Retiree Health Care Board of Trustees Regular Meeting September 25, 2017 Page 1
AGENDA RETIREE HEALTH CARE BOARD OF TRUSTEES REGULAR MEETING MONROE COUNTY BOARD OF COMMISSIONERS CHAMBERS ROOM MONDAY, SEPTEMBER 25, 2017 – 3:00 P.M. 125 E. SECOND STREET MONROE, MI 48161 (734) 240-7003
I. CALL TO ORDER
II. ROLL CALL
III. PLEDGE OF ALLEGIANCE
IV. APPROVAL OF AGENDA
V. APPROVAL OF MINUTES (08/28/17 Regular Meeting)
VI. PUBLIC COMMENT
VII. COMMUNICATIONS— 1. Boyd Watterson GSA Fund, LP—Natural Disaster Update
VIII. OLD BUSINESS
IX. NEW BUSINESS 1. Presentation by Money Manager, Schafer Cullen – International Dividend, Nick Petrovich 2. Monroe County Retiree Health Care Trust Investment Report as of August 31, 2017
X. PUBLIC COMMENT
XI. MEMBERS TIME
XII. NEXT MEETING – October 23, 2017 at 3:00 p.m.
XIII. ADJOURNMENT
The County of Monroe will provide necessary auxiliary aids and services, such as signers for the learning impaired and audiotapes of printed materials being considered at the meeting to individuals with disabilities at the meeting upon one week’s notice to the County of Monroe. Individuals with disabilities requiring auxiliary aids or services should contact the County of Monroe by writing or calling the following:
Human Resources – 125 East Second Street, Monroe, MI 48161 – Voice (734) 240-7295 and TDD (734) 240-7300 Retiree Health Care Board Regular Meeting Minutes August 28, 2017 Page 1
RETIREE HEALTH CARE BOARD OF TRUSTEES MINUTES August 28, 2017 Regular Meeting
I. The Regular Meeting of the Retiree Health Care Board of the Trustees of the Monroe County Board of Commissioners was held in the Board of Commissioners Chambers on Monday, August 28, 2017.
Chairman Bob Neely, called the meeting to order at 3:00 p.m.
II. ROLL CALL Roll call by Clerk as follows:
Trustees Present: Michael Bosanac, Bob Neely and Kay Sisung Trustees Absent: David Rever and Gary Wilmoth (excused)
Michael Cho, Brian Brice and Amy Cole of Morgan Stanley/Graystone were also in attendance.
A quorum being present, the Board proceeded to conduct business.
III. PLEDGE OF ALLEGIANCE Michael Cho led the Pledge of Allegiance.
IV. APPROVAL OF AGENDA Motion by Michael Bosanac, supported by Kay Sisung to approve the August 28, 2017 agenda as presented.
Voice vote taken. Motion carried.
V. APPROVAL OF MINUTES (07/24/17 Regular Meeting and 8/15/17 Special Meeting) Motion by Kay Sisung, supported by Michael Bosanac to approve the July 24, 2017 Regular Meeting minutes as presented and waive the reading thereof.
Voice vote taken. Motion carried.
Motion by Michael Bosanac, supported by Kay Sisung to approve the August 15, 2017 Special Meeting minutes as amended and waive the reading thereof.
Voice vote taken. Motion carried.
VI. PUBLIC COMMENT – None
VII. COMMUNICATIONS—None
VIII. OLD BUSINESS – None
Retiree Health Care Board Regular Meeting Minutes August 28, 2017 Page 2
IX. NEW BUSINESS 1. Presentation by Money Manager, Renaissance —International Equity, Michael Fedorovich Top Contributors YTD o Allocation: Sector-Overweight Information Technology o Allocation: Country- Overweight Hong Kong o Selection: Sector-Health Care & Consumer Discretionary o Selection: Country- Canada & United Kingdom Top Detractors YTD o Allocation: Sector-Overweight Materials o Allocation: Country- Overweight Ireland o Selection: Sector-Information Technology & Telecommunication Services o Selection: Country-Denmark & Hong Kong Outlook Positives: . Valuation of global Markets favors non-U.S. stocks even with the outperformance of international stocks this year. As an example, the FactSet World x US Index trailing Price to Earnings ratio stands at a 19% discount to the Fact Set US Index compare to an historical 11% discount over the previous ten years. . Foreign exchange headwinds, which had been the bane of US –based foreign market investors since 2013, have turned into tailwinds, and we foresee continued strength in foreign currencies relative to the US dollar. Negatives: . Central Banks may become less accommodative as global growth improves . Risks to the market’s upbeat tone include geopolitical uncertainty, terrorism and how deftly central bankers can control economic growth while keeping inflation in check Positioning Recent additions to the portfolio were in the Consumer Discretionary and Industrials sectors. We continue to review out Energy sector positioning in light of OPEC oil production cuts and increased shale production Out overweight in emerging markets is focused on capitalizing on rising disposable incomes. These rising incomes should result in high levels of consumption especially within the Asia-Pacific region. Top 4 Sectors—Industrials, Financials, Information Technology, Consumer Discretionary (as of 6/30/17) Currently the Biggest Opportunities are in China and Biggest Threat is in Korea Energy? Energy companies that they are seeing do not have the better overall characteristics
Retiree Health Care Board Regular Meeting Minutes August 28, 2017 Page 3
2. Monroe County Retiree Health Care Trust Investment Reports—Michael Cho a. Michael Cho explained the Monthly Investment Report as of July 31, 2017 Account value as of July 31, 2017 = $52,949,299.55; increase from June 30, 2017 = $794,230.52. MTD = 1.52%; YTD = 8.55%. Recommendation—Sell off Wisdomtree Japanese Dollar Hedge and put the proceeds into International Managers. $500,000 to Shafer Cullen and $861 remain to renaissance
Motion by Michael Bosanac to follow Investment Consultant’s recommendation and cash out Wisdomtree in the amount of $1,361,055.20 and reallocate $861,055.20 to Renaissance International and $500,000 to Shafer Cullen International, effective as soon as the transactions can be made, supported by Kay Sisung.
Voice vote taken. Motion carried.
b. Quarterly Performance report as of June 30, 2017—Michael Cho explained the Quarterly Performance Report—Current quarter 2.48% v 2.53% benchmark; YTD 7.13% v 6.90% benchmark c. Quarterly Watch List—ClearBridge Mid Cap is on the Watch list
3. Discussion of the potential to structure retiree health care trusts under a single aggregated account for managing assets for lower cost investment opportunities for lower market value trusts.
Michael Bosanac led the discussion as to whether there is any value in doing aggregated approach with Road Commission VEBA and Mental Health. They have expressed interest to see if it’s possible to do that. Auditor says it can be done. Next step is a conversation with Legal firm, Dykema. If this is done they would be moving their trust assets under Retiree Health Care investment program. Both of them together equal about $5,000,000. It would be on an allocated basis. Pro rata share of whatever return we get at the end of the year. Their money would be pooled with ours and invested accordingly. Benefit is for the smaller organizations to get a reduced fee and maybe some buying power too.
PUBLIC COMMENT –None
X. MEMBERS TIME– Michael Bosanac—Mayl not be here for the September 25 meeting Kay Sisung— Pass Bob Neely—Thank you to Mike Cho and his associates for your years of dedicated service to us. We appreciate everything that you’ve done for us. It has been a very difficult decision.
XI. NEXT MEETING—September 25, 2017 at 3:00 p.m.
XII. ADJOURNMENT Motion by Michael Bosanac, supported by Kay Sisung to adjourn. Chairman adjourned the meeting at 3:39 p.m. with no further business. SCHAFER CULLEN CAPITAL MANAGEMENT
International High Dividend Value ADR 2nd Quarter 2017
645 Fifth Avenue • New York, NY 10022 • T (212) 644.1800 • F (212) 593.4275 • www.schafer-cullen.com Organization
SCHAFER CULLEN CAPITAL MANAGEMENT | Page 2 | INTERNATIONAL HIGH DIVIDEND VALUE ADR STRATEGY Schafer Cullen Capital Management, Inc. Registered investment advisor established in 1983
Independent 100% employee owned firm Value Investor
Disciplined, Experienced, Research-driven Headquarters New York, New York Assets Under Advisement 1 $19.6 Billion as of 06/30/2017
SCHAFER CULLEN CAPITAL MANAGEMENT | Page 3 | INTERNATIONAL HIGH DIVIDEND VALUE ADR STRATEGY Schafer Cullen Capital Management Assets by Strategy as of June 30, 2017 Strategy Strategy Description Established AUA 1 U.S. Large Cap Equity portfolio with up to 30% ADR ownership investing in stocks High Dividend Value Equity trading at low earnings multiples with high 1994 $11.9 Billion absolute dividend yield and catalysts for future dividend growth.
