Global High Dividend ADR Strategy Q Commentary. Market Review: Performance:

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1 S C H A F E R C U L L E N C A P I T A L M A N A G E M E N T Global High Dividend ADR Strategy Q Commentary Market Review: Global equity markets diverged in the fourth quarter of 2016, as international markets remained rangebound while U.S. equities rallied following the unexpected election of Donald J. Trump as the next President of the United States. U.S. stocks marched higher on the prospect of renewed economic growth, fueled by the prospect of fiscal stimulus and more business-friendly government policies, while international markets traded lower on concerns about increased protectionism in global trade. Concurrently, long-term interest rates in the United States and other major developed markets continued to normalize, reinforced by the Federal Reserve s decision to increase the target Fed Funds rate by 25 basis points to between 0.50% and 0.75% and raise its outlook for three additional quarter-point hikes in 2017 from its previous forecast of two. Against this backdrop, equities outperformed fixed income, the U.S. Dollar appreciated against most currencies and cyclical high-beta companies outperformed defensive low-beta companies. By region, developed markets such as Japan and France outperformed emerging markets such as Mexico and China as market participants weighed the expectations of higher economic growth against perceived threats to international trade. Gains in emerging markets were led by Eastern Europe, with countries like Russia, Hungary and Poland among the top performers, while markets in Africa, Latin America and Asia lagged in relative performance. By sector, the largest beneficiary was the Financials sector, as investors anticipate that increased economic growth, higher trading activity, and a rising interest rate environment will translate into higher net interest income for banks. Energy companies also benefited from stronger crude oil prices following OPEC s agreement to restrict supply for the first time in eight years. Meanwhile, defensive sectors like Consumer Staples, Health Care, Utilities and Telecommunication Services underperformed. By style class, value outperformed growth and small caps outperformed large caps. With the near-term outlook for asset markets having become more uncertain and volatile, adhering to the price disciplines of low price-to-earnings and high dividend yield has become all the more important in providing satisfactory absolute and risk-adjusted returns. We believe that our strategy of buying shares in strong companies, at attractive valuations and holding them for the long-term remains attractive in this environment. Performance: Our performance in the quarter was in line with our performance profile since inception, whereby we generate alpha by outperforming in flat and down markets and underperforming in strong cyclical-driven up markets. On a risk-adjusted basis, the strategy is well positioned to outperform over a full market cycle, facilitated by our ownership of high quality industry leaders with attractive valuations and compelling long-term catalysts. 1 of 8

2 Global High Dividend ADR Returns vs. Benchmark Q4 1 Year 3 Year 5 Year 7 Year Since Incept * SCCM Global ADR (gross) SCCM Global ADR (net) S&P Global 1200 Index MSCI World Index *March Performance for periods greater than 1 year is annualized. Portfolio Attribution: Sector Attribution 2 of 8 Source: SCCM/Bloomberg, 12/31/2016. Industrials and Information Technology were the largest contributors to relative performance in the quarter due to our superior stock selection. Our underweight allocations to Real Estate and Utilities, two underperforming sectors for the benchmark in quarter, were also positive contributors to relative performance. Our overweight allocation and stock selection decisions within Consumer Staples and

3 Telecommunications were the largest drags on relative performance for the quarter. Stock selection within Consumer Discretionary hurt relative performance as well. Country Attribution Source: SCCM/Bloomberg, 12/31/2016. Our superior stock selection in the United States was our top country contributor for the quarter. We also benefited from our overweight allocation and stock selection in France. Stock selection in United Kingdom, Japan and Singapore were drags on relative performance during the quarter. Portfolio Changes Purchases: Vermilion Energy (Canada, Energy) Vermilion Energy (Vermilion) is a high-quality, global independent oil and gas producer with a unique asset base consisting of conventional Canadian fields as well as onshore and offshore international properties in France, Netherlands, Ireland, Australia and Germany. The company has a track record of consistent production growth, underpinned by its expertise in extracting value and extending the resource potential of late-life oil and gas assets. Vermilion s 3 of 8

