Pax Small Cap Fund Commentary Q4 2017

Performance and Portfolio Update

• The Pax Small Cap Fund outperformed the Russell 2000 Index in the fourth quarter. Strong stock selection within Industrials, Consumer Discretionary and Technology were key contributors to performance.
• Growth stocks outperformed value with the Russell 2000 Growth Index^† return of 4.58% topping the Russell 2000 Value Index^‡ by 2.54%. During 2017, growth outperformed by 14.32%. The Fund continues to have a value tilt and while this style detracted from full year underperformance, we remain comfortable with portfolio positioning.
• The Fund benefited from strong stock selection in the Industrials and Consumer Discretionary sectors. Due in large part to the passage of corporate tax cuts, many of our domestically focused holdings rallied on expectations of higher earnings outlooks. Within Industrials, our holding in Beacon Roofing Supply increased 24% as investors applauded the accretive acquisition of Allied Building Products. In the Consumer Discretionary sector, Carter’s increased 19% on better than expected quarterly results and increased optimism over consumer spending.
• The Healthcare sector lagged slightly due to poor selection. While no portfolio holdings in the sector were down meaningfully, the Fund did not have any strong performers either.
• Small-cap stocks finished the year on a positive note. The passage of corporate and personal tax cuts has provided not only a boost to gross domestic product (GDP) and earnings expectations, but to investor sentiment as well. In our view, economic growth should remain strong in the year ahead. The key question in our mind is: to what extent does nascent inflation force the Federal Reserve to quicken the pace of interest rate hikes? With small-cap valuations at levels not seen since the late 1990s and investors seemingly unconcerned, it may not take much of an inflation uptick to increase volatility. In this environment, we continue to position the Fund defensively, preferring to keep powder dry for periods of increased volatility.

Figures include reinvested dividends, capital gains distributions, and changes in principal value.

As of 5/1/17 prospectus, total annual Small Cap Fund operating expenses, gross of any fee waivers or reimbursements, for Individual Investor Class, Class A, and Institutional Class shares are 1.19%, 1.19% and 0.94%, respectively.

¹The inception date for the Pax Small Cap Fund Institutional Class and Individual Investor Class is March 27, 2008. The inception date for the Class A shares is May 1, 2013.

The performance information shown for Class A represents the performance of the Individual Investor Class shares for the period prior to Class A inception. Expenses have not been adjusted to reflect the expenses allocable to Class A shares. Class A inception date return since May 1, 2013 is 11.92% (annualized). A 1.00% CDSC (contingent deferred sales charge) may be charged on any shares sold within 18 months of purchase over $1 million. POP (public offering price) reflects the maximum sales load for the Fund’s Class A Shares of 5.50%.

Performance Attribution (as of 12/31/17) Sector: Average Active Weights (%)	Total Relative Contribution (%)

Top Ten Holdings

(as of 12/31/17)
Natus Medical, Inc. 3.7%, Investors Bancorp, Inc. 3.3%, White Mountains Insurance Group, Ltd. 3.0%, MRC Global, Inc. 3.0%, Beacon Roofing Supply, Inc. 2.9%, Ligand Pharmaceuticals, Inc. 2.9%, Antero Resources Corp. 2.9%, Capitol Federal Financial, Inc. 2.9%, HomeTrust Bancshares, Inc. 2.9% and Maple Leaf Foods, Inc. 2.6%. Holdings are subject to change.

Definitions

^†Russell 2000 Growth Index is a market capitalization weighted index that measures the performance of those Russell 2000 companies with higher price-to-book ratios and higher forecasted growth rates. One cannot invest directly in an index.
^‡Russell 2000 Value Index is a market capitalization weighted index that measures the performance of those Russell 2000 companies with lower price-to-book ratios and lower forecasted growth rates. One cannot invest directly in an index.
^ƒWeighted Average is an average in which each quantity to be averaged is assigned a weight. These weightings determine the relative importance of each quantity on the average.
^~Forward Price-Earnings Ratio or P/E FY1 ratio is a ratio for valuing a company that measures its current share price relative to its per-share earnings over the next 12 months.
^∘ Return on Equity: The amount of net income returned as a percentage of shareholders equity. Return on equity measures a corporation’s profitability by revealing how much profit a company generates with the money shareholders have invested.
^∞A historical Beta is used for Funds with greater than 2 years of performance history under the same mandate. Three year Beta is used. Beta reflects the sensitivity of a Fund’s return to fluctuations in its benchmark; a beta for a benchmark is 1.00: a beta greater than 1.00 indicates above average volatility and risk.

The statements and opinions expressed are those of the author as of the date of this report. All information is historical and not indicative of future results and subject to change. This information is not a recommendation to buy or sell any security. Past performance does not guarantee future results.

PAX007665 (4/18)