The international value portfolio is constructed from an equity universe spanning developed international markets. Eligible companies have market capitalizations generally greater than $750 million. The investment process is comprised of three stages: screening and initial analysis, fundamental research, and portfolio construction.

Our international 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 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 portfolio is a fully invested, 50-80 stock portfolio, typically with a value bias. Sector and regional weights are by-products of our bottom-up approach to stock selection.

Inception Date 06/11/2001

Fuelled by additional doses of quantitative easing, the first two months of calendar 2012 proved to be a complete reversal of the latter half of 2011 (especially the July through October 2011 period). The euphoria waned in March, however, as investors rotated out of cyclical stocks to more economically-defensive holdings. Despite these shifts, and due primarily to superior stock selection, the Portfolio outperformed the MSCI EAFE Index this quarter. The top performing markets in the EAFE Index included Germany, Singapore, Belgium, Denmark, and Finland. Japan delivered the best performance measured in yen, but translated into US dollars, the returns nearly halved. The biggest laggards included Spain, Portugal, the United Kingdom, and Israel. Top performing sectors in the EAFE Index included the following economically cyclical sectors: consumer discretionary, financials, information technology, industrials, and materials, while four of the five biggest laggards were traditional defensives: telecommunication services, utilities, health care, and consumer staples as well as energy. Relative performance was strengthened by portfolio holdings in the transportation, energy, capital goods, and materials industry groups as well as an overweight to insurance. Meanwhile, holdings in the food & staples retailing, consumer durables & apparel, consumer services, and food beverage & tobacco industry groups as well as an underweight to the diversified financials industry group detracted from relative performance. *

*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.