Quarterly Report to Clients

Fourth Quarter 2023

TA B L E O F C O N T E N T S

2 COMMENTARY
We explore the implications of today’s low equity risk
premium (ERP) environment, which has historically been
good for value stocks despite being a poor environment for
stocks overall. Current earning yields are consistent with the
historical record.

5 GLOBAL RESEARCH REVIEW

We delve into the diverse geographic and sector opportunities
we are finding, including new holdings in the global
recruitment and human services sector, as well as healthcare.

7 STEWARDSHIP INSIGHTS
Recent enhancements to our Opportunity List help us better
monitor the progress of our engagements.

9 HIGHLIGHTED HOLDING - BAXTER INTERNATIONAL

Baxter International’s revenue outlook is improving; at the
same time, its costs are moderating. The medtech giant’s near
record-low valuation multiple implies that investors have not
taken notice.

12 PORTFOLIO STRATEGIES
Most global equity markets were higher in the quarter, with
China being the notable exception, and growth outperformed.

320 Park Avenue | New York, NY 10022 | www.pzena.com

To Our Clients
Global equity markets were almost uniformly higher in the fourth quarter, with
performance broadening from the concentrated leaders that dominated the first three
quarters. Nearly all indices posted double-digit gains for the year, with the one notable
market posting negative returns being China.

As we turn the calendar to 2024, macroeconomic and geopolitical uncertainties

continue to weigh on the markets, with no clear path to resolution. It is worth
remembering the timing and resolution of complex problems are seldom predictable.
Few foresaw the factors that drove stocks higher over the past twelve months, and
market sentiment was quite bearish twelve months ago following a particularly weak
year for equities in 2022. In times like these, focusing on stocks with low valuations
continues to be our guide and is useful to block out the noise.

Our Commentary explores one aspect of this macroeconomic noise, namely the equity
risk premium, which is in the lower third of where it has been over the past 43 years.
While this has generally been a poor environment for stocks relative to bonds, it has
been the strongest period for value stocks, which today are offering double-digit
earnings yields. Our Global Research Review details the diverse opportunity set we are
seeing in sectors such as global recruitment and human services, as well as healthcare
companies.

Our Highlighted Holding delves deeper into one of the opportunities we are seeing
in healthcare, medical products and devices company Baxter International, which
we believe is seeing an improved revenue outlook at the same time its costs are
moderating. Finally, in our Creating Value Through Stewardship article, we conduct an
annual update on our ESG Opportunity List.

We appreciate your support and the opportunity to share our research. We look forward
to hearing your thoughts.

Sincerely,

Pzena Investment Management

Past performance is not indicative of future results.

PZENA COMMENTARY
In today’s low equity risk premium environment, value stocks’ double-digit earnings
yield is consistent with their historic outperformance.

Rising interest rates and elevated stock multiples, Exhibit 1: Value Has Flourished In Low ERP Periods
driven primarily by multiple expansion, have 5-Year Annualized Equity Returns By ERP Regime
18%
brought down the equity risk premium (ERP), 16.4%
leaving bonds more attractive relative to stocks 15.8%
16%
than they have been in quite some time.
14% 13.1%
12.6% 12.6%
11.7% 12.0% 12.1%
In this essay we'll show: 12%
• Low ERP environments have historically been 10%
advantageous for value stocks. 8.7%
• Stocks overall have underperformed bonds 8%

when the ERP is low. 6%

• Earnings yields are supportive of the current
4%
case for value.
2%
VALUE FLOURISHES IN LOW EQUITY RISK PREMIUM
0%
PERIODS Low Normal High

The ERP is a function of the prospective potential Value Value Light Expensive

return for stocks relative to bonds. There are several

Source: Sanford C. Bernstein & Co., Pzena analysis
methods for calculating the ERP. We calculate Value = stocks within the cheapest quintile based on price/book of the 1000 largest US
the ERP by solving for the cost of equity in a stocks (ranked by market cap).
Value Light = 2nd cheapest quintile. Expensive = most expensive quintile. The quintiles
discounted cash flow model of the market, based are measured on an equally weighted basis.
on consensus analyst estimates, and compare that Equity Risk Premium is calculated using a discounted cash flow model of consensus
analyst estimates and the 10-year Treasury yield.
to the 10-year Treasury yield. It can vary widely The monthly ERP data is segmented into tertiles, categorizing them as Low, Normal, or
High regimes.
from extremely low, for example in 1981, due to a Total return US dollar data from January 1, 1980 – December 31, 2023.
modest PE for stocks versus 15% Treasury yields, Does not represent any specific Pzena product or service. Past performance is not
indicative of future returns.
to very high, such as at the depths of the global
financial crisis, when bond yields were moderate,
while stocks were trading at a generational low PE STOCKS VS. BONDS
ratio.
Unsurprisingly, as ERPs come down, forward stock
As yields approached 5% in the fourth quarter, returns relative to bonds also generally come
200 basis points higher than the average over the down. Value’s superior return when the ERP is low
past two decades, investors rightly asked whether is even more impressive considering bonds have
the risk–reward trade-off of equities made sense, outperformed stocks overall by 50 basis points per
given their high-teens average multiple and low year (Exhibit 2) in these periods.
to mid-single-digit earnings yield. In other words,
are stocks earning a sufficiently high ERP to justify
investing in them over bonds?

Historically, during low ERP periods like today,

value significantly outperformed value-light stocks1,
and expensive stocks trailed both value and value-
light by a wide margin (Exhibit 1).

¹ Value-light stocks are the second cheapest quintile on price/book.

Pzena Fourth Quarter 2023 | 2

PZENA COMMENTARY CONT.

Exhibit 2: Bonds Have Outperformed in Low ERP Periods Exhibit 3: P/E Ratios Have Compressed as Rates Have Stopped Falling
5-Year Annualized Returns By ERP Regime
90x
14% 14
12.4% 80x
12% 11.5%
11.1% 12
10.6% 70x
10%
60x 10
8% 7.7%

P/E Ratio
50x

Yield %
8
6% 40x
4.8% 6
4% 30x
4
2% 20x

2
0% 10x

Low Normal High

0x 0

1950
1954
1958
1962
1966
1970
1974
1978
1982
1986
1990
1994
1998
2002
2006
2010
2014
2018
2022
Bonds Stocks

Source: Robert J. Shiller, Sanford C. Bernstein & Co., Pzena analysis US Recessionary Years Cheap Expensive 10-Year Treasury Yield (rhs)
Bonds = Bond returns based on US 10-year Treasuries.
Stocks = 1000 largest US stocks (ranked by market cap) on a cap-weighted basis.
Equity Risk Premium is calculated using a discounted cash flow model of consensus Source: Kenneth R. French, Pzena analysis
analyst estimates and the 10-year Treasury yield. The solid lines show the market-cap weighted trailing P/E ratios for the most expensive
The monthly ERP data is segmented into tertiles, categorizing them as Low, Normal, or and cheapest (value) quintiles of the US market.Annual December data from 1950 -
High regimes. 2022. Universe is all NYSE, AMEX, and NASDAQ stocks defined by Kenneth R. French
Total return US dollar data from January 1, 1980 – December 31, 2023. data library.
Does not represent any specific Pzena product or service. Past performance is not
indicative of future returns.

CURRENT EARNINGS YIELDS ARE FAVORABLE TO VALUE

The poor performance of expensive stocks is the STOCKS
primary driver of the tepid performance of stocks
overall in these periods, as they trailed value stocks For long-term investors, we believe the choice is
by a wide margin and even trailed bonds by 250 clear. While rising interest rates have made bond
basis points per year. yields more attractive than they’ve been for quite
some time, stocks by and large still maintain
As we have previously mentioned, the nearly earnings yields well above bonds. Value offers
40-year decline in interest rates had an outsized a significantly higher earnings yield than the
impact on expensive stocks, which saw their universe, and is the only style offering a double-
multiples expand significantly when ERPs were digit earnings yield, as it excludes high-flying, low-
higher. Meanwhile, cheap stocks have always earnings-yield stocks, including the Magnificent
traded in the same 7–10× earnings range, Seven (Exhibit 4).
regardless of the environment for interest rates
and ERPs (Exhibit 3). If interest rates once again
move higher, we could see a contraction of the
elevated multiple of expensive stocks, which would
be consistent with the historical performance of
expensive stocks in low ERP periods.

3 | Pzena Fourth Quarter 2023

PZENA COMMENTARY CONT.

Exhibit 4: Cheap Stocks Currently Have Superior Earnings Yields CONCLUSION

Value 13.2% Today’s low ERP has historically been an

advantageous environment for value stocks.
Value
9.4%
More importantly, we believe that the far superior
Light
earnings yield for value stocks should make them
an attractive addition to any portfolio.
Universe 7.6%

Magnificent 7 5.0%

10-Year
3.9%
Treasury Yield

Expensive 3.1%

0% 2% 4% 6% 8% 10% 12% 14%

Source: FactSet, Pzena analysis

Yields are based on the median stock within each cohort. Value = cheapest quintile.
Value Light = 2nd cheapest quintile. Expensive = most expensive quintile. The quintiles
are measured on an equally weighted basis based on price-to-normal earnings within
the US 1000 universe (1000 largest US stocks ranked by market cap.). Universe uses the
median stock within the entire universe. Price-to-normal earnings are Pzena’s estimates.
Magnificent 7 = Apple Inc, Microsoft Corp, Alphabet Inc, Amazon.com Inc, NVIDIA Corp,
Meta Platforms, Tesla Inc.
Data as of December 31, 2023. Does not represent any specific Pzena product or service.

Pzena Fourth Quarter 2023 | 4

GLOBAL RESEARCH REVIEW
Growth stocks outperformed in the quarter, led by the Magnificent Seven, widening
global valuation spreads. We are seeing opportunities in sectors such as global
recruitment and human services, and healthcare.
Growth stocks continued to leave value stocks in OPPORTUNITIES IN THE RECRUITMENT SECTOR
the “rearview mirror,” performance-wise, in the
final quarter of the year again, led particularly Concerns that economic headwinds might see
by the so-called “Magnificent Seven.” These increased unemployment and slower demand
names—Apple, Amazon, Alphabet, Meta Platforms, for labor have hit the valuations of companies
Microsoft, Nvidia, and Tesla (names that don’t operating in the global recruitment/human services
feature in true value managers’ portfolios on their industry. Meanwhile, some posit that this industry
current market valuations)—have, on average, is ripe for AI disruption, rather than it being a tool
doubled in 2023. The group accounts for more than to ultimately benefit the search industry. We believe
a quarter of the U.S. S&P 500 market capitalization the market has overreacted to these concerns.
and has therefore been largely responsible for the
index's 26% 2023 rise and a large portion of the Korn Ferry is the largest executive search firm
22% return for the MSCI All Country World Index globally, with growing interests in consulting.
in 2023. The MSCI ACWI Equal Weighted Index has Expanding into services adjacent to search, Korn
underperformed its market capitalization-weighted Ferry has been able to extract synergies across
counterpart by some 13 percentage points in 2023. the portfolio. The pullback in its valuation has
presented an opportunity to invest in this strong
Hence, this year has seen global valuation spreads franchise at an attractive entry point. It trades
widen, maintaining the opportunity in value stocks. on 6.4× our normal earnings estimate. Robert
Half provides temporary staffing and permanent
Exhibit 1: Global Valuations: Price-to-Normalized Earnings Mid-Points placement services specializing in finance and
As of December 31, 2023 accounting positions, with a growing franchise
in advisory and consulting through its acquired
Cheapest Quintile1 Universe2 Protiviti unit. Protiviti derives 40% of its revenues
Global 7.5 13.7 from the financial services industry, a rapidly
growing market driven by regulatory compliance
US 7.6 13.1 and digital transformation needs. It trades on 9×
Europe 6.8 12.6 our normal earnings estimate. Staffing, recruiting,
and workforce management company, TrueBlue
Japan 7.2 12.8
Inc., has been particularly weak this year on these
Emerging Markets 8.0 16.6 industry controversies and is currently trading on
just 3.8× our normal earnings estimate. For some
time, we have held Randstad, one of the world’s
Source: Pzena analysis
1
The “cheapest quintile” includes the cheapest 20% of stocks based on Pzena’s largest talent companies (our 3Q22 Newsletter's
estimates of their price-to-normal earnings valuations, measured on an equally weighted Highlighted Holding). Its shares trade currently on
basis within their relative universes (as defined below).
2
Universes comprise the largest stocks by market capitalization for each region as 7.5× our normal earnings estimate.
follows:
~2,000 largest global; ~1,000 largest US; ~750 largest European; ~750 largest Japanese;
~1,500 largest emerging markets. THE MOUSE THAT ONCE ROARED...

