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Non-U.S. Value Equity

The Non-U.S. Value Equity strategy at Barrow Hanley was a logical extension and expansion of our track record of success in investing in out-of-favor, low-expectation stocks. In our Non-U.S. Value Equity strategy, as well as our domestic value strategies, we seek to exploit inefficiencies in the valuation of securities through adherence to a value-oriented, bottom-up investment process. Our non-U.S. value equity portfolios reflect value characteristics such as: 1) price/earnings ratios below the market (MSCI EAFE), 2) price/book ratios below the market, 3) enterprise value/free cash flow ratios below the market, and 4) dividend yields above the market.

Strategy Summary
Asset Class Non-U.S. Equity
Investment Style Value
Portfolio Benchmark: MSCI EAFE (Gross)
Portfolio Assets $4,282 MM as of 12/31/2016
Commingled Fund Open
Separate Account Open
Mutual Fund Touchstone International Value Fund: FIVIX

Investment Process

Our approach to the equity market is based on the underlying philosophy that markets are inefficient. We believe that these inefficiencies can best be exploited through adherence to a value-oriented investment process dedicated to the selection of securities on a bottom-up basis. We do not attempt to time the market or rotate in and out of broad market sectors, as we believe that it is difficult, if not impossible, to add incremental value on a consistent basis by market timing.

We stay fully invested with a defensive, conservative orientation, based on the belief that superior returns can be achieved while taking below-average risks. We implement this strategy by constructing portfolios of individual stocks that reflect value characteristics such as: 1) price/earnings ratios below the market (MSCI EAFE Index), 2) price/book ratios below the market, 3) enterprise value/free cash flow ratios below the market, and 4) dividend yields above the market. Barrow Hanley's history of value investing indicates that a strategy of emphasizing low price/earnings ratios, low price/book ratios, and high dividend yields provides a measure of protection in down markets, as well as participation in improving economic cycles.

The equity research process at Barrow Hanley is conducted on a bottom-up basis by our experienced analysts and portfolio managers. Our team focuses primarily on fundamental securities analysis, valuation, and prospects for a return to fair valuation.

In our portfolio construction process, we do not attempt to implement macro bets from a top-down perspective. While we adhere to internal guidelines to ensure proper diversification, industry and sector weightings are a residual of the bottom-up stock selection process and may vary meaningfully at times from the respective weightings in the MSCI EAFE Index.

We construct portfolios with non-dollar currency exposure (i.e., unhedged) in a fully-invested manner. While the Non-U.S. Value Equity strategy is primarily invested in companies domiciled in developed non-U.S. markets, we may, on an opportunistic basis, invest up to 20% of the portfolio in companies domiciled in emerging markets, as defined by MSCI.

Portfolio Characteristics as of 12/31/2016

  Portfolio Benchmark1
P/B Ratio 1.4 1.7
Weighted Average Market Cap ($B) 34.0 54.0
Median Market Cap ($B) 15.2 8.9
Dividend Yield 3.1 3.1
P/E Trailing 1-Year (Ex. Negative Earnings) 18.0 18.3
1MSCI EAFE (Gross)
Regional Allocations as of 12/31/2016
  Portfolio
Asia/Pacific ex Japan 5.0%
Emerging Markets 7.8%
Europe ex UK 49.0%
Japan 15.2%
Middle East & Africa 2.1%
North America 3.2%
United Kingdom 17.7%
Top Holdings as of 12/31/2016
CRH 3.7%
Imperial Brands 3.3%
DS Smith 3.3%
ING Groep 3.2%
Sanofi 2.9%
Fuji Electric 2.9%
Bayer 2.8%
Fiat Chrysler Automobiles 2.8%
Airbus Group 2.7%
GlaxoSmithKline 2.5%
Sector Weightings as of 12/31/2016
Industrials 23.0%
Financials 21.4%
Health Care 13.5%
Materials 11.4%
Consumer Staples 8.7%
Energy 8.6%
Consumer Discretionary 5.7%
Information Technology 5.4%
Utilities 2.2%
Telecom Services 0.1%
Performance as of 12/31/2016
Annualized Portfolio Returns (%)

*3 Month returns are not annualized.

Disclosure

Barrow Hanley's returns are shown before investment management fees and custody expenses. Index returns do not reflect transaction costs, management fees, and other expenses. Performance is expressed in U.S. currency. Holdings and statistics are presented as supplemental information to the BHMS Non-U.S. Value composite. A full disclosure presentation may be accessed from the link above. Barrow, Hanley, Mewhinney & Strauss, LLC claims compliance with the Global Investment Performance Standards (GIPS®).

All institutional product information has been provided by Barrow, Hanley, Mewhinney & Strauss, LLC. Any questions about this material or requests for additional information may be made directly to the firm from the "Contact Us" link above.

Mutual Fund Disclosure

Investing involves risk including loss of principal. For more information pertaining to the mutual fund products above, including investment objectives, risks, charges and expenses, obtain a prospectus. Read the prospectus carefully before investing or sending money. Neither this material nor any accompanying oral presentation or remarks by a representative of the distributors is intended to constitute a recommendation of the funds or a determination of suitability for any investor.

‡ Touchstone International Value Fund is distributed by Touchstone Securities, Inc., which is not affiliated with Barrow, Hanley, Mewhinney & Strauss, LLC or any other affiliate. For more information on this Fund and to obtain a prospectus, please visit TouchstoneInvestments.com or contact Touchstone at 1-800-543-0407.

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