Charles Brandes' Q1 2015 Commentary - Seeking Pockets of Value in Divergent Markets

VALUE SPECIALISTS SINCE 1974CALL BRANDES 800.237.7119

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April 2015

Quarterly Commentary

Q1Q1

1 The Wall Street Journal, Lessons From a Year of Market Surprises, Dec. 30, 2014: http://www.wsj.com/articles/lessons-learned-from-the-year-of-surprise-1419957058;

GLOBAL INSIGHTS 2015

Seeking Pockets of Value in Divergent Markets During a tour of duty for the United States Army Air Corps in World War II, Nobel laureate and economist Kenneth Arrow was asked to evaluate mathematical models to predict the weather one month ahead. He told his superiors that the models werent accurate. Th ey responded: e Commanding General is well aware that the forecasts are no good. However, he needs them for planning purposes.1

Realizing that forecasting the near-term direction of global equity markets can be as diffi cult as predicting the weather, Brandes looks at investment conditions not to forecast if markets are going up or down in the near term but to help us determine where value exists.

Our global perspective enables us to assess relative valuations around the world and see investment fl ows between regions, sectors and companies. Th ese fl ows oft en create an environment where companies can be mispricedsometimes to levels that are extremely low or highand where valuations can diverge signifi cantly from one market to another. Th is global perspective and our company-level research combine to serve as the foundation of Brandes portfolio construction process.

Th is quarterly commentary highlights our insights on key investment themes gleaned from company-level research, and which have driven recent portfolio decisions:

1. Europe and Emerging Markets: Conditions Conducive for Value Investors2. Selectivity Is Key in the United States and Japan Following Broad-Based Gains

Europe and Emerging Markets: Conditions Conducive for Value InvestorsSelect European and emerging markets appear attractive to us, based on our company-by-company research, in part because declining share prices in these markets have created attractive valuations, as shown in Exhibit 1.

MORE VALUE

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Source: FactSet, Forward P/E is Price / Next 12 Months. Time-weighted annual estimates via FactSet market aggregates as of December 31, 2014.

Exhibit 1: Valuations Lend Insights into OpportunitiesValuations by Country/Region, December 31, 2014

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Europe: Opportunity Despite the MalaiseWere seeing attractive opportunities in Europe against the backdrop of continued concerns on euro zone economic growth as well as on how Greece and its euro zone neighbors will address Greeces sovereign debt problems, comments Jeff rey Germain, CFA, Senior Analyst, Brandes Investment Partners.

We believe value investing is oft en an eff ective strategy in that it periodically leads to areas of the world that have been written off at a macro level. Despite the tendency among many investors to paint the entire European investment picture as dark and foreboding, Brandes continues to see opportunity at the company level.

As we analyze companies around the world, four features stand out that indicate solid value opportunities exist in Europe:

1. Attractive Valuations and Higher Dividend Yields vs. the U.S. MarketIn Exhibit 2 (on page 3), the European markets valuations remain fairly attractive to us, especially when compared to the U.S. market, as measured by cyclically adjusted price-to-earnings (CAPE).2 Additionally, Europes 3.3% dividend yield as of March 31, 2015, was higher than its own 20-year average, as well as 60% higher than the dividend yield on U.S. stocks as of March 31, 2015.3 Although dividend yield is not a primary criterion for how we select value stocks at Brandes, it can contribute to long-term performance.

2. Depressed Corporate Profi tsCorporate profi ts in Europe were about 14% below their 10-year infl ation-adjusted average.4 While depressed profi ts may appear to be a near-term negative, given our view that profi tability is cyclical we believe the current situation presents an opportunity for long-term value investors. In our view, the current combination of low valuations and low profi ts could provide investors with an opportunity to benefi t from potential capital appreciation if both measures revert toward historical averages.

3. Diversifi ed Revenue Streams Many Europe-domiciled corporations are quite diversifi ed. For instance, European corporations derive about a third of their revenue from emerging-market regions,5 which represent 39% of global gross domestic product (GDP)6 and are forecasted to deliver over 70% of global GDP growth in 2015.7 Th e recent weakness of the euro has helped make many of these European companies more competitive with U.S. peers. A lower euro versus the U.S. dollar could, in time, provide a tail wind to profi ts for many European companies.