The opportunity set includes, but is by no The Walt Disney Co. faces a changing media
means confined to, cyclical names impacted by environment as television viewers increasingly
recessionary concerns; we are able to invest in a tune out of traditional linear TV in favor of other
disparate range of good companies today at deeply entertainment sources, such as streaming. Disney
discounted prices, many offering significant scope shares recently hit a five-year low on concerns
for self-improvement to restore their earnings about management’s ability to successfully
potential. navigate the shifting dynamics. Meanwhile, Disney
has had some recent big movie misses at the
box office. Questions about how it will replace its

5 | Pzena Fourth Quarter 2023

GLOBAL RESEARCH REVIEW CONT.

fading cash cow, the ESPN cable sports channels, podcast 'Finding Value in China', China continues
remain. The company is looking to transform the to be a fertile source of new ideas for our portfolios
proposition from cable to digital streaming with after protracted and significant underperformance.
ESPN+. The theme parks and cruise businesses China Merchants Bank (CMB) is the leading
are highly profitable, so Disney has a solid starting retail bank in China and the number one player
point, and the company is well-positioned in in the wealth management and private banking
the streaming ecosystem with a clear path to industries. The stock has underperformed following
profitability here. The jury is out on whether ESPN+ the ousting of its former CEO on corruption
will ramp up to replace the fading ESPN cashflows, allegations and on concerns that its retail business,
but linear subscribers may be resilient as streaming via credit cards, customers’ appetite to invest, and
pricing is increasing across the board, as it reaches mortgage demand, will be negatively impacted
full penetration. Although there is potential by the current macroeconomic environment and
for a wide range of outcomes, the company is stressed real estate sector. Industry-wide data
showing some positive trends, projecting $8B in indicates that CMB has been growing its market
free cashflow next year—the highest level since share over the past 1-2 years. We believe that these
2018—partly reflecting some significant self-help issues are temporary and that CMB will be able to
initiatives. The shares trade on 7.7× our normal sustain market-leading returns, given its superior
earnings estimate. business model, as sentiment improves. The shares
trade on just 3.2× our normal earnings estimate.
HEALTH CARE
WH Group is the world’s largest pork company with
We continue to see attractive opportunities in the a leading market share in both China and the U.S.
healthcare segment. Pharmaceutical company The controversy—and reason its stock price is near
Sanofi has struggled with R&D productivity since an all-time low—is financial underperformance
the merger with Aventis in 2004. We believe that among U.S. pork producers, which are currently
four years into the current management regime, experiencing their worst year ever due to industry
we are beginning to see signs of a sustainable overcapacity, with the global pork market not
improvement in their discovery engine, but this having regained its equilibrium fully following
has come at a cost. In October, the company the 2018 culling of half of China’s hog populations
announced a one-time increase in late-stage due to swine fever. While a full recovery in U.S.
trial spending to maximize the potential value pork might be a few years away, we anticipate
of the most promising late-stage compounds in WH Group’s Packaged Meats segment will sustain
the pipeline. The price controls embedded in the strong performance, particularly in China, where
Inflation Reduction Act change the approach to the company is larger than its next 10 competitors
incremental indications. Sanofi will pursue them combined and has greater than 20% operating
in parallel, rather than pursuing incremental labels margins. The shares offer an 8% dividend yield,
in serial. This is somewhat of a variant view in the trading on 4.5× our normal earnings estimate.
pharma world and the market did not take kindly
to the news. The consequent decline in the share SUMMARY
price was greater than the net present value of the
higher R&D spending. The shares trade on 7.8× our We continue to find many good companies—across
normal earnings estimate and on a rich current free a range of different industries and geographies—
cashflow yield, assuming worse than average R&D that are underearning relative to their history but
productivity. that have the scope to restore their profitability,
given time for managements’ self-help initiatives to
CHINA OPPORTUNITIES bear fruit.

As we highlighted in our recently published

Pzena Fourth Quarter 2023 | 6

STEWARDSHIP INSIGHTS
We continue to enhance our Opportunity List, most recently to help us better track the progress
of our engagements over time. We illustrate these enhancements through three company
examples where we used our influence to try and steer the company in the direction of long-
term shareholder value creation.
Pzena Investment Management regularly engages OPPORTUNITY LIST UPDATES
with companies where there is an opportunity to
improve on certain ESG matters. The Opportunity Since developing the Pzena Opportunity List two
List consists of a subset of our portfolio companies years ago, we have made several enhancements to
for which ESG matters are among the most better measure progress toward our engagement
financially material issues. Improvements in these objectives for each company.
ESG issues, aided by our engagement efforts,
could, therefore, lead to improvement in company Proprietary ESG Ratings
earnings. Companies remain on the Opportunity
List for varying durations depending on progress. We have introduced a proprietary rating system for
The process by which a company is added or all companies on the Opportunity List. Companies
removed from the Opportunity List is described are rated from 1 to 3 per our engagement
in further detail here. Figure 1 summarizes the objectives. A score of 1 indicates that a company
process. has made little to no progress on the outlined
objectives and/or has not acknowledged the issues.
Figure 1: Opportunity List Companies rated 3 are making substantial progress
in addressing our objectives and/or are highly
Between Initial and Final Review engaged in addressing the issues. The rating is
determined when the engagement plan is created
01. Identify and is reviewed at least every six months.
Naïve screening criteria help identify where
material ESG issues exist.
Companies rated a 3 for six months or more might
Fundamental research may uncover additional be — though not always — good candidates for
ESG issues.
removal from the Opportunity List. A company
02. Assess rated a 3 could be facing issues that will take years
Research Analyst assesses ESG issues with to resolve, such as capitalizing on opportunities in
support from the ESG Team. the energy transition. Conversely, a company might
be rated a 3 because it is addressing a discrete
issue, such as the lack of a fully independent
Final Review audit committee. A company will remain on the
Opportunity List even if there is little progress
03. Deliberate toward our engagement objectives, as we prefer
Preliminary engagement plan with specific engagement over divestment.
objectives discussed.
PMs, Research Analyst, and ESG Team decide These ratings allow us to track the progress of
whether to add a name to the OL.
companies on the Opportunity List more explicitly
For names added to the OL, engagement plan over time. We can measure how long a company
is finalized and proprietary rating from 1-3
assigned. has remained at its rating, whether it is making
progress toward our objectives, and over what
time horizon. This also allows us to evaluate in a
Post-Buy Decision timely manner whether we need to escalate our
engagement.
04. Monitor and Engage
Research Analyst is responsible for ongoing ESG Outcomes
engagement.

No finite timeline for engagement or removal We have introduced more detailed documentation
from the OL. and tracking of engagement outcomes for

7 | Pzena Fourth Quarter 2023

STEWARDSHIP INSIGHTS CONT.

companies on the Opportunity List. At every six- from the Opportunity List at the next six-month
month Opportunity List check-in, the research team review if we continue to see progress.
analyzes whether there have been any notable
outcomes related to engagements in the prior six NOV, provider of equipment, technologies, and
months. We do not always expect outcomes, given expertise to the upstream oil and gas industry
that some issues take time to resolve. Tracking
outcomes, where they exist, allows us to judge the NOV was added to the Opportunity List because
success of our engagements over time. we observed that more could be done to enhance
emissions disclosures and develop a differentiated
EXAMPLES energy transition strategy. Specifically, we had the
following three engagement objectives for NOV:
The following examples illustrate these process 1. Disclose scope 1 and 2 emissions
enhancements in more detail. 2. Set goals for mitigating the intensity of scope
1 and 2 emissions with appropriate timelines
Akbank, one of the largest banks in Turkey 3. Continue to explore and refine the
company's energy transition strategy
We added Akbank to the Opportunity List with the
objective of encouraging a fully independent audit We have engaged with the CEO and CFO of NOV
on these topics several times in recent years.
committee. We have engaged directly with the CEO, While we appreciate that other investors might
CFO, and IR on multiple occasions to express our have advocated for similar things, NOV recently
preference for the former Head of Internal Audit to began disclosing its scope 1 and 2 emissions as a
be removed from the audit committee. We believe baseline for future target-setting. We consider this
that his prior role presents a conflict of interest and a significant engagement outcome and continue
prevents him from exercising fully independent to discuss our two remaining objectives with NOV
regularly. NOV is rated a 2 because more work is
oversight. We also discussed our intention to use still needed to achieve our remaining engagement
our proxy vote accordingly. While management objectives.
appeared open to the feedback, we rated Akbank
a 1 to reflect the lack of progress in replacing
the audit committee member. We will continue
to engage on this matter and will escalate our
engagement as needed.

Hon Hai, Taiwanese multinational electronics

contract manufacturer

As discussed in this article a year ago, we added

Hon Hai to the Opportunity List based on the
escalating number of labor-related controversies.
Our engagement objective was to continue to
discuss the steps Hon Hai was taking to resolve
these issues to prevent ceding market share to
competitors. In addition, we expected Hon Hai to
go a minimum of one year without any further
labor-related incidents before it could be removed
from the Opportunity List. After it met the one-year
milestone, we increased Hon Hai’s rating to 3. This
makes Hon Hai a potential candidate for removal

Pzena Fourth Quarter 2023 | 8

HIGHLIGHTED HOLDING: BAXTER INTERNATIONAL
Baxter International, a vital supplier of medical products and devices, currently has
several major catalysts for earnings normalization. We believe the company’s material
valuation discount is unjustified.
Baxter International is a diversified manufacturer
Earnings Per Share Price/Earnings
of essential medical products and equipment,
supplying hospitals and healthcare clinics in over Price FY23E FY24E Normal* FY23E FY24E Normal*
100 countries. In 2022, Baxter was hit by a perfect
Baxter
storm of headwinds that impacted all four of its International $38.66 $2.59 $2.97 $4.75 14.9x 13x 8.1x
segments in tandem, sending shares down over Inc.
50% to an eight-year low. This considerable decline
in valuation for a durable business experiencing Fiscal year-end December 29. *Pzena estimate of normalized earnings. Source: FactSet,
Pzena analysis. Data as of December 29, 2023.
some cyclical pain was, in our view, an exploitable
value opportunity.
and 20% labor. Due to the nature of Baxter’s
core products, which are mostly high-volume
BAXTER’S BUSINESS BREAKDOWN
commoditized consumables, the manufacturer is
particularly sensitive to inflationary pressures and
Baxter has four operating segments, with its
supply chain snarls. Raw material prices like oil-
core Medical Products & Therapies (MPT) unit
based resins spiked, while fuel costs also swelled,
accounting for a third of total sales. Through this
taking a toll on its key medical therapies and renal
business, Baxter produces infusion pumps, clinical
businesses. Because Baxter’s Kidney Care unit is
nutrition products, surgical instruments, and
predominantly PD-focused, a key aspect of the
IV fluids—where it maintains a dominant ~70%
business involves the delivery of dialysis products
market share, delivering more than one million
and materials to patients’ homes, making last-
IV bags per day.1 Baxter’s Healthcare Systems &
mile logistical costs especially damaging in an
Technologies business focuses on durable hospital
inflationary environment. Additionally, procuring
products, such as smart beds, patient monitoring
semiconductors became nearly impossible,
systems, and surgery room fixtures, while its
hindering Baxter’s ability to meet demand in its
pharma unit develops generic injectables and
healthcare systems business.
inhaled anesthesia. Lastly is Baxter’s Kidney Care
unit (~30% of revenue)—a stable, but low-margin,
Many of Baxter’s current contracts were negotiated
mostly non-U.S. business that skews heavily to
with group purchasing organizations (GPOs) six or
peritoneal dialysis (PD) home use. Importantly, this
more years ago, when the notion of 9% headline
business is earmarked to be spun off in 2024 in
inflation was inconceivable. As a result, Baxter’s
a transaction we believe could unlock significant
long-term, fixed price contracts had no serious
value for shareholders.
price escalators embedded, rendering them far less
lucrative once costs spiked, as evidenced by 1H23
BAX SHARES REACH CRITICAL CONDITION
margins at their lowest level in seven years (Exhibit
1).
Baxter’s core earnings are largely a function of
hospital utilization. During the pandemic, the
company suffered a decline in revenue, as hospital
admissions fell to the lowest levels in decades,
while surgical procedures also dropped. Volumes
rebounded in subsequent quarters but are still yet
to fully recover to pre-pandemic levels, weighing
on Baxter’s top line.

Inflation began to rear its ugly head in 2021,

increasing Baxter’s costs by around $1B, with the
breakdown roughly 50% materials, 30% logistics,

¹ Company filings

9 | Pzena Fourth Quarter 2023

 HIGHLIGHTED HOLDING CONT.

Exhibit 1: PPI (indexed to pre-COVID) vs. BAX Margins MARGIN RESET

Baxter’s GPO contracts in the U.S. represent the
60% 20%
lion’s share of its core MPT revenue and are up for
renewal in 2025. We point out that Baxter, as the
Cumulative Increase in Costs

50% 18%
largest IV manufacturer in the world, has significant
40% 16% scale and global reach, while high barriers to

Operating Margins
entry make for an attractive oligopolistic market
30% 14%
structure. As such, we expect Baxter to negotiate
20% 12% materially better terms for its renewed contracts,
which should provide a nice boost to MPT margins
10% 10%
even if inflation remains elevated (margins have
0% 8%
already begun to inflect even before the updated
contracts, as high-cost inventory is being sold
-10% 6% down).
Jun-20

Jun-21

Jun-22

Jun-23
Dec-19

Dec-20

Dec-21

Dec-22
Sep-20

Sep-21

Sep-22

Sep-23
Mar-20

Mar-21

Mar-22

Mar-23

While contract renewals are perhaps the

most concrete near-term catalyst for earnings
Op. Margins Trucking Resins Labor
normalization, Baxter’s management isn’t
stopping there. The company is taking self-help
Source: FactSet, U.S. Producer Price Index, U.S. Bureau of Labor Statistics cost initiatives by increasing plant automation,
improving suppliers’ direct access (i.e., cutting out
middlemen), and reducing single-source suppliers.
As a result of these combined headwinds, Baxter’s Baxter has also been divesting non-core assets—
forward multiple collapsed from 24.5× just before most recently, its BioPharma Solutions business—
the March 2020 pandemic sell-off, when it was to reduce leverage and simplify the company.
on par with the industry, to 14.5× in the summer
of 2023—41% below the industry.2 We initiated Baxter is expected to spin out its renal business
a position with shares trading around 9× our next year, in what has the potential to be a
estimate of the company’s normal earnings. value-accretive corporate action. Management’s
rationale for offloading Kidney Care is, in our
THE OZEMPIC EFFECT view, sound. The business is distinct from Baxter’s
core operations, caters to different end users, is
On October 10th, Novo Nordisk announced the internationally focused, low-margin, and highly
early conclusion of its kidney outcomes trial, dependent on payor reimbursements. As such, it
which aimed to assess whether Ozempic slows doesn’t make much financial sense for Baxter to
the progression of chronic kidney disease, citing hold onto Kidney Care, and the math underpinning
significant efficacy. The news sent shares of Baxter the future transaction is compelling. Earnings are
(along with peers) down 15% on the premise that currently depressed due to the aforementioned
its renal business would be permanently impaired. cost inflation in conjunction with pandemic-
After researching the issue, we determined that induced excess mortality. We estimate that Kidney
the impact to Baxter’s normal earnings power, if Care should earn roughly $640M in normal EBITA3,
anything, would likely be de minimis; with shares which equates to an EV of $10.1B4. After removing
trading at under 7× our normal earnings estimate, this business from Baxter’s current EV of $30B,
we increased our stake in the company. the pro forma medical products company’s EV/

3
Earnings before interest, taxes, and amortization
4
Applying an industry median FY22 15.9× EV/EBITA multiple on the renal busi-
² FactSet, Russell 1000 – Medical Equipment and Services industry P/E - NTM ness

Pzena Fourth Quarter 2023 | 10

HIGHLIGHTED HOLDING CONT.

