International Opportunities Fund (HFOAX, HFOBX, HFOCX, HFOIX, HFORX)

The Fund seeks to achieve long-term capital appreciation primary through investment in equities of non-US companies. Fund performance will be primary derived from stock selection. A strategic asset allocation process will be a secondary contributor to the investment process. The Fund is managed by a team of portfolio managers. Stephen Peak, Director of International Equities, oversees the management of the Fund and its portfolio managers. The Asset Allocation Strategist, Bill McQuaker, Head of Multi-Asset, oversees the allocation of the Fund's assets among countries, regions and sectors. Individual members of the team manage the Fund's investment in specific countries, regions and sectors.

• Quarterly Factsheet

 

Why invest in this fund?

• A multi-manager approach, with five portfolio management teams focused on specific areas of sector or geographical expertise
• Exposure to attractive international investment opportunities, with active selection of a small number of securities representing each management team’s “best ideas”
• Bottom-up stock selection, with asset allocation decisions driven by the stock selection process

   

Fund facts (as of 3/31/12)

Inception date:	8/31/01
Minimum initial investment:	$500
Benchmark:	MSCI EAFE Index
Median market cap ($billions):	20.1
Total number of holdings:	54
Forward 12-month P/E ratio:	11.9
P/B ratio:	1.6
Beta:	1.0
% of holdings in top 10:	26.2
Class A expense ratio1:	1.48
Morningstar rating (as of 4/30/12)2

¹This ratio is not a guaranteed number and may fluctuate. The class A expense ratio is presented as a percentage of average net assets. The expense ratio is unaudited and is based on annualized fiscal year-to-date results from 8/01/11 to 3/31/12. The ratio may differ from that presented in the Fund’s prospectus that is based on the Fund’s then most recent previous fiscal year.

² Morningstar category: Foreign Large Blend, Number of funds in category: 722. The overall Morningstar Rating for the Fund is derived from a weighted average of the risk-adjusted performance figure associated with its 3-, 5- and 10- year Morningstar Rating metrics.

     

Portfolio management

Lead Portfolio Manager 
Stephen Peak 

Asset Allocation Strategist
Bill McQuaker

Europe - 1
Stephen Peak

Europe -2
Tim Stevenson

Global Technology
Ian Warmerdam
Stuart O'Gorman

Japan
Michael Wood-Martin

Asia Pacific
John Crawford
Andrew Mattock

 

 

Top ten holdings %
(as of 4/30/12)

Continental (Germany)	2.8
Samsung (Korea)	2.7
Roche Holdings (Switzerland)	2.7
Canon (Japan)	2.7
Ericsson (Sweden)	2.7
Renault (France)	2.6
Deutsche Post (Germany)	2.6
Rakuten (Japan)	2.6
Keyence (Japan)	2.5
ASML Holdings (Netherlands)	2.5

A company's country classification is based on multiple factors including legal domicile and underlying exposure of its business.

• Full holdings list

Performance

Relative performance as of 3/31/12

Inception date 8/31/01, inception of Class R shares 9/30/05, inception of Class I shares 3/31/09.

Lipper rankings are based on total return and do not reflect a sales charge. Rankings are for Class A shares only. other share classes may vary.

Expense ratios are not guaranteed numbers and may fluctuate. Gross and net expense ratios are presented as a percentage of average net assets. The gross expense ratio is stated in the current prospectus and is based on the Fund's then most recent previous fiscal year. The net expense ratio is unaudited and is based on annualized fiscal year-to-date results from 8/01/11 to 3/31/12. This ratio may differ from that presented in the Fund's prospectus.

Effective 11/30/10, the International Opportunities Fund will not accept new or additional investments in Class B shares (HFOBX).

Class I shares were formerly known as Class W shares.

For periods prior to inception, rate of return are based on Class A NAVs adjusted for the higher expenses associated with Class R shares.
The performance for Class I shares for the period prior to 3/31/09 is based on the performance of Class A shares. Performance for Class I shares would be similar because the shares are invested in the same portfolio of securities and have the same portfolio management. Class I shares are not subject to a front-end sales charge or a distribution fee.

