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International Small Cap Fund

NAV (as of 17 Jan 2018)

$13.74, -0.01

YTD

+5.21%

INCEPTION

20 Oct 2014

TICKER/CUSIP

CIISX/14949P703

Fact Sheet Prospectus

Fund Profile

The Fund invests primarily in common stocks of companies with smaller market capitalizations located in developed and emerging markets outside the U.S. The Fund normally invests at least 80% of its total assets in equity securities of companies with smaller market capitalizations. Smaller market capitalization companies are companies with market capitalizations that do not exceed the highest market capitalization of a company within the Fund’s benchmark, the MSCI ACWI ex USA Small Cap Index (Gross), at the time of purchase. Some of these companies, although small by U.S. standards, might be large companies in their local markets. The Fund may continue to hold securities of a portfolio company that appreciate above the smaller market capitalization threshold and thus may from time to time hold less than 80% of its total assets in equity securities of companies with smaller market capitalizations. The Fund may invest in a wide range of industries.

Minimum Investment$1,000,000
Sales ChargeNone
Net Expense Ratio1.33%
Gross Expense Ratio3.45%
Dividend FrequencyAnnual
Capital Gain FrequencyAnnual
Benchmark MSCI AC World ex USA Small Cap

Performance

Fund Quarter to Date Year to Date 1 Year3 Year Since Inception
CIISX 4.5%34.7%34.7%13.4%13.3%
MSCI AC World ex USA Small Cap 6.6%32.1%32.1%12.4%11.9%
Fund Quarter to Date Year to Date 1 Year3 Year Since Inception
CIISX 4.5%34.7%34.7%13.4%13.3%
MSCI AC World ex USA Small Cap 6.6%32.1%32.1%12.4%11.9%

Portfolio

Asset Allocation as of 31 Dec 2017

Stocks 99%
Cash 1%

Characteristics as of 31 Dec 2017

Causeway MSCI AC World ex USA Small Cap
No. of Holdings 124 4355
Wtd. Avg. Market Cap (Mn $US)$1,493$1,799
FY2 Price/Earnings9.015.4
Price/Book Value1.21.7

A “Weighted Average” measures a characteristic by the market capitalization of each stock. Price/Book Ratio is the weighted average of the price/book ratios of all the stocks in a portfolio. The P/B ratio of a company is calculated by dividing the market price of its stock by the company’s per-share book value. The Price/Earnings Ratio is the weighted average of the price/earnings ratios of the stocks in a portfolio. The FY2 P/E ratio is a forward P/E ratio using a next-twenty four months EPS estimate in the denominator.

SECTOR WEIGHTS as of 31 Dec 2017

Materials15.04%
Information Technology15.02%
Industrials14.12%
Financials13.76%
Real Estate13.13%
Consumer Discretionary12.38%
Equity Funds5.13%
Energy3.96%
Consumer Staples2.69%
Health Care2.51%
Utilities1.31%
Telecommunication Services0.00%

(VS. Benchmark)

Materials11.18%
Information Technology12.01%
Industrials19.34%
Financials10.54%
Real Estate9.93%
Consumer Discretionary15.73%
Equity Funds0.00%
Energy3.50%
Consumer Staples6.74%
Health Care7.07%
Utilities2.79%
Telecommunication Services1.17%
Materials
Information Technology
Industrials
Financials
Real Estate
Consumer Discretionary
Equity Funds
Energy
Consumer Staples
Health Care
Utilities
Telecommunication Services
Other

TOP 10 COUNTRIES as of 31 Dec 2017

Japan17.17%
United Kingdom8.70%
China8.31%
Taiwan5.89%
Australia5.48%
Canada5.45%
Italy4.89%
India4.80%
Germany4.79%
South Korea3.95%
France3.38%
Sweden2.81%
Norway2.78%
Netherlands2.45%
South Africa2.03%
Greece1.86%
Turkey1.73%
Singapore1.61%
Switzerland1.57%
Finland1.44%
Mexico1.43%
Egypt1.18%
Indonesia1.06%
Belgium0.91%
Spain0.79%
Thailand0.69%
Israel0.65%
United Arab Emirates0.59%
Denmark0.41%
New Zealand0.23%
Hong Kong0.00%
Malaysia0.00%
Pakistan0.00%
Philippines0.00%
Czech Republic0.00%
Hungary0.00%
Poland0.00%
Qatar0.00%
Russia0.00%
Austria0.00%
Ireland0.00%
Portugal0.00%
Brazil0.00%
Chile0.00%
Colombia0.00%
Peru0.00%
Multi-National All Country0.00%