4. Signs of ProgressAusterity has helped balance primary budgets in the euro zone. Additionally, some countries have made progress on other structural reforms. In Spain, for example, these include pension reforms and streamlined government administration.

Despite economic and political uncertainties in the region, our bottom-up fundamental research has led us to uncover a number of attractively valued companies in Europe, Mr. Germain points out. Companies that look particularly attractive include those in food & staples retailing and integrated oil & gas sectors.

Among our holdings in the European food & staples retailing sector, we view those domiciled in the United Kingdom as being particularly attractive. While we appreciate the headwinds that have been pressuring these retailers over the last number of years (e.g., depressed U.K. economy and market share losses to hard discounters), we believe, over the long term, these represent attractive businesses trading at signifi cant discounts to their true worth, with value in their property ownership and the capacity to improve and restructure their operations.

2 As of 3/31/2015. Sources: Morgan Stanley, MSCI, S&P and other national sources. CAPE (cyclically adjusted P/E) attempts to show the relationship between price and multi-year average company earnings. This valuation measure seeks to smooth out earnings uctuations caused by business cycles while also re ecting the long-term effects of in ation.

3 Source: Brandes Investment Partners, MSCI via FactSet as of 3/31/2015. 20-year average: 3.03%. Europe represented by the MSCI Europe Index. The declaration and payment of shareholder dividends are solely at the discretion of the issuer and are subject to change at any time.

4Source: SG Cross Asset Research/Equity Quant, MSCI as of 3/31/2014. European companies represented by the MSCI Europe Index.5Source: Morgan Stanley Research, Global Exposure Guide 2014, May 20146Source: International Monetary Fund, World Economic Outlook Database, October 20147 Source: Deutsche Bank, January 2015. There is no assurance that a forecast will be accurate. Because of the many variables involved, an investor should not rely on forecasts without realizing their limitations.

The European markets valuations remain fairly attractive to us, especially when compared to the U.S. market.

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In the European oil & gas sector, there continues to be a number of attractive investment opportunitieseven aft er accounting for the recent fall in oil prices, Mr. Germain adds. As shown in Exhibit 3, the European oil sector is trading at a historically wide earnings valuation discount to the overall European market. Our holdings are concentrated in the large integrated oil & gas businesses that operate globally across many parts of the hydrocarbon value chain. Along with their compelling valuations, the companies hand-selected by Brandes feature a geographically diverse resource base, solid balance sheets and good cost positions.

However, the current excess supply is clearly weighing on oil prices and to the extent that this imbalance continues, these investments will likely underperform the market, Mr. Germain notes.

Exhibit 2: Europe Among Its Cheapest Ever vs. the United StatesMSCI Europe Index CAPE Divided by U.S. stocks CAPE, March 31, 1985 March 31, 2015

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Source: Morgan Stanley, MSCI, S&P, various national sources; CAPE (cyclically adjusted price/earnings ratio) de ned as in ation adjusted price to 10Y average EPS from continuing operations. CAPE attempts to show the relationship between price and multi-year average company earnings in order to better estimate long-term earnings power. This valuation measure seeks to smooth out earnings uctuations caused by business cycles while also re ecting the long-term effects of in ation. In this chart, a reading above 1.0 indicates that prices for Europe stocks are more expensive than U.S. stocks in relation to their underlying long-term company earnings. A reading below 1.0 indicates U.S. stocks are more expensive on a long-term price/earnings basis. Past performance is not a guarantee of future results. Please note that all indices are unmanaged and are not available for direct investment. U.S. market represented by S&P 500 composite. The CAPE is based on prices from the Standard & Poors Composite Stock Price Index, now known in its current form as the S&P 500 Index.

