P E N N S Y LV A N I A T R U S T

perspectivestrust & investment

FALL 2015

the market’s expectation of 30-day returnsand is constructed using volatilities of S&P500 index options. A low VIX does not nec-essarily mean that markets will do well, butthe history of the index does indicate that relationship. Along with the VIX being un-usually subdued, the market itself showed little variability. For the two and a half yearsleading up to the August sell-off, the maxi-mum decline for the S&P 500 was 7%. Overthe past 35 years, the simple average for thismeasure was 14% per year. Only five timesover that 35-year period was the annual de-cline less than 7%. The VIX did move higherin August to a level we last saw in the 2011August market decline. And, the peak-to-trough decline measure did reach 11%. Nei-ther of these is out of line with the history ofmarket corrections and, we do not think, portends anything other than normal marketmovements. This comes with one caveat.

On August 24th, the Dow Jones averageopened down 1,000 points, only to rally by500 points in about an hour and to finishthe day off by 588 points. Many maturestocks opened down by 15-20%. We be-lieve that much of this was driven by what isreferred to as algorithmic trading — com-puter-to-computer trades that are motivatedby market trends. This type of trading tendsto reinforce market movements and, in thiscase, we believe drove prices to whatseemed unreasonable levels. It did not lastlong, but it did create fear and reinforced anotion among investors that the marketmechanism was out of control. This has happened before with the “Flash Crash” in2010. These sorts of events are not “normal”and the exchanges, regulators, and marketmakers need to find ways to mitigate the impact of these trading strategies.

As we move through the last quarterof 2015, two things seem to be on investors’ minds the most: the

current rate of economic growth with particular emphasis on China and themeaning of renewed volatility in the markets. Together, the question becomes“Does the volatility in the markets portenda crisis brought on by an implosion in theChinese economy?” Our answer to this isno. But there are aspects of both issuesthat will be important for investing overthe next several years.

First, volatility. As investors, we havebeen treated to an unusually long period oflow market volatility. For the three years lead-ing up to the market decline that began inAugust, the CBOE VIX index had fallen to avery low level, one only seen in the mid2000s and mid 1990s. The VIX index, whichwas only created in the early 1990s, shows

Pennsylvania Trust is pleased to welcome Nan M. Lansinger, Senior Vice President, as Director

of Marketing and Client Development. Nan brings over 35 years of experience in marketing

and public relations in the wealth management and health care industries, with a particular

understanding of the many issues senior citizens face today. Nan joins us from Saunders

House and Bryn Mawr Terrace – two affiliated health care organizations that serve older adults

– where she was Director of Public Relations and Fundraising. Prior to her tenure there, she

served as Vice President in the Trust Division of Provident National Bank (now PNC).

Nan M. Lansinger Joins Pennsylvania Trust

Unsettled Markets by Willard N. Woolbert

continued on page 4

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perspectivestrust & investment

Volatility. It’s a word that makes usinstantly apprehensive and morethan a bit uncomfortable. We by

and large value a high degree of pre-dictability in our lives. Whether it’s jobsecurity, family stability, or investmentconfidence, we tend to fear uncertaintyand shudder at the prospect of change.

Yet we live in a world where global information is now virtually instantaneous.Investors no longer are afforded the timeto gain a degree of perspective on events,but rather feel compelled, rightly orwrongly, to act immediately. Unfortunately,it’s precisely those types of spontaneousdecisions that run counter to the coretenets of sound wealth management.

The truth of the matter is that noamount of information or data will ever en-able you to predict the day-to-day move-ments of financial markets. And anyonewho tells you otherwise is being supremelymisleading. There’s a reason why trendslike day trading seem to vanish as quicklyas they appear – because the foundationalbuilding blocks of a well-grounded wealthmanagement plan (i.e., diversification, riskmanagement and asset allocation) work,and work well.

Two of the articles in this issue serveto bookend this reality. As our Chief In-vestment Officer Bill Woolbert states in his article, Unsettled Markets, a relativelyquiet first half of the year quickly gave wayto dramatic volatility in Q3, fueled by aweaker Chinese economy and a devalua-tion of their currency. Market instabilitysoon spread throughout emerging marketsand ultimately spilled over into developedmarkets, driving the S&P 500® down by11%. Markets settled and began to regainlost ground until the Federal Reserve ap-peared to confirm a global slowdown bymaintaining short-term interest rates atzero. This triggered nervous investors toonce again sell off stocks heading into thefinal days of the quarter.