(VS. Benchmark)

Japan21.73%
United Kingdom13.26%
China4.34%
Taiwan3.83%
Australia4.74%
Canada6.88%
Italy2.83%
India3.36%
Germany4.26%
South Korea3.66%
France2.68%
Sweden3.58%
Norway1.22%
Netherlands1.79%
South Africa1.21%
Greece0.17%
Turkey0.27%
Singapore1.16%
Switzerland3.39%
Finland1.07%
Mexico0.55%
Egypt0.10%
Indonesia0.50%
Belgium1.31%
Spain1.81%
Thailand0.82%
Israel1.09%
United Arab Emirates0.13%
Denmark1.18%
New Zealand0.70%
Hong Kong1.51%
Malaysia0.73%
Pakistan0.16%
Philippines0.20%
Czech Republic0.02%
Hungary0.02%
Poland0.22%
Qatar0.09%
Russia0.15%
Austria0.66%
Ireland0.75%
Portugal0.27%
Brazil1.20%
Chile0.29%
Colombia0.08%
Peru0.04%
Multi-National All Country0.00%
Japan
United Kingdom
China
Taiwan
Australia
Canada
Italy
India
Germany
South Korea
France
Sweden
Norway
Netherlands
South Africa
Greece
Turkey
Singapore
Switzerland
Finland
Mexico
Egypt
Indonesia
Belgium
Spain
Thailand
Israel
United Arab Emirates
Denmark
New Zealand
Hong Kong
Malaysia
Pakistan
Philippines
Czech Republic
Hungary
Poland
Qatar
Russia
Austria
Ireland
Portugal
Brazil
Chile
Colombia
Peru
Multi-National All Country
Other

TOP 10 ACTIVE HOLDINGS as of 31 Dec 2017

Security Country Industry Active Weight*
Mineral Resources Ltd. Australia Materials 2.0
Gigabyte Technology Co., Ltd. Taiwan Technology Hardware & Equipment 1.9
Radiant Opto-Electronics Corp. Taiwan Semiconductors & Semi Equipment 1.9
Sojitz Corp. Japan Capital Goods 1.9
AGF Management Canada Diversified Financials 1.8
Motor Oil (Hellas) Corith Refineries SA Greece Energy 1.8
Wüstenrot & Württembergische AG Germany Insurance 1.8
Hemfosa Fastigheter AB Sweden Real Estate 1.8
Astral Foods Ltd. South Africa Food Beverage & Tobacco 1.8
Deutsche Pfandbriefbank AG Germany Banks 1.8

*Active defined as Fund weight minus MSCI ACWI ex USA Small Cap Index weight. Holdings are subject to change.

Approach

For Causeway International Small Cap Fund, our quantitative process examines a multitude of factors within four main categories to gauge the return potential of a stock. First, we seek relatively inexpensive valuations. Second, we want to see accelerating earnings growth prospects and upward earnings estimate revisions from the sell-side analysts who cover the stock. Third, we look for positive recent momentum, since recent trends tend to persist. And fourth, we want to find quality by seeking stocks with a focus on strong free cash flow generation rather than simply sales growth. We then rank the stocks on these factors to identify candidates that we believe should produce the most attractive risk-adjusted returns. Before we establish new positions, our fundamental portfolio managers and analysts have the opportunity to review stocks in their sector of coverage and report any “red flags” that may be outside the scope of quantitative analysis.

We take many steps to monitor and manage risk within the portfolio. We start by including in our tradable universe only the roughly 2,800 stocks that trade at least $1 million per day on average, to seek sufficient liquidity and to minimize market impact when we enter and exit positions. We intend for the portfolio to also typically contain between 120 and 200 stocks at any one time, and this breadth is intended to limit idiosyncratic risk.