Exhibit 3: Attractive Valuations in European OilMean Industry Valuations Relative to Market, January 31, 1990 February 28, 2015

Source: Worldscope via FactSet. Market de ned as the top 25% of companies in developed Europe based on market cap, after exclusion of securities with free oat market cap 1.0 = premium

Investors using an index approach to emerging-market investing will likely miss the opportunity offered by individual companies.

Emerging Markets: Di ering Regional Opportunity SetsTh e poor performance of many emerging markets over the past three years has led to an increased number of value opportunities.

A variety of concerns have contributed to market declines, including the dramatic slide in oil prices in the fourth quarter of 2014, the Russia-Ukraine confl ict, as well as Chinas slowing economic growth and currency depreciation in a number of important markets. Due to these factors, emerging-market valuations have moved closer to levels last seen during the 2008 global fi nancial crisis, as shown in Exhibit 4 (on page 4).

Equity performance across emerging markets has diverged considerably, as shown in Exhibit 5 (on page 5). Over the last few quarters, we have found incremental value opportunities in Latin America, Russia and Eastern Europe, as these regions have already factored in a more challenging backdrop. In contrast, the Asian markets have not corrected as much nor off ered as many new value ideas.

Th e diff ering regional opportunity sets can also be observed from each countrys forward price-to-earnings (P/E) ratios, as shown in Exhibit 1 on page 1, with Russia and Brazil showing much more attractive valuation multiples compared to most other countries.

In times of macroeconomic dislocation when many investors are running for the exits, we oft en uncover pockets of value by focusing on companies with attractive valuations, comments Louis Lau, CFA, Director, Investments Group, Brandes Investment Partners.

Investors using an index approach to emerging-market investing will likely miss the opportunity off ered by individual companies that remain fundamentally sound against the macroeconomic and geopolitical upheaval, Mr. Lau points out. While valuations are attractive in emerging markets, it is important to discriminate at the company level.

For example, Brazil, which has been aff ected by alleged corruption at a state-run oil company, fi scal austerity, political gridlock, drought and a depreciating currency, has presented value opportunities in industries such as food & staples retailing, apparel and construction services. Companies in these industries were previously not inexpensive enough for Brandes to get involved. In addition, we have invested in utilities, banks, telecommunications and packaged food companies with attractive valuations.

Exhibit 4: Emerging-Market Valuations Near 2008 Crisis LevelsMSCI EM Index P/B, March 31, 1995 March 31, 2015

Source: MSCI. Past performance is not a guarantee of future results. Please note that all indices are unmanaged and are not available for direct investment.

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Latin America Crisis2000-2002

Global FinancialCrisis 2008

Current(3/31/2015)

MSCI EM Performance 1999: +66%



Asian Crisis1997-1998

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We have found incremental value opportunities in Latin America, Russia and Eastern Europe.

Exhibit 5: Divergent Performance: Emerging-Market Regions Price Indexed to 3/31/2012=100

Source: FactSet; as of 3/31/2015 Past performance is not a guarantee of future results. One cannot invest directly in an index.

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Selectivity Is Key in the United States and Japan Following Broad-Based Gains

United States: Select Company Level Research The U.S. market in general appears fully valued when viewed over the long term, in part due to profit margins near all-time highs. The cyclically adjusted P/E of U.S. stocks is 27.2x vs. the long-term (1871-2014) median of 16.0x. (See Exhibit 6 on page 6).

While its difficult to find value in the United States, select areas of opportunity exist, especially among U.S. banks, as companies have improved their balance sheets and decreased leverage, says Brent Fredberg, Director, Investments Group, Brandes Investment Partners. A number of U.S. banks continue to build capital, trade at low valuations, and demonstrate potential for increased capital return, he adds.

In Russia, many market participants seem to currently view investing there as a binary decision, which means they are either in or out of the market with no regard for individual company merits or valuations. Political instability, economic sanctions and a sharp drop in oil prices have contributed to the difficult investing environment in Russia. However, although the magnitude of the recent decline in oil prices and the ensuing weakening of the ruble were unexpected, we continue to invest in a hand-selected group of companies that are relatively resilient and offer an attractive risk/reward tradeoff for the patient, long-term investor.