What investors need to keep in mind,however, is that corrections are normal.They’re a fundamental part of the cyclicalnature of markets. And by no means arethey necessarily indicative of bad things to come. Often, corrections can serve assomething of a pressure release valve, allowing strong markets to sustain mo-mentum.

If the study of behavioral finance hastaught us anything, it’s that when it comes

to our money, we sometimes have a tendency to act irrationally. By adhering toa clearly-defined financial plan, however,the inclination to allow short-term emo-tions to derail your long-term goals can begreatly reduced. It’s the topic of another article in this issue, Financial Planning: Putting Your Financial House in Order,that bears discussion. Many wealth man-agement concerns can be alleviated if we all take the necessary time to create anintegrated financial plan — a comprehen-sive plan that addresses both short-termneeds and long-term goals, and that focuses as much or more on your portfo-lio’s tax-efficiency and diversification as onits return. That’s why at Pennsylvania Trustwe continue to strengthen our growingteam with seasoned financial planning professionals.

Our aim isn’t to distinguish ourselvesthrough fashionable investment trends, but rather by maintaining frequent, ongo-ing conversations to help keep you ontrack toward achieving financial wellbeing.

Preparing for the Road Ahead

Richardson T. MerrimanChairman and Chief Executive Officer

Pennsylvania Trust was recently awarded the silver designation in the

category of Trust Administration according to The Legal Intelligencer’s annual “Best of” poll. The poll

is the result of readers casting their votes for the best providers of products and services to the legal

community. The Legal Intelligencer is the oldest law journal in the United States and a trusted

source of legal news, information, and analysis.

Pennsylvania Trust Named Best Provider for the Third Year in a Row

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We all know we should have one.Yet the prospect of creating a financial plan can seem a daunt-

ing, complex, and time-consuming task.Odds are, it’s probably one of thoseunchecked resolutions on your list – rightbetween exercising more regularly andlearning a foreign language.

But bringing clarity to your wealth picture doesn’t have to be a monumentalundertaking. It starts with a simple con-versation, allowing your advisor to under-stand what’s truly important to you andwhy, where you are today and where youwant to be, and whether you’re ahead ofschedule, on track, or behind.

Through the financial planningprocess we’re able to work with you to siftthrough competing priorities and deter-mine what makes sense for you and yourloved ones. We assess various actionsand goals and the implications they canhave on each other, rather than viewingeach of them in isolation. It enables us toaccount for the intricacies of investments,taxation, estate planning, insurance, riskand reward, rules and regulations, andhow those things impact each other whenthey all come together.

It’s all about getting organized, being

in control, and having flexibility. Whenproperly crafted, your financial plan canhelp answer some of the most pressingwealth-related questions that may bekeeping you up at night, such as:

� When can I retire, and will my retire-ment income sustain my lifestylethroughout my life?

� Have I put enough money away formy children’s/grandchildren’s edu-cation expenses?

� How can I ensure that my spouse istaken care of when I die?

� What’s the most tax-efficient way Ican transfer assets to my heirs?

� How will I fund long-term care ex-penses if they arise?

� Are my insurance policies adequate,up-to-date, and payable to the rightbeneficiaries?

� Is my estate plan up to date?

� When is it most beneficial to take mysocial security benefits and IRA with-drawals?

At its core, the objective of the finan-cial planning process is simple — to distilla vast universe of financial opportunities

down to a critical few recommended actions that will most positively impactyour financial wellbeing, and then to helpyou prioritize those actions so you cansuccessfully achieve them. By assessingall of your goals in tandem we can iden-tify gaps and opportunities (financial, tax, retirement, educational, and legacy), uncover new ways to protect and pre-serve your assets, and ultimately help ensure that your wealth endures for gen-erations to come.

It’s important to remember, however,that a financial plan is not a “once anddone” proposition. Over time, your cir-cumstances, needs, and priorities will inevitably change, and with that your planwill need to adapt and adjust.

Could a financial plan help get you ontrack toward achieving all of your wealthgoals? Talk to your Pennsylvania Trustteam and find out. The Certified FinancialPlanner designation (CFP®) is consideredthe gold standard of financial planning expertise. As CFP®s at Pennsylvania Trust,we are ready to assist you in gaining moreconfidence and control over your financialfuture.

