DePrince, Race & Zollo, Inc. Mandate: Micro Cap Value Hired: 2011 Firm Information Investment Approach Total ARMB Mandate DePrince, Race & Zollo, Inc. is a 100% employee owned company that was founded in 1995. The firm, based in Winter Park, Florida currently employs 43 professionals. As of 12/31/2016, the firm’s total assets under management were $5.5 billion. Key Executives: Victor A. Zollo, Jr. Founding Partner & Co-Chief Executive Officer Gregory T. Ramsby Managing Partner, Portfolio Manager Kelly W. Carbone Managing Partner, Director of Marketing DePrince, Race & Zollo, Inc. (DRZ) believes undervalued stocks with an above average yield and a fundamental catalyst provide the opportunity for superior long- term total returns. DRZ seeks to own undervalued stocks with a minimum 1% dividend yield and a fundamental catalyst to obtain superior long-term total returns. Bottom-up stock selection is the key component to performance. Research moves up from company to industry and economy, to a confirmation of improving fundamental prospects. DRZ moves funds into new stocks which have better risk/reward prospects. Benchmark: Russell Micro Cap Value Index Assets Under Management: 12/31/2016: $103 Million Concerns: None 12/31/2016 Performance Last Quarter 1-Year 3-Years Annualized 5-Years Annualized DRZ Micro Cap Value 20.84% 46.47% 9.39% 14.49% Russell Micro Cap Value Index 16.32% 30.59% 8.01% 16.92%
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DePrince, Race & Zollo, Inc. Mandate: Micro Cap Value Hired: 2011
Firm Information Investment Approach Total ARMB Mandate
DePrince, Race & Zollo, Inc. is a 100% employee owned company that was founded in 1995. The firm, based in Winter Park, Florida currently employs 43 professionals. As of 12/31/2016, the firm’s total assets under management were $5.5 billion. Key Executives: Victor A. Zollo, Jr. Founding Partner & Co-Chief Executive Officer Gregory T. Ramsby Managing Partner, Portfolio Manager Kelly W. Carbone Managing Partner, Director of Marketing
DePrince, Race & Zollo, Inc. (DRZ) believes undervalued stocks with an above average yield and a fundamental catalyst provide the opportunity for superior long-term total returns. DRZ seeks to own undervalued stocks with a minimum 1% dividend yield and a fundamental catalyst to obtain superior long-term total returns. Bottom-up stock selection is the key component to performance. Research moves up from company to industry and economy, to a confirmation of improving fundamental prospects. DRZ moves funds into new stocks which have better risk/reward prospects. Benchmark: Russell Micro Cap Value Index
Assets Under Management: 12/31/2016: $103 Million
Concerns: None
12/31/2016 Performance
Last Quarter 1-Year 3-Years
Annualized 5-Years
Annualized DRZ Micro Cap Value 20.84% 46.47% 9.39% 14.49% Russell Micro Cap Value Index 16.32% 30.59% 8.01% 16.92%
Alaska Retirement Management Board
March 2, 2017
Kelly W. Carbone – Managing Partner Gregory T. Ramsby – Managing Partner
Randy A. Renfrow, CFA – Partner
DePrince, Race & Zollo, Inc. 250 Park Avenue South • Suite #250 • Winter Park, FL 32789
Alaska Retirement Russell Micro Cap Value Russell 2000 Value
Investment Performance
DePrince, Race & Zollo – U.S. Micro-Cap Value 6 See attached disclosure
December 31, 2016
*The Russell Micro Cap Value Index inception June 2006
11.36 11.14
8.58
13.49 14.61
9.58
46.43
8.63 9.22
5.26
14.08
16.92
8.01
30.59
6.26
13.14
15.07
8.31
31.74
0
5
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Inception to Date(09/30/97-12/31/16)
Annualized
Fifteen YearsEnded 12/31/16
Annualized
Ten YearsEnded 12/31/16
Annualized
Seven YearsEnded 12/31/16
Annualized
Five YearsEnded 12/31/16
Annualized
Three YearsEnded 12/31/16
Annualized
One YearEnded 12/31/16
DRZ Russell Micro Cap Value Russell 2000 Value
Calendar Year Performance
DePrince, Race & Zollo – U.S. Micro-Cap Value 7 See attached disclosure
*The Russell Micro Cap Value Index inception June 2006
46.43
-9.65
-0.55
30.78
14.88
-4.43
28.34
34.19
-27.77
-3.07
29.77
1.87
28.08
34.21
-5.80
26.17
26.21