EBITA5 multiple is roughly 8.2×. This compares Exhibit 2: Hospital Spending Continues to Rise
to an industry forward multiple of over 18×6—a $2,500 $3,000
considerable differential7 we believe could be
narrowed upon a successful spin-off of Kidney Care $2,500
next year. $2,000

Hospitals' Capex ($M)

$2,000

Cost of Supplies
SECULAR EARNINGS DRIVERS $1,500
$1,500
Beyond the more near-term tangible profit
$1,000
opportunities, Baxter has several structural
$1,000
tailwinds working in its favor. The pharma business,
which has been contending with increased $500
$500
competition in the U.S. generic injectables market,
is showing signs of life, as the FDA has become
$0 $0
more aggressive post-pandemic. Baxter is also

2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
in the process of decentralizing its cost structure.
For the first time, segment-level executives will
be accountable for their own P&Ls. We believe Hospitals' Capex ($M) Supplies Expense per Equivalent Admissions

this could lead to future cost savings and strategic

Source: Bloomberg Intelligence (equivalent admissions incorporates both inpatients and
divestments, as management will look to maximize outpatients).
profit at each individual business unit. Additionally, Data includes only Community Health Systems, Tenet Healthcare Corp., Universal Health
Services, and HCA Holdings
the company is awaiting FDA approval for its
latest pump, which is expected to arrive in 2024
and should provide a major boost to its Infusion
CONCLUSION
Therapies business.
With hospital staffing back above its pre-
Ultimately, Baxter’s long-term earnings trajectory
pandemic trend, and healthcare job openings
will be a function of total hospital expenditures,
down over 28% from 2022’s peak,10 Baxter’s end
regardless of any short-term volatility on input
markets are rapidly improving. At the same time,
costs, patient volumes, payor reimbursements,
inflation is moderating, while potentially major
etc. The reality is that hospitals’ outlays have only
revenue drivers are on the horizon. The stock’s
been increasing over time (Exhibit 2). Considering
9.8× forward EV/EBITDA multiple is the lowest
the nation’s aging population, the expectation is for
(outside of November’s reading) since it became
hospital utilization and capacity to keep rising over
a separate company in 2015 (post-Baxalta spin-
the long run—the benefits of which should accrue
off), and an indication that the market is severely
to Baxter, given the medical supplier’s discernable
underappreciating Baxter’s normal earnings
economic moat. In fact, the U.S. government
power—which we estimate at $4.75/share, equating
projects spending on medical equipment &
to a multiple of just 8.1×.
products to top $277B by 2031,8 representing a
5.2% CAGR9 from 2022.

5
Pzena’s estimate of RemainCo’s normal EBITA of $2.45B
6
Russell 1000 – Medical Equipment and Services
7
Median NTM EV/EBITDA differential is ~3.1× (monthly data, Dec. ’13–Dec. ’23)
8
Centers for Medicare & Medicaid Services projections for durable medical
equipment and other non-durable medical products FactSet, U.S. Bureau of Labor Statistics, Pzena analysis of Hospitals employ-
10
9
Compound annual growth rate ment and Health Care & Social Assistance job openings

11 | Pzena Fourth Quarter 2023

Pzena Investment Strategies
STRATEGY
APPROXIMATE INVESTMENT TYPICAL CLIENT PAGE
INCEPTION
HOLDINGS UNIVERSE BENCHMARKS #
DATE

GLOBAL/NON-US STRATEGIES

2,000 Largest
Global Value 60 - 95 MSCI World1 1/2010 13
Companies Worldwide

2,000 Largest
Global Focused Value 40 - 60 MSCI ACWI 1/2004 14
Companies Worldwide

1,500 Largest
International Value 60 - 80 MSCI EAFE1 11/2008 15
non-US Companies

1,500 Largest MSCI ACWI ex

International Focused Value 30 - 50 1/2004 16
non-US Companies USA

MSCI World ex MSCI World ex

International Small Cap Focused Value 40 - 70 10/2016 17
USA Small Cap USA Small Cap

1,500 Largest Companies MSCI Emerging

Emerging Markets Focused Value 40 - 80 1/2008 18
in Non-Developed Markets Markets

750 Largest
European Focused Value 40 - 50 MSCI Europe 8/2008 19
European Companies

750 Largest
Japan Focused Value 25 - 40 TOPIX 7/2015 20
Japanese Companies

US STRATEGIES

500 Largest Russell 1000

Large Cap Value 50 - 80 7/2012 21
US Companies Value®

500 Largest Russell 1000

Large Cap Focused Value 30 - 40 10/2000 22
US Companies Value®

1,000 Largest Russell 1000

Focused Value 30 - 40 1/1996 23
US Companies Value®

1,000 US Companies Russell Mid Cap

Mid Cap Focused Value 30 - 40 9/1998 24
(ranked 201 – 1200) Value®

2,000 US Companies Russell 2000

Small Cap Focused Value 40 - 50 1/1996 25
(ranked 1001 – 3000) Value®

All our strategies follow the same value investment process and philosophy; the primary difference lies in the universe considered for investment.
1
MSCI ACWI and MSCI ACWI ex-USA versions also available

Pzena Fourth Quarter 2023 | 12

PORTFOLIO STRATEGIES
PZENA GLOBAL VALUE

Global equities rallied in the last few We scaled back our VW Land & Investment, and
weeks of 2023 on signs of easing exposure, as the delay Sanofi, all on weakness. ■
inflation and an end to the rate hike andcomplexity of its transition
cycle. Growth outperformed value strategy made our normal
in the quarter; consequentially, our earnings expectation less
portfolio trailed its broad benchmark, achievable. We also added to
but outperformed the value index. Daimler Truck, China Overseas
PERFORMANCE SUMMARY periods greater than 1 year annualized in USD as of December 31, 2023
Communication Services led the
Since
declines, and telecom equipment One Three Five Ten Inception
company Nokia lost AT&T as a key 4Q YTD Year Year Year Year 1/1/10
mobile network customer. Charter Pzena Global Value Composite - Gross 10.3% 20.1% 20.1% 10.3% 11.5% 7.1% 8.7%
Communications (Spectrum TV/ Pzena Global Value Composite - Net 10.1% 19.4% 19.4% 9.7% 10.9% 6.6% 8.1%
Internet/Voice) fell, as strong wireless MSCI World Index 11.4% 23.8% 23.8% 7.3% 12.8% 8.6% 9.4%
broadband subscriber gains at
MSCI World Value Index 9.3% 11.5% 11.5% 8.3% 8.9% 5.9% 7.3%
T-Mobile & Verizon pressured its
subscriber base. Pharma giant See Calendar Year Returns, Portfolio Notes/Disclosures and important risk information beginning on pg. 26.
Bristol-Myers Squibb was weak after Past Performance is not indicative of future results.
management lowered guidance for Returns could be impacted, positively or negatively, by currency fluctuations, where applicable.
sales contributions from new drug
launches through 2025. TOP 10 HOLDINGS PORTFOLIO CHARACTERISTICS
(See Portfolio Notes on page 27)

Financials was the standout sectoral COGNIZANT TECH SOLUTIONS 3.3% Strategy Index
performer, and shares of PVH – owner MICHELIN SA 3.0% Price to Normal Earnings ¹ 7.6x 13.7x *
of Tommy Hilfiger and Calvin Klein DAIMLER TRUCK HOLDING 2.5% Price / Earnings (1-Year Forecast) 11x 18.4x
– benefitted from tangible progress CAPITAL ONE FINANCIAL CORP 2.5% Price / Book 1.3x 3.1x
on its self-help plan, as evidenced RANDSTAD NV 2.5% Median Market Cap ($B) $25.6 $18.0
by strong margin performance in SHELL PLC 2.5% Weighted Average Market Cap ($B) $64.0 $480.8
North America Capital One’s share EDISON INTERNATIONAL 2.5% Active Share 95.5% -
price reacted positively to signs of PVH CORP. 2.5% Standard Deviation (5-Year) 23.3% 18.1%
sequential improvement on credit SS&C TECH HOLDINGS INC. 2.5% Number of Stocks (model portfolio) 60 1,480
quality, and Citigroup rallied along LEAR CORPORATION 2.4%
with other large cap US banks in Total 26.2%
Source: MSCI World Index, Pzena analysis
*Investment universe median; ¹Pzena’s estimate of normal earnings.
response to a brightening macro-
outlook. REGION CONCENTRATION Strategy Index
We initiated a position in medical North America 49% 73%
products company Baxter on Europe ex-U.K. 29% 14%
concerns over cost inflation and the United Kingdom 10% 4%
long-term prospect for its renal care Emerging Markets 8% 0%
segment. We also added Skyworks – a Japan 3% 6%
leading radio frequency component Dev. Asia ex-Japan 1% 1%
supplier to Apple – on concerns over Australia/New Zealand 0% 2%
iPhone unit volumes and pricing Country weights adjusted for cash - may appear higher than actual.
pressure. We bought Rexel, which
SECTOR WEIGHTS Strategy Index
is a French electrical equipment
Communication Services 2% 7%
distributor that stands to benefit from Consumer Discretionary 13% 11%
the energy transition despite some Consumer Staples 6% 7%
short-term end market pressure. Energy 4% 4%
Financials 22% 15%
During the quarter, we exited OTA Health Care 12% 12%
Industrials 13% 11%
Booking Holdings, Oracle, and Information Technology 17% 23%
Amgen, and trimmed GE and Wabtec, Materials 6% 4%
both on valuation. Real Estate 1% 2%
Utilities 4% 3%
0% 10% 20% 30%
Sector weights adjusted for cash - may appear higher than actual. Numbers may not add to 100% due to rounding.

13 | Pzena Fourth Quarter 2023

PORTFOLIO STRATEGIES
PZENA GLOBAL FOCUSED VALUE

Global equities rallied in the last few During the quarter, we exited strategy made our normal
weeks of 2023 on signs of easing GE and trimmed Japanese earnings expectation less
inflation and an end to the rate hike heavy machinery company achievable. We also added to
cycle. Growth outperformed value Komatsu, as well as Wabtec Daimler Truck, China Overseas
in the quarter; consequentially, our on valuation. We scaled back Land & Investment, and
portfolio trailed its broad benchmark, our VW exposure, as the delay Medtronic, all on weakness.■
but outperformed the value index. and complexity of its transition
PERFORMANCE SUMMARY periods greater than 1 year annualized in USD as of December 31, 2023
Communication Services Since
led the declines, and Charter One Three Five Ten Inception
4Q YTD Year Year Year Year 1/1/04
Communications (Spectrum TV/
Pzena Global Focused Value
Internet/Voice) fell, as strong wireless Composite - Gross
10.1% 20.8% 20.8% 10.4% 11.5% 6.7% 6.5%
broadband subscriber gains at
T-Mobile & Verizon pressured its Pzena Global Focused Value
9.9% 19.9% 19.9% 9.5% 10.7% 5.9% 5.6%
Composite - Net
subscriber base. Alibaba backtracked
on its restructuring plans, which, MSCI All Country World Index 11.0% 22.2% 22.2% 5.7% 11.7% 7.9% 7.5%
coupled with weak sentiment MSCI All Country World Value Index 9.2% 11.8% 11.8% 7.3% 8.2% 5.5% 6.2%
toward Chinese businesses, led to See Calendar Year Returns, Portfolio Notes/Disclosures and important risk information beginning on pg. 26.
meaningful underperformance in the Past Performance is not indicative of future results.
quarter. European biopharma Sanofi’s Returns could be impacted, positively or negatively, by currency fluctuations, where applicable.
checkered history made investors TOP 10 HOLDINGS PORTFOLIO CHARACTERISTICS
skeptical of management’s new (See Portfolio Notes on page 27)
spending plans. MICHELIN SA 3.7% Strategy Index
SHELL PLC 3.3% Price to Normal Earnings ¹ 7.3x 13.7x *
Financials was the standout sectoral DAIMLER TRUCK HOLDING AG 3.3% Price / Earnings (1-Year Forecast) 10.4x 17.7x
performer, and Capital One’s share COGNIZANT TECH SOLUTIONS 3.1% Price / Book 1.2x 2.8x
price reacted positively to signs CAPITAL ONE FINANCIAL CORP 3.1% Median Market Cap ($B) $25.5 $10.6
of sequential improvement on
RANDSTAD NV 3.0% Weighted Average Market Cap ($B) $56.4 $441.0
credit quality. PVH Corp. – owner of
BASF SE 2.9% Active Share 96.4% -
Tommy Hilfiger and Calvin Klein –
DOW, INC.. 2.9% Standard Deviation (5-Year) 24.5% 17.8%
benefitted from tangible progress
on its self-help plan, as evidenced EDISON INTERNATIONAL 2.8% Number of Stocks (model portfolio) 47 2,921
by strong margin performance in BAXTER INTERNATIONAL, INC.. 2.5% Source: MSCI ACWI Index, Pzena analysis
North America. French tire producer Total 30.6% *Investment universe median; ¹Pzena’s estimate of normal earnings.

Michelin guided to better free cash

REGION CONCENTRATION Strategy Index
flow, while displaying continued
North America 42% 65%
share gains in the premium market.
Europe ex-U.K. 35% 12%
United Kingdom 12% 4%
We initiated a position in leading
Emerging Markets 7% 10%
medical products company Baxter.
Japan 2% 5%
Profits have been negatively
Dev. Asia ex-Japan 1% 1%
impacted by rapid cost inflation
Australia/New Zealand 0% 2%
and concerns over the long-term
prospect for its renal care segment. Country weights adjusted for cash - may appear higher than actual.
We expect margins to improve as the
SECTOR WEIGHTS Strategy Index
company executes on its repricing
Communication Services 2% 7%
and restructuring initiatives. We Consumer Discretionary 15% 11%
also added Rexel, a French electrical Consumer Staples 5% 7%
equipment distributor that stands to Energy 5% 5%
benefit from the energy transition Financials 28% 16%
despite some short-term end market Health Care 10% 11%
Industrials 15% 11%
pressure. Information Technology 9% 23%
Materials 8% 5%
Real Estate 1% 2%
Utilities 4% 3%
0% 10% 20% 30%
Sector weights adjusted for cash - may appear higher than actual. Numbers may not add to 100% due to rounding.