Financial Planning: Putting Your Financial House in Order by Nicole Bennett Price, CFP® and Frank T. Files, CFP®

FALL 2015

Ms. Price and Mr. Files are Vice Presidents at Pennsylvania Trust.

Larry Kudlow, a commentator for CNBC and former Reagan economic advisor, spoke to a fullhouse of clients and friends at Pennsylvania Trust’s 2015 Investor Seminar held on October 7that the Merion Cricket Club. In his remarks, Kudlow stressed the importance of working hard asa way of life and shared his positive outlook for our country and the economy.

Pennsylvania Trust has presented the Investor Seminar regularly since 2004, with na-tionally known speakers such as Jeremy Siegel, General Barry McCaffrey, the Honorable WilliamS. Cohen, Judy Woodruff, David Gergen, and Governor Christine Todd Whitman.

Pennsylvania Trust Hosts Investor Seminar

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There is very little doubt that the Chinese economy is slowing. Part of this is afunction of the sheer size of that economy.Ten years ago, when the Chinese economywas growing at double-digit rates, it was lessthan half the size it is today. Nothing growsby double digits forever. A second reason isa planned shift in the economy from pro-duction to consumption. The recent five-yearplan, begun in 2012, emphasized con-sumption and services over productiongrowth. This is indeed what has happenedas measures such as retail sales growth, cur-rently above a 10% rate, have consistentlyexceeded production growth in the recentpast. Production and related export figureshave lagged, growing (by Chinese govern-

ment figures) at only 4% in the most recentquarter. This is both a function of slowergrowth in China, but also of a drop in de-mand for Chinese goods throughout theworld. In the early part of the last decade,Chinese production growth was pushed bygovernment decree, but was consumed byWestern economies that were growing dueto the stimulus of low interest rates and anexpansion of leverage. Today, that is not thecase. Interest rates remain low, but the ac-celerator of debt creation is gone. Whether itwas the catharsis of the financial crisis of2008 or just the absolute level of debtreached, consumers have been very reluc-tant to return to the spending behavior thatexisted before 2008 and in fact for most ofthe last 50 years.

Five Radnor Corporate CenterSuite 450100 Matsonford RoadRadnor, Pennsylvania 19087610.975.4300800.975.4316610.975.4324 F

penntrust.com

Pennsylvania Trust is committed to conduct all our relationshipswith integrity and to maintain the highest ethical standards; provide outstanding professional and personalized services; produce superior investment results consistent with clientobjectives; and retain exceptionally skilled individuals, empow-ering them with state-of-the-art technology.

Mr. Woolbert is Senior Vice President andChief Investment Officer at Pennsylvania Trust.

continued from page 1 So what is the consequence of this?When we focus on slower growth in China,we are looking at a different economy thanwe saw ten years ago, but we are also see-ing a reflection of what is happening to theeconomies that helped fuel its past growth.The new scarce resource in this world is demand — from China for resources andfrom the U.S. in the form of consumption.As a result, we have and will continue to see currency devaluations, trade friction, lowor no inflation, and low interest rates.

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The information herein has been obtained from sources we believe to be reliable but is not guaranteed and doesnot purport to be a complete statement of all material facts. This report is for informational purposes only.

1 year 10 year

ANNUALIZED RETURNS OF SELECT ASSET CLASSES

6.8%U.S. LT

Government Bonds

U.S. 30 Day T-Bill1.2%

U.S. Inflation1.8%

7.9%Russell Mid Cap

6.8%S&P 500

0.2%

0.0%

9.2%

-0.6%

-0.3%

6.6%U.S Small Cap 1.6%

3.4%MSCI EAFE -8.3%

Source: Morningstar

As of 9/30/15

9/30/15 5/31/15 9/30/14

STOCK INDICES

Dow Jones Industrial Average 16,284 18,010 17,042

Standard & Poor’s 500 1,920 2,107 1,972

U.S TREASURY YIELDS

2 Year 0.6% 0.6% 0.6%

5 Year 1.4% 1.5% 1.8%

10 Year 2.0% 2.1% 2.5%

30 Year 2.9% 2.9% 3.2%

MARKET INDICATORS

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Richardson T. MerrimanChairman and CEO