10.44
-9.18
30.59
-6.45
3.15
41.17
22.81
-10.33
28.35
17.50
-34.92
-13.13
21.80
4.70
22.25
46.03
-11.43
14.02
22.83
-1.49
-6.45
31.74
-7.47
4.22
34.52
18.05
-5.50
24.50
20.58
-28.93
-9.77
23.48
-60 -40 -20 0 20 40 60
Year 2016
Year 2015
Year 2014
Year 2013
Year 2012
Year 2011
Year 2010
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Year 2008
Year 2007
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Year 2005
Year 2004
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Year 2002
Year 2001
Year 2000
Year 1999
Year 1998
DRZ Russell Micro Cap Value Russell 2000 Value
Equity Characteristics
DePrince, Race & Zollo – U.S. Micro-Cap Value 8
December 31, 2016
See Attached Disclosure
2.3
1.7
1.5
1.5
1.9
1.6
Yield
P/B
17.4
18.2
18.2
597.1
533.1
2,002.6
ForwardP/E
Market Cap$Million
Alaska Retirement Russell Micro Cap Value Russell 2000 Value
Alaska Retirement Management Board
Representative Holdings
DePrince, Race & Zollo – U.S. Micro-Cap Value 9
December 31, 2016
See Attached Disclosure
Sector %Portfolio Yield
Alon U.S.A. Energy Inc. Energy 2.7 5.3
Park Sterling Corp. Financials 2.4 1.5
United Financial Bancorp Inc. Financials 2.4 2.6
CatchMark Timber Trust Inc. Real Estate 2.4 4.8
Aceto Corp. Health Care 2.3 1.2
TriCo Bancshares Financials 2.2 1.8
Cohu Inc. Information Technology 2.2 1.7
Calgon Carbon Corp. Materials 2.2 1.2
Southwest Bancorp Inc. Financials 2.1 1.1
Kforce Inc. Industrials 2.1 2.1
Alaska Retirement Management Board
Three Equally Balanced Factors
DePrince, Race & Zollo – U.S. Micro-Cap Value See Attached Disclosure
10
TriCo Bancshares, TCBK
Overview:
TriCo Bancshares is a bank holding company with $4 Billion in assets operating 70 branches throughout Northern and Central California. The bank offers financial services and provides a diversified line of products and services to both consumers and businesses.
Dividend Yield: 1.80% Market Capitalization: $770 Million Relative Valuation:
We value TCBK on a relative P/B range of 0.60 – 1.00 vs. the S&P 600. We determine the range by linking our historical valuation analysis with our fundamental research. The stock is a candidate for purchase when the expected upside versus downside is two to one. We purchased TCBK when it was trading at the lower end of its relative P/B range.
Fundamental Catalysts:
TCBK is using excess capital to grow loans and return capital to shareholders through dividends and potential share repurchases.
The company is leveraging new investments in technology to drive the efficiency ratio lower.
Loan demand continues to improve, and the company has a strong pipeline. We expect TCBK
to generate strong loan growth in 2017.
Cash and securities represent 33% of assets. As excess cash is deployed into higher yielding loans, we expect profitability to improve.
Three Equally Balanced Factors
DePrince, Race & Zollo – U.S. Micro-Cap Value See Attached Disclosure
11
Kforce Inc., KFRC
Overview:
Kforce is a U.S. centric, full service staffing firm providing flexible and permanent staffing solutions. The company specializes in project based activities within the technology, financial, and health care industries.
Dividend Yield: 2.10% Market Capitalization: $630 Million Relative Valuation:
We value KFRC on a relative P/E range of 0.55 – 1.00 vs. the S&P 600. We determine the range by linking our historical valuation analysis with our fundamental research. The stock is a candidate for purchase when the expected upside versus downside is two to one. We purchased KFRC when it was trading at the lower end of its relative P/E range.
Fundamental Catalysts:
Veterans Affairs Next Generation: The VA awarded KFCR prime contractor status on the VA T4NG contract, a multi-year, multi-vendor award totaling $22 Billion.
We expect significant consultant hiring in 2015 and 2016 to drive revenue growth and margin
expansion going forward.
Financial Services: We believe the company’s large exposure to financial service firms will be beneficial in light of the more favorable interest rate and regulatory environment we foresee in 2017 and 2018.
