty
Vident Financial
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