Non-U.S. developed markets stocks rose modestly overall in a tumultuous first quarter of 2014 that saw losses in January, gains in February, and mixed results in March. Developed European and Nordic stock markets generated the best gains, benefiting from reduced emphasis on austerity measures and progress on structural reforms. Japan's economy is taking steps toward recovery thanks to the government's policies to stimulate growth, but equity markets lost ground for the quarter after a stellar 2013. Emerging markets stocks fell slightly overall. Concerns about slowing Chinese economic growth led to selling in the world's second-largest market, but India generated strong gains.
The Overseas Stock Fund returned −0.20% in the quarter compared with 0.77% for the MSCI EAFE Index and 0.08% for the Lipper International Large-Cap Core Funds Average. For the 12 months ended March 31, 2014, the fund returned 17.37% versus 18.06% for the MSCI EAFE Index and 15.46% for the Lipper International Large-Cap Core Funds Average. The fund's average annual total returns were 17.37%, 17.43%, and 2.27% for the 1-, 5-, and Since Inception (12/29/2006) 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 Overseas Stock 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 sector performance was mixed. Utilities, information technology, energy, and health care outperformed the broader market with good gains, while telecommunication services, health care, and financials declined. Consumer discretionary remains our second-largest sector position as we expect a broadening economic recovery in Europe to fuel increased consumer spending. Our financials exposure is centered on European banks and insurers, which we think have continued to improve their capital positions and earnings growth potential. We reduced our exposure to information technology by trimming a few stocks on strength due to valuation concerns. We remain less optimistic about consumer staples due to rich valuations, but added to select stocks on weakness.
Valuations for non-U.S. developed markets stocks remain reasonable. Europe should continue to perform as a broadening recovery bolsters consumer and business confidence. With many of the quick economic fixes already implemented, Japan's performance has weakened as the next phases of the government's stimulative policies have become more challenging to execute. Emerging markets continue to disappoint on the back of weaker economic growth and political uncertainties, but valuations are becoming more attractive. Finding stocks with a favorable combination of fundamentals and valuations has become more difficult over the past year, placing a premium on the in-depth proprietary research and careful stock selection at the heart of our investment approach.