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Causeway International Value Fund Second Quarter 2014 Commentary

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Vera Yuan
Aug 11, 2014
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Thanks to abundant liquidity globally, equities appreciated during the second quarter. Top performing markets in the developed world included Norway, Canada, Hong Kong, Spain, and Japan. The biggest laggards (each posted negative returns) included Ireland, Portugal, New Zealand, Sweden, and Austria. The best performing sectors in the MSCI EAFE Index (“Index”) included energy, utilities, consumer staples, health care, and telecommunication services. The worst performing sectors in the Index included information technology, industrials, financials, consumer discretionary, and materials. All major currencies except the euro and the Swiss franc appreciated versus the US dollar this period, which provided an added translation boost to the Index’s return for US dollar-based investors.

Due primarily to less effective stock selection in the industrials and financials sectors, the Fund underperformed the Index for the second quarter. Holdings in the banks, transportation, capital goods, diversified financials, and materials industry groups detracted from relative performance, while holdings in the telecommunication services, media, and food beverage & tobacco industry groups, as well as an overweight position in the energy industry group and an underweight position in the retailing industry group contributed favorably to relative performance. The largest individual detractor from absolute performance was global investment bank, UBS AG (XSWX:UBSN)(Switzerland). Additional top detractors included paints & coatings producer, Akzo Nobel NV (XAMS:AKZA)(Netherlands), banking and financial services company, BNP Paribas SA (XPAR:BNP)(France), multinational airline holding company, International Consolidated Airlines Group SA (LSE:IAG)(United Kingdom), and airline, Deutsche Lufthansa AG (FRA:LHA)(Germany). The largest individual contributor to performance this quarter was oil & gas exploration company, CNOOC Ltd. (HKSE:00883)(Hong Kong). Additional significant contributors included telecommunications operator, SK Telecom Co., Ltd. (XKRX:017670)(South Korea), tobacco & ginseng products company, KT&G Corp. (XKRX:033780)(South Korea), print & publishing company, Reed Elsevier NV (XAMS:REN)(Netherlands), and oil & gas exploration company, BG Group Plc (LSE:BG.)(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 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.

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