Non-U.S. Large Cap equity portfolio International High Dividend investing in stocks trading at low earnings 2004 Value Equity multiples with high absolute dividend yield $5.6 Billion and catalysts for future dividend growth.
Emerging Markets equity portfolio investing Emerging Market High in stocks trading at low earnings multiples 2005 Dividend Equity with high absolute dividend yield and $762 Million catalysts for future dividend growth.
U.S. Large Cap Equity portfolio with up to 30% ADR ownership investing in stocks Enhanced Equity Income trading at low earnings multiples with high 2010 $903 Million absolute dividend yield and writing covered call options of between 25-40%.
U.S. all-cap equity portfolio with up to 30% ADR ownership investing in stocks trading Value Equity at low earnings multiples with earnings 1983 $358 Million growth catalysts.
1Includes model program assets of $7.8 billion as of 06/30/2017. SCCM provides models on the following SMA strategies: High Dividend, International High Dividend, Emerging Markets High Dividend, Value Equity, and Global High Dividend.
SCHAFER CULLEN CAPITAL MANAGEMENT | Page 4 | INTERNATIONAL HIGH DIVIDEND VALUE ADR STRATEGY Cullen Capital Management, LLC
Cullen High Dividend Equity Fund Share Class Ticker Cusip Number Min. Investment Net Expense Ratio Retail Share (Class A) CHDEX 230001208 $1,000 1.00%
Institutional Shares (Class I) CHDVX 230001406 $1,000,000 0.75% The Funds' investment objectives, risks, Class C Shares CHVCX 230001307 $1,000 1.75% charges and expenses must be considered Cullen International High Dividend Fund carefully before investing. The prospectus contains this and other important Share Class Ticker Cusip Number Min. Investment Net Expense Ratio information about the investment Retail Share (Class A) CIHDX 230001505 $1,000 1.25% companies. A prospectus may be obtained Institutional Shares (Class I) CIHIX 230001703 $1,000,000 1.00% by calling 1-877-485-8586, or visiting Class C Shares CIHCX 230001604 $1,000 2.00% www.cullenfunds.com . Read it carefully before investing. Cullen Ehanced Equity Income Fund Share Class Ticker Cusip Number Min. Investment Net Expense Ratio Mutual fund investing involves risk. Retail Share (Class A) ENHRX 230001737 $1,000 1.01% Principal loss is possible. Investments Institutional Shares (Class I) ENHNX 230001729 $1,000,000 0.76% in medium-capitalization companies will involve additional risks such as limited Class C Shares ENHCX 230001711 $1,000 1.76% liquidity and greater volatility. Cullen Value Fund Investments in foreign securities Share Class Ticker Cusip Number Min. Investment Net Expense Ratio involve greater volatility and political, Retail Share (Class A) CVLEX 230001778 $1,000 1.00% economic, and currency risks and differences in accounting methods. Institutional Shares (Class I) CVLVX 230001786 $1,000,000 0.75% Past performance does not guarantee Class C Shares CVLFX 230001794 $1,000 1.75% future results. Cullen Emerging Markets High Dividend Fund Share Class Ticker Cusip Number Min. Investment Net Expense Ratio Retail Share (Class A) CEMDX 230001745 $1,000 1.25% Institutional Shares (Class I) CEMFX 230001752 $1,000,000 1.00% Class C Shares CEMGX 230001760 $1,000 2.00%
SCHAFER CULLEN CAPITAL MANAGEMENT | Page 5 | INTERNATIONAL HIGH DIVIDEND VALUE ADR STRATEGY Investment Management Team
Jim Cullen, Portfolio Manager / Chairman / CEO Mr. Cullen has been a portfolio manager for Schafer Cullen Capital Management for over 30 years and has been in the investment business for more than 50 years. Prior to founding SCCM, Mr. Cullen was a Vice President at Donaldson, Lufkin & Jenrette. Prior to DLJ, Mr. Cullen co-managed the New York Research Group at Raucher Pierce. Mr. Cullen began his career at Merrill Lynch in 1965 and later worked for the research firm, Spencer Trask & Company. Mr. Cullen served four years as a naval officer aboard the aircraft carrier USS Essex after receiving a B.S. in finance from Seton Hall University.
Rahul Sharma, Portfolio Manager / Executive Director Mr. Sharma started his investment career at Schafer Cullen and has 18 years of investment experience. As a portfolio manager, Rahul focuses on global and international strategies across all market capitalizations. Prior to Schafer Cullen Capital Management, Mr. Sharma worked in small business management. In 1994, he received his B.A. in mathematics from the College of William and Mary.
SCHAFER CULLEN CAPITAL MANAGEMENT | Page 6 | INTERNATIONAL HIGH DIVIDEND VALUE ADR STRATEGY Strong Team Based Approach
James P. Cullen CEO / Chairman / Co-Portfolio Manager 50 Years Experience
Rahul Sharma Executive Director / Co-Portfolio Manager 18 Years Experience
Brooks Cullen Jennifer Chang Timothy Cordle Michael Kelly, CFA Pravir Singh, CFA Analyst Analyst Analyst Analyst Analyst 27 Years Experience 19 Years Experience 25 Years Experience 14 Years Experience 13 Years Experience
Matthew Dodds Brian Drubetsky Michael Gallant, CFA Stephen O’Neil Anuca Laudat, CFA Analyst Analyst Analyst Analyst Analyst 29 Years Experience 16 Years Experience 15 Years Experience 33 Years Experience 6 Years Experience
Karen Ramlogan Gayle Baldwin Erik Schafer Kriti Jain Investment Ops. Analyst Analyst Analyst 17 Years Experience 12 Years Experience 11 Years Experience 5 Years Experience
SCHAFER CULLEN CAPITAL MANAGEMENT | Page 7 | INTERNATIONAL HIGH DIVIDEND VALUE ADR STRATEGY Investment Overview
SCHAFER CULLEN CAPITAL MANAGEMENT | Page 8 | INTERNATIONAL HIGH DIVIDEND VALUE ADR STRATEGY Investment Overview
Legendary investor Benjamin Graham said it best in summarizing his 50 years in the investment business. He said that the key to being successful in investing was to ignore everything else and focus on two key principles:
1. Invest with a discipline which helps you to avoid overpaying for your investments. The disciplines he recommended were price/earnings, price/book and dividend yield. 2. Be a long-term investor (i.e. 5 years)
The next 5 pages are studies which add support to Graham’s advice.
