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International Opportunities

Strategy Profile

The Causeway International Opportunities strategy is a blend of Causeway’s best skills, combining our international value (bottom-up, fundamental, developed international markets) and emerging markets (quantitatively managed with a targeted tracking error of 5%) equity strategies. Tracking error is a measurement of dispersion from a benchmark index. Our quantitative research team developed a multi-factor model that measures the relative attractiveness of emerging markets, and guides the portfolio managers in tactically allocating between the developed and emerging portfolio segments.

Inception Date30 June 2007
BenchmarkMSCI ACWI ex US

Performance

Fund Quarter to Date Year to Date 1 Year3 Year5 Year10 Year Since Inception
Gross % 7.6%24.0%25.0%5.6%8.7%4.0%4.1%
Net % 7.5%23.7%24.5%5.2%8.4%3.6%3.7%
MSCI ACWI ex US 6.3%21.6%20.2%5.2%7.5%1.7%2.2%

Portfolio

Asset Allocation as of 30 Sep 2017

Stocks 99.3%
Cash 0.7%

Characteristics as of 30 Sep 2017

Causeway MSCI ACWI ex US
No. of Holdings 189 1859
Wtd. Avg. Market Cap (Mn $US)$57,450$50,864
FY2 Price/Earnings12.013.9
Price/Book Value1.51.7
Dividend Yield (%)3.12.9

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 30 Sep 2017

Financials19.26%
Industrials16.90%
Information Technology11.03%
Consumer Discretionary10.13%
Health Care9.59%
Energy8.96%
Materials8.31%
Consumer Staples5.10%
Telecommunication Services4.90%
Utilities3.48%
Real Estate1.69%

(VS. Benchmark)

Financials23.30%
Industrials11.79%
Information Technology11.21%
Consumer Discretionary11.28%
Health Care7.89%
Energy6.64%
Materials7.85%
Consumer Staples9.59%
Telecommunication Services4.20%
Utilities3.08%
Real Estate3.19%
Financials
Industrials
Information Technology
Consumer Discretionary
Health Care
Energy
Materials
Consumer Staples
Telecommunication Services
Utilities
Real Estate
Other

TOP 10 COUNTRIES as of 30 Sep 2017

United Kingdom25.82%
Japan11.16%
Switzerland10.67%
Germany9.48%
China7.82%
Canada6.10%
France5.58%
South Korea4.40%
Taiwan2.85%
Netherlands2.36%
India2.21%
Italy1.77%
Russia1.34%
Brazil1.32%
Thailand1.24%
Sweden0.87%
Malaysia0.70%
Australia0.68%
Turkey0.63%
South Africa0.60%
Spain0.53%
Poland0.27%
United Arab Emirates0.24%
Ireland0.17%
Mexico0.15%
Indonesia0.13%
Qatar0.10%
Hungary0.09%
Czech Republic0.07%
Egypt0.00%
Greece0.00%
New Zealand0.00%
Singapore0.00%
Pakistan0.00%
Philippines0.00%
Israel0.00%
Austria0.00%
Belgium0.00%
Denmark0.00%
Finland0.00%
Norway0.00%
Portugal0.00%
Hong Kong0.00%
Peru0.00%
Chile0.00%
Colombia0.00%

(VS. Benchmark)

United Kingdom12.33%
Japan15.94%
Switzerland5.71%
Germany6.75%
China7.12%
Canada6.69%
France7.45%
South Korea3.61%
Taiwan2.77%
Netherlands2.57%
India2.03%
Italy1.71%
Russia0.82%
Brazil1.82%
Thailand0.54%
Sweden2.03%
Malaysia0.55%
Australia4.73%
Turkey0.27%
South Africa1.54%
Spain2.40%
Poland0.32%
United Arab Emirates0.17%
Ireland0.32%
Mexico0.83%
Indonesia0.55%
Qatar0.14%
Hungary0.08%
Czech Republic0.04%
Egypt0.03%
Greece0.08%
New Zealand0.11%
Singapore0.88%
Pakistan0.02%
Philippines0.27%
Israel0.33%
Austria0.18%
Belgium0.82%
Denmark1.29%
Finland0.69%
Norway0.48%
Portugal0.11%
Hong Kong2.39%
Peru0.09%
Chile0.30%
Colombia0.11%
United Kingdom
Japan
Switzerland
Germany
China
Canada
France
South Korea
Taiwan
Netherlands
India
Italy
Russia
Brazil
Thailand
Sweden
Malaysia
Australia
Turkey
South Africa
Spain
Poland
United Arab Emirates
Ireland
Mexico
Indonesia
Qatar
Hungary
Czech Republic
Egypt
Greece
New Zealand
Singapore
Pakistan
Philippines
Israel
Austria
Belgium
Denmark
Finland
Norway
Portugal
Hong Kong
Peru
Chile
Colombia
Other

