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 posted strong gains in the second quarter of 2017 as market participants remained optimistic about the outlook for global growth, fueled by the prospect of fiscal stimulus and more business-friendly reform policies. In this regard, the recent election of President Macron in France, with among the largest mandates in over seventy years, provides further strength to the recovery unfolding across Europe. By contrast, market sentiment in the United States was held back by a host of unfavorable developments on the political front, which dampened enthusiasm about the new administration s progrowth economic agenda. The Federal Reserve raised interest rates by another 25 basis points in June, the second of three targeted hikes in 2017, and signaled its intention to reduce the size of its $4.5 trillion balance sheet. Against this backdrop, equities outperformed fixed income, long-term interest rates remained mostly range-bound and the U.S. dollar reversed gains from last year to depreciate against most major currencies. Most commodities, with the exception of a few, such as gold and copper, retraced some of their earlier gains in the year on the back of unfavorable supply-demand dynamics, among other factors. By region, developed markets performed broadly in line with emerging markets, both of which outperformed U.S. markets. Within developed markets, Western European countries, such as Italy and France, outperformed, whereas commodity-oriented countries such as Australia and Canada, underperformed. Gains in emerging markets were led by Eastern Europe, where equities were lifted higher by the relief rally in the aftermath of the French election, and Asia Pacific, with countries like South Korea and Taiwan posting solid gains. By sector, the largest beneficiary was the Health Care sector, where constituents rebounded after having underperformed in the prior year, followed by Industrials and Financials. Energy was the laggard for the quarter, as market participants weighed the extension of OPEC production cuts through to early 2018 against continued growth in U.S. shale production. By style class, growth outperformed value 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 earnings and high dividend yield has become all the more important in generating 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: The strategy posted strong absolute returns in the quarter and modestly underperformed our benchmark, which is in-keeping 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. We continue to believe that our strategy is well positioned to outperform on a risk-adjusted basis over a full market cycle. 1 of 8

2 Global High Dividend ADR Returns vs. Benchmark Q2 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 Source: SCCM/Bloomberg, 6/30/2017. The largest contributor to relative performance was our strong stock selection in the Financials, Consumer Staples and Materials sectors, where our well-positioned companies, with unique long-term catalysts and a clear commitment to shareholder value creation outperformed, including ING Groep, HSBC, MetLife, Nestle, Unilever, Altria and Smurfit Kappa. Across the Financials sector, we did well to invest in attractively-valued companies in Europe and Asia with robust earnings growth and to avoid companies in Australia and Japan with lackluster earnings growth. Our stock selection within the 2 of 8

3 Consumer Discretionary sector was also a positive contributor to relative performance, with Michelin outperforming during the quarter. The largest detractor from relative performance was our underweight allocation to Information Technology and Industrials and our overweight allocation to Telecommunication Services and Energy, which underperformed in the quarter. Information Technology, the best-performing sector year-to-date, contributed 24% of the MSCI World s first half gains, but market leadership remained narrow, with the top 10 technology stock contributors comprising 58% of the sector s returns. We remain comfortable with these allocation decisions based on valuations and the long-term outlook for our portfolio companies and we continue to find new, attractively valued investment opportunities across a number of sectors. Stock selection hurt relative performance in Information Technology, Health Care, Industrials, Telecommunication Services and Energy. Cash was a detractor from performance during the quarter. Country Attribution Source: SCCM/Bloomberg, 6/30/2017. Our overweight positions and stock selection in Switzerland, United Kingdom, Ireland and Netherlands, which posted strong gains in the quarter, were the primary contributors to relative performance, where a diverse set of well-positioned companies performed strongly, including Nestle, Novartis, UBS, HSBC, Unilever, Smurfit Kappa and ING Groep. Our overweight allocation to France and our stock selection in Japan aided relative performance. 3 of 8

4 Our stock selection in the United States, Canada and Germany, our underweight allocation to Denmark, as well as our overweight allocation to Brazil and Russia were the primary detractors from relative performance. In the United States, market leadership was fairly narrow in breadth, with the top 10 stock contributing over a third of the total return in the quarter, and our high quality stocks, including Boeing, Johnson & Johnson, Microsoft and Altria, outperformed lower quality stocks. We retain confidence in these allocation decisions based on the attractive valuations of our holdings across these countries. Cash was a detractor from performance during the quarter. Portfolio Changes Purchases: Advanced Semiconductor Engineering (Taiwan, Technology) Advanced Semiconductor Engineering (ASE) is the world s largest independent provider of semiconductor assembly, packaging and testing (OSAT) services, offering integrated engineering solutions and final testing services for electronics manufacturers. The company serves several global multinational clients and has an end market exposure that is significantly geared towards consumer, wireless and connectivity applications. Looking ahead, a meaningful catalyst for ASE is the proposed merger with its closest competitor, Siliconware Precision Industries, which is expected to close in the second half of The combined entity would benefit from significant economies of scale, substantial earnings accretion as cost synergies feed through to the bottom line, and a stronger position relative to emerging Chinese competitors. With a dominant share of the global OSAT market, ASE is well positioned to take advantage of several engines of growth over the medium-to-long term, including ongoing investments in 4G/LTE networks, the transition to 5G technology and the shift from copper wire bonding to flip chip technology, widely used in the latest generation of mobile computing devices for its superior electrical performance, higher density of interconnections and small semiconductor size. Furthermore, the emerging trend towards Internet of Things applications, including consumer wearable devices, should boost the semiconductor industry as a whole. With an attractive valuation and a proven track record of shareholder returns, ASE offers a long runway of earnings and dividend growth. Shares of the company are valued at 13.1 times forward earnings and offer a 4.4% dividend yield. Sales: Chevron (United States, Energy) We liquidated our position in Chevron, a global integrated oil and gas company, amid more defensive alternatives in an industry that remains challenged. In light of Chevron s higher-than-average capital spending requirements, we decided to reallocate capital to higherdividend-yielding holdings in this sector. The stock trades at 8.1 times price-to-(forward) cash flow, with a 4.1% dividend yield. Genuine Parts (United States, Consumer Discretionary) We liquidated our position in Genuine Parts, a North American distributor of automotive and industrial replacement parts. Amid a slowing North American automotive market, sentiment towards auto parts retailers will likely remain challenged, especially with the potential entry of Amazon in the do-it-yourself auto parts market. The stock trades at 16.6 times forward earnings, with a 3.3% dividend yield. Johnson Controls (United States, Industrials) We liquidated our position in Johnson Controls, a global provider of ventilation, fire safety and building technology solutions, amid more attractive alternatives in this sector. While we believe that the merger with Tyco should be earnings-accretive, we decided to reallocate capital to higher-dividend-yielding holdings in this sector. The stock trades at 15.6 times forward earnings, with a 2.3% dividend yield. 4 of 8