SCHAFER CULLEN CAPITAL MANAGEMENT | Page 9 | INTERNATIONAL HIGH DIVIDEND VALUE ADR STRATEGY The Potential Offered by a Disciplined Value Approach
Top 20% Bottom 20% Bottom 20% Top 20% Top 20% Bottom 20% Bottom 20% Top 20% Years S&P 500 Years S&P 500 By P/E By P/E By P/BK By Yield By P/E By P/E By P/BK By Yield 1968 11.0 11.6 30.5 37.3 27.3 1993 10.1 20.1 16.9 20.5 16.0 1969 -8.4 -17.7 -16.5 -24.2 -16.6 1994 1.3 3.7 2.3 0.4 -2.3 1970 3.9 -10.1 12.8 3.1 12.1 1995 37.6 23.5 41.6 38.1 36.3 1971 14.3 21.2 10.5 19.3 10.7 1996 23.0 18.8 18.9 16.3 16.3 1972 18.9 17.1 8.0 7.1 10.3 1997 33.4 19.8 37.0 31.2 27.9 1973 -14.7 -21.6 -14.8 -14.4 -13.9 1998 28.6 24.3 -0.3 14.7 8.7 1974 -26.5 -27.1 -10.9 -5.9 -20.0 1999 21.0 35.2 7.0 14.9 -2.3 1975 37.2 43.4 59.3 63.6 64.3 2000 -9.1 -5.4 24.2 20.1 15.4 1976 23.9 29.1 48.0 55.8 42.1 2001 -11.9 -13.6 16.2 15.8 11.1 1977 -7.2 -8.9 8.5 4.5 4.0 2002 -22.1 -33.1 -8.9 -18.7 -8.4 1978 6.6 6.8 14.1 7.2 3.1 2003 28.7 71.1 38.6 64.9 36.8 1979 18.6 32.3 30.8 32.3 20.2 2004 10.9 17.0 22.3 25.1 15.3 1980 32.4 33.1 32.8 19.2 17.4 2005 4.9 5.0 15.9 9.4 3.8 1981 -4.9 -5.3 17.5 15.1 17.7 2006 15.8 13.5 18.1 21.0 23.3 1982 21.5 41.8 27.9 42.7 31.0 2007 5.5 0.0 -0.7 -12.4 -1.4 1983 22.6 40.3 28.1 44.3 33.4 2008 -37.0 -51.2 -39.1 -47.4 -39.9 1984 6.3 -14.7 17.1 5.2 12.6 2009 26.5 71.8 52.8 67.6 45.0 1985 31.7 19.6 34.2 18.8 32.4 2010 15.1 23.0 20.5 24.4 20.8 1986 18.7 -0.1 32.1 9.4 18.4 2011 2.1 -5.7 1.3 -7.3 12.8 1987 5.3 15.2 -6.2 9.4 -1.4 2012 16.0 20.1 16.0 21.0 12.6 1988 12.5 15.6 28.0 25.2 20.5 2013 32.4 39.5 42.7 45.6 30.2 1989 31.7 21.4 22.7 19.6 26.2 2014 13.7 15.2 11.8 8.4 19.8 1990 -3.1 -23.8 -15.2 -28.3 -17.5 2015 1.4 4.9 1.4 -0.2 -0.5 1991 30.5 36.5 47.9 51.3 43.3 2016 12.0 11.9 17.8 19.7 24.9 1992 7.6 22.1 16.7 28.6 18.3 Compound Annualized Returns 49 Years S&P 500 Top 20% by P/E Bottom 20% by P/E Bottom 20% by P/B Top 20% by Yield 1968-2016 9.8 9.6 15.3 14.6 12.9 Returns noted are for illustrative purposes only and do not represent the performance of an account, fund or composite. The performance data quoted represents past performance, which is no guarantee of future results. The Standard & Poor's 500 Stock Index (the S&P 500) is a commonly used measure of the broad U.S. stock market. Indices are unmanaged and their returns assume reinvestment of dividends and, unlike mutual fund returns, do not reflect any fees or expenses associated with a mutual fund or separately managed account. It is not possible to invest directly in an index. The Top 20% and Bottom 20% by P/E and P/B represents holdings within the S&P 500 Index. Source: Capital IQ, Standard & Poors, SCCM Research, June 30, 2017. SCHAFER CULLEN CAPITAL MANAGEMENT | Page 10 | INTERNATIONAL HIGH DIVIDEND VALUE ADR STRATEGY The Case for Disciplined Value Funds Rolling 5-Year Performance: Bottom 20% of the S&P 500 by P/E & Top 20% by Yield S&P 500 S&P 500 S&P 500 S&P 500 Period Period Bottom 20% by P/E Top 20% by Yield Bottom 20% by P/E Top 20% by Yield 1968-1972 7.96% 7.77% 1991-1995 23.95% 21.22% 1969-1973 -0.88% -0.33% 1992-1996 18.65% 16.27% 1970-1974 0.42% -1.18% 1993-1997 22.50% 18.11% 1971-1975 7.59% 6.67% 1994-1998 18.66% 16.59% 1972-1976 14.06% 12.12% 1995-1999 19.72% 16.60% 1973-1977 14.18% 10.82% 1996-2000 16.63% 12.77% 1974-1978 21.06% 14.90% 1997-2001 16.09% 11.72% 1975-1979 30.73% 24.64% 1998-2002 7.01% 4.51% 1976-1980 26.06% 16.55% 1999-2003 14.30% 9.43% 1977-1981 20.38% 12.24% 2000-2004 17.38% 13.12% 1978-1982 24.39% 17.54% 2001-2005 15.77% 10.75% 1979-1983 27.31% 23.75% 2002-2006 16.16% 13.09% 1980-1984 24.53% 22.16% 2003-2007 18.16% 14.77% 1981-1985 24.79% 25.12% 2004-2008 0.23% -2.64% 1982-1986 27.74% 25.28% 2005-2009 4.81% 1.91% 1983-1987 20.06% 18.36% 2006-2010 5.61% 5.05% 1984-1988 20.04% 15.97% 2007-2011 2.41% 3.21% 1985-1989 21.16% 18.65% 2008-2012 5.64% 5.98% 1986-1990 10.52% 7.95% 2009-2013 25.27% 23.70% 1987-1991 13.05% 12.14% 2010-2014 17.68% 19.07% 1988-1992 18.11% 16.29% 2011-2015 13.70% 14.54% 1989-1993 15.98% 15.42% 2012-2016 17.19% 15.90% 1990-1994 11.85% 9.64% Past performance is no guarantee of future results. The Standard & Poor's 500 Stock Index (the S&P 500) is a commonly used measure of the broad U.S. stock market. Indices are unmanaged and their returns assume reinvestment of dividends and, unlike mutual fund returns, do not reflect any fees or expenses associated with a mutual fund. It is not possible to invest directly in an index. Source: Capital IQ, Standard & Poors, SCCM Research, June 30, 2017. SCHAFER CULLEN CAPITAL MANAGEMENT | Page 11 | INTERNATIONAL HIGH DIVIDEND VALUE ADR STRATEGY Dividend Yield + Dividend Growth = Best Performing Group Global relative performance of dividend Europe relative performance of dividend yield combined with dividend growth yield combined with dividend growth
Asia Pacific ex-Japan relative performance of Emerging Markets relative performance of dividend yield combined with dividend growth dividend yield combined with dividend growth
Source: Merrill Lynch Global Quantitative Strategy, Bank of America – Merrill Lynch Global Quantitative Strategy, MSCI, Worldscope, February 28, 2017
SCHAFER CULLEN CAPITAL MANAGEMENT | Page 12 | INTERNATIONAL HIGH DIVIDEND VALUE ADR STRATEGY Dividends Matter Dividends Are Large Contributors to Total Return Decomposition of Real Returns Since 1970
8.0 6.3 4.1 5.6 5.4 6.0 5.1 5.0 3.8
4.0
2.0
0.0
Dividend Yield -2.0 Dividend growth Multiple expansion Total annualised returns -4.0 UK US France Germany Australia Canada Japan Dividends matter. They have been an important contributor to historical equity market returns. Since 1970, they have made up roughly 30% of the annualized total return from global equities. Contribution to individual markets has been greater. Their importance increases dramatically during periods of equity market weakness. In the 2000’s they contributed 144% of the global equity return (i.e. the capital return has been negative). While in the 1970’s it was nearly 60%. Source: Societe Generale, Thompson Datastream, June 2017
SCHAFER CULLEN CAPITAL MANAGEMENT | Page 13 | INTERNATIONAL HIGH DIVIDEND VALUE ADR STRATEGY Investment Process & Risk Management
SCHAFER CULLEN CAPITAL MANAGEMENT | Page 14 | INTERNATIONAL HIGH DIVIDEND VALUE ADR STRATEGY Investment Overview
Description • A value equity style managed account that invests in non-U.S. companies that offer ADRs trading on U.S. exchanges or local shares that trade on Canadian exchanges.