Performance data quoted represents past performance and is no guarantee of future results. Current performance may be lower or higher than the performance data quoted. Investment return and principal value will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than original cost. Performance results with sales charges reflect the deduction of the maximum front end sales charge and/or the deduction of the applicable contingent deferred sales charge (CDSC). Class A shares are subject to a maximum front end sales charge of 5.75%. Class B shares are subject to a CDSC, which declines from 5% the first year to 0% at the beginning of the seventh year. Class C shares may be subject to a CDSC of up to 1% on certain redemptions made within 12 months of purchase. Performance presented at NAV which does not include these sales charges would be lower if these charges were reflected. The Fund’s annual operating expenses will likely vary from year to year. It is important for you to understand that a decline in the Fund’s average net assets during the current fiscal year due to recent market volatility or other factors could cause the Fund’s expense ratios for the Fund’s current fiscal year to be higher than the expense information presented. Returns greater than one year are annualized. Index returns provided by Lipper, Inc. Net Asset Value (NAV) is the value of one share of the Fund excluding any sales charge.

Returns included the reinvestment of dividends and capital gains. Performance results reflect expense subsidies and waivers in effect during the periods shown. Absent these waivers, results would have been less favorable for certain periods.

Forward 12-month P/E ratio is calculated using the closing price of portfolio holdings divided by the sum of the 12-month forward earnings per share. P/B ratio is calculated using the closing price of portfolio holdings divided by the most recent fiscal year end book value. Both calculations take into account the respective weightings of portfolio holdings. Beta is a quantitative measure of the volatility of a given stock, mutual fund, or portfolio, relative to the overall market. The MSCI EAFE Index (Europe, Australasia, Far East) is a free float-adjusted market capitalization weighted index that is designed to measure the equity market performance of developed markets, excluding the US and Canada. The Fund may invest in emerging markets while the index only consists of companies in developed markets. It is not possible to invest directly in any index or average.

Fund overview

This Fund seeks to achieve long-term capital appreciation primarily through investment in equities of non-US companies. Fund performance will be primarily derived from stock selection. A strategic asset allocation process will be a secondary contributor to the investment process. The Fund is managed by a team of portfolio managers. The Lead Portfolio Manager, Stephen Peak, and The Asset Allocation Strategists, Bill McQuaker, oversee the management of the Fund and the allocation of the Fund’s assets among countries, regions and sectors. Individual members of the team manage the Fund’s investment in specific countries, regions and sectors.

Quarterly update

Global equities made small gains in March contributing to a strong first quarter return on the back of much improved investor risk appetite. The US led the way with relatively favorable macro news flow; Japan was also strong as the yen continued to weaken while Europe, though positive, lagged as sovereign debt concerns remained. Despite another positive month, it could be argued that the momentum in stock prices is fading as the more cyclical sectors that led the market in January and February faltered in March, while more defensive sectors advanced.

Fund performance

Over the period the Fund made strong gains and outperformed the MSCI EAFE Index as four of the 5 sub-portfolios performed very well on both an absolute and relative basis, notably Europe 1 and Asia Pacific. In Europe, the higher beta cyclical names rebounded sharply from what we believed to be oversold levels, in particular Renault, Continental AG, Alstom and HeidlebergCement. In Asia Pacific, the sub-portfolio made some positive changes early in the period by broadening out the Chinese exposure to India and Korea with Tata Motors and Baidu adding value.

The only real laggard was the Japan sub-portfolio. The overall rally in the Japanese market was led by cyclical companies and banks, which was met positively by Mitsubishi UFJ, Daiwa and Sumitomo Mitsui but the Fund’s shares in domestic names such as Yamada Denki underperformed the broader market thus pulling relative performance lower.

Investment activity

There was little activity over the period. In Europe 1, the Fund initiated a position in Banco Santander as we are seeking to take advantage of the improving banking environment as a result of the European Central Bank’s (ECB) Long Term Refinancing Operation (LTRO). Vivendi Universal, which was a restructuring candidate, but following recent results we believe their challenges look to be longer and more difficult that originally thought. Thus Vivendi was sold to fund the new position. In Asia, the Fund sold underperforming Shinhan Financial.

Outlook

Our view remains that the global economy should grow over 2012, but significant risks remain. In Europe, where the ECB’s LTRO has lessened the risk of default in the Financial sector but has not altered the poor outlook for the region's economy. China's economic data has continued to worsen and the authorities' desire to ease policy may be hampered by persistent inflation. Although the oil price has stabilized recently, it has stayed at these levels despite many countries suggesting they would use strategic reserves to ease supply issues. Consequently, pressure remains on fuel costs which could yet derail weak economies. On balance, we see markets rising a little further after a short term pause.

Prospectus/SAI

International Opportunities Fund