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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 Year Since Inception
Gross % 5.4%15.2%18.9%1.7%10.5%3.4%
Net % 5.4%15.0%18.5%1.3%10.1%3.1%
MSCI ACWI ex US 5.6%14.1%18.8%1.7%8.9%1.6%

Portfolio

Asset Allocation as of 31 May 2017

Stocks 98.7%
Cash 1.3%

Characteristics as of 31 May 2017

Causeway MSCI ACWI ex US
No. of Holdings 184 1852
Wtd. Avg. Market Cap (Mn $US)$52,353$46,776
FY2 Price/Earnings11.413.4
Price/Book Value1.41.7
Dividend Yield (%)3.32.9

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 31 May 2017

Financials20.18%
Industrials16.74%
Consumer Discretionary10.41%
Information Technology10.18%
Health Care8.95%
Energy8.66%
Materials7.77%
Telecommunication Services5.16%
Consumer Staples4.86%
Utilities4.13%
Real Estate1.64%

(VS. Benchmark)

Financials22.73%
Industrials11.96%
Consumer Discretionary11.45%
Information Technology10.34%
Health Care8.24%
Energy6.45%
Materials7.65%
Telecommunication Services4.57%
Consumer Staples10.19%
Utilities3.17%
Real Estate3.25%
Financials
Industrials
Consumer Discretionary
Information Technology
Health Care
Energy
Materials
Telecommunication Services
Consumer Staples
Utilities
Real Estate
Other

TOP 10 COUNTRIES as of 31 May 2017

United Kingdom25.07%
Switzerland12.09%
Japan11.84%
Germany8.24%
France6.59%
China6.08%
Canada5.29%
South Korea4.16%
Netherlands3.05%
Taiwan2.71%
Italy2.27%
India2.24%
Russia1.36%
Thailand1.33%
Brazil1.03%
Sweden0.90%
Spain0.87%
South Africa0.74%
Australia0.71%
Turkey0.57%
Malaysia0.56%
United Arab Emirates0.26%
Poland0.24%
Mexico0.16%
Qatar0.11%
Hungary0.10%
Indonesia0.08%
Czech Republic0.07%
Egypt0.00%
Greece0.00%
New Zealand0.00%
Singapore0.00%
Philippines0.00%
Hong Kong0.00%
Norway0.00%
Portugal0.00%
Ireland0.00%
Israel0.00%
Austria0.00%
Belgium0.00%
Denmark0.00%
Finland0.00%
Chile0.00%
Colombia0.00%
Peru0.00%

(VS. Benchmark)

United Kingdom12.55%
Switzerland6.28%
Japan16.17%
Germany6.70%
France7.41%
China6.50%
Canada6.39%
South Korea3.68%
Netherlands2.49%
Taiwan2.87%
Italy1.53%
India2.06%
Russia0.80%
Thailand0.51%
Brazil1.61%
Sweden2.04%
Spain2.44%
South Africa1.60%
Australia4.77%
Turkey0.26%
Malaysia0.57%
United Arab Emirates0.17%
Poland0.30%
Mexico0.83%
Qatar0.17%
Hungary0.08%
Indonesia0.59%
Czech Republic0.04%
Egypt0.03%
Greece0.09%
New Zealand0.11%
Singapore0.91%
Philippines0.28%
Hong Kong2.46%
Norway0.43%
Portugal0.11%
Ireland0.32%
Israel0.45%
Austria0.16%
Belgium0.82%
Denmark1.24%
Finland0.72%
Chile0.27%
Colombia0.10%
Peru0.09%
United Kingdom
Switzerland
Japan
Germany
France
China
Canada
South Korea
Netherlands
Taiwan
Italy
India
Russia
Thailand
Brazil
Sweden
Spain
South Africa
Australia
Turkey
Malaysia
United Arab Emirates
Poland
Mexico
Qatar
Hungary
Indonesia
Czech Republic
Egypt
Greece
New Zealand
Singapore
Philippines
Hong Kong
Norway
Portugal
Ireland
Israel
Austria
Belgium
Denmark
Finland
Chile
Colombia
Peru
Other

TOP 10 HOLDINGS as of 31 May 2017

Security Country Industry % of Total
Volkswagen AG Germany Automobiles & Components 3.7
Royal Dutch Shell Plc United Kingdom Energy 2.9
KDDI Corp. Japan Telecommunication Services 2.8
British American Tobacco Plc United Kingdom Food Beverage & Tobacco 2.7
ABB Ltd. Switzerland Capital Goods 2.7
Schneider Electric SE France Capital Goods 2.4
Novartis AG Switzerland Pharmaceuticals & Biotechnology 2.4
Akzo Nobel NV Netherlands Materials 2.4
UniCredit S.p.A. Italy Banks 2.3
Roche Holding AG Switzerland Pharmaceuticals & Biotechnology 2.3

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 31 May 2017


Global developed and emerging markets equities continued their ascent in May, buoyed by demand for growth stocks and by evidence of a recovery in European economies and supportive monetary conditions. The top performing markets in our investable universe included Greece, Hungary, Portugal, Austria, and South Korea. The worst performing markets included Russia, Brazil, Australia, Qatar, and Israel. The best performing sectors in the MSCI ACWI ex US Index (“Index”) were utilities, consumer staples, and telecommunication services. The worst performing sectors were materials, energy, and financials. Every major currency except the Australian dollar and British pound appreciated versus the US dollar during the period, thus amplifying overall returns on overseas assets for US dollar-based investors.

The Portfolio underperformed the Index during the month, due primarily to stock selection. Portfolio holdings in the capital goods, food beverage & tobacco, transportation, and automobiles & components industry groups, along with an underweight position in the household & personal products industry group, detracted from relative performance. Holdings in the banks, pharmaceuticals & biotechnology, utilities, telecommunication services, and technology hardware & equipment industry groups offset some of the underperformance versus the Index. The largest detractor was construction & mining equipment manufacturer, Komatsu Ltd. (Japan). Additional detractors included oil & natural gas producer, Encana (Canada), automobile manufacturer, Volkswagen AG (Germany), Japan Airlines Co., Ltd. (Japan), and paints & coatings producer, Akzo Nobel NV (Netherlands). The top contributor to performance was multinational electric utility company, ENGIE SA (France). Other notable contributors included telecommunication services provider, Vodafone Group (United Kingdom), pharmaceutical company, AstraZeneca Plc (United Kingdom), electrical & electronic equipment manufacturer, Hitachi Ltd. (Japan), and banking & financial services company, UniCredit S.p.A. (Italy).*

*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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