Style • International Value and Equity Income
Principle Objectives • Outperform the MSCI EAFE index over a full market cycle • Deliver superior downside protection and lower overall volatility • Provide a high current income stream with the potential for long-term income growth
Risk Target • Superior to international equity strategies and indices
Yield Target • + 4.5% Gross Yield
SCHAFER CULLEN CAPITAL MANAGEMENT | Page 15 | INTERNATIONAL HIGH DIVIDEND VALUE ADR STRATEGY Investment Process
Fundamental / Screening Portfolio Qualitative / Sell Discipline Investable Construction Universe Credit Research
Screen universe of ADRs and Attractive Valuations Approximately 40-50 holdings Price objectives reached Canadian Stocks With +3% Yields For: Dominant Company No more than 30% in any Earnings growth not realized Characteristics one sector at cost Deteriorating fundamentals – Low P/E Ratios Catalysts for Price and EPS No more than 15% in any Tax reasons – High Dividend Yield Appreciation one industry at cost Changes in dividend policy – Long-term DPS Growth Superior Dividend Policies No more than 5% in any one stock at cost Overvaluation – Long-Term EPS Growth Stable Macroeconomic and Geopolitical Environment Generally, no more than 20% Change in Market Thesis Sector and Industry Inflection in any one country at cost Points Portfolio Upgrade Top 10 holdings typically represent 35 – 40%
Approx. 90% in ADRs
Continual Portfolio Upgrade
SCHAFER CULLEN CAPITAL MANAGEMENT | Page 16 | INTERNATIONAL HIGH DIVIDEND VALUE ADR STRATEGY Screening the Investible Universe – International ADR
Investible Universe: ADR’s and Canadian Locals
Market Cap > =$1bn
Eligibility Liquidity > =$1mn
Fwd PE < =16x or P/B < =1x
Valuation Fwd DY >3%
EPS & DPS Growth
CG
UNIVERSE ENTERS FUNDAMENTAL RESEARCH STAGE Source: SCCM Research, June 2017 SCHAFER CULLEN CAPITAL MANAGEMENT | Page 17 | 17 INTERNATIONAL HIGH DIVIDEND VALUE ADR STRATEGY Price Momentum Analysis – Developed Markets
We employ technical analysis as a complement to our fundamental research in order to gauge price momentum and risk trends on a country, sector, and individual security level. Using a qualitative assessment of internally-developed indicators, we periodically generate and analyze over 170 charts in order to identify regions and sectors with positive price moment. Above is an example of one of the ways we evaluate price momentum. Source: SCCM Research, Coppock Curve as Momentum Indicator, December 31, 2016
SCHAFER CULLEN CAPITAL MANAGEMENT | Page 18 | INTERNATIONAL HIGH DIVIDEND VALUE ADR STRATEGY Company Research Process
Review Filings & Earnings Presentations Company Disclosure Calls Financials
Assess Sell-side calls Bull case Bear case Consensus and meetings Expectations
Meet with Company Competitors, Corporate management Customers, Company governance Management and IR Suppliers
Off- Evaluate Catalyst Visit country, Wall Street potential operations Industry calls
SCCM Peer and Earnings Dividend historical Financial projections capacity Analysis valuation
Risk Country Quantitative Investment Management Research Profile Constraints
SCHAFER CULLEN CAPITAL MANAGEMENT | Page 19 | INTERNATIONAL HIGH DIVIDEND VALUE ADR STRATEGY Fundamental Research
SCHAFER CULLEN CAPITAL MANAGEMENT | Page 20 | INTERNATIONAL HIGH DIVIDEND VALUE ADR STRATEGY Risk Management – Quantitative Analysis
The performance data quoted represents past performance, which is no guarantee of future results. Investment return and principal value will fluctuate, and an investors’ account may be worth more or less than their original cost. Please refer to performance disclosure included with this presentation. This information should not be used as the primary basis for any investment decision nor, should it be construed as advice to meet your particular investment needs. A list of all recommendations made by SCCM within the immediately preceding period of not less than one year is available upon request. Source: Bloomberg, SCCM Research, 06/30/2017
SCHAFER CULLEN CAPITAL MANAGEMENT | Page 21 | INTERNATIONAL HIGH DIVIDEND VALUE ADR STRATEGY Top Down Perspective
Based on our proprietary country report, we assess the strength of countries based on several factors such as :
• Valuations • Country’s Qualitative Strength • P/E, P/B & Dividend Yield on an absolute level as well • World & Global Competitiveness Ranking as relative to 10-year average & lows • Ease of Doing Business • Earnings Yields vs. 10-year Sovereign Yield • Opacity Ranking • Fiscal & Macroeconomic Profile of Countries • Corruption Ranking • GDP Growth • Corporate Governance Ranking • Inflation/Deflation Levels • Banking System Strength • Unemployment • Size of Banking System • Currencies & Purchasing Power Parity • Capital Adequacy • Public Debt/GDP & Fiscal Balance • Money Supply Growth • Taxation Base • Regulatory Environment • External Fiscal Position • Other Measures • Current Account Balance/GDP • Demographics • Trade/GDP • Food Security • External Debt/GDP • Energy Security • Reserves/External Debt • Pain Index • Credit Research • Gini Index • Yield Curve Spread • Geopolitical Risks • Country CDS Assessment • Unfavorable Change of Government • Credit Rating • Armed Conflicts and/or Civil Wars • Historical Fiscal Defaults • Negative Change in Regulatory Policies • Property Markets • History of Asset Repatriations • Rental Yield Relative to Bond Yields • History of Capital Controls • Long-Term Real Estate Returns
SCHAFER CULLEN CAPITAL MANAGEMENT | Page 22 | INTERNATIONAL HIGH DIVIDEND VALUE ADR STRATEGY Country Rankings In order to assess the various strengths and weaknesses of countries, we rank them across macroeconomic, fiscal, geopolitical, qualitative and other diverse metrics. We generally avoid certain types of investments or all investments in those countries ranked lowest overall unless there are discernable prospects for improvement in these countries. Below is an isolated example that ranks DM countries based on their external strength as measured by their (a) current account, trade and external debt as a % of GDP and (b) reserves as a % of external debt.
Note: C = Country. Source: SCCM Research, Bloomberg, 2015
SCHAFER CULLEN CAPITAL MANAGEMENT | Page 23 | INTERNATIONAL HIGH DIVIDEND VALUE ADR STRATEGY Risk Management
Systemic Risk Non-Systemic Risk Concentration Limits: Quantitative Analysis: Maximum position size limit: 6% Attractive correlation attributes Maximum industry exposure: 20% Strong historical track record Maximum country exposure: 30% Unique quantitative profile
Portfolio Measures: Investment Discipline Lowers Risk: Real time portfolio monitoring models Low P/E, high dividend yield focus Tiered stop loss per position Long-term investment horizon No leverage Avoid chasing performance
Trade Selection Process: Invest primarily in liquid stocks Country and Sector Diversification
SCHAFER CULLEN CAPITAL MANAGEMENT | Page 24 | INTERNATIONAL HIGH DIVIDEND VALUE ADR STRATEGY Investment Examples & Portfolio Exposure
SCHAFER CULLEN CAPITAL MANAGEMENT | Page 25 | INTERNATIONAL HIGH DIVIDEND VALUE ADR STRATEGY Siemens AG/ Industrials/ Germany
Company Snapshot Valuation
Siemens is a leading supplier of systems and services for power • P/E: 14.4x EPS generation, transmission & distribution, factory automation and rail • Dividend yield: 3.3% transportation. The company is also managing a medical diagnostic • Long-term projected dividend growth rate: +8.0% equipment business it is possibly looking to carve out.
Investment Thesis Stock Price • Margin Recovery & Restructuring Related Catalysts Wind Power & Renewables and Energy Management are expected to see strong margin recovery that should be sustainable because of the restructuring of its electric transmission & distribution systems and as poorly-bid legacy offshore wind contracts are worked out. • Hidden Asset Value Siemens’ Healthcare business, which is a separately managed unit could be divested or spun from the parent company. As the #2 global competitor in imaging equipment, diagnostics and services this business would likely trade at a premium multiple. • Best-In-Class Multinational Siemens’ automation business is a global leader that will gain market share with its value-added software. Its other industrial businesses also have strong market positions that will benefit from a global cyclical recovery. • Attractive Valuation Siemens’ trades at over a 10% discount to peers on an adjusted P/E basis and offers better long-term growth prospects. Source: SCCM Research, Bloomberg, June 30, 2017
SCHAFER CULLEN CAPITAL MANAGEMENT | Page 26 | INTERNATIONAL HIGH DIVIDEND VALUE ADR STRATEGY Imperial Brands / Consumer Staples / United Kingdom
Company Snapshot Valuation
Imperial Brands is among the largest international tobacco companies • P/E: 12.9x EPS with a strong position across several tobacco categories including • Dividend yield: 5.2% cigarettes, roll-it-yourself products and cigars. • Long-term projected dividend growth rate: +10.0%
Investment Thesis Stock Price • Beneficiary of Consolidation Across Global Tobacco Industry The most recent acquisition of the Lorillard and Reynolds American brands in the United States are expected to be double digit earnings accretive in year one. Imperial Brands itself could be a takeout candidate given its current undemanding valuation and its strong long-term prospects. • Management’s Plan to Increase Operating Margins Management’s plan to rationalize costs and focus on expanding the footprint of key strategic brands including Davidoff, Gauloises Blondes, JPS and West, should lead to meaningfully higher operating margins going forward. • Strong Positioning Over Long-Term Imperial Brands’ diverse set of businesses, its overweight exposure to more stable developed markets and its strong participation in tobacco markets experiencing secular growth such as roll-it-yourself products, cigars and value tobacco brands, positions the group well over the long-term. • Attractive Valuations and Growth The company continues to remain a standout from an income perspective with a 5% dividend yield and management’s stated goal of delivering +10% long-term dividend growth. Source: SCCM Research, Bloomberg, June 30, 2017
SCHAFER CULLEN CAPITAL MANAGEMENT | Page 27 | INTERNATIONAL HIGH DIVIDEND VALUE ADR STRATEGY Deutsche Telekom / Telecommunication Services / Germany
Company Snapshot Valuation
Deutsche Telekom is the leading telecom provider in Germany, with • P/E: 16.5x EPS strategic assets in Europe and the United States. The company offers • Dividend yield: 4.3% fixed-network, mobile communications, Internet, and IPTV products • Long-term projected dividend growth rate: +9.0% and services.
