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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 % 3.4%19.3%23.1%3.5%9.5%3.9%3.7%
Net % 3.4%19.0%22.7%3.2%9.1%3.6%3.4%
MSCI ACWI ex US 3.7%18.7%19.6%2.8%8.2%2.0%1.9%

Portfolio

Asset Allocation as of 31 Jul 2017

Stocks 99%
Cash 1%

Characteristics as of 31 Jul 2017

Causeway MSCI ACWI ex US
No. of Holdings 188 1863
Wtd. Avg. Market Cap (Mn $US)$54,239$49,148
FY2 Price/Earnings11.513.7
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 Jul 2017

Financials20.59%
Industrials16.35%
Information Technology10.94%
Consumer Discretionary10.16%
Energy9.19%
Materials8.62%
Health Care7.94%
Telecommunication Services4.97%
Consumer Staples4.52%
Utilities4.06%
Real Estate1.63%

(VS. Benchmark)

Financials23.69%
Industrials11.76%
Information Technology10.95%
Consumer Discretionary11.16%
Energy6.38%
Materials7.79%
Health Care7.77%
Telecommunication Services4.39%
Consumer Staples9.77%
Utilities3.11%
Real Estate3.23%
Financials
Industrials
Information Technology
Consumer Discretionary
Energy
Materials
Health Care
Telecommunication Services
Consumer Staples
Utilities
Real Estate
Other

TOP 10 COUNTRIES as of 31 Jul 2017

United Kingdom24.48%
Japan10.98%
Switzerland10.93%
Germany9.14%
China7.44%
France6.41%
Canada5.95%
South Korea4.41%
Taiwan3.09%
Netherlands2.49%
India2.31%
Italy2.09%
Thailand1.25%
Russia1.24%
Brazil1.19%
Sweden0.84%
Spain0.73%
Australia0.67%
Malaysia0.67%
Turkey0.65%
South Africa0.65%
Ireland0.31%
United Arab Emirates0.28%
Poland0.20%
Mexico0.16%
Indonesia0.12%
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%
Hong Kong0.00%
Norway0.00%
Portugal0.00%
Peru0.00%
Chile0.00%
Colombia0.00%

(VS. Benchmark)

United Kingdom12.31%
Japan16.06%
Switzerland5.76%
Germany6.49%
China6.91%
France7.21%
Canada6.60%
South Korea3.69%
Taiwan2.90%
Netherlands2.54%
India2.17%
Italy1.66%
Thailand0.51%
Russia0.74%
Brazil1.69%
Sweden1.98%
Spain2.47%
Australia4.95%
Malaysia0.55%
Turkey0.29%
South Africa1.61%
Ireland0.31%
United Arab Emirates0.18%
Poland0.32%
Mexico0.88%
Indonesia0.56%
Qatar0.16%
Hungary0.08%
Czech Republic0.04%
Egypt0.03%
Greece0.09%
New Zealand0.12%
Singapore0.92%
Pakistan0.03%
Philippines0.28%
Israel0.45%
Austria0.17%
Belgium0.83%
Denmark1.26%
Finland0.70%
Hong Kong2.43%
Norway0.46%
Portugal0.10%
Peru0.09%
Chile0.29%
Colombia0.11%
United Kingdom
Japan
Switzerland
Germany
China
France
Canada
South Korea
Taiwan
Netherlands
India
Italy
Thailand
Russia
Brazil
Sweden
Spain
Australia
Malaysia
Turkey
South Africa
Ireland
United Arab Emirates
Poland
Mexico
Indonesia
Qatar
Hungary
Czech Republic
Egypt
Greece
New Zealand
Singapore
Pakistan
Philippines
Israel
Austria
Belgium
Denmark
Finland
Hong Kong
Norway
Portugal
Peru
Chile
Colombia
Other

TOP 10 HOLDINGS as of 31 Jul 2017

Security Country Industry % of Total
Volkswagen AG Germany Automobiles & Components 3.8
Royal Dutch Shell Plc United Kingdom Energy 2.9
Schneider Electric SE France Capital Goods 2.6
BASF SE Germany Materials 2.4
KDDI Corp. Japan Telecommunication Services 2.4
Barclays Plc United Kingdom Banks 2.3
Novartis AG Switzerland Pharmaceuticals & Biotechnology 2.3
British American Tobacco plc United Kingdom Food Beverage & Tobacco 2.3
ABB Ltd. Switzerland Capital Goods 2.3
BP Plc United Kingdom Energy 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 Jul 2017


Positive economic data emerged across developed and emerging markets regions in July, boosting the demand for global equities. The top performing markets in our investable universe included Norway, Brazil, China, Austria, and Chile. The worst performing markets included Pakistan, Israel, Malaysia, Indonesia, and Ireland. The best performing sectors in the MSCI ACWI ex US Index (“Index”) were materials, information technology, and energy. The worst performing sectors were health care, consumer staples, and industrials. Every major currency except the Swiss franc 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 currency allocation (a byproduct of our bottom-up stock selection process). Portfolio holdings in the transportation, telecommunication services, pharmaceuticals & biotechnology, banks, and food beverage & tobacco industry groups detracted from relative performance. Holdings in the technology hardware & equipment, energy, and utilities industry groups, as well as an overweight position in the insurance industry group and an underweight position in the commercial & professional services industry group, offset some of the underperformance. The largest detractor was British American Tobacco plc (United Kingdom). Additional detractors included power & automation technology company, ABB Ltd. (Switzerland), pharmaceutical company, AstraZeneca Plc (United Kingdom), pharmaceutical & consumer healthcare company, GlaxoSmithKline Plc (United Kingdom), and major passenger railway operator, East Japan Railway Co. (Japan). The top contributor to return was oil & natural gas producer, Encana (Canada). Other notable contributors included electrical & electronic equipment manufacturer, Hitachi Ltd. (Japan), energy supermajor, Royal Dutch Shell Plc (United Kingdom), multinational electric utility company, ENGIE SA (France), 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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