Pzena Fourth Quarter 2023 | 14

PORTFOLIO STRATEGIES
PZENA INTERNATIONAL VALUE

Equity markets outside the US Our portfolio is still weighted

bounced back strongly in the fourth towards businesses in recovery
quarter, surging on the back of mode, albeit now less tilted
optimism around potential rate cuts towards energy. ■
in 2024 and lower energy prices. Our
portfolio was solidly in the black but
underperformed the broad MSCI EAFE
benchmark, with growth outpacing PERFORMANCE SUMMARY periods greater than 1 year annualized in USD as of December 31, 2023
value. Since
One Three Five Ten Inception
4Q YTD Year Year Year Year 11/1/08
Health care and real estate were the Pzena International Value Composite -
only material detracting sectors. 6.4% 19.4% 19.4% 7.6% 9.3% 4.8% 9.1%
Gross
Crop science & pharma company Pzena International Value Composite - Net 6.3% 18.7% 18.7% 7.0% 8.7% 4.3% 8.5%
Bayer was weak after losing a fourth MSCI EAFE Index 10.4% 18.2% 18.2% 4.0% 8.2% 4.3% 6.9%
glyphosate lawsuit and announcing a
MSCI EAFE Value Index 8.2% 19.0% 19.0% 7.6% 7.1% 3.2% 6.0%
failed phase 3 drug trial. Swiss wealth
manager Julius Baer fell on headlines See Calendar Year Returns, Portfolio Notes/Disclosures and important risk information beginning on pg. 26.
Past Performance is not indicative of future results.
of potentially significant credit losses Returns could be impacted, positively or negatively, by currency fluctuations, where applicable.
related to loans made to Signa, raising
questions about their broader risk TOP 10 HOLDINGS PORTFOLIO CHARACTERISTICS
management approach. Industrials (See Portfolio Notes on page 27)

was the standout sector performer, MICHELIN SA 3.4% Strategy Index

and Rexel, a distributor of low SHELL PLC 3.2% Price to Normal Earnings¹ 7.5x 14.2x *
voltage electrical products, was up on RANDSTAD NV 3.0% Price / Earnings (1-Year Forecast) 9.6x 13.7x
improving European macro sentiment. BASF SE 2.9% Price / Book 1.1x 1.8x
UK grocer Sainsbury rallied on SANOFI 2.9% Median Market Cap ($B) $22.0 $12.9
strength in its core grocery business DAIMLER TRUCK HOLDING AG 2.8% Weighted Average Market Cap ($B) $50.6 $87.8
that more than offset softer results AMUNDI SA 2.8% Active Share 89.0% -
in general merchandising. Financial REXEL SA 2.6% Standard Deviation (5-Year) 21.8% 17.9%
services giant UBS posted solid results ENEL SPA 2.5% Number of Stocks (model portfolio) 64 783
that highlighted further progress on its ROCHE HOLDING LTD.. 2.5%
Source: MSCI EAFE Index, Pzena analysis
Credit Suisse integration. Total 28.6% *Investment universe median; ¹Pzena’s estimate of normal earnings.

During the quarter, we added Europe- REGION CONCENTRATION Strategy Index

based Teleperformance, the leading Europe ex-U.K. 54% 51%
outsourced customer experience United Kingdom 17% 15%
provider whose stock has been Japan 14% 22%
negatively impacted by AI euphoria, Emerging Markets 10% 0%
Medtronic, the largest standalone North America 3% 0%
medical device company in the world Dev. Asia ex-Japan 2% 4%
Australia/New Zealand 0% 8%
with leading positions across several
Dev. Africa/Middle East 0% 1%
high barriers-to-entry categories,
Country weights adjusted for cash - may appear higher than actual.
and Olympus – the leading global
manufacturer of gastrointestinal SECTOR WEIGHTS Strategy Index
scopes operating in a relatively Communication Services 0% 4%
consolidated market. We also added Consumer Discretionary 16% 12%
Consumer Staples 8% 9%
to our positions in Reckitt Benckiser, Energy 3% 4%
Sanofi, and China Overseas Land Financials 26% 19%
& Investment on weakness. These Health Care 13% 13%
purchases were funded via a full Industrials 17% 16%
Information Technology 5% 9%
sale of Publicis Group, and trims of Materials 9% 8%
Samsung, Subaru, and UBS. Real Estate 1% 2%
Utilities 3% 3%
0% 10% 20% 30%
Sector weights adjusted for cash - may appear higher than actual. Numbers may not add to 100% due to rounding.

15 | Pzena Fourth Quarter 2023

PORTFOLIO STRATEGIES
PZENA INTERNATIONAL FOCUSED VALUE

Equity markets outside the US These purchases were funded Our portfolio is still weighted
bounced back strongly in the fourth via a full sale of drugmaker towards businesses in
quarter, surging on the back of Takeda and trims of hotel recovery mode, albeit now
optimism around potential rate cuts operator Accor, Subaru, and less tilted towards energy. ■
in 2024 and lower energy prices. Sainsbury.
Our portfolio was solidly in the black
but modestly underperformed the
benchmark. PERFORMANCE SUMMARY periods greater than 1 year annualized in USD as of December 31, 2023
Since
One Three Five Ten Inception
Real estate and health care were 4Q YTD Year Year Year Year 1/1/04
the only material detracting sectors. Pzena International Focused Value
7.3% 20.8% 20.8% 7.7% 9.4% 5.0% 6.6%
Swiss wealth manager Julius Baer Composite - Gross
was weak on headlines of potentially Pzena International Focused Value
significant credit losses related 7.1% 19.9% 19.9% 6.9% 8.5% 4.3% 5.7%
Composite - Net
to loans made to Signa, raising MSCI All Country World Ex-US Index 9.8% 15.6% 15.6% 1.5% 7.1% 3.8% 5.7%
questions about their broader risk MSCI ACWI ex USA Value - Net Index 8.4% 17.3% 17.3% 5.8% 6.3% 2.9% 5.3%
management approach. China
See Calendar Year Returns, Portfolio Notes/Disclosures and important risk information beginning on pg. 26.
Overseas Land & Investment was Past Performance is not indicative of future results.
weak due to concerns around the Returns could be impacted, positively or negatively, by currency fluctuations, where applicable.
nation’s property sector, while TOP 10 HOLDINGS PORTFOLIO CHARACTERISTICS
telecom equipment company Nokia (See Portfolio Notes on page 27)
fell after losing out on a major 5G MICHELIN SA 4.1% Strategy Index
equipment deal with AT&T. BASF SE 3.8% Price to Normal Earnings ¹ 7.1x 14.2x *
DAIMLER TRUCK HOLDING AG 3.7% Price / Earnings (1-Year Forecast) 8.9x 13.5x
Industrials was the standout sector RANDSTAD NV 3.5% Price / Book 1x 1.7x
performer, and Rexel, a distributor of SHELL PLC 3.5% Median Market Cap ($B) $23.0 $8.5
low voltage electrical products, was SANOFI 3.1% Weighted Average Market Cap ($B) $49.0 $89.2
up on improving European macro AMUNDI SA 3.0% Active Share 92.8% -
sentiment. UK grocer Sainsbury REXEL SA 3.0% Standard Deviation (5-Year) 23.1% 17.6%
rallied on strength in its core grocery ALIBABA GROUP LIMITED 2.8% Number of Stocks (model portfolio) 45 2,312
business that more than offset softer NOKIA OYJ 2.6% Source: MSCI ACWI (ex USA) Index, Pzena analysis
results in general merchandising. Total 33.1% *Investment universe median; ¹Pzena’s estimate of normal earnings.
Another contributor, German
chemical giant BASF guided to better- REGION CONCENTRATION Strategy Index
than-expected free cash flow while Europe ex-U.K. 56% 33%
announcing the sale of its Wintershall Emerging Markets 19% 28%
assets in Russia. United Kingdom 16% 9%
Japan 5% 14%
During the quarter, we added Europe- Dev. Asia ex-Japan 2% 2%
based Teleperformance, the leading North America 2% 8%
outsourced customer experience Australia/New Zealand 0% 5%
provider whose stock has been
Country weights adjusted for cash - may appear higher than actual.
negatively impacted by AI euphoria,
Bayer, a German-domiciled crop SECTOR WEIGHTS Strategy Index
Communication Services 0% 5%
science and pharma company facing
Consumer Discretionary 15% 11%
legal headwinds and a drug patent Consumer Staples 7% 8%
cliff, and China Merchants Bank – the Energy 3% 6%
leading retail bank in China with Financials 28% 21%
a best-in-class deposit franchise. Health Care 11% 9%
Industrials 18% 13%
We added to our positions in auto Information Technology 6% 12%
supplier Magna, Daimler Truck, and Materials 8% 8%
appliance manufacturer Haier Smart Real Estate 2% 2%
Home. Utilities 2% 3%
0% 10% 20% 30%
Sector weights adjusted for cash - may appear higher than actual. Numbers may not add to 100% due to rounding.

Pzena Fourth Quarter 2023 | 16

PORTFOLIO STRATEGIES
PZENA INTERNATIONAL SMALL CAP FOCUSED VALUE

International small cap stocks The ISCFV portfolio remains While macroeconomic
performed well in the fourth quarter, a collection of idiosyncratic expectations may be changing,
as global inflation fears abated. Our investment opportunities trading we believe that our portfolio
portfolio similarly posted strong at what we believe are extremely holdings are mostly a function
returns (albeit underperformed large discounts to intrinsic value. of company-specific factors,
the style-neutral benchmark), as and not broad market forces. ■
expectations for a global recession in
2024 reversed, while leading economic PERFORMANCE SUMMARY periods greater than 1 year annualized in USD as of December 31, 2023

indicators improved in Europe. One Three Five

Since
Inception
4Q YTD Year Year Year 10/1/16
The strategy’s relative return this Pzena International Small Cap Focused Value
8.8% 24.0% 24.0% 13.4% 10.4% 8.6%
quarter was driven more by the Composite - Gross
benchmark’s holdings, as no sector Pzena International Small Cap Focused Value
8.5% 22.8% 22.8% 12.3% 9.4% 7.5%
detracted from absolute performance. Composite - Net
The strategy was relatively MSCI World ex USA Small Cap Index 10.6% 12.6% 12.6% -0.2% 7.1% 5.4%
underexposed to real estate and MSCI World ex USA Small Cap Value Index 10.0% 14.7% 14.7% 3.8% 7.1% 5.4%
information technology – the two See Calendar Year Returns, Portfolio Notes/Disclosures and important risk information beginning on pg. 26.
strongest benchmark sectors in Q4. Past Performance is not indicative of future results.
In absolute terms, our industrials, Returns could be impacted, positively or negatively, by currency fluctuations, where applicable.
materials, and consumer discretionary TOP 10 HOLDINGS PORTFOLIO CHARACTERISTICS
holdings performed the best. (See Portfolio Notes on page 27)
The top individual contributors for REXEL SA 4.5% Strategy Index
the quarter were Rexel, which is ORIGIN ENTERPRISES PLC 4.0% Price to Normal Earnings¹ 7.2x 11.8x *
broadly exposed to construction and TRANSCONTINENTAL, INC. 3.7% Price / Earnings (1-Year Forecast) 9.9x 13.3x
industrial production end markets, C&C GROUP PLC 3.3% Price / Book 0.9x 1.3x
and Transcontinental, our Canadian DANIELI & C.MECCANICHE S.p.A. 3.2% Median Market Cap ($B) $1.8 $1.3
packaging & printing company, which ANIMA HOLDING S.P.A. 3.1% Weighted Average Market Cap ($B) $2.3 $2.8
had been struggling with passing SIGNIFY NV 3.0% Active Share 97.6% -
through inflationary pricing to SABRE INSURANCE GROUP PLC 2.9% Standard Deviation (5-Year) 25.7% 20.3%
customers. KANTO DENKA KOGYO CO. LTD. 2.8% Number of Stocks (model portfolio) 46 2,386
FOSTER ELECTRIC CO. LIMITED 2.7% Source: MSCI World ex USA Small Cap Index, Pzena analysis
The largest detractor was Zeon Corp., a Total 33.2% *Investment universe median; ¹Pzena’s estimate of normal
earnings.
bellwether for the Japanese chemicals
space, which suffered from inflationary REGION CONCENTRATION Strategy Index
pressures, weak end markets, and Europe ex-U.K. 39% 32%
increasing capital spending needs. Japan 22% 30%
Another underperformer was Ituran United Kingdom 19% 14%
Location and Control, which was Dev. Asia ex-Japan 6% 3%
mostly a function of being Israeli- North America 6% 9%
domiciled. Emerging Markets 5% 0%
Dev. Africa/Middle East 2% 3%
Turnover was relatively high this Australia/New Zealand 0% 9%
quarter, with new positions in Kanto Country weights adjusted for cash - may appear higher than actual.

Denka Kogyo – a Japanese specialty SECTOR WEIGHTS Strategy Index

gas producer, Nokian Renkaat – a Communication Services 0% 4%
Finnish tire manufacturer, Pennon Consumer Discretionary 12% 12%
Group – a UK regulated utility, and Irish Consumer Staples 7% 6%
lender Permanent TSB. We also bought Energy 2% 5%
Financials 20% 11%
back our position in ams-OSRAM after Health Care 1% 6%
the completion of its capital raise. We Industrials 30% 22%
exited our positions in Ushio and SAF- Information Technology 8% 10%
Holland. Materials 17% 11%
Real Estate 0% 10%
Utilities 2% 3%
0% 10% 20% 30% 40%
Sector weights adjusted for cash - may appear higher than actual. Numbers may not add to 100% due to rounding.

