ValueCore International Equity SRI

At a Glance

• Primary Benchmark: MSCI EAFE® (net) Index.
• Universe: ValueCore International portfolios are invested in non-U.S. companies through ADRs. We focus on companies with market capitalizations greater than $100 million and ADRs with what we believe to be sufficient liquidity.
• Our portfolios typically invest in 30-65 securities from developed & emerging markets diversified across all market sectors & capitalizations.
• We expect to add value primarily through stock selection.
• Our annual turnover generally ranges from 50%-70%.
• Social screens are used to help identify and exclude companies that do not meet our investors' standards for corporate behavior.

Objective

We strive to outperform the total return of the MSCI EAFE (net) Index over a full market cycle of 3-5 years, investing in non-U.S. companies through ADRs.

Typical Investment Guidelines

Factor	Guideline
Stock Weightings At Purchase	1%-3%
Maximum Stock Weighting	5%
Maximum Industry Weighting	15%
Maximum Sector Weighting	35%
Maximum Emerging Markets Exposure	15%
Maximum Single Country Exposure	50%

Investment Process Summary

Stock selection for our ValueCore International Equity portfolios entails both quantitative and fundamental analysis. Our screening process identifies those stocks that are trading below normal valuation and have low expectations, while our fundamental research highlights those firms that have the catalysts in place to spur a return to normal valuation.

Quantitative Screening

We consider non-U.S. companies with market capitalizations greater than $100 million. Specifically, we compare a company's current P/E, P/B, and P/CF ratios to its own historical averages, its sector's historical averages and its country's historical averages. We assign each security ten percentile valuation scores—nine based on the combination of the three ratios and three metrics and an overall ranking (the overall score is the equal-weighted average of the first nine). Securities must have an average score of 50% or higher (trading below normal valuation) to qualify for further evaluation. Companies that score less than 50% (trading above normal valuation) are excluded from further analysis.

Company Elimination

We then eliminate stocks with characteristics associated with poor performance, such as declining quality of financial characteristics, high product risk factors, deteriorating competitive position, discomfort with management, or accelerating industry deterioration.

Social Screening

We seek to ensure that our clients' portfolios reflect their social concerns by leveraging resources both internally and externally to monitor and evaluate the SRI impact of all companies in the portfolio. Many of our socially conscious portfolios shun companies with significant stakes in the manufacture of tobacco, alcohol, weapons, or nuclear energy. Other portfolios avoid firms that have poor records for environmental safety, that fail to comply with fair employment or labor relations standards, or that do not appear to respect basic human rights.

Fundamental Analysis

In-depth fundamental analysis is performed on our remaining universe of high quality companies selling below normal valuation levels. The goal of our fundamental analysis is to develop a deep understanding of these businesses in order to identify the key drivers of their valuation and profitability. We focus on uncovering the scope and likelihood of recovery in the longer term, as opposed to developing specific short-term earnings forecasts.

Sell Discipline

A security is reviewed for sale if:

• It appreciates to our target price, which is set at the valuation of the dynamic intrinsic value of the business;
• The reward/risk tradeoff of a new investment is more favorable than that of the existing holding, or
• Essential steps toward a successful recovery fail to materialize (within the allotted 18-month timeframe), causing a fundamental change in the security's upside potential.
• Social guidelines are violated.