For example, we continue to hold one of Russias largest oil producersa vertically integrated company with operations at all levels of gas and oil exploration, production and refining. Market sentiment toward the company declined significantly in the latter half of 2014 due to geopolitical concerns around Russia, particularly the situation in Ukraine, as well as the global oil-price decline.

In our view, the company is actually a fairly defensive business in a declining oil-price environment. The company has a healthy oil reserve life of 20 to 27 years (as of December 31, 2014), higher than many oil companies around the world. Its historical profitability per barrel of oil has also been quite stable and less volatile than the oil market price, due partly to Russias progressive export tariff on oil. Furthermore, much of the companys revenue is generated in U.S. dollars, while a portion of its costs are paid in rubles. As a result, the weaker ruble could potentially have a positive net impact on the company.

While U.S. banks are better capitalized than theyve been historically, valuations are low in part due to depressed earnings. We believe earnings are depressed for two primary reasons:

1. Abnormally low interest-rate environment, which makes it di cult for banks to earn adequate profi ts on their substantial deposit bases, and

2. Heightened level of compliance and litigation expense that should ease with time.

Not only could earnings signifi cantly increase if these factors normalize, but the return of shareholder capital through share buybacks and increased dividends could contribute to higher valuation levels as well, Mr. Fredberg explains.

Th e recently completed Comprehensive Capital Analysis and Review (CCAR) process supports our underlying thesis that capital levels among the largest U.S. banks are building steadily and are making the return of capital to shareholders a reality, Mr. Fredberg adds. Th e CCAR, a U.S. Federal Reserve program now in its fi ft h year,

evaluates the capital planning processes and capital adequacy of the largest U.S.-based bank holding companies, including the fi rms planned capital actions such as dividend payments and share buybacks and issuances. Strong capital levels act as a cushion to absorb losses and help better ensure that banking organizations have the ability to lend to households and businesses even in times of stress, according to the Federal Reserve.8

We are also seeing opportunity arise from a refreshing increase in valuation dispersion, with intra-sector diff erences expanding. For example, while investors have been enamored with the biotech portion of the healthcare sector over the last two years, potential value opportunities exist in less exciting areas such as healthcare services and medical products. Similarly, while the cloud and social networking areas of technology are all the rage, a large number of boring technology stocks still are selling at what we view are discounted valuations. Th ese one-time market favorites typically have had high returns on capital, healthy growth rates, high customer switching costs, and have returned a signifi cant portion of their ample free cash fl ow to shareholders.

Some of these companies, with their large international presence, have seen their stock prices come under pressure recently with the fi nancial statement translation of weaker foreign currencies back into the U.S. dollar, but their strong balance sheets have allowed them opportunistically to repurchase shares at attractive discounts to our estimates of fair value.

8 Source: U.S. Federal Reserve, as of March 2015 http://www.federalreserve.gov/newsevents/press/bcreg/20150311a.html

Exhibit 6: U.S. Market No Longer InexpensiveCyclically Adjusted P/E (CAPE), January 1880 March 31, 2015

Source: Prof. Robert Shiller online data: http://www.econ.yale.edu/~shiller/data.htm. Past performance is not a guarantee of future results. CAPE attempts to show the relationship between price and multi-year average company earnings in order to better estimate earnings power. This valuation measure seeks to smooth out earnings uctuations caused by business cycles while also re ecting the long-term effects of in ation. U.S. market represented by S&P 500 composite. The CAPE is based on prices from the Standard & Poors Composite Stock Price Index, now known in its current form as the S&P 500 Index. Professor Shiller uses monthly dividend and earnings data computed from the S&P four-quarter totals for the quarter since 1926; Professor Shiller uses dividend and earnings data before 1926 from Cowles and Associates.

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Median16.0x

We are also seeing opportunity arise from a refreshing increase in valuation dispersion.

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Our continued commitment to a bottom-up company analysis will enable us to be ready to take advantage of further potential mispricings.