17 | Pzena Fourth Quarter 2023

PORTFOLIO STRATEGIES
PZENA EMERGING MARKETS FOCUSED VALUE

Emerging markets had a strong finish Despite a strong Q4, Industries and countries
to the year, rallying on optimism recessionary fears and the future continue to be out of favor, and
around peaking inflation and possible path of interest rates, inflation, we are finding cheap company
rate cuts in 2024. The notable exception and the US dollar continue to valuations when assessed
was China, where macroeconomic create uncertainty. against their fundamentals. ■
concerns led to underperformance.
Amidst this backdrop, our EMFV
portfolio posted a positive return, but
PERFORMANCE SUMMARY periods greater than 1 year annualized in USD as of December 31, 2023
underperformed its benchmark. Since
One Three Five Ten Inception
4Q YTD Year Year Year Year 1/1/08
Real estate was the largest sectoral
detractor, and South African energy Pzena Emerging Markets Focused Value
6.3% 22.4% 22.4% 7.5% 9.2% 5.6% 4.7%
Composite - Gross
company Sasol underperformed due
to weak oil prices and a continued Pzena Emerging Markets Focused Value
6.1% 21.2% 21.2% 6.4% 8.1% 4.6% 3.6%
downturn in specialty chemicals. China Composite - Net
Overseas Land & Investment was weak MSCI Emerging Markets Index 7.9% 9.8% 9.8% -5.1% 3.7% 2.7% 1.2%
due to concerns around the nation’s MSCI Emerging Markets Value Index 8.1% 14.2% 14.2% -- 3.4% 1.9% 0.9%
property sector while China Merchant’s See Calendar Year Returns, Portfolio Notes/Disclosures and important risk information beginning on pg. 26.
bank reported challenging results, as Past Performance is not indicative of future results.
weak sentiment and central bank rate Returns could be impacted, positively or negatively, by currency fluctuations, where applicable.
cuts weighed on volumes and net TOP 10 HOLDINGS PORTFOLIO CHARACTERISTICS
interest margins. (See Portfolio Notes on page 27)
SAMSUNG ELECTRONICS CO. LTD. 4.3% Strategy Index
Info Tech was the top-performing TAIWAN MANUFACTURING CO. 4.2% Price to Normal Earnings¹ 8.4x 16.6x*
sector, and Samsung’s earnings beat HON HAI PRECISION CO. LTD. 3.3% Price / Earnings (1-Year Forecast) 8.6x 13x
expectations due to both a recovery in HANKOOK TIRE & TECH CO. LTD. 3.3% Price / Book 1x 1.6x
the memory chip cycle and strength AMBEV SA 2.9% Median Market Cap ($B) $11.2 $6.0
in premium smartphone and OLED WEICHAI POWER CO. LTD. 2.8% Weighted Average Market Cap ($B) $66.1 $102.0
sales. Korean tire producer Hankook’s ALIBABA GROUP HOLDING LTD. 2.8% Active Share 80.6% -
margins were strong due to pricing/
COGNIZANT TECH SOLUT IONS 2.8% Standard Deviation (5-Year) 20.6% 19.0%
volume improvements, and TSMC is
CHINA OVERSEAS INVESTMENT 2.7% Number of Stocks (model portfolio) 54 1,441
seeing an end to the industry-wide
PACIFIC BASIN SHIPPING LIMITED 2.6%
destocking that has hampered server Source: MSCI Emerging Markets Index, Pzena analysis
demand, while PC and smartphone Total 31.7% *Investment universe median; ¹Pzena’s estimate of normal earnings

demand is also stabilizing.

REGION CONCENTRATION Strategy Index
We added HDFC Bank – a leading Asia 73% 78%
private lender in India that recently Latin America 15% 9%
merged with a mortgage lender and Europe 6% 2%
sister company, creating some noise in Africa/Middle East 3% 10%
its financials and temporarily elevated North America 3% 0%
capital levels. Another new position,
Vale, is a Brazilian mining company
with best-in-class iron ore assets. We Country weights adjusted for cash - may appear higher than actual.
bought Man Wah, a manufacturer of
SECTOR WEIGHTS Strategy Index
sofa recliners with 60% market share
Communication Services 3% 9%
in China, and Beijing Oriental Yuhong Consumer Discretionary 14% 13%
– China’s largest waterproof building Consumer Staples 9% 6%
materials company. Energy 2% 5%
Financials 32% 22%
Health Care 2% 4%
Industrials 8% 7%
Information Technology 19% 22%
Materials 6% 8%
Real Estate 3% 2%
Utilities 3% 3%
0% 10% 20% 30% 40%
Sector weights adjusted for cash - may appear higher than actual. Numbers may not add to 100% due to rounding.

Pzena Fourth Quarter 2023 | 18

PORTFOLIO STRATEGIES
PZENA EUROPEAN FOCUSED VALUE

After a slow start to the quarter, European macroeconomic

European bourses rallied in the back volatility remains elevated, but
half on moderating inflation and we believe our portfolio holdings
expectations for rate cuts in 2024. Our are mostly a function of company-
strategy closed the quarter well in specific factors that should
the black, performing in-line with the lead to appreciable earnings
MSCI Europe Value index, but modestly normalization over time.■
underperforming the style-neutral
PERFORMANCE SUMMARY periods greater than 1 year annualized in USD as of December 31, 2023
benchmark. Since
One Three Five Ten Inception
4Q YTD Year Year Year Year 8/1/08
Health care was the main detracting
sector, and crop science & pharma Pzena European Focused Value
9.4% 24.8% 24.8% 11.1% 10.1% 4.4% 6.0%
Composite - Gross
company Bayer was weaker after
losing a fourth glyphosate lawsuit and Pzena European Focused Value
9.2% 24.0% 24.0% 10.4% 9.4% 3.7% 5.3%
announcing a failed phase 3 drug trial. Composite - Net
Swiss wealth manager Julius Baer fell MSCI Europe Index 11.1% 19.9% 19.9% 5.8% 9.1% 4.1% 3.8%
on headlines of potentially significant MSCI Europe Value Index 9.2% 19.7% 19.7% 7.9% 7.0% 2.4% 2.2%
credit losses related to loans made to See Calendar Year Returns, Portfolio Notes/Disclosures and important risk information beginning on pg. 26.
Signa, raising questions about their Past Performance is not indicative of future results.
broader risk management approach, Returns could be impacted, positively or negatively, by currency fluctuations, where applicable.
while Telecom equipment company TOP 10 HOLDINGS PORTFOLIO CHARACTERISTICS
Nokia sold off after losing out on a (See Portfolio Notes on page 27)
major 5G equipment deal with AT&T. MICHELIN SA 3.6% Strategy Index
BASF SE 3.6% Price to Normal Earnings ¹ 7x 12.6x *
Industrials was the standout contributor SIGNIFY NV 3.5% Price / Earnings (1-Year Forecast) 9.3x 13.2x
in the quarter, and Signify, a global RANDSTAD NV 3.3% Price / Book 1.1x 2x
leader in lighting solutions, led the ENEL SPA 3.2% Median Market Cap ($B) $19.1 $15.4
gains after reporting impressive Q3 DAIMLER TRUCK HOLDING AG 3.2% Weighted Average Market Cap ($B) $39.1 $104.6
margins and later announcing a well-
AMUNDI SA 3.1% Active Share 86.4% -
received organizational restructuring.
REXEL SA 3.0% Standard Deviation (5-Year) 26.8% 19.4%
Shares of French electrical equipment
NOKIA OYJ 3.0% Number of Stocks (model portfolio) 44 425
distributor Rexel benefitted from solid
quarterly results and an improvement in UBS GROUP AG 2.9%
Source: MSCI Europe Index, Pzena analysis
European macro sentiment, while Italian Total 32.4% *Investment universe median; ¹Pzena’s estimate of normal earnings.
utility Enel rose in the buildup to, and
REGION CONCENTRATION
after reporting its Q3 earnings release, Strategy Index
which reflected strength in its domestic Europe ex-U.K. 76% 77%
retail market and improving hydro United Kingdom 24% 23%
conditions in Italy and Spain.

During the quarter, we added

Teleperformance, the leading
outsourced customer experience
provider whose stock has been Country weights adjusted for cash - may appear higher than actual.
negatively impacted by AI euphoria,
SECTOR WEIGHTS Strategy Index
and SEB SA, a global small appliance
Communication Services 0% 3%
manufacturer mostly catering to
Consumer Discretionary 11% 11%
European end markets, where it Consumer Staples 6% 12%
earns above-peer margins due to its Energy 4% 6%
strong presence. We also added to Financials 27% 18%
our positions in Sanofi and Bayer on Health Care 13% 15%
weakness, while trimming Shell and Industrials 22% 16%
Information Technology 4% 7%
Accor on strength. Materials 9% 7%
Real Estate 0% 1%
Utilities 4% 4%
0% 10% 20% 30%
Sector weights adjusted for cash - may appear higher than actual. Numbers may not add to 100% due to rounding.

19 | Pzena Fourth Quarter 2023

PORTFOLIO STRATEGIES
PZENA JAPAN FOCUSED VALUE

Japanese equity markets saw a modest We also added to our positions Our portfolio maintains
uptick in local currency during the in Net One Systems, Komatsu, significant exposures to
quarter, while growth outperformed Toray, DIC Corp., and Teijin, industrials, financials, and
value, driven by the anticipation of the as their valuations remain consumer discretionary
end of monetary tightening. Our Japan undemanding. To facilitate sectors. We remain solely
Focused Value strategy finished the these purchases, we divested focused on selectively investing
period in the black, but underperformed from Seiko Epson, Tsubakimoto in undervalued Japanese
both the broad TOPIX benchmark and Chain, and Kuraray, while also companies, especially those
TOPIX Value series. Only energy and scaling back positions in Isuzu, undergoing structural reforms
communication services detracted Dai-ichi Life, and T&D Holdings, for enhanced capital efficiency
from absolute performance, while all on valuation. and shareholder returns. This
industrials, health care, and information outlook shapes our ongoing
technology all gained. commitment to navigating
the dynamic Japanese equity
Zeon Corp., a specialty chemical market. ■
company, was a major underperformer
after reporting a disappointing set
quarterly results stemming from
weak demand in end-markets such as periods greater than 1 year annualized in USD as of December 31, 2023
smartphones and EVs. Regional lender PERFORMANCE SUMMARY
Since
Resona performed poorly mostly due One Three Five Inception
4Q YTD Year Year Year 7/1/15
to profit-taking following a superb
third quarter, coupled with more Pzena Japan Focused Value
2.2% 11.6% 11.6% 6.8% 6.8% 5.1%
Composite - Gross
subdued expectations for near-term
monetary policy changes. Iida Group, Pzena Japan Focused Value
2.0% 10.7% 10.7% 5.9% 5.9% 4.3%
a leading detached single-family home Composite - NET
manufacturer, faced challenges amid TOPIX Index 8.0% 19.6% 19.6% 0.7% 6.4% 4.8%
sluggish domestic housing demand. TOPIX Value Index 4.7% 23.9% 23.9% 7.5% 7.4% 5.0%
See Calendar Year Returns, Portfolio Notes/Disclosures and important risk information beginning on pg. 26.
Conversely, MinebeaMitsumi Past Performance is not indicative of future results.
(manufacturer of ball bearings) and Returns could be impacted, positively or negatively, by currency fluctuations, where applicable.
vacuum technology company ULVAC
TOP 10 HOLDINGS PORTFOLIO CHARACTERISTICS
performed well, fueled by expectations (See Portfolio Notes on page 27)
of a cyclical demand recovery in high-
MINEBEAMITSUMI INC. 3.8% Strategy Index
tech end-markets. DIC Corp., a specialty
SANKYU INC. 3.7% Price to Normal Earnings ¹ 8.5x 12.8x *
chemical company, outperformed late
in the quarter after an Asian activist BRIDGESTONE CORPORATION 3.6% Price / Earnings (1-Year Forecast) 12.1x 14x
investor took a position in the stock. ZEON CORPORATION 3.5% Price / Book 0.9x 1.3x
TORAY INDUSTRIES INC. 3.5% Median Market Cap ($B) $4.1 $0.4
We initiated a number of positions in SUMITOMO ELECTRIC INDUSTRIES 3.3% Weighted Average Market Cap ($B) $11.1 $46.2
a wide range of industries this quarter, SUMITOMO MITSUI FINANCIAL 3.2% Active Share 92.1% -
including in ULVAC, Olympus (global KOMATSU LTD. 3.2% Standard Deviation (5-Year) 18.2% 15.2%
leader in endoscopes), Yamaha (largest RESONA HOLDINGS, INC.. 3.2% Number of Stocks (model portfolio) 39 2,155
global music instrument manufacturer),
PERSOL HOLDINGS CO. LTD. 3.1%
TDK Corp. (leading supplier of Source: TOPIX Index, Pzena Analysis
small-cell batteries and electronic Total 34.1% *Investment universe median; ¹Pzena's estimate of normal earnings.

components), Lion Corp. (leader in oral

SECTOR WEIGHTS Strategy Index
care products in Japan), and Sawai
Group Holdings (largest generic drug Communication Services 1% 7%
Consumer Discretionary 19% 18%
manufacturer in Japan). While these Consumer Staples 5% 7%
companies face earnings pressure Energy 2% 1%
from various factors, including cyclical Financials 18% 12%
demand slumps and company-specific Health Care 9% 7%
issues, we see unique opportunities Industrials 20% 24%
for each of them to improve earnings Information Technology 8% 14%
Materials 15% 6%
over the next several years, including
Real Estate 0% 2%
demand recovery, cost efforts, and Utilities 0% 1%
pricing actions. 0% 10% 20% 30%
Sector weights adjusted for cash - may appear higher than actual. Numbers may not add to 100% due to rounding.

