International developed markets stocks declined moderately in U.S. dollar terms for the second quarter. Japanese shares gained slightly as the yen strengthened nearly 10% versus the U.S. dollar. Most European markets declined, with Italy tumbling 9% amid concerns about nonperforming loans in the country's banking sector. UK stocks fell and the sterling lost 7% versus the dollar amid the UK's decision to leave the European Union, or Brexit. Emerging markets stocks rose slightly overall. Latin American equities surged in response to higher commodity prices and signs of political stabilization in regional heavyweight Brazil. The U.S. dollar gained against most major currencies and boosted returns for U.S. investors.
The Overseas Stock Fund returned −1.58% in the quarter compared with −1.19% for the MSCI EAFE Index and −0.74% for the Lipper International Large-Cap Core Funds Average. For the 12 months ended June 30, 2016, the fund returned −11.39% versus −9.72% for the MSCI EAFE Index and −11.11% for the Lipper International Large-Cap Core Funds Average. The fund's average annual total returns were −11.39%, 1.86%, and 0.67% for the 1-, 5-, and Since Inception (12/29/2006) periods, respectively, as of June 30, 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 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.
From a sector perspective, our energy shares generated double-digit gains as oil prices rebounded amid optimism that recent supply disruptions could improve the global supply/demand dynamic contributed to an oil price rebound. Our utilities stocks advanced as investors were attracted by the sector's defensive characteristics and attractive dividend yields. Our financial stocks continued to struggle against a backdrop of ultralow interest rates and Brexit-related uncertainties. The portfolio's consumer discretionary shares fell sharply as slowing global economic growth and heightened instability in key markets caused sentiment on cyclical stocks to sour.
Economic data continue to show modest growth in Europe, but the outlook is more uncertain after Brexit due to fears that the region's fragile recovery could lose momentum as the UK and the EU negotiate a new relationship. In addition, political and economic instability could increase as other member states reconsider their relationships with the EU. Japan's economy continues to idle after years of reform efforts have failed to ignite sustainable growth, although we are encouraged by improvements in corporate governance. There is significant divergence across emerging markets in terms of economic, monetary, and fiscal conditions. In an uncertain environment, our approach remains the same: identify high-quality companies with healthy balance sheets, attractive business models, and the potential to grow earnings over time.