4 exposure to European gas markets, at roughly one third of cash flow, is strategically valuable given the continent s position as a net gas importer and the rising relative costs of subsidies for renewable energy sources. The company is bringing on-stream several gas fields in Ireland and Germany, which should buttress earnings going forward given the differential in gas prices, which are roughly three times higher in Europe. Owing to its strong cash flow generation, fueled by high margins, low decline rates and strong capital efficiencies, Vermilion has never cut its dividend and remains the only Canadian independent producer to have maintained its dividend during the recent commodity downturn. While the company is positively geared towards rising oil prices, it also remains defensively positioned given its diversified international footprint, dividend support from a strong balance sheet, and an inflecting production profile. Vermilion is also well positioned to pursue additional acquisitions at discounted valuations as other players look to divest assets in order to strengthen their financial profiles. Moreover, current valuation levels, on a price-to-book and price-to- cash-flow basis, are attractive relative to historic averages. Shares of Vermilion Energy trade at 10.6 times cash flow and offer a 4.7% dividend yield. MMC Norilsk Nickel (Russia, Materials) MMC Norilsk Nickel (Norilsk Nickel) is the largest global producer of nickel and palladium, with top five positions in platinum, cobalt, rhodium, and a strong presence in copper. The company is vertically integrated, with a high-quality resource base, long-life reserve assets, and low-cost production facilities. In the aftermath of Indonesia s ban on ore exports, supply/demand dynamics are expected to normalize and may lead to a global deficit as China depletes its nickel ore stockpiles. With one of lowest production cost structures among global peers and the only large nickel producer with negative cash costs, Norilsk Nickel is best positioned to benefit from rising and expanding profit margins as prices recover. Demand for the company s main exports should be buoyed by rising sales of autos, home appliances, stainless steel applications, and smart grid technologies, among others. The company also stands to benefit from the secular trend towards tighter emissions standards globally, as platinum and palladium are used in auto catalytic converters and other pollution-control devices. Norilsk Nickel has a solid financial standing with a strong balance sheet supported by robust free cash flow. Moreover, the company has a strong track record of shareholder returns and has taken steps to improve its corporate governance profile and its environmental footprint. Norilsk management has reaffirmed its focus on capital and investment discipline, with the aim of delivering on its production, profitability, and dividend targets. Shares of Norilsk Nickel trade at 11.2 times forward earnings and offer an 8.9% dividend yield. Sales: Eli Lilly (United States, Health Care) We exited our position in Eli Lilly as the confluence of mounting regulatory risk in the US and a full valuation multiple no longer presented an attractive investment case. A strong relative performer, the company has demonstrated the effectiveness of its research and development spend via strong momentum in its autoimmune and diabetes franchises. However, relative to our other positions in this sector, the company is more exposed and thus more vulnerable to US drug pricing regulation. With the stock trading at 19.5 times forward earnings with a 2.7% dividend yield, we believe the risk-reward profile is skewed to the downside. NextEra Energy (United States, Utilities) We exited our position in NextEra Energy after the stock posted strong absolute and relative performance. Under the Trump administration, the outlook for the company s installed renewable energy base and backlog is uncertain, especially if renewable energy tax incentives are removed. Furthermore, ongoing negotiations with Texas regulators regarding the company s acquisition of Oncor will likely weigh on the stock. The company trades at a generous 17.5 times forward earnings multiple and offers a 3.4% dividend yield. 4 of 8