Investment Thesis Stock Price • Leveraged to a European Recovery & 4G Rollout With an improving macro-economy in Europe, the company’s (cyclical) mobile revenues will increase. Concurrently, DT’s Eastern European assets offer substantial upside off of depressed valuations as the region benefits from a recovering European economy. The rollout of 4G in Europe and increasing penetration of triple and quad play offers will further bolster earnings growth. • Improving Regulatory Environment Favorable regulatory changes to trigger consolidation, enhance returns on network investments and improve the competitive environment, leading to market share gains and a multiple re-rating for Deutsche Telekom. • Hidden Asset Value Substantial portfolio of valuable, noncore assets across Europe, the UK and the US could be divested to unlock considerable value. DT should see its multiple re-rate as valuation converges to the sum-of- the-parts. • Attractive Valuation Trades at an 18% discount to peers on an adjusted P/E basis and an 11% EV/EBITDA discount. Source: SCCM Research, Bloomberg, June 30, 2017
SCHAFER CULLEN CAPITAL MANAGEMENT | Page 28 | INTERNATIONAL HIGH DIVIDEND VALUE ADR STRATEGY Top Ten Holdings & Sector Weights As of June 30, 2017
Top Ten Holdings * Sector Portfolio (%) Sector Weights *
Novartis Health Care 3.1 5.9 Consumer Discretionary 12.1
Consumer Staples 15.7 Nestle SA Consumer Staples 3.1 11.5
Energy 6.2 Siemens Industrials 3.1 4.7 Financials 24.0 21.5
British American Tobacco Consumer Staples 2.9 Health Care 14.6 10.8 10.8 Allianz Financials 2.9 Industrials 14.5 1.6 Information Technology 6.1 ABB Ltd. Industrials 2.9 3.7 Materials 7.5 HSBC Holdings Financials 2.8 0.0 Real Estate 3.6
Telecommunications 9.8 GlaxoSmithKline Health Care 2.8 4.3 2.3 Utilities 3.4 BAE Systems Industrials 2.8 SCCM Intl High Dividend ADR Cash 5.4 MSCI EAFE 0.0
Unilever Consumer Staples 2.7 0.0 2.0 4.0 6.0 8.0 10.0 12.0 14.0 16.0 18.0 20.0 22.0 24.0 26.0 Source: Thomson, Bloomberg, SCCM Research
Total Percentage 29.1 The Portfolio is actively managed and current holdings and characteristics may be different. The holdings listed should not be considered recommendations to buy or sell any particular security listed. The MSCI EAFE is a commonly used measure of the broad International equity market. Indices are unmanaged and Number of Holdings 45 their returns assume reinvestment of dividends and, unlike mutual fund returns, do not reflect any fees or expenses associated with a mutual fund. It is not possible to invest directly in an index * This material is supplemental to (GIPS®), see the fully compliant presentation on the last slide of this presentation.
SCHAFER CULLEN CAPITAL MANAGEMENT | Page 29 | INTERNATIONAL HIGH DIVIDEND VALUE ADR STRATEGY Geographic Exposure As of June 30, 2017
SCCM International Region * Top Ten Countries * (%) High Dividend ADR
United Kingdom 23.1 Developed World 89.6
Switzerland 16.5 Emerging Markets 5.1
Germany 11.5 Cash 5.4
France 9.7
Canada 5.7
Japan 5.6
Netherlands 5.3
Singapore 3.4
Australia 2.6
Ireland 2.6
Source: SCCM Research, 06/30/2017
* This material is supplemental to (GIPS®), see the fully compliant presentation on the last slide of this presentation.
SCHAFER CULLEN CAPITAL MANAGEMENT | Page 30 | INTERNATIONAL HIGH DIVIDEND VALUE ADR STRATEGY Portfolio Characteristics *
International High As of June 30, 2017 Dividend ADR MSCI EAFE
Price / Earnings Ratio (Forward) 14.3 15.8
Dividend Yield 4.3 3.3
Long-Term Debt to Capital 28.2 29.2
Long-Term DPS Growth 7.7 5.5
Long-Term EPS Growth (est.) 9.4 9.0
Weighted Avg. Market Cap ($B) 83.0 60.4
Source: SCCM, Bloomberg 06/30/2017
* This material is supplemental to (GIPS®), see the fully compliant presentation on the last slide of this presentation.
SCHAFER CULLEN CAPITAL MANAGEMENT | Page 31 | INTERNATIONAL HIGH DIVIDEND VALUE ADR STRATEGY Performance
SCHAFER CULLEN CAPITAL MANAGEMENT | Page 32 | INTERNATIONAL HIGH DIVIDEND VALUE ADR STRATEGY International High Dividend Value ADR Composite Performance
Annualized Returns (%) Since As of June 30, 2017 QTD YTD 1 yr 3 yr 5 yr 10 yr Inception 06/30/05
Schafer Cullen International High Dividend Value ADR (Gross) 6.0 13.7 14.2 1.2 7.8 2.1 6.2
Schafer Cullen International High Dividend Value ADR (Net) 5.8 13.4 13.7 0.8 7.4 1.6 5.7
MSCI EAFE Index 6.1 13.8 20.3 1.2 8.7 1.0 4.9
MSCI AC World Index ex-U.S. 5.8 14.1 20.5 0.8 7.2 1.1 5.3
12-month period ending December 31 2016 2015 2014 2013 2012 2011 2010 2009 2008 2007 2006 Schafer Cullen International 2.9 -0.6 -5.8 17.6 18.8 -7.5 8.4 27.6 -39.5 19.2 27.4 High Dividend Value ADR (Gross)
Schafer Cullen International 2.4 -1.0 -6.2 17.2 18.3 -8.0 7.6 26.6 -39.9 18.7 26.5 High Dividend Value ADR (Net)
MSCI EAFE Index 1.0 -0.8 -4.9 22.8 17.3 -12.1 7.8 31.8 -43.4 11.2 26.3
AC World Index ex-U.S. 4.5 -5.7 -3.9 15.3 16.8 -13.7 11.2 41.5 -45.5 16.7 26.7
Performance results are a preliminary, unaudited, net of fees estimate includes reinvestment of dividends and other income . Current performance may be lower or higher than the performance data quoted. The performance data quoted represents past performance, which is no guarantee of future results. Investment return and principal value will fluctuate, and shares, when redeemed, may be worth more or less than their original cost. The MSCI EAFE Index is a free float-adjusted market capitalization index that measures the equity market performance of developed markets, excluding the US & Canada. The MSCI AC World Index ex-U.S. measures stock performance throughout the world, with the exception of U.S.-based companies. Please refer to performance disclosure included with this presentation.
SCHAFER CULLEN CAPITAL MANAGEMENT | Page 33 | INTERNATIONAL HIGH DIVIDEND VALUE ADR STRATEGY International High Dividend Value ADR Since Inception Total Risk Reward: June 30, 2005 – June 30, 2017
Intl High MSCI Dividend EAFE 7% ADR Index Schafer Cullen Intl High Return (Gross)* 6.23 4.92 Dividend ADR 6% Beta 0.91 1.00
Alpha 1.57 0.00 5% Standard Deviation 16.64 17.42 Return MSCI EAFE
Sharpe Ratio 0.38 0.30 4% Information Ratio 0.25 --
Tracking Error 5.16 0.00 3% R-squared 91.25 100.0 16% 17% 18% 19% Standard Deviation
Past performance is no guarantee of future results. The portfolio is actively managed; holdings and characteristics will vary. The MSCI EAFE Index in an unmanaged market capitalization-weighted index based on the average weighted performance of widely held stocks. It is not possible to invest directly in an index. Alpha is a measure of the portfolio's risk-adjusted performance. When compared to the portfolio's beta, a positive alpha indicates better-than-expected portfolio performance and a negative alpha worse-than-expected portfolio performance. Beta is a measure of the volatility of a fund relative to the overall market. A beta less than one indicates lower risk than the market; a beta greater than one indicates higher risk than the market. Information ratio is a measure of portfolio management's performance against risk and return relative to a benchmark or alternative measure. Standard deviation is a statistical measure of the historic volatility of a portfolio. Sharpe Ratio is a risk- adjusted measure calculated to determine reward per unit of risk. It uses a standard deviation and excess return. The higher the Sharpe Ratio, the better the portfolio's historical risk-adjusted performance. Tracking error is reported as a "standard deviation percentage" difference – the difference between the return received on an investment and that of the investment’s benchmark. R2 represents the percentage of the portfolio's movements that can be explained by the general movements of the market. Index portfolios will tend to have R2 values very close to 100. *Please refer to net performance. Source: SCCM, Morningstar Direct, June 30, 2017
SCHAFER CULLEN CAPITAL MANAGEMENT | Page 34 | INTERNATIONAL HIGH DIVIDEND VALUE ADR STRATEGY The Strategy's Downside Profile
Performance Analysis Since Strategy Inception in Down Periods*
Months Quarters Years
Total Time Periods Since Inception (06/30/2005) 144 48 12
Total Down Periods – ACWI ex-U.S. Index 61 16 4
Number of Times SCCM International High Dividend ADR 39 12 Outperforms ACWI ex-U.S. in Underperforming Periods 3
% of Time SCCM International High Dividend ADR 64% 75% Outperforms ACWI ex-U.S. in Underperforming Periods 75%
*Data as of June 30, 2017 The longer the time frame, the stronger is the strategy's downside profile. As the analysis above indicates, our strategy has outperformed in 64% of down months, but then gone on to outperform in 75% of down quarters and 75% of down years versus the ACWI ex-U.S.
