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International Value Select

Strategy Profile

The international value select portfolio is constructed from an equity universe spanning the non US, developed markets. Emerging markets investments may also be included. The strategy uses our international value equity strategy with two distinctions: the select portfolio has greater liquidity (eligible companies have market capitalizations generally greater than $5 billion) and fewer holdings. We believe that concentrating the holdings can compensate for the loss of small/mid cap exposure. The investment process is comprised of three stages: quantitative screening and initial analysis, fundamental research, and portfolio construction.

Inception Date31 Mar 2005
BenchmarkMSCI EAFE

Performance

Fund Quarter to Date Year to Date 1 Year3 Year5 Year10 Year Since Inception
Gross % 5.5%14.5%17.4%2.1%11.7%3.3%6.7%
Net % 5.4%14.3%16.9%1.7%11.3%2.9%6.3%
MSCI EAFE 6.5%14.4%17.0%2.0%10.7%1.5%5.3%

Portfolio

Asset Allocation as of 31 May 2017

Stocks 98.9%
Cash 1.1%

Characteristics as of 31 May 2017

Causeway MSCI EAFE
No. of Holdings 53 928
Wtd. Avg. Market Cap (Mn $US)$56,599$49,390
FY2 Price/Earnings12.414.3
Price/Book Value1.51.7
Dividend Yield (%)3.33.1

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

Financials18.43%
Industrials17.04%
Consumer Discretionary10.54%
Telecommunication Services10.22%
Health Care9.54%
Energy8.72%
Information Technology7.69%
Materials7.12%
Consumer Staples4.77%
Utilities3.89%
Real Estate0.94%

(VS. Benchmark)

Financials20.77%
Industrials14.40%
Consumer Discretionary12.20%
Telecommunication Services4.45%
Health Care10.95%
Energy4.84%
Information Technology5.92%
Materials7.58%
Consumer Staples11.77%
Utilities3.44%
Real Estate3.69%
Financials
Industrials
Consumer Discretionary
Telecommunication Services
Health Care
Energy
Information Technology
Materials
Consumer Staples
Utilities
Real Estate
Other

TOP 10 COUNTRIES as of 31 May 2017

United Kingdom28.40%
Japan13.87%
Switzerland13.55%
Germany9.29%
France6.88%
Canada6.02%
Hong Kong5.05%
Netherlands4.19%
South Korea4.04%
Italy2.59%
China2.06%
Sweden1.01%
Spain1.01%
Australia0.94%
Norway0.00%
Portugal0.00%
Ireland0.00%
Israel0.00%
Austria0.00%
Belgium0.00%
Denmark0.00%
Finland0.00%
New Zealand0.00%
Singapore0.00%

(VS. Benchmark)

United Kingdom17.90%
Japan23.06%
Switzerland8.95%
Germany9.56%
France10.58%
Canada0.00%
Hong Kong3.51%
Netherlands3.54%
South Korea0.00%
Italy2.18%
China0.00%
Sweden2.92%
Spain3.49%
Australia6.80%
Norway0.62%
Portugal0.16%
Ireland0.46%
Israel0.64%
Austria0.23%
Belgium1.17%
Denmark1.77%
Finland1.02%
New Zealand0.16%
Singapore1.29%
United Kingdom
Japan
Switzerland
Germany
France
Canada
Hong Kong
Netherlands
South Korea
Italy
China
Sweden
Spain
Australia
Norway
Portugal
Ireland
Israel
Austria
Belgium
Denmark
Finland
New Zealand
Singapore
Other

TOP 10 HOLDINGS as of 31 May 2017

Security Country Industry % of Total
Volkswagen AG Germany Automobiles & Components 4.3
Royal Dutch Shell Plc United Kingdom Energy 3.4
British American Tobacco Plc United Kingdom Food Beverage & Tobacco 3.1
KDDI Corp. Japan Telecommunication Services 3.1
ABB Ltd. Switzerland Capital Goods 3.1
Schneider Electric SE France Capital Goods 2.8
Novartis AG Switzerland Pharmaceuticals & Biotechnology 2.8
China Mobile Ltd. Hong Kong Telecommunication Services 2.8
East Japan Railway Co. Japan Transportation 2.7
Prudential Plc United Kingdom Insurance 2.6

Holdings are subject to change.

Approach

The international value select portfolio is constructed from an equity universe spanning primarily developed markets, including the United States. Emerging markets investments may also be included. The strategy uses our international value equity strategy with two distinctions: the select portfolio has greater liquidity (eligible companies have market capitalizations generally greater than $5 billion) and fewer holdings. We believe that concentrating the holdings can compensate for the loss of small/mid cap exposure. The investment process is comprised of three stages: quantitative screening and initial analysis, fundamental research, and portfolio construction.

Our investment philosophy is value-driven with a fundamentally based, bottom-up approach to stock selection. We believe that companies derive their value from the contribution of yield and profitable re-investment of earnings back into the company.

Our philosophy on risk management is simple. We believe risk is best measured by the volatility of a portfolio's returns, not its dispersion from a benchmark. In our view, investors are rewarded over the long term by a reduction in volatility. Our goal is to construct a portfolio that provides consistent long-term, risk-adjusted returns.

The Causeway International Value Select portfolio is a fully invested, typically 35-60 stock portfolio, typically with a value bias. Sector and regional weights are by-products of our bottom-up approach to stock selection.

Commentary

PERFORMANCE REVIEW for the month ended 31 May 2017


Global equities continued their ascent in May, buoyed by demand for growth stocks and by evidence of a recovery in European economies. The top performing markets in our investable universe included Portugal, Austria, South Korea, Finland, and Ireland. The worst performing markets included Australia, Israel, Canada, Japan, and Switzerland. The best performing sectors in the MSCI EAFE Index (“Index”) were utilities, information technology, and telecommunication services. The worst performing sectors were materials, consumer discretionary, and industrials. 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 energy, insurance, materials, capital goods, and real estate industry groups detracted from relative performance. An overweight position in the pharmaceuticals & biotechnology, telecommunication services, and software & services industry groups and an underweight position in the banks and diversified financials 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 energy supermajor, Royal Dutch Shell Plc (United Kingdom).*

*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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