Pzena Fourth Quarter 2023 | 20

PORTFOLIO STRATEGIES
PZENA LARGE CAP VALUE (US)

US markets rallied in the fourth quarter, as CVS shares have been pressured by advancement of kidney disease. The
signs of easing inflation and lower interest a host of factors across its business negative valuation impact from this
rates boosted confidence in a soft landing. lines, such as reimbursement headline exceeded our estimate
Technology and rate-sensitive real estate pressure in the retail pharmacy of the earnings contribution from
stocks performed the best, while energy business, rising medical expenses Baxter’s renal business, creating an
was the only sector to post a negative weighing on insurance profitability, attractive buying opportunity.
return with oil prices softening. Growth and negative political rhetoric
outperformed value in the quarter, and our aimed at curbing PBM profitability. We exited Booking Holdings and
portfolio outpaced the value index. We believe these fears are more Verizon, and trimmed Wabtec, GE,
than priced in given the company’s and Skechers, all on valuation.
Financials, industrials, and consumer leading competitive positions in Despite the quarter’s solid
discretionary were the top contributing an industry with favorable growth performance, valuations remain
sectors, while telecom and energy demographics. attractive in the portfolio, which is
detracted. Shares of PVH, owner of most exposed to the financials and
Tommy Hilfiger and Calvin Klein, were We added to our position in healthcare sectors. ■
strong during the quarter. The company Baxter, a leading global medical
demonstrated tangible progress on its self- products company, after trial data
help plan, as evidenced by strong margin indicated that GLP-1 drugs slowed
performance in North America – historically
its most challenging region. Capital One’s periods greater than 1 year annualized in USD as of December 31, 2023
PERFORMANCE SUMMARY
share price reacted positively to signs of
Since
sequential improvement on credit quality; One Three Five Ten Inception
we expect the lender’s credit card portfolio 4Q YTD Year Year Year Year 7/1/12
to benefit from continued strength in the US Pzena Large Cap Value Composite - Gross 11.8% 17.5% 17.5% 13.4% 12.6% 9.1% 12.0%
labor market. Citigroup rallied along with Pzena Large Cap Value Composite - Net 11.7% 17.0% 17.0% 13.0% 12.2% 8.7% 11.5%
other large cap US banks in response to a
Russell 1000 Value Index 9.5% 11.5% 11.5% 8.9% 10.9% 8.4% 10.7%
brightening macroeconomic outlook. Citi’s
management also provided encouraging See Calendar Year Returns, Portfolio Notes/Disclosures and important risk information beginning on pg. 26.
guidance on expense control, which has Past Performance is not indicative of future results.
weighed on the bank’s returns in recent Returns could be impacted, positively or negatively, by currency fluctuations, where applicable.
years.
TOP 10 HOLDINGS PORTFOLIO CHARACTERISTICS
The top individual detractor, Charter (See Portfolio Notes on page 27)
Communications (Spectrum TV/Internet/ EQUITABLE HOLDINGS INC. 3.4% Strategy Index
Voice) sold off, as strong wireless COGNIZANT TECH SOLUTIONS 3.4% Price to Normal Earnings ¹ 8.1x 13.3x *
broadband subscriber gains at T-Mobile CAPITAL ONE FINANCIAL CORP 3.4% Price / Earnings (1-Year Forecast) 12.5x 15.9x
& Verizon pressured its subscriber base.
BANK OF AMERICA CORP 3.3% Price / Book 1.6x 2.4x
Pharma giant Bristol-Myers Squibb
SS&C TECH HOLDINGS INC. 3.2% Median Market Cap ($B) $38.5 $12.0
was weak after management lowered
guidance for sales contributions from new WELLS FARGO & COMPANY 3.2% Weighted Average Market Cap ($B) $83.9 $128.8
drug launches through 2025. We believe JPMORGAN CHASE & CO. 3.1% Active Share 83.4% -
BMY’s current valuation reflects an overly BAXTER INTERNATIONAL. 3.1% Standard Deviation (5-Year) 24.8% 18.8%
pessimistic view of the drugmaker’s new METLIFE INC. 3.1% Number of Stocks (model portfolio) 50 849
product pipeline. Energy major Exxon DOW INC. 3.0%
Source: Russell 1000® Value, Pzena analysis
declined in concert with oil prices. Total 32.2% *Investment universe median; ¹Pzena’s estimate of normal earnings.

We initiated a position in Skyworks

Solutions – a leading radio frequency SECTOR WEIGHTS Strategy Index
Basic Materials 3% 4%
component supplier to Apple and other
Consumer Discretionary 14% 9%
device-makers – after concerns over Consumer Staples 3% 7%
iPhone unit volumes and pricing pressure Energy 6% 8%
weighed on the stock’s valuation. We Financials 27% 20%
also added CVS Health Corp., which is a Health Care 16% 14%
leading healthcare services provider with a Industrials 11% 16%
diversified set of offerings including retail Real Estate 1% 5%
pharmacy, pharmacy benefits management Technology 14% 8%
Telecommunications 3% 4%
(Caremark), and health insurance (Aetna).
Utilities 3% 5%
0% 10% 20% 30%
Sector weights adjusted for cash - may appear higher than actual. Numbers may not add to 100% due to rounding.

21 | Pzena Fourth Quarter 2023

PORTFOLIO STRATEGIES
PZENA LARGE CAP FOCUSED VALUE (US)

US markets rallied in the fourth quarter, as We initiated a position in Skyworks We exited Booking Holdings and
signs of easing inflation and lower interest Solutions – a leading radio frequency Skechers, and trimmed Wabtec, GE,
rates boosted confidence in a soft landing. component supplier to Apple and Gildan all on valuation. Despite
Technology and rate-sensitive real estate and other device-makers – after the quarter’s solid performance,
stocks performed the best, while energy concerns over iPhone unit volumes valuations remain attractive in the
was the only sector to post a negative and pricing pressure weighed on portfolio, which is most exposed
return given softening oil prices. Growth the stock’s valuation. We added to to the financials and consumer
outperformed value in the quarter, and our our position in Baxter, a leading discretionary sectors. ■
portfolio outpaced the value index. global medical products company,
after the aforementioned trial data
Financials, industrials, and consumer indicated that GLP-1 drugs slowed
discretionary were the top contributing advancement of kidney disease.
sectors, while telecom and energy detracted. The negative valuation impact from
Capital One’s share price reacted positively this headline exceeded our estimate
to signs of sequential improvement on credit of the earnings contribution from
quality; we expect the lender’s credit card Baxter’s renal business, creating an
portfolio to benefit from continued strength attractive buying opportunity. We
in the US labor market. Citigroup rallied also continued building our position
along with other large cap US banks in in Disney, which we initiated in Q3.
response to a brightening macroeconomic periods greater than 1 year annualized in USD as of December 31, 2023
PERFORMANCE SUMMARY
outlook. Citi’s management also provided
Since
encouraging guidance on expense control, One Three Five Ten Inception
which has weighed on the bank’s returns 4Q YTD Year Year Year Year 10/1/00
in recent years. Shares of PVH, owner of Pzena Large Cap Focused Value
12.1% 20.0% 20.0% 13.8% 12.9% 8.9% 7.9%
Tommy Hilfiger and Calvin Klein, were also Composite - Gross
strong during the quarter. The company Pzena Large Cap Focused Value
12.0% 19.2% 19.2% 13.0% 12.1% 8.2% 7.1%
demonstrated tangible progress on its self- Composite - Net
help plan, as evidenced by strong margin Russell 1000 Value Index 9.5% 11.5% 11.5% 8.9% 10.9% 8.4% 7.2%
performance in North America – historically See Calendar Year Returns, Portfolio Notes/Disclosures and important risk information beginning on pg. 26.
its most challenging region. Past Performance is not indicative of future results.
Returns could be impacted, positively or negatively, by currency fluctuations, where applicable.
The top individual detractor, Charter
Communications (Spectrum TV/Internet/ TOP 10 HOLDINGS PORTFOLIO CHARACTERISTICS
(See Portfolio Notes on page 27)
Voice) sold off, as strong wireless broadband
DOW INC. 4.8% Strategy Index
subscriber gains at T-Mobile & Verizon
pressured its subscriber base. Pharma CITIGROUP INC. 4.8% Price to Normal Earnings¹ 7.7x 13.3x *
giant Bristol-Myers Squibb was weak after WELLS FARGO & COMPANY 4.7% Price / Earnings (1-Year Forecast) 12.3x 15.9x
management lowered guidance for sales CAPITAL ONE FINANCIAL CORP 4.2% Price / Book 1.5x 2.4x
contributions from new drug launches BAXTER INTERNATIONAL. 4.1% Median Market Cap ($B) $35.5 $12.0
through 2025. We believe BMY’s current METLIFE INC. 4.0% Weighted Average Market Cap ($B) $74.7 $128.8
valuation reflects an overly pessimistic view LEAR CORPORATION 3.7% Active Share 89.0% -
of the drugmaker’s new product pipeline. COGNIZANT TECH SOLUTIONS 3.6% Standard Deviation (5-Year) 27.4% 18.8%
Fresenius Medical Care, a leading provider of
EQUITABLE HOLDINGS INC. 3.5% Number of Stocks (model portfolio) 36 849
dialysis products and services, declined after
MAGNA INTERNATIONAL INC. 3.4%
trial data indicated that GLP-1 drugs slowed Source: Russell 1000® Value, Pzena analysis
the advancement of kidney disease. The Total 40.8% *Investment universe median; ¹Pzena’s estimate of normal earnings.
share price reaction implied that GLP-1 usage
will result in lower demand for dialysis. SECTOR WEIGHTS Strategy Index
However, we note that any impact will be Basic Materials 5% 4%
Consumer Discretionary 16% 9%
long-dated and that other GLP-1 benefits,
Consumer Staples 2% 7%
such as the potential for fewer fatalities from Energy 5% 8%
heart disease, could result in an increase in Financials 31% 20%
the dialysis patient population. Health Care 13% 14%
Industrials 10% 16%
Real Estate 0% 5%
Technology 12% 8%
Telecommunications 3% 4%
Utilities 3% 5%
0% 10% 20% 30% 40%
Sector weights adjusted for cash - may appear higher than actual. Numbers may not add to 100% due to rounding.

Pzena Fourth Quarter 2023 | 22

PORTFOLIO STRATEGIES
PZENA FOCUSED VALUE (US)

US markets rallied in the fourth quarter, as We also added Universal Health We added to our position in Baxter,
signs of easing inflation and lower interest Services, a leading hospital a leading global medical products
rates boosted confidence in a soft landing. group and the largest owner and company, after the aforementioned
Technology and rate-sensitive real estate operator of inpatient behavioral trial data indicated that GLP-1 drugs
stocks performed the best, while energy health facilities in the US. slowed advancement of kidney
was the only sector to post a negative The company’s margins have disease. The negative valuation
return with oil prices softening. Growth suffered from rising costs due impact from this headline exceeded
outperformed value in the quarter, but our to post-Covid labor shortages our estimate of the earnings
portfolio outpaced both the broad Russell and increased physician group contribution from Baxter’s renal
1000 index and the value series. subsidies from the No Surprises business, creating an attractive
Act. We expect margin headwinds buying opportunity.
Financials, consumer discretionary, and to improve as reimbursement
industrials were the top contributing rates reset to reflect the labor cost We trimmed Gap, Gildan, and
sectors, while telecom and energy inflation. Acuity Brands on strength. Despite
detracted. Gap, Inc. shares rallied the quarter’s solid performance,
after the company’s earnings report valuations remain attractive in
demonstrated progress on the turnaround the portfolio, which is positioned
at Old Navy. Capital One’s share price toward more economically
reacted positively to signs of sequential sensitive and cyclical businesses ■
improvement on credit quality; we
expect the lender’s credit card portfolio PERFORMANCE SUMMARY periods greater than 1 year annualized in USD as of December 31, 2023
to benefit from continued strength in the Since
US labor market. PVH, owner of Tommy One Three Five Ten Inception
Hilfiger and Calvin Klein, demonstrated 4Q YTD Year Year Year Year 1/1/96
tangible progress on its self-help plan, as Pzena Focused Value Composite - Gross 16.5% 28.7% 28.7% 15.3% 14.2% 9.1% 10.6%
evidenced by strong margin performance Pzena Focused Value Composite - Net 16.2% 27.4% 27.4% 14.1% 13.1% 8.0% 9.5%
in North America – historically its most
challenging region. Russell 1000 Value Index 9.5% 11.5% 11.5% 8.9% 10.9% 8.4% 8.8%

The top individual detractor, Charter See Calendar Year Returns, Portfolio Notes/Disclosures and important risk information beginning on pg. 26.
Past Performance is not indicative of future results.
Communications (Spectrum TV/Internet/ Returns could be impacted, positively or negatively, by currency fluctuations, where applicable.
Voice) declined, as strong wireless
broadband subscriber gains at T-Mobile
& Verizon pressured its subscriber base. TOP 10 HOLDINGS PORTFOLIO CHARACTERISTICS
(See Portfolio Notes on page 27)
Pharma giant Bristol-Myers Squibb
was weak after management lowered CAPITAL ONE FINANCIAL CORP 4.5% Strategy Index
guidance for sales contributions from new CITIGROUP INC. 4.4% Price to Normal Earnings ¹ 7.7x 13.1x *
drug launches through 2025. We believe WELLS FARGO & COMPANY 4.1% Price / Earnings (1-Year Forecast) 12x 15.9x
BMY’s current valuation reflects an overly DOW INC. 3.8% Price / Book 1.6x 2.4x
pessimistic view of the drugmaker’s new LEAR CORPORATION 3.6% Median Market Cap ($B) $16.9 $12.0
product pipeline. Fresenius Medical Care,
COGNIZANT TECH SOLUTIONS 3.6% Weighted Average Market Cap ($B) $55.4 $128.8
a leading provider of dialysis products and
services, declined after trial data indicated BAXTER INTERNATIONAL INC. 3.4% Active Share 90.7% -
that GLP-1 drugs slowed the advancement EQUITABLE HOLDINGS INC. 3.2% Standard Deviation (5-Year) 28.1% 18.8%
of kidney disease. The share price reaction METLIFE INC. 3.1% Number of Stocks (model portfolio) 40 849
implied that GLP-1 usage will result in EDISON INTERNATIONAL 2.9% Source: Russell 1000® Value, Pzena analysis
lower demand for dialysis. However, we Total 36.6% *Investment universe median; ¹Pzena’s estimate of normal earnings.
note that any impact will be long-dated
and that other GLP-1 benefits, such as the
potential for fewer fatalities from heart SECTOR WEIGHTS Strategy Index
disease, could result in an increase in the Basic Materials 4% 4%
dialysis patient population. Consumer Discretionary 16% 9%
Consumer Staples 3% 7%
We initiated a position in Skyworks Energy 4% 8%
Financials 27% 20%
Solutions – a leading radio frequency
Health Care 12% 14%
component supplier to Apple and other Industrials 17% 16%
device-makers – after concerns over Real Estate 0% 5%
iPhone unit volumes and pricing pressure Technology 14% 8%
weighed on the stock’s valuation. Telecommunications 2% 4%
Utilities 3% 5%
0% 10% 20% 30%
Sector weights adjusted for cash - may appear higher than actual. Numbers may not add to 100% due to rounding.