The performance data quoted represents past performance, which is no guarantee of future results. Investment return and principal value will fluctuate, and an investors’ account may be worth more or less than their original cost. Please refer to performance disclosure included with this presentation. The MSCI AC World Index ex-U.S. measures stock performance throughout the world, with the exception of U.S.-based companies. You cannot invest directly in an index. Source: SCCM, Bloomberg, June 30, 2017 .
SCHAFER CULLEN CAPITAL MANAGEMENT | Page 35 | INTERNATIONAL HIGH DIVIDEND VALUE ADR STRATEGY Market Environment
SCHAFER CULLEN CAPITAL MANAGEMENT | Page 36 | INTERNATIONAL HIGH DIVIDEND VALUE ADR STRATEGY The Universe Of Equity Opportunities Is Clearly Larger Outside the U.S.
Companies with market cap of over $1 billion and dividend yield of over 3%
2,000
1,800
1,600
1,400
1,200
1,000 1,840 800
600
400
200 301 0 Non-U.S. U.S.
Source: Bloomberg, as of 06/30/2017.
SCHAFER CULLEN CAPITAL MANAGEMENT | Page 37 | INTERNATIONAL HIGH DIVIDEND VALUE ADR STRATEGY The Strategy’s Income Stream Is Attractive Relative To Alternatives
5.0 Income Opportunities By Asset Class 4.5 4.3
4.0
3.5 3.3 3.2 3.0
2.5 2.3 2.0 2.0
1.5 1.2
12 12 MonthForwardYields 1.0 0.5 0.5 0.0 0.0 SCCM Intl Large US Corp US Govt US Large EU Corp EU Govt Cash Intl Caps Bonds Bonds Caps Bonds Bonds The strategy’s current 4.3% income stream is meaningfully higher than that available for a number of equity and fixed income alternatives. Most notably, the strategy’s yield is considerably higher than the basket of 10 year sovereign bonds in Europe, highlighting both the exceptional relative valuations for our companies and the potential opportunities available for corporates in Europe to prudently put their balance sheets to work to further enhance shareholder value creation. Note: In the above graph, US Corp Bonds represent the iShares IBOXX Investment Grade Corporate Bond ETF (US), Intl Large Caps represent the MSCI EAFE Index, US Large Caps represent the S&P 500 Index, US Govt Bonds represent US 10 Year Treasury Bonds, EU Corp Bonds represent the IBOXX Euro Corporates index, EU Govt Bonds represent the Bloomberg Euro Generic Govt Bond 10 Year index. Source: SCCM Research, Bloomberg, June, 2017
SCHAFER CULLEN CAPITAL MANAGEMENT | Page 38 | INTERNATIONAL HIGH DIVIDEND VALUE ADR STRATEGY International Equities Look Set To Outperform
1971 1973 1976 1983 1978 1992 1988 1994 2002 2008 June-2017
International Ann. Asset Class Outperforming Start Month End Month Durati on In Months Return US Ann. Return International Equities Mar-1971 Jun-1973 27 25.9% 1.7% US Equities Jun-1973 Sep-1976 40 -9.7% 0.3% International Equities Sep-1976 Dec-1978 27 21.2% -4.0% US Equities Dec-1978 Jun-1983 55 4.8% 13.2% International Equities Jun-1983 Dec-1988 67 31.4% 9.5% US Equities Dec-1988 Dec-1992 49 -6.0% 15.6% International Equities Dec-1992 Jun-1994 18 25.8% 4.2% US Equities Jun-1994 Mar-2002 94 1.2% 15.0% International Equities Mar-2002 Jun-2008 76 12.1% 3.7% US Equities Jun-2008 Jun-2017 110 3.0% 9.7% Average: International Equities 43 23.3% 3.0% While international equities have lagged behind their US peers for the last nine years, it is pertinent to note that this is the longest period of such underperformance in over 40 years. Historically, when international equities have finally turned around and come back into favor, they have on average provided an annualized return over the next 3.6 years of 23.3%, beating the S&P 500 by an annualized 20.3%. Source: SCCM, Bloomberg, June 2017.
SCHAFER CULLEN CAPITAL MANAGEMENT | Page 39 | INTERNATIONAL HIGH DIVIDEND VALUE ADR STRATEGY Price/Book of International Equities Relative to US Equities (Price/Book)
MXEA Index / SPX Index 0.5555
(Years)
The price/book ratio of International equities relative to U.S. equities is at one of its most attractive valuation levels seen in the last 20 years . Source: Bloomberg, June 30, 2017
SCHAFER CULLEN CAPITAL MANAGEMENT | Page 40 | INTERNATIONAL HIGH DIVIDEND VALUE ADR STRATEGY International Global Multinationals Offers Compelling Valuations
P/E Average Dividend Yield Average Sector Portfolio Securities U.S. Peers Premium/Discount Premium/Discount Novartis Bristol-Myers, Eli Lilly, Amgen Health Care Roche Inc. -12% +47% GlaxoSmithKline Total SA EOG Resources, Anadarko Energy Royal Dutch Shell Petroleum, Occidental NM +256% ABB Danaher Corp, Honeywell, Industrials Siemens FedEx, UPS -13% +103% Deutsche Post BAE Systems Lockheed Martin, General Defense Dynamics, Northrop Grumman -27% +72% Engie Dominion Res, Duke Energy, Utilities SSE PLC Sempra Energy, Edison, PPL -33% +58% Allianz Renaissancere, Everest Re Insurers Munich-Re Group, Validus Holdings -15% +179% Zurich Insurance Imperial Tobacco General Mills, Reynolds Consumer Staples Japan Tobacco America, Kraft Heinz Co., -29% +26% Orkla ASA Procter & Gamble Deutsche Telekom, SingTel, T-Mobile, Verizon Telecom NTT -36% +55% Portfolio Average -24% +100% The consistent approach to our value and dividend discipline has allowed us to invest in world-leading companies at attractive valuations. Relative to their U.S. peers, our portfolio holdings trade, on average, at an 20% discount on a forward P/E basis, while offering nearly double the dividend yield. *Simple Average Price-to-Earnings and Dividend Yield Based on 12-Month Forward Estimates for Fiscal Year 2017. March 31, 2017
SCHAFER CULLEN CAPITAL MANAGEMENT | Page 41 | INTERNATIONAL HIGH DIVIDEND VALUE ADR STRATEGY European Earnings Should Mean Revert to US Earnings
European earnings to catch up with U.S. earnings and further support the area’s equity markets.
Earnings in Europe and the U.S. have been highly correlated over the long term. Given the recent disconnect in this relationship, one can make a strong case for mean reversion and substantial earnings growth from Europe as the U.S. continues to recover.
12-month trailing earnings in USD for US and in Euro for Europe. Source: IBES, MSCI, Datastream, SG Cross Asset Research/Equity Strategy. March 31, 2017.
SCHAFER CULLEN CAPITAL MANAGEMENT | Page 42 | INTERNATIONAL HIGH DIVIDEND VALUE ADR STRATEGY MSCI Eurozone and S&P 500 in the Historical Context S&P 500 MSCI Eurozone
Source: Datastream, JP Morgan Global Equity Research, March 31, 2017
The performance data quoted represents past performance, which is no guarantee of future results. Investment return and principal value will fluctuate, and an investors’ account may be worth more or less than their original cost. Please refer to performance disclosure included with this presentation. You cannot invest directly in an index. The Standard & Poor's 500 Index is the commonly used measure of the broad U.S. stock market. The MSCI Eurozone Index is composed of large- and mid-capitalization equities from developed market countries that use the Euro as their official currency.