5 Sanofi (France, Health Care) We liquidated our position in Sanofi as the company s exposure to Medicare drug pricing in the US leaves it exposed to potentially punitive policies under the new US administration. Moreover, the company s target of spending $20 billion on acquisitions opens the door to a potentially expensive deal, which would dampen investor sentiment around capital allocation. Furthermore, consensus expectations for Sanofi s pipeline drugs are elevated, leaving the company with limited flexibility around execution. The company trades at 13.5 times forward earnings and offers a 4.1% dividend yield. Market Outlook: The success of Trump s economic agenda hinges on the interplay between his aggressively pro-growth economic policies and his isolationist approach to global trade and foreign policy. In the United States, the current expansion, which began in early 2009, is entering its eight year and is now the second longest bull market since With U.S. equity markets trading at elevated valuation levels, further appreciation will depend heavily on earnings growth, particularly since price-to-earnings multiples have historically tended to contract when inflation rises. For the time being, the market appears to be looking past potential challenges ahead: the new Administration s ability to transform broad themes into concrete policy proposals; the willingness of Congress to support drastic increases in infrastructure spending or any rollback of federal regulation; and the amount of debt Trump s proposals would add to the country s already historic debt burden, currently the highest since President Truman in the 1940s. Furthermore, as the Federal Reserve embarks on a gradual rate hike cycle in 2017, it is worth noting that since the Second World War, the central bank has embarked on twelve rate hike cycles in an attempt to engineer soft economic landings. However, it has only been successful once in the mid-1990s, while the other eleven instances have resulted in recessions and equity bear markets 1. The following charts demonstrate that in the United States, stable, defensive sectors have outperformed in the past seven rate hike cycles since 1970: Source: BCA Research, Study based on S&P 500 equities, January 2017 With monetary policy in several other major developed markets likely to embark on a normalization path, investors need to be well positioned for this eventuality. In this regard, a study titled The Case for Global 1 Gary Schilling Insight, January of 8

6 Dividends: Valuations And the Impact of Rising Rates 2 shows that during periods with 100 basis points moves upwards in U.S. long-term interest rates from 1970 to 2012, the global top decile of equities by dividend yield has outperformed the broad market by an annualized 440 basis points, with international dividend payers outperforming U.S. dividend payers. Moreover, rising interest rates and inflation expectations typically restrain P/E multiples for equities, an environment that favors value stocks. In this context, we believe that our disciplined approach to investing in high quality companies with solid balance sheets, cheap valuations and sustainable and growing streams of dividends remains a sound strategy. With a diversified portfolio of strong domestic businesses and well-positioned global exporters, we believe that we are well positioned across a number of potential interest rate environments. Against the backdrop of rising global political and economic uncertainty, we believe investors should be more mindful of risk, not less. The most effective way to manage risk is to adhere to an investment discipline focused on valuation and quality, which is the core tenet of our investment approach. We believe that our portfolio positioning is defensive, with a balanced allocation between several regions, countries and sectors. In this regard, one of our recent studies shows that since 1980, a time frame that includes several challenging market environments, international equities have delivered a positive return in 75% of periods of rising U.S. interest rates. Furthermore, international equities have outperformed U.S. equities in such periods 3. In a world where, until recently, over $10 trillion of sovereign bonds globally offered a negative yield, there is a clear need for sound investment assets that offer sustainable long-term returns, which is exactly what our strategy aims to offer. While continued accommodative monetary policies have created some pockets of froth and excess in asset markets, we believe that over the long term, fundamentally-driven value investing should deliver meaningful outperformance relative to passive, technically-driven momentum ETFs. With equity price multiples having recovered closer to historical norms, going forward we believe that the bulk of returns will be generated via the components of dividend yield and earnings/dividend growth, which is in line with the long-term norm of equity markets globally. On both these measures, our portfolio is well positioned, with a higher, 4.0% dividend yield and a faster and more sustainable dividend growth profile relative to the benchmark, MSCI World. In 2016, 82% of our portfolio companies have raised their dividend payments by an average of 8.9% year-over-year. With strong balance sheets and continued earnings growth, we anticipate that this trend will continue in 2017 and beyond. Thank you for your continued support and please do not hesitate to contact us with any questions. Best Regards, Schafer Cullen Capital Management, Inc. 2 The Case for Global Dividends: Valuations and the Impact of Rising Rates by O Shaughnessy Asset Management, August MSCI EAFE and S&P 500 index performance was calculated by compounding the total return rate for each index during the 20 instances of rising U.S. interest rates between US 10-year government bond yields were used as the reference for bond yields. For a date to qualify as the bond yield trough date, ALL of the following conditions had to be satisfied: (i) the bond yield on that particular date was the lowest in the next 125-day (6-month) period starting that day; (ii) the bond yield at the end of the 6-month window had increased by more than 50bp; (iii) there was no bond yield trough date in the previous 125 days (6 months) ending that day; and (iv) the decline in yield from the bond yield peak during the last episode was greater than 50bp. Only periods when U.S. interest rates rose by more than 100 basis points were included in this study. 6 of 8

