Non-U.S. stocks endured a tumultuous first quarter. Developed European and Nordic stock markets generated the best gains, benefiting from reduced emphasis on austerity measures and progress on structural reforms in some countries. Developed stock markets in the Asia-Pacific region posted mixed results-Japan and Hong Kong ended lower, which underperformed the broad MSCI Europe, Australasia, and Far East (EAFE) Index. Emerging market equities began the year with losses in January and February followed by solid gains in March, but ended the quarter modestly lower.
The International Growth & Income Fund returned 1.61% in the quarter compared with 0.77% for the MSCI EAFE Index and 1.24% for the Lipper International Multi-Cap Value Funds Average. For the 12 months ended March 31, 2014, the fund returned 19.77% versus 18.06% for the MSCI EAFE Index and 20.19% for the Lipper International Multi-Cap Value Funds Average. The fund's average annual total returns were 19.77%, 17.31%, and 7.32% for the 1-, 5-, and 10-year periods, respectively, as of March 31, 2014. The fund's expense ratio was 0.86% as of its fiscal year ended October 31, 2013.
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.
The portfolio's country and sector allocations result from bottom-up stock selection but also are influenced by an assessment of macroeconomic prospects. Financials continues to be the largest overweight in the portfolio, and we increased the allocation mainly through purchases in the banking industry. Conversely, the portfolio is underweight in the energy sector, which is grappling with slow demand growth and a rapid increase in global supply.
In Europe, better economic data suggest that the modest recovery will continue. Valuations remain reasonable by several key measures, and many European companies should benefit from reducing costs and improving their market positions over time. While we remain optimistic about the longer-term prospects for Japan's market, we are looking for signs that its policymakers are politically willing and able to address important structural reforms to labor markets, tax and regulatory regimes, and social spending. We believe emerging markets offer compelling valuation opportunities, although the twin tailwinds of a commodity supercycle and double-digit growth in China have ended.