23 | Pzena Fourth Quarter 2023

PORTFOLIO STRATEGIES
PZENA MID CAP FOCUSED VALUE (US)

US markets rallied in the fourth quarter, as We also initiated a position in To fund these purchases, we exited
signs of easing inflation and lower interest Skyworks Solutions – a leading our positions in AIG, Skechers,
rates boosted confidence in a soft landing. radio frequency component Wabtec and MasterBrand, all
The growth style outperformed value in supplier to Apple and other on valuation. We also trimmed
the quarter, but our portfolio outpaced device-makers – after concerns positions in Gap, Cardinal Health,
its value benchmark, as well as the broad over iPhone unit volumes and and Axalta on strength. Despite
Russell Midcap index. pricing pressure weighed on the the quarter’s solid performance,
stock’s valuation. Another name, valuations remain attractive in the
The top contributing sectors in the quarter Corebridge, formerly AIG’s Life portfolio, which is most exposed
were financials, consumer discretionary, & Retirement business, has been to the financials and consumer
and industrials, whereas energy was weak due to the overhang from discretionary sectors. ■
the only detractor. The top individual AIG’s sell-down, which we viewed
performer was apparel company Gap, as a buying opportunity. We
Inc., owner of Old Navy, Athleta, Banana added Universal Health Services,
Republic, and Gap. The stock doubled, a leading US hospital group, on
as Old Navy comparable sales turned the premise that current margin
positive for the first time in over two headwinds are likely to abate,
years, while margins expanded on lower as reimbursement rates reset to
commodity costs and less promotional reflect labor cost inflation.
activity. Shares of PVH, owner of Tommy periods greater than 1 year annualized in USD as of December 31, 2023
PERFORMANCE SUMMARY
Hilfiger and Calvin Klein, were also
Since
strong during the quarter. The company One Three Five Ten Inception
demonstrated tangible progress on its 4Q YTD Year Year Year Year 9/1/98
self-help plan, as evidenced by strong Pzena Mid Cap Focused Value Composite
17.1% 22.6% 22.6% 15.7% 16.7% 10.5% 12.5%
margin performance in North America - Gross
– historically its most challenging Pzena Mid Cap Focused Value Composite
16.8% 21.4% 21.4% 14.5% 15.5% 9.4% 11.4%
region. Finally, shares of door & window - Net
manufacturer JELD-WEN were up, as Russell Midcap Value Index 12.1% 12.7% 12.7% 8.4% 11.2% 8.3% 9.8%
margins came in ahead of expectations – a
See Calendar Year Returns, Portfolio Notes/Disclosures and important risk information beginning on pg. 26.
reflection of self help initiatives bearing Past Performance is not indicative of future results.
fruit. Returns could be impacted, positively or negatively, by currency fluctuations, where applicable.

Fresenius Medical Care, a leading provider TOP 10 HOLDINGS PORTFOLIO CHARACTERISTICS

(See Portfolio Notes on page 27)
of dialysis products and services, declined
DOW INC. 4.3% Strategy Index
after trial data indicated that GLP-1 drugs
BAXTER INTERNATIONAL INC. 4.0% Price to Normal Earnings ¹ 8.0x 12.7x *
slowed the advancement of kidney
disease. However, we note that any impact LEAR CORPORATION 3.8% Price / Earnings (1-Year Forecast) 12.3x 15.9x
will likely be long-dated and that other CNO FINANCIAL GROUP INC. 3.2% Price / Book 1.7x 2.2x
GLP-1 benefits, such as the potential for ACUITY BRANDS INC. 3.2% Median Market Cap ($B) $10.7 $9.6
fewer fatalities from heart disease, could COGNIZANT TECH SOLUTIONS 3.2% Weighted Average Market Cap ($B) $15.2 $22.8
result in an increase in the dialysis patient EQUITABLE HOLDINGS INC. 3.0% Active Share 95.0% -
population. Shares of consumer products OLIN CORPORATION 2.9% Standard Deviation (5-Year) 29.5% 22.0%
company Newell Brands were weak on Number of Stocks (model portfolio) 41 703
SS&C TECH HOLDINGS INC. 2.9%
management’s lower outlook for 2023 and
MAGNA INTERNATIONAL INC. 2.9%
2024 sales, and NOV (energy services) Source: Russell Midcap® Value, Pzena analysis
shares languished on lower energy prices Total 33.4% *Investment universe median; ¹Pzena’s estimate of normal earnings.
despite strong operating results.
SECTOR WEIGHTS Strategy Index
In additional to Baxter (see Highlighted Basic Materials 7% 4%
Consumer Discretionary 18% 13%
Holding section), we added four new
Consumer Staples 3% 4%
names to the portfolio. One such company, Energy 2% 6%
Concentrix, is a leading outsourced Financials 27% 16%
customer experience provider that is Health Care 11% 7%
contending with contract resets post- Industrials 14% 23%
COVID. We maintain there is long-term Real Estate 0% 11%
value to be found in the scaled players, Technology 15% 9%
Telecommunications 0% 1%
despite nearer-term cyclical economic
Utilities 3% 8%
headwinds weighing on volumes.
0% 10% 20% 30%
Sector weights adjusted for cash - may appear higher than actual. Numbers may not add to 100% due to rounding.

Pzena Fourth Quarter 2023 | 24

PORTFOLIO STRATEGIES
PZENA SMALL CAP FOCUSED VALUE (US)

Markets traded up sharply to end 2023, We initiated a position in Korn faced a sharp decline in revenue
as the Fed’s reaction to slowing inflation Ferry, a leading executive search and earnings as commercial real
led to a decline in yields and increased firm with a strong consulting estate volumes softened. The
investor optimism going into 2024. Small business. The company uses stock subsequently rebounded
caps outperformed large caps in the its strong C-suite and board as interest rates declined, so
quarter, but still lagged for the full year, relationships to cross-sell services we were not able to build a
while value outperformed growth. Our and maintain tight relationships full position. We funded these
portfolio outperformed the benchmark for with companies. The stock has positions via cash from the
both the quarter and the full year. traded down on concerns that acquisition of P&C insurer Argo
parts of the business were Group, as well as from the sale of
The top contributing sectors for the performing above-trend, but the Terex (aerial work platforms and
quarter were consumer discretionary, company has a strong net-cash material handling equipment) on
financials, and industrials. Shares of Gap, balance sheet to work through valuation.
Inc., owner of Old Navy, Athleta, Banana any weakness, and the stock more
Republic, and Gap, doubled as Old Navy than discounts these concerns, The portfolio remains positioned
comparable sales turned positive for in our view. We also initiated a towards more economically
the first time in over two years, while position in commercial real estate sensitive and cyclical names,
margins expanded on lower commodity broker Marcus & Millichap. The as valuations remain quite
costs and less promotional activity. company is the leader in small attractive.■
Tobacco leaf merchant Universal Corp. private market transactions, but
was also strong after reporting earnings PERFORMANCE SUMMARY periods greater than 1 year annualized in USD as of December 31, 2023
that benefited from tight tobacco supply, Since
as well as improving profitability in the One Three Five Ten Inception
company’s ingredients business. PVH, 4Q YTD Year Year Year Year 1/1/96
which owns Calvin Klein and Tommy Pzena Small Cap Focused Value
Hilfiger, rose on improved profitability Composite - Gross 16.4% 26.7% 26.7% 15.9% 14.9% 10.3% 13.2%
and a drawdown of inventory. Pzena Small Cap Focused Value
Composite - Net 16.1% 25.5% 25.5% 14.8% 13.7% 9.2% 11.9%
Only health care detracted marginally in Russell 2000 Value Index 15.3% 14.6% 14.6% 7.9% 10.0% 6.8% 9.2%
the quarter, and the biggest individual
detractor was Belden (signal transmission See Calendar Year Returns, Portfolio Notes/Disclosures and important risk information beginning on pg. 26.
Past Performance is not indicative of future results.
equipment), which reported disappointing Returns could be impacted, positively or negatively, by currency fluctuations, where applicable.
earnings and guidance, as destocking
at its end customers led to a revenue TOP 10 HOLDINGS PORTFOLIO CHARACTERISTICS
decline. Another underperformer was (See Portfolio Notes on page 27)
nutritional supplement direct seller CNO FINANCIAL GROUP INC. 4.1% Strategy Index
USANA Health Sciences, which reported STEELCASE INC. CLASS A 3.7% Price to Normal Earnings1¹ 8.2x 12.2x**
weaker-than-expected sales, driven ORION S.A. 3.4% Price / Earnings (1-Year Forecast) 11.6x 12.4x
by challenging economic conditions
SCANSOURCE INC. 3.2% Price / Book 1.4x 1.3x
in various Asian geographies, as well
as lower promotional activity. Despite RESIDEO TECHNOLOGIES INC. 3.2% Median Market Cap ($B) $2.7 $0.8
the weakness, USANA maintains a UNIVERSAL CORPORATION 3.1% Weighted Average Market Cap ($B) $3.2 $2.7
very strong cash position and is well- MRC GLOBAL INC. 3.1% Active Share 95.9% -
positioned for an expected rebound TRIMAS CORPORATION 2.8% Standard Deviation (5-Year) 30.2% 25.0%
in Chinese demand. Finally, door NOV INC 2.8% Number of Stocks (model portfolio) 45 1,431
manufacturer Masonite International
OLIN CORPORATION 2.7%
traded down despite improving Source: Russell 2000® Value, Pzena analysis
fundamentals after management Total 32.1% *Investment universe median; ¹Pzena’s estimate of normal earnings.
announced the acquisition of a premium
window manufacturer. While the target SECTOR WEIGHTS Strategy Index
company is a high-quality business, the Basic Materials 7% 4%
price is expensive and Masonite is taking Consumer Discretionary 20% 14%
on substantial leverage to complete the Consumer Staples 7% 2%
transaction, which prompted us to trim Energy 6% 9%
Financials 22% 26%
our position.
Health Care 2% 9%
Industrials 28% 14%
Real Estate 2% 11%
Technology 6% 6%
Telecommunications 0% 1%
Utilities 0% 4%
0% 10% 20% 30%
Sector weights adjusted for cash - may appear higher than actual. Numbers may not add to 100% due to rounding.

25 | Pzena Fourth Quarter 2023

 Calendar Year Returns FIGURES IN USD

GLOBAL VALUE GLOBAL FOCUSED VALUE

2019 2020 2021 2022 2023 2019 2020 2021 2022 2023
Global Value - Gross 22.9% 4.4% 20.6% -7.3% 20.1% Global Focused Value - Gross 23.6% 3.7% 20.2% -7.4% 20.8%
Global Value - Net 22.2% 3.9% 19.9% -7.8% 19.4% Global Focused Value - Net 22.7% 3.0% 19.3% -8.1% 19.9%
MSCI World Index 27.7% 15.9% 21.8% -18.1% 23.8% MSCI ACWI Index 26.6% 16.3% 18.5% -18.4% 22.2%
MSCI World Value Index 21.7% -1.2% 21.9% -6.5% 11.5% MSCI ACWI Value Index 20.6% -0.3% 19.6% -7.5% 11.8%

INTERNATIONAL VALUE INTERNATIONAL FOCUSED VALUE

2019 2020 2021 2022 2023 2019 2020 2021 2022 2023
International Value - Gross 18.1% 5.8% 12.9% -7.6% 19.4% International Focused Value - Gross 18.5% 5.7% 13.2% -8.7% 20.8%
International Value - Net 17.5% 5.2% 12.3% -8.1% 18.7% International Focused Value - Net 17.6% 4.9% 12.3% -9.4% 19.9%
MSCI EAFE Index 22.0% 7.8% 11.3% -14.5% 18.2% MSCI ACWI ex USA Index 21.5% 10.7% 7.8% -16.0% 15.6%
MSCI EAFE Value Index 16.1% -2.6% 10.9% -5.6% 19.0% MSCI ACWI ex USA Value Index 15.7% -0.8% 10.5% -8.6% 17.3%

INTERNATIONAL SMALL CAP FOCUSED VALUE EMERGING MARKETS FOCUSED VALUE

2019 2020 2021 2022 2023 2019 2020 2021 2022 2023
Int. Small Cap Focused Value - Gross 12.4% 0.3% 18.0% -0.3% 24.0% EM Focused Value - Gross 13.4% 10.0% 7.5% -5.7% 22.4%
Int. Small Cap Focused Value - Net 11.3% -0.7% 16.8% -1.3% 22.8% EM Focused Value - Net 12.3% 9.0% 6.4% -6.6% 21.2%
MSCI World ex-USA Small Cap Index 25.4% 12.8% 11.1% -20.6% 12.6% MSCI Emerging Markets Index 18.4% 18.3% -2.5% -20.1% 9.8%
MSCI World ex-USA Small Cap Value 22.8% 2.6% 13.3% -14.0% 14.7% MSCI Emerging Markets Value Index 11.9% 5.5% 4.0% -15.8% 14.2%
Index

EUROPEAN FOCUSED VALUE JAPAN FOCUSED VALUE

2019 2020 2021 2022 2023 2019 2020 2021 2022 2023
European Focused Value - Gross 17.4% 0.3% 17.2% -6.2% 24.8% Japan Focused Value - Gross 13.9% 0.1% 8.3% 0.7% 11.6%
European Focused Value - Net 16.6% -0.4% 16.5% -6.8% 24.0% Pzena Japan Focused Value - Net 13.0% -0.7% 7.5% -0.1% 10.7%
MSCI Europe Index 23.8% 5.4% 16.3% -15.1% 19.9% TOPIX 18.8% 12.6 0.8% -15.2% 19.6%
MSCI Europe Value Index 17.4% -5.1% 13.2% -7.2% 19.7% TOPIX Value 14.1% 0.8% 5.5% -5.0% 23.9%

LARGE CAP VALUE LARGE CAP FOCUSED VALUE

2019 2020 2021 2022 2023 2019 2020 2021 2022 2023
Large Cap Value - Gross 26.0% -1.4% 29.5% -4.1% 17.5% Large Cap Focused Value - Gross 26.5% -1.5% 30.2% -5.7% 20.0%
Large Cap Value - Net 25.5% -1.8% 29.0% -4.5% 17.0% Large Cap Focused Value - Net 25.6% -2.2% 29.3% -6.3% 19.2%
Russell 1000® Value 26.5% 2.8% 25.2% -7.5% 11.5% Russell 1000® Value 26.5% 2.8% 25.2% -7.5% 11.5%

FOCUSED VALUE MID CAP FOCUSED VALUE

2019 2020 2021 2022 2023 2019 2020 2021 2022 2023
Focused Value - Gross 26.9% -0.1% 27.2% -6.4% 28.7% Mid Cap Focused Value - Gross 29.6% 7.8% 32.9% -5.0% 22.6%
Focused Value - Net 25.7% -1.1% 26.0% -7.4% 27.4% Mid Cap Focused Value - Net 28.4% 6.8% 31.6% -6.0% 21.4%
Russell 1000® Value 26.5% 2.8% 25.2% -7.5% 11.5% Russell Midcap® Value 27.1% 5.0% 28.3% -12.0% 12.7%

SMALL CAP FOCUSED VALUE

2019 2020 2021 2022 2023
Small Cap Focused Value - Gross 26.7% 1.4% 30.5% -5.8% 26.7%
Small Cap Focused Value - Net 25.5% 0.3% 29.2% -6.8% 25.5%
Russell 2000® Value 22.4% 4.6% 28.3% -14.5% 14.6%

See Portfolio Notes/Disclosures and important risk information beginning on the following page.
Past Performance is not indicative of future results.
Returns could be impacted, positively or negatively, by currency fluctuations, where applicable.
Gross rates of return are presented gross of investment management fees and net of the deduction of transaction costs. An investor’s actual return will be reduced
by investment management fees. Net Returns are derived using a model fee applied monthly to Gross returns. Pzena uses the highest tier fee schedule, excluding
performance fees, to illustrate the impact of fees on performance returns. As product fees change, the current highest tier schedule will be in effect.

