Stocks in developed non-U.S. markets underperformed U.S. shares, but a weaker U.S. dollar versus most major currencies helped returns. The Japanese economy remained sluggish, and the government and central bank downgraded their growth expectations near the end of the quarter. European equity markets generally declined, though shares in the Netherlands and Portugal bucked the negative trend. Many markets were hurt by weakness among bank stocks amid concerns about negative interest rates; nonperforming loans, especially in Italy; and exposure to the energy sector. Stocks in emerging markets gained in the first quarter, thanks to a March rally led by Brazil, but India and China declined.
The International Growth & Income Fund returned −1.15% in the quarter compared with −2.88% for the MSCI EAFE Index and −2.00% for the Lipper International Multi-Cap Value Funds Average. For the 12 months ended March 31, 2016, the fund returned −7.86% versus −7.87% for the MSCI EAFE Index and −9.48% for the Lipper International Multi-Cap Value Funds Average. The fund's average annual total returns were −7.86%, 1.81%, and 1.87% for the 1-, 5-, and 10-year periods, respectively, as of March 31, 2016. The fund's expense ratio was 0.84% as of its fiscal year ended October 31, 2015.
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 the portfolio from the bottom up, leveraging our global research platform to uncover undervalued stocks regardless of sector, region, or country. Although we invest primarily in developed market countries, we also maintain modest exposure to emerging markets. As a result of our individual stock decisions, our overweight to industrials and business services decreased during the first quarter and became an underweight position. Conversely, we reduced our underweight to energy in the quarter, partly through the addition of an equipment and services firm.
Valuations in many parts of the market are reasonable but not compelling. In our view, we are in a midcycle environment where any spike in investor concerns over low growth or other outstanding risks could lead to additional sharp downdrafts in the market. While the recent pullback offered us some chances to add good businesses at attractive valuations, the rally in late March eliminated many, but not all, of those opportunities. Europe continues to recover, although valuations in the region differ greatly between sectors. In Japan, we are now more constructive on equity valuations than we have been in some time, and we are looking for more chances to own good quality stocks at more enticing valuations. Until we see increased stability in emerging market currencies, we will remain cautious about increasing our direct exposure to the region.