George C. McFarland, Jr., Esq.President

Lee J. Anderson, CFASenior Vice PresidentChief Information Officer

Leslie Gillin Bohner, Esq.Senior Vice President Chief Fiduciary Officer

Juliana S. KarnavasSenior Vice PresidentDirector of Portfolio Management

Barbara S. Wood, CPASenior Vice PresidentChief Financial Officer

Willard N. WoolbertSenior Vice President Chief Investment Officer

Gilpin W. BartelsSenior Vice PresidentMulti-Cap Value Portfolio Manager

Nils L. BerglundSenior Vice PresidentPortfolio Management

Stanley BroadbentSenior Vice PresidentClient Development

Douglas H. DeLong, CFASenior Vice PresidentPortfolio Management

Frederic N. Dittmann, CFASenior Vice PresidentPortfolio Management

Bayard R. FiechterSenior Vice PresidentPortfolio Management

Aaron H. Fox, Esq.Senior Vice PresidentTrust and Account Administration

William H. Haines, IVSenior Vice PresidentClient Development

Jonathan M. HeckscherSenior Vice PresidentDirector of Fixed Income

Peter J. Johnson, Esq.Senior Vice PresidentTrust and Account Administration

Nan M. LansingerSenior Vice PresidentDirector of Marketing and Client Development

Charles T. Lee, IIISenior Vice PresidentPortfolio Management

Patrick J. McGinnis, Jr. Senior Vice PresidentPortfolio Management

Charles L. Sheppard, IISenior Vice PresidentDirector of Investment Research

Newbold StrongSenior Vice PresidentPortfolio Management

Randy G. Thomas, CPA, CFP®

Senior Vice PresidentDirector of Tax Services

Cole P. VastineSenior Vice PresidentTrust and Account Administration

Carolyn L. WyethSenior Vice PresidentTrust and Account Administration

Susan L. BartelsVice PresidentDirector of Human Resources

Kenneth R. BrightcliffeVice PresidentEquity and Fixed Income Trading

Frank T. Files, CFP®

Vice PresidentPortfolio Management

Sheila GibsonVice PresidentTrust and Account Administration

Francis X. MehaffeyVice PresidentTax Administration

Nicole Bennett Price, CFP®

Vice PresidentTrust and Account Administration

Monica P. RuggioVice PresidentOperations

Debra S. TongueVice PresidentTrust and Account Administration

Marc D. ZlatkinVice PresidentInformation Technology

Diane A. FerrieSenior Tax OfficerTax Administration

Caroline W. FortinSenior Operations OfficerOperations

J. August Gerhardt, CFASenior Investment OfficerPortfolio Management

Lucas J. SaundersSenior Technology OfficerInformation Technology

Monica C. AhernTrust OfficerTrust and Account Administration

Patricia A. CampbellClient Service OfficerPortfolio Management

Mary Ellen GilroyClient Service OfficerPortfolio Management

Susan B. SchaferTax OfficerTax Administration

CONSULTANTS

Bruce M. BrownSenior Philanthropy Consultant

Kevin R. FisherSenior Technology Consultant

JoAnne T. Fredericks, CFASenior Investment Consultant

Francis R. Grebe, Esq.Senior Trust Consultant

Donald E. Lewin, Ph.D.Senior Investment Consultant

I. Wistar Morris, III, CFASenior Investment Consultant

Radclyffe F. Thompson, CFP®

Senior Business DevelopmentConsultant

Senior Vice President David Robinson began

his career in financial services at The Philadel-

phia National Bank in 1971 where he gained

a foundational knowledge of banking and finance.

With an accomplished career in financial services,

investing, and consulting, David joined Pennsylvania

Trust in 2012 with his team from Spartan Capital

Management, an asset management firm he

founded in 2004. He and the Spartan team

brought the Multi-Cap Value investment strategy to

Pennsylvania Trust. Now, after a very successful

44-year career, David is retiring on November 15

from his position as Chief Strategy Officer and

Director of Marketing at Pennsylvania Trust.

A celebration was held in October to honor

David. In the words of Gip Bartels, Senior Vice

President at Pennsylvania Trust, “David is one of a

kind. His love of family, his kindness to others, his

dedication to his clients, and his astute business

leadership and investment knowledge are the hall-

marks of his career.” In recognition of David’s dedi-

cation to the beneficial work of Summer Search, a

contribution was made to the organization in his

honor. We wish David and his family the very best

as he retires to his beloved Crebilly Farm.

Pennsylvania Trust Celebrates the Retirementof David M. Robinson