5 Market Outlook: We continue to believe that our strategy is well positioned from a long-term perspective given the strong outperformance potential from a reversal of the historically extreme multi-year underperformance of 1) international versus US equities and 2) value versus growth equities. In this regard, as seen below, Eurozone equities have meaningfully underperformed in the latest market cycle and have room to surprise, driven by an improving outlook for earnings, with the Eurozone expected to post the fastest earnings growth of any major region globally this year, at 19% YoY. Within this region, domesticallyexposed companies such as financials, which have lagged the most since March of 2009, have the potential, going forward, to benefit from the twin tailwinds of valuation re-rating and faster earnings growth. Further supporting the improvement in investor sentiment across the Eurozone is the dissipation of political risk following a string of positive election results, the most important of which was the election of a reform-minded president in France with among the largest mandates since the Second World War. The key determinant of whether this positive political tailwind will continue and drive economic growth is the actual implementation of policies that improve the long-term competiveness and earnings power of Eurozone companies. We are clearly encouraged by the strong year-to-date performance of Eurozone equities, which continues to be supported by a relatively broad-based economic recovery in the region. Source: Datastream; As of 06/30/2017 Within Europe, our strategy remains to invest in companies with visible long-term earnings growth drivers and/or in global multinationals that are trading at a meaningful valuation discount to their US peers. Within Emerging Markets, the outlook is constructive though the wide diversity of countries and companies which fall under this umbrella term makes prudent stock selection key for success. In the United States, however, the current expansion, which began in early 2009, is now in its ninth year and is the second-longest bull market since While financial markets have benefited from the extraordinary low interest rate environment, the subsequent increase in debt levels has contributed to subpar GDP growth in this recovery. With the Federal Reserve raising interest rates, this presents a risk that while rates are rising from a low level, high debt levels make economies more vulnerable to higher interest rates. 5 of 8

6 Market participants, however, are optimistic that the current low inflationary and low growth market will keep the Fed from tightening too aggressively and that economic growth will be self-sustaining. In a world where, until recently, over $10 trillion of sovereign bonds globally offered a negative yield, there is a clear need for investment assets that offer sustainable long-term returns, which is what our strategy attempts 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 could potentially deliver meaningful outperformance relative to passive, technically-driven momentum ETFs. As monetary policy in several major developed markets has likely reached the limit of its effectiveness, investors need to prepare for some eventual form of normalization in long-term interest rates. Given the flexibility afforded to our strategy by our focus on three key investment variables including 1) low price/earnings ratios, 2) high dividend yields and 3) strong earnings/dividend growth, we believe that we are well positioned across a number of potential interest rate environments. This point is further accentuated by the conservative and underleveraged nature of several of our portfolio companies balance sheets which allows for greater long-term stability in future dividend payments and the valuable ability to make opportunistic acquisitions during downturns. 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 we consider our portfolio to be well positioned with a higher, 4.1% dividend yield and a faster and more sustainable dividend growth profile relative to the benchmark, MSCI World. Year-to-date, 82% of our portfolio companies have raised their dividend payments by an average of 7.9% YoY. In this regard, strong dividend increasers include Norilsk Nickel, Boeing, Telefonica Brasil, Smurfit Kappa, BNP Paribas, Michelin and British American Tobacco. 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. 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 6/30/2017 Portfolio Exposure Sectors % Assets Regions % Assets Consumer Discretionary 4.6 Developed Asia Pacific 3.5 Consumer Staples 16.6 Europe 46.1 Energy 5.7 North America 43.3 Financials 21.4 Asia Pacific Emerging 1.5 Healthcare 14.5 Latin America 1.3 Industrials 10.2 EMEA 1.1 Information Technology 11.0 Materials 5.6 Real Estate 0.0 Developed Markets 92.9 Telecommunications 5.9 Emerging Markets 4.0 Utilities 1.5 Cash 3.2 Cash 3.2 Total Total 100 Top Country Exposure United States United Kingdom Switzerland Germany France Netherlands Japan Ireland Canada Top Ten Holdings Microsoft JP Morgan Chase Johnson & Johnson Boeing HSBC Holdings Pfizer MetLife Altria Cisco Systems Unilever 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