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2nd Quarter Commentary:

Global Value Investing in a Continually Changing World

Posted July 27, 2015

Investors and long-term observers of Wintergreen Fund know that we remain disciplined when applying our investment criteria:

First, a business that has good or improving economics, and often generates sales and profits in multiple currencies and jurisdictions;

Second, a management team that is working for the benefit of all shareholders and not just for its own short-term compensation; and

Third, the security is available at a compelling price.

If any one of these factors begins to deteriorate or otherwise changes in a company or sector, we re-evaluate the investment. In the case of gaming in Macau, which for several years experienced a boom, the economics of the business slowly began to drain away with the advent of the so-called austerity regime under Chinese President Xi Jinping. Without a firm or improving business environment for gaming companies, it is very difficult for casino stocks to perform well. We sold our position in SJM Holdings during the second half of last year, and sold our entire position of Wynn Macau and the majority of our holding in Galaxy Entertainment in the first quarter of 2015. We continue to carefully monitor this sector, as we believe there is enormous potential once the governmental restrictions are relaxed.

When we look across Europe in our search for value, we usually end up in Switzerland or the United Kingdom, not Eurozone countries. This is partly because of the strength of certain Swiss and U.K. brands around the world, but also because of the basic fact that the Eurozone is only as strong as its weakest link. For the last few years, the markets have viewed one member country as the most vulnerable, and eventually the enormous debt problem in Greece will need to be addressed. In the meantime, we are confident in our current positions and we will keep a cautious eye on the developments in the Eurozone.

We recently initiated a position in CSX, one of the two main Class I railroad operators in the Eastern portion of the United States. For many years we have favored the freight transportation industry for its essential role in our economy, pricing power of freight rates, free cash flow generation, and shareholder-friendly policies. In our view, CSX has the most potential among the major railroad companies to outperform the industry. A serious commitment to drive the operating ratio (the railroad industrys primary measure of profitability) to the mid-60s has provided the impetus for our investment in CSX. Management is beginning to deliver on this goal  in the second quarter of this year the company produced a record-low operating ratio of 67%, a decrease of 9% over the prior years period, by adjusting labor costs and improving average train speeds and terminal dwell times. The current softness in freight volumes makes it necessary for CSX to manage costs effectively and, when transportation volumes pick up again, the company will be in a better position to capitalize on its operating leverage.

As we stated in our 2014 Annual Report Shareholder Letter, the current market continues to be a challenging period for disciplined buy-and-hold value investors, but we remain confident that our investment process should deliver satisfying results over time. Many of the Funds holdings remain unloved or overlooked by the market today, and we remain optimistic about the future.

View a recent listing of the Fund's Top 10 Holdings

The views contained in this commentary are those of the Funds portfolio manager as of June 30, 2015, and may not reflect his views on the date this report is first published or anytime thereafter. The preceding examples of specific investments are included to illustrate the Funds investment process and strategy. There can be no assurance that such investments will remain represented in the Funds portfolios. Holdings and allocations are subject to risks and to change. The views described herein do not constitute investment advice, are not a guarantee of future performance, and are not intended as an offer or solicitation with respect to the purchase or sale of any security.


The Fund is subject to several risks, any of which could cause an investor to lose money. The Fund may purchase risk arbitrage securities (securities of companies involved in a restructuring) or distressed companies. These companies may not be successful in their restructuring and securities of distressed companies are generally more likely to become worthless than securities of more financially stable companies. Smaller companies involve substantial risk as these securities are traditionally more volatile in price than larger company securities. Securities rated below investment grade, sometimes called junk bonds, involve a greater degree of risk than investment grade bonds in return for higher yield potential. The Fund may be subject to interest rate risk which is the risk that debt securities in the Fund's portfolio will decline in value because of increases in market interest rates. By participating in derivative securities, the Fund may attempt to hedge (protect) against currency risk which is the risk that the value of foreign securities may be affected by changes in currency exchange rates. Derivatives can be volatile and involve various types and degrees of risks, depending upon the characteristics of a particular derivative. International investing involves certain risks and increased volatility not associated with investing solely in the U.S. These risks include currency fluctuations, economic or financial instability, lack of timely or reliable financial information or unfavorable political or legal developments. These risks are magnified in emerging markets. Short sale risk is the risk that the Fund will incur an unlimited loss if the price of a security sold short increases between the time of the short sale and the time the Fund replaces the borrowed security.

In light of these risks, the Fund may not be suitable for all investors.

Before investing you should carefully consider the Fund's investment objectives, risks, charges and expenses. The prospectus and summary prospectus contain this and additional information regarding the Fund. To obtain a prospectus or summary prospectus, please download from this site or call toll-free 1-888-468-6473. The prospectus and summary prospectus should be read carefully before investing. This website is not a solicitation for the Fund outside of the United States.

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