Pzena Fourth Quarter 2023 | 26

Portfolio Notes / Disclosures

PORTFOLIO NOTES DISCLOSURES

The specific portfolio securities discussed in the Commentary, Global London Stock Exchange Group plc and its group undertakings (collectively,
Research Review, and Stewardship Insights section of this report were the “LSE Group”). ©LSE Group 2024. FTSE Russell is a trading name of
selected for inclusion based on their ability to help you understand our certain of the LSE Group companies. Russell® is a trade mark of the relevant
investment process and not based on performance. They do not represent all LSE Group companies and is used by any other LSE Group company under
of the securities purchased or sold or recommended for our client accounts license. All rights in the FTSE Russell indexes or data vest in the relevant
during the quarter, and it should not be assumed that investments in such LSE Group company which owns the index or the data. Neither LSE Group
securities were or will be profitable. The portfolio security discussed in the nor its licensors accept any liability for any errors or omissions in the
Highlighted Holding section of this report (Baxter International) was held in indexes or data and no party may rely on any indexes or data contained
our Focused Value, Global Focused Value, Global Value, Large Cap Focused in this communication. No further distribution of data from the LSE Group
Value, Large Cap Value, Mid Cap Focused Value, and other strategies during is permitted without the relevant LSE Group company’s express written
the fourth quarter of 2023. These securities were selected to illustrate our consent. The LSE Group does not promote, sponsor or endorse the content of
research process and not based on performance. Top 10 holdings for our this communication.
strategies have been derived from the strategy’s composite. Holdings will
vary among client accounts as a result of different product strategies having The Global Industry Classification Standard (“GICS”) was developed by
been selected thereby. Holdings also may vary among client accounts as a and is the exclusive property and a service mark of MSCI Inc. (“MSCI”) and
result of opening dates, cash flows, tax strategies, etc. There is no assurance Standard & Poor’s, a division of The McGraw-Hill Companies, Inc.
that any securities discussed herein remain in your portfolio at the time you (“S&P”) and is licensed for use by Pzena Investment Management, LLC
receive this report or that securities sold have not been repurchased. The (“PIM”). Neither MSCI, S&P nor any third party involved in making or
securities discussed do not represent an account’s entire portfolio and, in the compiling the GICS or any GICS classifications makes any express or implied
aggregate, may represent only a small percentage of an account’s portfolio warranties or representations with respect to such standard or classification
holdings. (or the results to be obtained by the use thereof), and all such parties hereby
expressly disclaim all warranties of originality, accuracy, completeness,
Gross rates of return are presented gross of investment management fees merchantability and fitness for a particular purpose with respect to any of
and net of the deduction of transaction costs. An investor’s actual return will such standard or classification. Without limiting any of the foregoing, in no
be reduced by investment management fees. Net Returns are derived using event shall MSCI, S&P, and of their affiliates or any third party involved in
a model fee applied monthly to Gross returns. Pzena uses the highest tier making or compiling the GICS or any GICS classifications have any liability
fee schedule, excluding performance fees, to illustrate the impact of fees for any direct, indirect, special, punitive, consequential or any other damages
on performance returns. As product fees change, the current highest tier (including lost profits) even if notified of the possibility of such damages.
schedule will be in effect.
The S&P 500® is a registered trademark of Standard & Poor’s, a division
The contents of this document are for informational purposes only, of The McGraw Hill Companies, Inc., which is the owner of all copyrights
and highlight certain investment strategies that Pzena Investment relating to this index and the source of the performance statistics of this
Management, LLC (“PIM”) manages. It does not constitute an offer to sell, or index that are referred to herein.
a solicitation of an offer to buy, any strategy referenced herein.
The MSCI information may only be used for your internal use, may not be
reproduced or redisseminated in any form and may not be used as a basis for
RISK INFORMATION or a component of any financial instruments or products or indices.
All investments involve risk, including loss of principal.
Investments may be in a variety of currencies and therefore None of the MSCI information is intended to constitute investment advice or
changes in rates of exchange between currencies may a recommendation to make (or refrain from making) any kind of investment
cause the value of investments to decrease or increase. decision and may not be relied on as such. Historical data and analysis
The price of equity securities may rise or fall because of should not be taken as an indication or guarantee of any future performance
economic or political changes or changes in a company’s analysis, forecast or prediction. The MSCI information is provided on an
financial condition, sometimes rapidly or unpredictably. “as is” basis and the user of this information assumes the entire risk of any
Investments in foreign securities involve political, economic use made of this information. MSCI, each of its affiliates and each other
and currency risks, greater volatility and differences in person involved in or related to compiling, computing or creating any MSCI
accounting methods. These risks are greater for investments information (collectively, the MSCI Parties) expressly disclaims all warranties
in Emerging Markets. Investments in small-cap or mid- (including, without limitation, any warranties of originality, accuracy,
cap companies involve additional risks such as limited completeness, timeliness, non-infringement, merchantability and fitness for
liquidity and greater volatility than larger companies. PIM’s a particular purpose) with respect to this information. Without limiting any
strategies emphasize a “value” style of investing, which of the foregoing, in no event shall any MSCI party have any liability for any
targets undervalued companies with characteristics for direct, indirect, special, incidental, punitive, consequential (including, without
improved valuations. This style of investing is subject to the limitation, lost profits) or any other damages.
risk that the valuations never improve or that returns on
“value” securities may not move in tandem with the returns Benchmarks are used for comparative purposes only. The Russell, MSCI,
on other styles of investing or the stock market in general. and TOPIX indices cannot be invested in directly. The Pzena strategies
are significantly more concentrated in their holdings and have different
Past performance is no guarantee of future results, and the sector/ regional weights than their respective benchmarks. Accordingly, the
past performance of any accounts or commingled funds performance of the Pzena Composites will be different from, and at times
managed by PIM should not be considered indicative of more volatile, than that of the indices.
the future performance of any accounts or commingled
funds managed by PIM. Investment return and principal The Russell 1000® Value Index measures the performance of the large-cap
value of an investment will fluctuate over time. The value segment of the US equity universe. It includes those Russell 1000®
performance information provided is historical in nature. companies with lower price-to-book ratios and lower expected growth
The performance information presented for each investment values. The Russell 2000® Value Index measures the performance of small-
strategy represents composite performance of separately- cap value segment of the US equity universe. It includes those Russell
managed accounts and/or commingled funds (depending 2000® companies with lower price-to-book ratios and lower forecasted
on the particular investment strategy presented). growth values. The Russell Midcap® Value Index measures the performance
of the midcap value segment of the US equity universe. It includes those
Russell Midcap® Index companies with lower price-to-book ratios and lower
forecasted growth values.

27 | Pzena Fourth Quarter 2023

Portfolio Notes / Disclosures (Cont.)

The MSCI World Index is a free float-adjusted market capitalization index that professional clients and eligible counterparties as defined
is designed to measure developed market equity performance and provides by the FCA. Past performance is not indicative of future
equity returns including dividends net of withholding tax rates as calculated results. The value of your investment may go down as
by MSCI. The MSCI All Country World Index (ACWI) is a free float-adjusted well as up, and you may not receive upon redemption the
market capitalization index that is designed to measure developed and full amount of your original investment. The views and
emerging market equity performance and provides equity returns including statements contained herein are those of Pzena Investment
dividends net of withholding tax rates as calculated by MSCI. The MSCI EAFE Management and are based on internal research.
Index is a free float-adjusted market capitalization index that is designed
to measure developed market equity performance, excluding the U.S. and
Canada, and provides equity returns including dividends net of withholding
tax rates as calculated by MSCI. The MSCI ACWI ex USA Index is a free float- ADDITIONAL INFORMATION FOR EU INVESTORS:
adjusted market capitalization index that is designed to measure developed This marketing communication is issued by Pzena Investment Management
and emerging market equity performance, excluding the U.S., and provides Europe Limited (“PIM Europe”). PIM Europe (No. C457984) is authorised and
equity returns including dividends net of withholding tax rates as calculated regulated by the Central Bank of Ireland as a UCITS management company
by MSCI. The MSCI Emerging Markets Index is a free float-adjusted market
(pursuant to the European Communities (Undertakings for Collective
capitalization index that is designed to measure equity market performance
Investment in Transferable Securities) Regulations, 2011, as amended). PIM
of emerging markets, and provides equity returns including dividends net of
Europe is registered in Ireland with the Companies Registration Office (No.
withholding tax rates as calculated by MSCI. The MSCI World ex-USA Small
699811), with its registered office at Riverside One, Sir John Rogerson’s
Cap Index is a free float-adjusted market capitalization index that is designed
Quay, Dublin, 2, Ireland. Past performance is not indicative of future results.
to measure small cap developed market equity performance, excluding
The value of your investment may go down as well as up, and you may
the United States, and provides equity returns including dividends net of
not receive upon redemption the full amount of your original investment.
withholding tax rates as calculated by MSCI. The TOPIX Net Total Return Index
The views and statements contained herein are those of Pzena Investment
is a free-float adjusted market capitalization-weighted index that is calculated
Management and are based on internal research.
based on all the domestic common stocks listed on the TSE First Section
including dividends net of withholding tax rates as calculated by TOPIX. The
MSCI Europe Index is a free float-adjusted market capitalization index that
is designed to measure the equity market performance of the developed
FOR AUSTRALIA AND NEW ZEALAND INVESTORS ONLY:
markets in Europe, and provides equity returns including dividends net of
withholding tax rates as calculated by MSCI. This document has been prepared and issued by Pzena Investment
Management, LLC (ARBN 108 743 415), a limited liability company (“Pzena”).
The MSCI World Value Index, MSCI ACWI Value Index, MSCI EAFE Value Index, Pzena is regulated by the Securities and Exchange Commission (SEC) under
MSCI ACWI ex USA Value Index, MSCI Emerging Markets Value Index, MSCI U.S. laws, which differ from Australian laws. Pzena is exempt from the
World ex-USA Small Cap Value Index, TOPIX Value Index and MSCI Europe requirement to hold an Australian financial services license in Australia in
Value Index are constructed from their respective parent index. The value accordance with ASIC Corporations (Repeal and Transitional) Instrument
investment style characteristics for index construction are defined using 2016/396. Pzena offers financial services in Australia to ‘wholesale clients’
three variables: book value to price, 12-month forward earnings to price, and only pursuant to that exemption. This document is not intended to be
dividend yield. distributed or passed on, directly or indirectly, to any other class of persons
in Australia.

In New Zealand, any offer is limited to ‘wholesale investors’ within the

FURTHER INFORMATION meaning of clause 3(2) of Schedule 1 of the Financial Markets Conduct Act
These presentation materials are intended for the exclusive purpose 2013 (‘FMCA’). This document is not to be treated as an offer, and is not
of evaluating the investment advisory services of Pzena Investment capable of acceptance by, any person in New Zealand who is not a Wholesale
Management, LLC. Pzena Investment Management, LLC is located at 320 Park Investor.
Avenue, 8th Floor, New York, NY 10022 and is a registered investment adviser
registered with the United States Securities and Exchange Commission. Any
other use is strictly prohibited.
FOR JERSEY INVESTORS ONLY:
This document does not constitute an offer to sell, or a solicitation of an offer Consent under the Control of Borrowing (Jersey) Order 1958 (the “COBO”
to buy, securities or investment advisory services in any jurisdiction where Order) has not been obtained for the circulation of this document.
such an offer or solicitation is against the law, or to anyone to whom it is Accordingly, the offer that is the subject of this document may only
unlawful to make such an offer or solicitation, or if the person making the be made in Jersey where the offer is valid in the United Kingdom or
offer or solicitation is not qualified to do so. The information contained herein Guernsey and is circulated in Jersey only to persons similar to those to
is general in nature and does not constitute legal, tax, or investment advice. whom, and in a manner similar to that in which, it is for the time being
Prospective investors are encouraged to consult their own professional circulated in the United Kingdom, or Guernsey, as the case may be.
advisers as to the implications of making an investment in any securities or
investment advisory services. The directors may, but are not obliged to, apply for such consent in the
future. The services and/or products discussed herein are only suitable for
sophisticated investors who understand the risks involved. Neither Pzena
ADDITIONAL INFORMATION FOR UK INVESTORS:
Investment Management, Ltd. nor Pzena Investment Management, LLC
This marketing communication is issued by Pzena nor the activities of any functionary with regard to either Pzena Investment
Investment Management, Limited (“PIM UK”). PIM UK is Management, Ltd. or Pzena Investment Management, LLC are subject to the
a limited company registered in England and Wales with provisions of the Financial Services (Jersey) Law 1998.
registered number 09380422, and its registered office is at
34-37 Liverpool Street, London EC2M 7PP, United Kingdom.
PIM UK is an appointed representative of Vittoria & Partners
LLP (FRN 709710), which is authorised and regulated by the FOR SOUTH AFRICAN INVESTORS ONLY:
Financial Conduct Authority (“FCA”). The Pzena documents Pzena Investment Management, LLC is an authorised financial services
have been approved by Vittoria & Partners LLP and, in the provider licensed by the South African Financial Sector Conduct Authority
UK, are only made available to professional clients and (licence nr: 49029).
eligible counterparties as defined by the FCA.

The Pzena documents are only made available to © Pzena Investment Management, LLC, 2024. All rights reserved.

Pzena Fourth Quarter 2023 | 28

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