Commentary

PERFORMANCE REVIEW for the month ended 31 Dec 2017


International smaller capitalization equities delivered another month of positive returns in December, closing the year with twelve consecutive months of positive absolute returns. International smaller capitalization equities, as measured by the MSCI ACWI ex USA Small Cap Index (“Index”) delivered over 30% gross returns in 2017. Overall, international smaller capitalization equities outperformed larger capitalization equities in December. Emerging markets (as measured by the MSCI Emerging Markets Index) outperformed developed markets (as measured by the MSCI World ex-US Index) in the month of December, and by over 10% in 2017. Smaller capitalization equities within emerging markets (as measured by the MSCI Emerging Markets Small Cap Index) outperformed their developed market peers (as measured by the MSCI World ex USA Small Cap Index) during the month of December, however in 2017, they only outperformed by about 3%. This stands in stark contrast to larger caps, where emerging markets (as measured by the MSCI EM Large Cap Index) outperformed developed markets (as measured by the MSCI World x-US Large Cap Index) by over 14%. Within emerging markets, smaller capitalization equities slightly outperformed larger capitalization equities in December. Smaller capitalization equities in developed markets also slightly outperformed developed large caps in December.

Within the Index, all eleven sectors posted positive returns in December. Among them, the top performing sectors were materials, health care, and energy. Information technology, utilities, and financials were the weakest performers for the month.

Causeway International Small Cap Fund (“Fund”) performed in-line with the Index during December, while strongly outperforming for the year. To evaluate stocks in our investable universe, our multi-factor quantitative model employs four bottom-up factor categories: valuation, earnings growth, technical indicators, and quality; and employs two top-down factor categories: macroeconomic, and country aggregate.

Although value factors have struggled in recent months, they finished 2017 with reasonably positive returns. Earnings growth factors posted flat returns in December, however they performed well in 2017, especially within emerging markets. Technical factors posted negative returns in December, but were the strongest factor group in 2017. The financial strength factor group posted modestly positive returns in December, and financial strength was the weakest factor group performer, though still positive, in 2017. All bottom-up factor group returns delivered positive returns in 2017, and all remain positive on an inception-to-date basis. Our macroeconomic and country aggregate factor groups both posted negative returns in the month of December.

Fund holdings in the real estate, consumer discretionary, and health care sectors detracted the most from relative performance. However, holdings in the consumer staples, materials, and information technology sectors offset a portion of the underperformance. While underperforming for the month, the Fund has outperformed the Index year-to-date, almost entirely due to stock selection. Similarly, December’s underperformance was primarily driven by stock selection. The largest detractor to relative performance was financial services company, CIBanco S.A. Institución de Banca Múltiple (Mexico). Additional top detractors included real estate investment company, Immobiliare Grande Distribuzione SpA (Italy), digital communications & mailroom equipment provider, Neopost SA (France), commercial printer, Transcontinental (Canada), and Motor Oil (Hellas) Corith Refineries SA (Greece). The largest contributor to relative performance was integrated poultry producer, Astral Foods Ltd. (South Africa). Additional contributors included steel & iron distribution company, EVRAZ Plc (United Kingdom), computer hardware manufacturer, Gigabyte Technology Co., Ltd. (Taiwan), mining industry crushing service provider, Mineral Resources Ltd. (Australia), and passenger & cargo airline company, Air-France-KLM SA (France).

The market commentary expresses the portfolio managers’ views as of the date of this report and should not be relied on as research or investment advice regarding any stock. These views and the fund holdings and characteristics are subject to change. There is no guarantee that any forecasts made will come to pass. Any securities identified and described in this report do not represent all of the securities purchased, sold or recommended for client accounts. The reader should not assume that an investment in the securities identified was or will be profitable. Diversification does not protect against market loss.

Dividends

2017$0.3792
2016$0.2901
2015$0.2407
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Short-term Capital Gains

2017$0.23757
2016$0.0000
2015$0.0000
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Long-term Capital Gains

2017$0.47945
2016$0.0000
2015$0.0000
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Distributions are per share. Distribution amounts are based on gains and losses realized and income earned by the Fund through October 31 (or earlier under certain circumstances).

Documents

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