SCHAFER CULLEN CAPITAL MANAGEMENT | Page 43 | INTERNATIONAL HIGH DIVIDEND VALUE ADR STRATEGY Value As A Style Class Is Deeply Out Of Favor
Within global equities, value as a style class has currently underperformed growth on a trailing ten year basis by the second largest margin in nearly 30 years, translating into a negative two standard deviation event. Historically, such extreme underperformance of value equities relative to growth equities has been followed by strong outperformance of the former, as was the case in the nearly decade-long period following the NASDAQ crash in March 2000. Source: Strategas Research, June 30, 2017
SCHAFER CULLEN CAPITAL MANAGEMENT | Page 44 | INTERNATIONAL HIGH DIVIDEND VALUE ADR STRATEGY Index Performance During Rising U.S. Interest Rates
Index performance is calculated by compounding the total return rate for each index during the 20 instances of rising U.S. interest rates between 1980 - 2016. 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; 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.
SCHAFER CULLEN CAPITAL MANAGEMENT | Page 45 | INTERNATIONAL HIGH DIVIDEND VALUE ADR STRATEGY Global High Dividend Equities Performance During Rising U.S. Rates
Historically, global high dividend equities have, on average, provided a 27.8% annualized return and outperformed global equities by an annualized 4.4% during the 11 instances from 1970 to 2012 when 10-year U.S. government bond yields rose by more than 100 basis points during a twelve month period.
Source: Worldscope, Global Financial Data, OSAM calculations based on an equal-weighted universe of stocks from the MSCI Global Database, August 2013
SCHAFER CULLEN CAPITAL MANAGEMENT | Page 46 | INTERNATIONAL HIGH DIVIDEND VALUE ADR STRATEGY Countries with Tax Treaties
Australia Germany Luxembourg South Africa Austria Greece Malta Spain Bangladesh Hungary Mexico Sri Lanka Barbados Iceland Morocco Sweden Belgium India Netherlands Switzerland Bulgaria Indonesia New Zealand Thailand Canada Ireland Norway Trinidad & Tobago China Israel Pakistan Tunisia Cyprus Italy Philippines Turkey Czech Republic Jamaica Poland Ukraine Denmark Japan Portugal United Kingdom Egypt Kazakhstan Romania Venezuela Estonia Korea Russia Finland Latvia Slovak Republic France Lithuania Slovenia
Dividends from portfolio companies in these and other countries qualify for the qualified dividend tax rate.
This information is not intended to be tax advice and SCCM is not a tax advisor. Source: Publication 901 September 2016 / SCCM Research
SCHAFER CULLEN CAPITAL MANAGEMENT | Page 47 | INTERNATIONAL HIGH DIVIDEND VALUE ADR STRATEGY International Diversification
Risk-Return Trade-off of Internationally Diversified versus Domestic-Only Portfolios Expected Return Expected
Risk Horizontal Axis = Risk - standard deviation Vertical Axis = Expected Return - the total amount of money an investor anticipates to receive from an investment.
Source: International Investments by Bruno Solnik & Dennis McLeavey, Addison & Wesley Publishing 2002 Adding international exposure can improve an investor’s risk/return profile by expanding their efficient frontier*.
*The combinations of securities portfolios that maximize expected return for any level of expected risk, or that minimizes expected risk for any level of expected return.
SCHAFER CULLEN CAPITAL MANAGEMENT | Page 48 | INTERNATIONAL HIGH DIVIDEND VALUE ADR STRATEGY The Schafer Cullen Dividend Advantage
Drivers of Higher Dividend Income: 1)HigherDividendYields 2)StrongerDividendGrowth 3)Special Dividend Payments
Note: The above graph provides the actual dividends received and paid by the issuers held in an actual SCCM High Dividend ADR account for the period January 1, 2007 through December 31, 2015 and the MSCI EAFE ETF for the same period. Dividend income shown is shown gross of withholding taxes. Individual account performance will vary depending on market conditions and restrictions imposed by the investor. The full composite and listing of all recommendations made over the last 12 months is available upon request. An investor should have no expectation of a specific rate of return from investing in the fund. Past performance is no indication of future performance. Source: SCCM, Bloomberg, June 2016.
SCHAFER CULLEN CAPITAL MANAGEMENT | Page 49 | INTERNATIONAL HIGH DIVIDEND VALUE ADR STRATEGY Portfolio Holdings Have Provided Robust Dividend Growth
2009 2016 Dividend Currency CAGR** Company Name Cash Dividend Cash Dividend Growth (%)
Imperial Brands 63.20 150.20 GBp 138% 13.2% British American Tobacco 89.50 155.90 GBp 74% 8.3% Siemens 1.60 3.50 EUR 119% 11.8% Nippon Telegraph & Telephone 57.50 120.00 JPY 109% 11.1% Nestle 1.40 2.25 CHF 61% 7.0% Roche Holdings 5.00 8.10 CHF 62% 7.1% Bayer 1.40 2.50 EUR 79% 8.6% Diageo 36.10 59.20 GBp 64% 7.3% Novartis 2.00 2.70 CHF 35% 4.4% ABB 0.48 0.74 CHF 54% 6.4% MSCI EAFE $47.43 $57.25 USD 21% 2.7%
**Compound Annual Growth Rate Source: Bloomberg; SCCM Research, December 2016
Projected earnings and dividend growth is strong in international markets and portfolio companies have demonstrated strong historical dividend growth.
SCHAFER CULLEN CAPITAL MANAGEMENT | Page 50 | INTERNATIONAL HIGH DIVIDEND VALUE ADR STRATEGY International Opportunities
Attractive valuations, dividend yields and dividend and earnings growth.
Growing research coverage, corporate communications and transparency efforts of international companies.
Highly competitive levels of tax-efficient income.
Exposure to international investments, emerging markets and U.S. dollar diversification.
Benefits from trend of lower taxation and increasing foreign ownership limits resulting from globalization.
SCHAFER CULLEN CAPITAL MANAGEMENT | Page 51 | INTERNATIONAL HIGH DIVIDEND VALUE ADR STRATEGY Summary
SCHAFER CULLEN CAPITAL MANAGEMENT | Page 52 | INTERNATIONAL HIGH DIVIDEND VALUE ADR STRATEGY Summary
Strategy Historic studies show that investing in high dividend, low P/E stocks gives investors an edge over time.
Timeliness We believe this strategy is timely in the present economic and stock market environment.
Experience We have a successful track record working with the strategy.
SCHAFER CULLEN CAPITAL MANAGEMENT | Page 53 | INTERNATIONAL HIGH DIVIDEND VALUE ADR STRATEGY 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.
All opinions expressed constitute Schafer Cullen Capital Management’s judgment as of the date of this report and are subject to change without notice.
SCHAFER CULLEN CAPITAL MANAGEMENT | Page 54 | INTERNATIONAL HIGH DIVIDEND VALUE ADR STRATEGY Composite Returns 12/31/07 – 12/31/16 Transaction Based Composite Total Composite Assets Firm Assets Total Return Total Return Benchmark Number of Composite End of Year Ex-Model Delivery *Total Firm Assets YEAR Gross of Fees Net of Fees Return Portfolios Dispersion (in millions) ($ millions) ($ millions) 2007 19.24% 18.71% 11.17% 129 1.53 $84 $10,486 $10,486 2008 -39.52% -39.94% -43.38% 155 0.93 $62 $8,716 $8,716 2009 27.64% 26.61% 31.78% 80 0.80 $44 $10,750 $10,750 2010 8.41% 7.64% 7.75% 74 0.72 $48 $12,058 $12,609 2011 -7.45% -7.96% -12.14% 74 0.65 $75 $12,232 $13,712 2012 18.83% 18.31% 17.32% 198 1.20 $197 $9,999 $12,351 2013 17.55% 17.17% 22.78% 3276 0.57 $1,790 $14,500 $18,107 2014 -5.77% -6.17% -4.90% 5665 0.64 $2,493 $14,965 $19,211 2015 -0.59% -0.99% -0.81% 5165 0.76 $2,297 $12,552 $17,185 2016 2.86% 2.45% 1.00% 4090 0.63 $2,000 $10,942 $17,825 * Includes assets from Model Delivery relationships where SCCM does not have discretionary trading authority.
Performance Disclosures
Schafer Cullen Capital Management (SCCM) is an independent investment advisor registered under the Investment Advisors Act of 1940. Cullen Capital Management (CCM) is an affiliate of SCCM. The use of the term “firm” in describing total assets refers to both SCCM and CCM.