TOP 10 HOLDINGS as of 30 Sep 2017

Security Country Industry % of Total
Volkswagen AG Germany Automobiles & Components 4.0
British American Tobacco plc United Kingdom Food Beverage & Tobacco 2.9
Royal Dutch Shell Plc United Kingdom Energy 2.8
Schneider Electric SE France Capital Goods 2.8
ABB Ltd. Switzerland Capital Goods 2.4
KDDI Corp. Japan Telecommunication Services 2.4
Barclays Plc United Kingdom Banks 2.4
BASF SE Germany Materials 2.3
BP Plc United Kingdom Energy 2.2
Compagnie Financiere Richemont Switzerland Consumer Durables & Apparel 2.1

Holdings are subject to change.

Approach

The Causeway International Opportunities strategy is a blend of Causeway’s best skills, combining our international value (bottom-up, fundamental, developed international markets) and emerging markets (quantitatively managed with a targeted tracking error of 5%) equity strategies. Tracking error is a measurement of dispersion from a benchmark index. Our quantitative research team developed a multi-factor model that measures the relative attractiveness of emerging markets, and guides the portfolio managers in tactically allocating between the developed and emerging portfolio segments.

Our developed markets exposure aims to add value through intensive fundamental research implemented via a disciplined value approach.

Our emerging markets exposure is the result of a quantitative strategy tailored to the unique growth, momentum, and risk characteristics of developing markets. Our proprietary tactical allocation model is designed to add additional value.

The Causeway International Opportunities portfolio is a fully invested, typically 120-200 stock portfolio. Allocation between developed and emerging markets can range from 0-2x the allocation of the MSCI All Country World Index ex-US, but is scalable to clients’ desired parameters.

Commentary

PERFORMANCE REVIEW for the month ended 30 Sep 2017


Developed equity markets rose during the month as rising employment and improving consumer confidence data indicated a healthy global economy. Emerging markets equities retreated in late-September, following the US Federal Reserve’s (“Fed’s”) announcement that it intends to slim its balance sheet. The top performing markets in our investable universe included Ireland, Germany, Russia, France, and Brazil. The worst performing markets included Greece, Turkey, South Africa, Qatar, and Hungary. The best performing sectors in the MSCI ACWI ex US Index (“Index”) were energy, consumer discretionary, and industrials. The worst performing sectors were utilities, telecommunication services, and consumer staples.

The Portfolio outperformed the Index during the month, due primarily to stock selection. Portfolio holdings in the energy, materials, capital goods, pharmaceuticals & biotechnology, and transportation industry groups contributed to relative performance. Holdings in the consumer services, diversified financials, and technology hardware & equipment industry groups, along with an overweight position in the telecommunication services industry group and an underweight position in the software & services industry group, offset a portion of the outperformance. The top contributor to return was oil & natural gas producer, Encana (Canada). Other notable contributors included automobile manufacturer, Volkswagen AG (Germany), energy supermajor, Royal Dutch Shell Plc (United Kingdom), pharmaceutical company, AstraZeneca Plc (United Kingdom), and crude oil & natural gas company, BP Plc (United Kingdom). The largest detractor was cruise ship operator, Carnival Plc (United Kingdom). Additional detractors included diversified mining company, BHP Billiton Plc (United Kingdom), telecommunication services provider, Vodafone Group (United Kingdom), retail bank, CaixaBank SA (Spain), and telecommunication services provider, KDDI Corp. (Japan).*

*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 portfolio holdings and characteristics are subject to change. There is no guarantee that any forecasts made will come to pass. The securities identified and described above 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.  Past performance does not guarantee future results.  For a description of our performance attribution methodology, or to obtain a list showing every holding's contribution to the overall account's performance during the quarter, please contact our product manager, Kevin Moutes, at 310-231-6116 or moutes@causewaycap.com.

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