U.S. equities began the quarter on strength, helped by expectations for fewer federal interest rate increases in 2016 and rebounding commodity prices. Markets plunged late in the quarter after a surprise vote by the United Kingdom to exit the European Union (Brexit). However, stocks began to recover most of their losses in the last three days of the second quarter. Within the benchmark S&P 500, the energy, telecommunications, and utilities sectors posted the strongest returns. Information technology and consumer discretionary declined.
The Dividend Growth Fund - I Class returned 4.53% in the quarter compared with 2.46% for the S&P 500 Index and 2.14% for the Lipper Large-Cap Core Funds Index. For the 12 months ended June 30, 2016 the fund returned 7.91% versus 3.99% for the S&P 500 Index and 1.52% for the Lipper Large-Cap Core Funds Index. The fund's average annual total returns were 7.91%, 12.24%, and 8.13% for the 1-, 5-, and 10-year periods, respectively, as of June 30, 2016.* The fund's expense ratio was 0.79% as reported in the most recent Prospectus. *The Dividend Growth Fund - I Class started operations on December 17, 2015. It shares the portfolio of an existing fund (referred to an "investor class"). The total return figures have been calculated using the performance data of the investor class up to the inception date of the I Class and the actual performance results of the I class since that date. Because the I Classes are expected to have lower expenses than the Investor Classes, the I Class performance, had it existed over the periods shown, would have been higher.
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.
We continue to think that select companies in the consumer discretionary sector have the potential for consistent, durable earnings growth; demonstrate pricing power in their industry; and provide products or services at a good value. Financials remains one of our largest absolute sector weights, driven by our holdings within the insurance, banks, and capital markets industries. Health care appears to be the most attractive of the traditionally defensive sectors, and we favor firms that offer innovative solution-driven care or unique therapeutic benefits. We remain underweight in energy versus the benchmark due to an expectation that oil supplies will continue to grow.
In the year ahead, we maintain our reasonably positive stance on the domestic economy and continue to expect a low but durable pace of economic growth. Markets are likely to remain choppy due to the uncertainty stemming from the aftermath of the UK's vote to leave the European Union and the ongoing U.S. presidential election. Earnings growth is likely to remain under pressure in the near term, but we expect modest growth to resume later in 2016.