The 3yr annualized ex-post standard deviation for this composite and benchmark, respectively are 20.46% and 22.45% for 2011, 16.78% and 19.37% for 2012, 13.94% and 16.25% for 2013, 11.82% and 13.03% for 2014, 11.72% and 12.46% for 2015, and 11.24% and 12.46% for 2016. The 3yr annualized ex-post standard deviation is not presented prior to 2011 as it is not required.
The International High Dividend ADR Equity Transaction Based Composite was created on 06/30/05. The minimum portfolio size for inclusion into the composite is $100,000. Non-fee paying clients are not included in any composite and represent less than 1% of total firm assets for all periods presented. These accounts invest primarily in non-US companies who offer ADRs that trade on US exchanges or local shares that trade on Canadian exchanges with market capitalizations in excess of $1,000MM. All securities share a common value orientation, i.e.: low Price/Earnings Ratios and Low Price/Book Value Ratios with the added criteria of an above average dividend yield. The composite benchmark is the MSCI EAFE. The benchmark returns reflect net dividends. The MSCI EAFE index is comprised of the MSCI country indices that represent developed markets outside of North America. Additional information regarding policies for valuing portfolios, calculating performance and preparing compliant presentations are available upon request.
Results for fully discretionary accounts are market value weighted and are calculated on a total return, time-weighted basis using trade date valuations. Returns reflect the reinvestment of dividends and other earnings. Cash returns are included in a component of the total account and are not detailed separately. Leverage is not used in managed account and mutual fund strategies. Returns are expressed in US dollars. Performance results will vary based upon the period measured. Composite dispersion is measured using an asset-weighted standard deviation of the individual accounts included in the composite for the full year only. Gross of fee performance is calculated gross of actual management fees and custodian fees and net of transaction costs. Net of fee performance is calculated net of actual management fees and transaction costs but gross of custodian fees. Returns are calculated net of withholding taxes on dividends. Fees may vary depending on size of account, the relative complexity of servicing the account and legal and other restrictions applicable to the account. Investment advisory fees are generally between .50% and 1% per annum.
SCCM claims compliance with the Global Investment Performance Standards (GIPS®) and has prepared and presented this report in compliance with the GIPS® standards. SCCM has been independently verified for the periods 1994-2016. The verification reports are available upon request. Verification assesses whether (1) the firm has complied with all of 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 accuracy of any specific composite presentation. Past Performance does not guarantee future results. This performance report should not be construed as a recommendation to purchase or sell any particular securities held in composite accounts. Market conditions can vary widely over time and can result in a loss of portfolio value. To receive a complete list and description of SCCM’s composites contact Steve Mullooly at (212) 644-1800, or [email protected] .
SCHAFER CULLEN CAPITAL MANAGEMENT | Page 55 | INTERNATIONAL HIGH DIVIDEND VALUE ADR STRATEGY MONROE COUNTY RETIREE HEALTH CARE FUND As of August 31, 2017
Account Value Account Value Manager Unaudited Returns Net Incpn Name August 31, 2017 July 31, 2017 Change in Value Cash TransferAlloc % MTD YTD Value
Total Fund (Incpn Date) $52,847,874.20 $52,949,299.55 ($101,425.35) $0.00 (0.19%) 8.34% Domestic Equities Atlanta Capital - Core Eq (2/16) $3,379,510.13 $3,389,850.46 (10,340.33) 6.39% (0.31%) 12.69% $3,184,821 S&P 500 Index Fund (12/16) $4,045,037.04 $4,033,996.56 11,040.48 7.65% 0.27% 11.75% $3,639,934 SGA - Large Growth (12/16) $4,228,880.02 $4,270,835.21 (41,955.19) 8.00% (0.98%) 18.01% $3,728,000 TCW - Large Value (10/07) $3,500,840.54 $3,520,462.80 (19,622.26) 6.62% (0.56%) 7.16% $2,793,126 Large Cap Sub-Total $15,154,267.73 $15,215,145.03 (60,877.30) $0.00 28.68% (0.40%) 11.64% Clearbridge - Mid Core (4/13) $5,241,616.15 $5,298,821.43 (57,205.28) 9.92% (1.08%) 6.05% $4,837,564 Mid Cap Sub-Total $5,241,616.15 $5,298,821.43 (57,205.28) $0.00 9.92% (1.08%) 6.05% iShares S&P 600 (11/16) $5,495,761.76 $5,634,210.08 (138,448.32) 10.40% (2.46%) 1.18% $5,026,636 Small Cap Sub-Total $5,495,761.76 $5,634,210.08 (138,448.32) $0.00 10.40% (2.46%) 1.18% Sub-total Domestic Equities $25,891,645.64 $26,148,176.54 (256,530.90) $0.00 48.99% (0.98%) 8.27% International Equities Renaissance - International (3/10) $2,191,700.38 $2,183,426.10 $8,274.28 4.15% 0.38% 22.86% $1,374,993 Schafer Cullen - International (7/14) $2,021,907.14 $2,040,186.93 ($18,279.79) 3.83% (0.90%) 13.46% $2,053,695 Wisdomtree Japan $hdgd (2/15) $1,354,809.44 $1,361,055.20 ($6,245.76) 2.56% (0.46%) 6.76% $1,200,093 Lazard - Emerging Mkt (3/10) $3,832,621.16 $3,702,604.75 $130,016.41 7.25% 3.51% 22.42% $2,423,560 Sub-total International Equities $9,401,038.12 $9,287,272.98 $113,765.14 $0.00 17.79% 1.22% 17.90% Fixed Income Boyd Watterson - Intm Fixed (1/98) $6,137,877.42 $6,100,565.54 $37,311.88 11.61% 0.61% 2.59% $2,724,225 iShares Intm Gov/Cred (2/17) $3,139,972.78 $3,121,184.64 $18,788.14 5.94% 0.60% 2.18% $3,082,434 LM Brandywine Global FI (8/16) $1,785,703.28 $1,774,719.17 $10,984.11 3.38% 0.62% 13.60% $1,680,000 Sub-total Fixed Income $11,063,553.48 $10,996,469.35 $67,084.13 $0.00 20.93% 0.61% 4.06% Real Estate Boyd Watterson - GSA RE (12/13) $5,418,106.87 $5,390,405.42 $27,701.45 10.25% 0.51% 4.77% $3,706,510 Sub-total Real Estate $5,418,106.87 $5,390,405.42 $27,701.45 $0.00 10.25% 0.51% 4.85% Alternatives Tortoise MLP (6/16) $1,073,245.27 $1,126,705.03 -$53,459.76 $0.00 2.03% (4.74%) (4.46%) $1,000,000
Cash CGA - Cash $284.82 $270.23 $14.59 $0.00 0.00% 0.00% 0.03%
This summary page is not an official statement, please see your Morgan Stanley statements / custodial statements. Past performance is not indicative of future returns. Net inception value is the starting value (+/-) contribution and withdrawals - please see Morgan Stanley quarterly reports for detailed flows. 1 MONROE COUNTY RETIREE HEALTH CARE FUND As of August 31, 2017
Asset Allocation LM Brandywine Alts Cash iShares GVI Tortoise MLP CashAtlanta - CE Real Estate Global Bond Fund 2% 6% 2.03% 1.24% 6% 0% S&P 500 3% SGA - LG 10.25% Boyd Watterson - 8% Int. Fixed Inc. 8% 12% Fixed Income 20.73%
WisdomTree JPN TCW - LV 3% 7% Lazard - EM 7%
Equities SchaffCullen - IE Clearbridge - MC 4% 10% 65.74% Renaissance - IE 4% S&P 600 10%
Domestic Equity Managers 48.99% International Equity Managers 17.79% Fixed Income Manager 20.93% Real Estate Managers 10.25% Cash 0.00%
Change in Account Value and Disbursements IPS Allocation Targets Domestic Large Cap (10-30%) 25% As of August 31, 2017 Domestic Mid Cap (5-20%) 10% Month Year-to-Date Domestic Small Cap (5-10%) 10% Beginning Value $52,949,299.55 $46,866,184.41 International Equity (0-20%) 10% Cash Transfers $0.00 $2,000,000.00 Domestic Fixed Income (20-40%) 22% Ending Value $52,847,874.20 $52,847,874.20 Global Bonds (0-20%) 15% Real Estate (0-10%) 5% Appreciation before transfers -$101,425.35 $3,981,689.79 Alternatives (0-10%) 0% Unaudited Returns -0.19% 8.34% Cash (0-5%) 3%
This summary page is not an official statement, please see your Morgan Stanley statements. Past performance is not indicative of future returns. 2