7 Disclosure: Schafer Cullen Capital Management (SCCM or the Adviser ) is an independent investment advisor registered under the Investment Advisers Act of This information should not be used as the primary basis for any investment decision nor should it be considered as advice to meet your particular investment needs. The portfolio securities and sector weights may change at any time at the discretion of the Adviser. It should not be assumed that any security transactions, holdings or sectors discussed were or will be profitable, or that future recommendations or decisions will be profitable or equal the investment performance discussed herein. Investing in equity securities is speculative and involves substantial risk. Past performance is no guarantee of future results. Market conditions can vary widely over time and can result in a loss of portfolio value. Individual account performance results will vary and will not match that of the composite or model. This variance depends on factors such as market conditions at the time of investment, and / or investment restrictions imposed by a client which may cause an account to either outperform or underperform the composite or model s performance. A list of all recommendations made by SCCM within the immediately preceding period of not less than one year is available upon request. The strategy depicted in this report has been managed in accordance with the investment objectives of the strategy as determined by the Adviser. The Adviser has selected benchmarks, which in their opinion closely resemble the style of the securities held in the composite or model portfolio of the strategy (e.g. large cap value, small cap value, international, etc.). The securities held in the composite or model are actively managed while the benchmark index is not. Investors should be aware that the Adviser makes no attempt to match the portfolio securities, or the security weightings of the benchmark. The composite or model s performance will be affected greater by the price movements of individual securities as the composite or model is more concentrated, generally less than 100 securities, while a comparative benchmark will generally have between 500 and 2,500 securities where individual security price movements have a lesser affect. An individual cannot invest directly in an index. In the case where this report displays model results, please be aware that such results do not represent actual trading and that results may not reflect the impact that material economic and market factors might have had on the Adviser's decision-making if the Adviser were actually managing clients' money. Model and actual results reflect the deduction of advisory fees, brokerage or other commissions, and any other expenses that a client would have paid or actually paid (Net of Fee performance) and reflect the reinvestment of dividends and other earnings. Schafer Cullen Capital Management, Inc. makes no representation that the use of this material can in and of itself be used to determine which securities to buy or sell, or when to buy or sell them; SCCM makes no representation, either directly or indirectly, that any graph, chart, formula or other device being offered herein will assist any person in making their own decisions as to which securities to buy, sell, or when to buy or sell them. For comparative purposes, the adviser uses the MSCI World Index. All opinions expressed constitute Schafer Cullen Capital Management s judgment as of the date of this report and are subject to change without notice. 7 of 8

8 Appendix: Portfolio Exposure and Characteristics as of 12/31/2016 Portfolio Exposure Sectors % Assets Regions % Assets Consumer Discretionary 7.9 Developed Asia Pacific 7.6 Consumer Staples 14.9 Europe 38.0 Energy 7.1 North America 50.3 Financials 21.9 Asia Pacific Emerging 0.0 Health Care 14.9 Latin America 0.0 Industrials 9.6 EMEA 1.4 Information Technology 7.4 Materials 3.7 Real Estate 0.9 Developed Markets 95.9 Telecommunications 9.2 Emerging Markets 1.4 Utilities 0.0 Cash 2.7 Cash 2.7 Total Total 100 Top Country Exposure United States Switzerland United Kingdom Germany Japan France Canada Netherlands Singapore Top Ten Holdings JP Morgan Chase Microsoft Pfizer General Electric Altria Group Johnson & Johnson MetLife Merck Vermilion Energy Chevron Portfolio Characteristics Forward Price / Earnings Forward Dividend Yield LT Debt / Capital Est. LT EPS Growth Weighted Avg. Market Cap ($B) SCCM Global High Dividend ADR MSCI World Index of 8