Sector Allocation
DePrince, Race & Zollo – U.S. Micro-Cap Value 12 See attached disclosure
December 31, 2016
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Alaska Retirement Russell Micro Cap Value
Alaska Retirement Management Board
DePrince, Race & Zollo, Inc.PORTFOLIO APPRAISAL
State of Alaska - Micro capAY4E
December 31, 2016
Unit Total Market Pct. Cur.Quantity Security Cost Cost Price Value Assets Yield
Cash & EquivalentsShort Term Investment Fund 4,831,304 4,831,304 4.7 1.0
DePrince, Race & Zollo, Inc. has presented this report in compliance with the Global Investment Performance Standards (GIPS®). 1. DePrince, Race & Zollo Inc. (DRZ) is an independent investment management firm, founded in 1995, that manages equity portfolios primarily for U.S. institutional
clients. 2. DRZ claims compliance with the Global Investment Performance Standards (GIPS®) and has prepared and presented this report in compliance with the GIPS
standards. DRZ has been independently verified for the periods March 31, 1995 through December 31, 2015 by The Spaulding Group. The verification report is available upon request. Verification assesses whether (1) the firm has complied with all the composite construction requirements of the GIPS standards on a firm-wide basis and (2) the firm’s policies and procedures are designed to calculate and present performance in compliance with the GIPS standards. Verification does not ensure the accuracy of any specific composite presentation.
3. Accounts that experience cash flows of 10% or more will be temporary removed from the composite for one month. Additional information regarding the firm’s policies for valuing portfolios, calculating performance, and preparing compliant presentations are available upon request.
4. The composite invests in U.S. stocks, ADRs, and foreign domiciled stocks traded in US dollars on the major US exchanges that generally have the following characteristics; a dividend yield generally above 1% and a market capitalization that does not exceed the largest market capitalization in the Russell Micro-Cap Value Index.
5. Past performance is not indicative of future results. The actual return and value of an account will fluctuate and at any point could be worth more or less than the amount invested. Individual account performance will vary according to individual client investment objectives.
6. The benchmark is the Russell Microcap Value Index which measures the performance of the microcap value segment of the U.S. Equity market. It includes those Russell Microcap Index companies with lower price-to-book ratios and lower forecasted growth values. This index is utilized to allow for comparison of the strategy’s performance to that of well-known and widely recognized index. Prior to January 2007 the composite was measured against the Russell 2000 Value index, which was changed to more accurately represent the composite strategy.
7. Total time-weighted rates of return are expressed in US dollars. Computations include the reinvestment of all dividends and capital gains. For investments in ADRs and foreign domiciled companies, dividends are included net of any withholding taxes.
8. The composite was created in October 1997. DRZ’s list of composite descriptions is available upon request. This composite requires a minimum asset level of $1,000,000 (one million dollars) for inclusion.
9. Net performance returns are calculated by deducting the highest investment advisory fee. 10. DRZ’s standard fee schedule for Micro Cap Value is 1.00% on all amounts. 11. Internal dispersion is calculated using the equal-weighted standard deviation of annual gross returns of those portfolios that were included in the composite for the
entire year; it is not presented for periods with 5 or fewer portfolios. The three-year annualized ex-post standard deviation measures the variability of the composite and the benchmark returns over the preceding 36 months period. The three-year ex-post standard deviation is not required for periods prior to 2011.
12. All information contained in this document is provided for informational purposes only and should not be deemed as a recommendation to buy the securities mentioned. The securities highlighted in this document, if any, represent recent holdings. Each quarter, DRZ uses the same objective, non-performance based criteria to select these securities. It should not be assumed that recommendations made in the future will be profitable or will equal the performance of the securities discussed in this report.
13. If clients are listed in this document, it is not known they approve or disapprove of DRZ or the advisory services it provides. If included, the representative clients listed in this document are a cross section of current accounts that may or may not maintain similar investment objectives as those expressed by DRZ’s prospective clients. This list may include accounts that are not invested in the investment strategy described in this document.
14. Frank Russell Company is the source and owner of Russell Index data reflected in this material and all trademarks and copyrights related thereto. Unauthorized use, disclosure, copying or redistribution of such data is prohibited. Frank Russell Company is not responsible for the formatting or configuration of this material or for any inaccuracy in this presentation.
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Value Returns to Favor
• Since Value’s rally began mid-2015, we’ve added over +1370bps in relative performance.
• We continue to believe we’re in the early innings of a rebound for Value stocks as the group remains well below their 10-year mean vs. Growth.