Finally, we look forward to more opportunities arising as we expect the near record-high U.S. profit margins to return to more normal levels. We dont profess to know exactly what will drive this normalization to occur, whether its the stronger U.S. dollar, the eventual increase in real wages as unemployment continues to decline, or simply competitive pricing dynamics within a number of industries, Mr. Fredberg points out. However, what we do know is that our continued commitment to a bottom-up company analysis will enable us to be readyamid changing market conditionsto take advantage of further potential mispricings when they do arrive.

Japan: Signs of ProgressJapan Prime Minister Shinzo Abe, who took office in 2012, introduced a three arrows approach to revitalize the economy following two decades of sluggish growth. The three arrows consist of fiscal stimulus, monetary policy easing and structural reforms9 including a plan to reduce the corporate tax rates in stages, from 35% to below 30%, which is set to begin in the 2015 fiscal year.10 These government reform initiatives and growing investor optimism on Japans economic prospects helped drive Japans equity market higher starting in late 2012, following the governments announcement of its economic revitalization plan.

While the Japanese equity market as a whole no longer appears deeply undervalued to us due to the sustained rise in equity prices, we continue to find clusters of opportunity in a wide range of companies exhibiting attractive valuationsfrom small-capitalization, domestically focused and cash-rich firms to large-capitalization, globally competitive auto companies.

We view the Japanese governments focus on improving corporate governance and return on equity (ROE) as positive signs for companies in Japan and their investors. We continue to invest in what we believe are attractively priced, fundamentally sound companies in Japan, including some domestically and globally facing companies with strong balance sheets, says Shingo Omura, CFA, Director, Investments Group, Brandes Investment Partners.

We remain optimistic about the long-term potential of corporate profitability in Japan, as benefits from cost reduction programs initiated during the 2008 financial crisis and during the long period of a strong Japanese yen begin to bear fruit. Additionally, we are encouraged by the increased attention placed by the Japanese government on improving corporate governance and implementing structural reforms with the intention of revitalizing the economy and improving overall returns on capital.

There have been a number of notable initiatives that appear to be paving a path for improved corporate governance, which we believe is key for Japanese companies in their efforts to raise returns on equity to global standards. These initiatives include:

1. Introduction of the Japanese Stewardship Codewhich calls on shareholders to disclose how they vote at annual general meetings and engage more actively with company management, with the ultimate goal of promoting sustainable growth in the corporate sector; 127 institutions have signed the code.11

2. Introduction and adoption of the JPX-Nikkei Index 400this new index, which started in January 2014, includes 400 companies that meet global investment standards such as efficient use of capital and investor-focused management.12

3. Implementation of the Corporate Governance Code comply-or-explain provision13this requires companies subject to the code to comply with its principles or explain why they cannot do so.

Over the past two decades, ROEs in Japan have been hampered by low operating margins brought on by a high cost structure and deflation, in addition to the buildup of excess capital following the banking crisis in the late 90s. The aforementioned initiatives, plus the improvement in the long-term outlook of the Japanese economy, appear to be positively impacting many Japanese companies as they are now beginning to have a stronger focus on shareholder returns. Dividends and share buybacks have been on the rise, as shown in Exhibit 7 (on page 8), in an effort to reduce excess capital. Additionally, operating profitability has been improving as cost reduction plans are starting to gain traction. We believe these are significant developments and ROEs over the long term will continue to improve. Exhibit 8 (on page 8) shows operating margins and ROE have been improving for companies in the Tokyo Stock Price Index (TOPIX).

