Developed non-U.S. stock markets generated strong returns in the third quarter of 2013. Developed European markets outperformed most markets in Asia and the Americas largely due to signs of improving economic growth and investor sentiment. Despite several bouts of heightened volatility, Asia's largest markets, China and Japan, returned solid third-quarter results. However, most emerging markets continued to struggle amid concerns about slowing growth, rising interest rates across developed markets, political unrest, and currency weakness. Value shares outperformed growth stocks, and small-caps significantly outperformed their large-cap counterparts for the three-month period. Stocks in the telecommunication services, industrials and business services, and materials sectors generated standout performance.
The International Growth & Income Fund returned 10.69% in the quarter compared with 11.61% for the MSCI EAFE Index. For the 12 months ended September 30, 2013, the fund returned 22.33% versus 24.29% for the MSCI EAFE Index. The fund's average annual total returns were 22.33%, 6.59%, and 8.46% for the 1-, 5-, and 10-year periods, respectively, as of September 30, 2013. The fund's expense ratio was 0.87% as of its fiscal year ended October 31, 2012.
For up-to-date standardized total returns, including the most recent month-end performance, please click on the Performance tab, above.
Current performance may be lower or higher than the quoted past performance, which cannot guarantee future results.
Share price, principal value, and return will vary and you may have a gain or loss when you sell your shares.
The International Growth & Income Fund charges a 2%
redemption fee on shares held 90 days or less.
The performance information shown does not reflect the deduction of the redemption fee;
if it did, the performance would be lower.
We construct this portfolio on a stock-by-stock basis by exploiting our global research platform to uncover stocks that are trading below what we believe to be their intrinsic value. We select stocks regardless of sector, region or country, making broader positioning an effect of our investment process. At the sector level, the portfolio's overweight in financials grew as we added to positions in certain European financial names that we believe offer attractive valuations given the upside to normalized earnings and cash flow levels. The underweight in health care grew as we eliminated one large position in the sector and trimmed another.
Global growth is still underwhelming more than five years after the onset of the global financial crisis. It remains to be seen whether policymakers and central bankers in developed markets will be able to muster the political will to make the structural reforms necessary to boost growth beyond its anemic levels. In Europe, looming questions over structural reforms within the periphery economies and in Frankfurt and Brussels remain unanswered. While Japanese markets have fared well recently, it is also an open question whether the Abe government will successfully enact the longer-term labor market and tax reforms needed to break Japan out of its deflationary slump. We have continued to identify select companies that we believe have solid fundamentals that should continue to improve over time, and which are less dependent on improvements in the global economy in the short term.