9 The Wall Street Journal blogs, For Abenomics, Third Arrow is the Hardestand Most Needed http://blogs.wsj.com/economics/2014/02/25/for-abenomics-third-arrow-is-the-hardest/tab/print/

10 The Wall Street Journal, Japan to Lower Corporate Tax Rates, December 30, 2014 http://www.wsj.com/articles/japan-to-lower-corporate-tax-rate-141993530811 Reuters, Almost 130 institutional investors adopt Japan shareholder code, June 10, 2014 http://www.reuters.com/article/2014/06/10/japan-stocks-

stewardshipcode-idUSL4N0OR2CC20140610; 12 Source: Tokyo Stock Exchange, http://www.tse.or.jp/english/market/topix/jpx_nikkei.html 13 Tokyo Stock Exchange, Japans Corporate Governance Code, page 5, March 5, 2015 http://www.tse.or.jp/english/listing/cg/cg-code/b7gje60000024vhl-att/

b7gje60000029gfh.pdf

Exhibit 7: Capital Return Policies Are ImprovingImproved Capital Return Policies, 2001 2014e

*Estimated: Total dividend amount is estimated with dividend yield and market cap. Equity issuance shown as negative. Past performance is not a guarantee of future results. The declaration and payment of shareholder dividends are solely at the discretion of the issuer and are subject to change at any time.Sources: Nikkei Astra, BofA Merrill Lynch Global Research. Data based on companies listed on the Tokyo Stock Exchange.

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Exhibit 8: Corporate Japan: Improving Operating Margin and Return on EquityMarch 31, 1995 March 31, 2015

Source: FactSet; as of 3/31/2015. Japan represented by TOPIX Index.

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Operating pro tability has been improving as cost reduction plans are starting to gain traction.

Witnessing such progress in Japan is a good reminder that it may not take a lot in the way of good news for fundamentals to come to the forefront.

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Look to Brandes to pursue value in all types of investment conditions.

14 This phenomenon is thoroughly examined in a Brandes Institute paper, Value vs. Glamour: A Long-Term Worldwide Perspective. Using data from 1980 to 2014, the study showed that over the long term, the value premium was evident across valuation metrics, regions and market capitalizations. http://www.brandes.com/docs/default-source/brandes-institute/value-vs-glamour-worldwide-perspective.pdf

Two years ago in this quarterly commentary, we cited some of the challenges Japan has faced, including its sovereign debt and demographic issues, as well as the prolonged bearish sentiment on the equity market and the economy at that time. We noted then that despite the uncertainties, there were still meaningful fiscal, monetary and policy options available to the Japanese government to combat serious macroeconomic issues. Not surprising to us, the Japanese equity market rebounded following the governments move to implement such policies starting in late 2012.

Over the years, the market has taken a negative view of Japan for many macroeconomic reasons, as the firms founder and Chairman Charles Brandes points out in his recently published book, Brandes on Value: The Independent Investor. Notwithstanding the economic uncertainties and market view on Japan in the last few decades, we never let these factors overshadow the unique opportunities that many Japanese companies presented to the rational, long-term value investor, he stated.

Conclusion: Throughout changing investment climates, markets across the globe may offer pockets of value for investors who know where and how to look.As value investors, we see investment conditions that are conducive to value equity investingespecially in Europe and emerging markets.

As the short-term performance cycles of global markets have historically changed leadership, it is important to remember that over the long term, we believe valuations remain key drivers of returns.14

Look to Brandes to pursue value in all types of investment conditions. Our global analysts scan the globe for companies with the potential to deliver market-beating returns. We believe this is the best way we can help clients pursue their long-term financial goals.

Dividend Yield: Dividend per share divided by price per share.Price/Book: Price per share divided by book value per share.Price/CF: Price per share divided by cash ow per share.Price/Earnings: Price per share divided by earnings per share.Return on equity: Earnings per share divided by equity value per share.

Not all investment strategies are suitable for all investors.

The information provided in this material should not be considered a recommendation to purchase or sell any particular security. It should not be assumed that any security transactions, holdings, or sectors discussed were or will be pro table, or that the investment recommendations or decisions we make in the future will be pro table or will equal the investment performance discussed herein. Portfolio holdings and allocations are subject to change at any time and should not be considered a recommendation to buy or sell particular securities. Strategies discussed herein are subject to change at any time by the investment manager in its discretion due to market conditions or opportunities. Indices are unmanaged and are not available for direct investment. Market conditions may impact performance. The performance results presented were achieved in particular market conditions which may not be repeated. Moreover, the current market volatility and uncertain regulatory environment may have a negative impact on future performance.

International investing is subject to certain risks such as currency uctuation and social and political changes which may result in greater share price volatility; such risks are increased when investing in emerging markets. Additional risks associated with emerging markets investing include smaller-sized markets, liquidity risks, and less established legal, political, social, and business systems to support securities markets. Some emerging-market countries may have xed or managed currencies that are not free- oating against the U.S. dollar. Certain of these currencies have experienced, and may experience in the future, substantial uctuations or a steady devaluation relative to the U.S. dollar. Emerging markets investments can experience substantial price volatility in the short term and should be considered long-term investments. Investments in small and medium capitalization companies tend to have limited liquidity and greater price volatility than large capitalization companies.

The MSCI Emerging Markets Asia Index measures equity market performance of emerging markets in Asia.

The MSCI Emerging Markets Eastern Europe Index captures large-and mid-cap representation among companies in the Czech Republic, Hungary, Poland and Russia. Source: http://www.msci.com/resources/factsheets/index_fact_sheet/msci-emerging-markets-eastern-europe.pdf

The MSCI EAFE (Europe, Australasia, Far East) Index with net dividends measures equity market performance of developed markets in Europe, Australasia, and the Far East.

The MSCI Europe Index with net dividends measures equity market performance of developed markets in Europe.

The MSCI Emerging Markets Index with gross dividends measures equity market performance of emerging markets.

The MSCI Frontier Markets Index includes large, mid and small cap representation and covers approximately 99% of the investable equity universe across all Frontier Markets countries. Source: http://www.msci.com/products/indexes/country_and_regional/fm/

The MSCI Emerging Markets Latin America Index measures equity market performance of emerging markets in Latin America.

The MSCI World Index with net dividends measures equity market performance of developed markets.

The MSCI information may only be used for your internal use, may not be reproduced or redisseminated in any form and may not be used as a basis for or a component of any nancial instruments or products or indices. None of the MSCI information is intended to constitute investment advice or a recommendation to make (or refrain from making) any kind of investment decision and may not be relied on as such. Historical data and analysis should not be taken as an indication or guarantee of any future performance analysis, forecast or prediction. The MSCI information is provided on an as is basis and the user of this information assumes the entire risk of any use made of this information. MSCI, each of its af liates and each other person involved in or related to compiling, computing or creating any MSCI information (collectively, the MSCI Parties) expressly disclaims all warranties (including, without limitation, any warranties of originality, accuracy, completeness, timeliness, non-infringement, merchantability and tness for a particular purpose) with respect to this information. Without limiting any of the foregoing, in no event shall any MSCI Party have any liability for any direct, indirect, special, incidental, punitive, consequential (including, without limitation, lost pro ts) or any other damages. (www.msci.com)

The Russell 2000 Index with gross dividends measures the performance of the small-capitalization segment of the U.S. equity universe. The Russell 2000 Index is a subset of the Russell 3000 Index.

The S&P 500 Index with gross dividends measures equity performance of 500 leading companies in industries of the U.S. economy.

The S&P Developed Ex-U.S. SmallCap Index with gross dividends measures the equity performance of small-capitalization companies from developed markets excluding the United States.

The Tokyo Stock Price Index (TOPIX) with gross dividends is calculated based on the performance of all domestic common stocks listed on the Tokyo Stock Exchange First Section. The total returns for the index prior to 12/31/1998 are not available; therefore returns are derived by combining the price index returns and corresponding month-end yields (the source of this index information is FT Interactive Data Corporation). From 12/31/1998 to present time, the returns for the TOPIX are calculated on a total return basis.

The foregoing re ects the thoughts and opinions of Brandes Investment Partners exclusively and is subject to change without notice.

Brandes Investment Partners is a registered trademark of Brandes Investment Partners, L.P., in the United States and Canada.

10154 PUB 0315

VALUE SPECIALISTS SINCE 1974CALL BRANDES 800.237.7119

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Charles Brandes' Q1 2015 Commentary - Seeking Pockets of Value in Divergent Markets