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The World Is Open For Business
- 1. © 2011 American Funds Distributors, Inc. AI-99998 Figures are past results and are not predictive of results in future periods. Investments are not FDIC-insured, nor are they deposits of or guaranteed by a bank or any other entity, so they may lose value.
- 2. © American Funds Distributors, Inc. AI-35862 V1
- 3. The world is open for business. Are you participating? © American Funds Distributors, Inc. AI-35863 V1
- 5. © American Funds Distributors, Inc. History in the making AI-35865 V1
- 6. © American Funds Distributors, Inc. A global version of the U.S. ascent … but faster AI-35866 V1
- 7. © American Funds Distributors, Inc. Despite the downturn, there remains an insatiable demand around the world for food, transportation, health care and education. You can’t put the genie back in the bottle. — Alan Berro portfolio counselor AI-35867 V1
- 8. Managing risk through research © American Funds Distributors, Inc. AI-35868 V1
- 10. © American Funds Distributors, Inc. Our research process is comprehensive An example of our nontraditional research approach … but not always traditional AI-35870 V1
- 11. © American Funds Distributors, Inc. We’re a private company. We have the ability to continue to invest in our research. We’ve seen a lot of our competitors cut back on travel and conferences, and we don’t intend to do that. — Martin Romo investment analyst AI-35871 V1
- 12. © American Funds Distributors, Inc. Not if , but how to put global investments to work in your portfolio AI-35872 V1
- 14. 1973 1977 1981 1985 1989 1993 1997 2001 2005 2009 © American Funds Distributors, Inc. New Perspective Fund Global investing through a challenging landscape As outlined in the prospectus, the sales charge is reduced for accounts (and aggregated investments) of $25,000 or more and is eliminated for purchases of $1 million or more. There is no sales charge on dividends or capital gain distributions that are reinvested in additional shares. The maximum initial sales charge was 8.5% prior to July 1, 1988. Includes reinvested dividends of $140,244 and reinvested capital gain distributions of $392,164. Figures shown are past results for Class A shares and are not predictive of results in future periods. Current and future results may be lower or higher than those shown. Share prices and returns will vary, so investors may lose money. Investing for short periods makes losses more likely. Fund results are for Class A shares and reflect deduction of the maximum sales charge (5.75% for equity funds). For current information and month-end results, visit americanfunds.com. $857,599 New Perspective Fund $287,540 MSCI World Index $335,347 MSCI USA Index Energy crisis (1977) Record market declines (1987) Global economic turmoil (1998) Credit crisis (2007) Hypothetical $10,000 investment in New Perspective Fund (3/13/73–12/31/10) AI-35874 V1
- 15. New Perspective Fund vs. top world markets *The fund’s inception date † Volatility is calculated by Lipper using annualized standard deviation (based on monthly returns), a measure of how returns over time have varied from the mean; a lower number signifies lower volatility. Source for top markets: MSCI Country indexes. Average annual total returns calculated in U.S. dollars with gross dividends reinvested. Figures shown are past results for Class A shares and are not predictive of results in future periods. Current and future results may be lower or higher than those shown. Share prices and returns will vary, so investors may lose money. Investing for short periods makes losses more likely. Fund results shown are at net asset value with all distributions reinvested. If a sales charge had been deducted, the results would have been lower. For current information and month-end results, visit americanfunds.com. Ranked by average annual total return from 3/13/73 * to 12/31/10 © American Funds Distributors, Inc. Sweden New Perspective Fund Denmark Switzerland Australia Germany Belgium Norway France United Kingdom Netherlands 14.5% 12.7% 12.6% 12.0% 11.5% 10.7% 10.6% 10.6% 10.1% 10.1% 10.3% Canada United States 10.0% 9.7% AI-35875 V1 25.0 15.1 19.7 19.7 18.7 24.7 22.8 28.1 21.3 23.3 22.4 Volatility † 20.4 15.9 New Perspective Fund
- 16. © American Funds Distributors, Inc. We don’t pick countries. We don’t pick industries. We find individual companies with the potential for superior results. Everything else flows from that. — Rob Lovelace portfolio counselor AI-35876 V1
- 18. © American Funds Distributors, Inc. Average annual returns for periods ended 3/31/11 New Perspective Fund ® 8.09% 4.45% 6.60% 0.79% American Funds investment results Figures shown are past results for Class A shares and are not predictive of results in future periods. Current and future results may be lower or higher than those shown. Share prices and returns will vary, so investors may lose money. Investing for short periods makes losses more likely. Fund results are for Class A shares and reflect deduction of the maximum sales charge (5.75% for equity funds). For current information and month-end results, visit americanfunds.com. © American Funds Distributors, Inc. 1 year 5 years 10 years Expense ratio Investment results assume all distributions are reinvested and reflect applicable fees and expenses. The expense ratio is as of the fund’s most recent fiscal year-end available at time of publication. From September 1, 2004, through December 31, 2008, the investment adviser to the American Funds waived a portion of its management fees. Investment results reflect the waiver, without which the results would have been lower. Please see each fund’s most recent shareholder report or prospectus for details. AI-35878
- 19. Investors should carefully consider the investment objectives, risks, charges and expenses of the American Funds. This and other important information is contained in each fund’s prospectus and summary prospectus, which can be obtained from a financial professional and should be read carefully before investing. © American Funds Distributors, Inc. AI-99980
- 20. © American Funds Distributors, Inc. MSCI country indexes are free float-adjusted market capitalization- weighted indexes that measure a specific country’s portion of the world market. MSCI USA Index is a free float-adjusted market capitalization-weighted index that is designed to measure the U.S. portion of the world market. MSCI World Index is a free float-adjusted market capitalization-weighted index that measures equity market results of developed markets. The index consists of more than 20 developed market country indexes, including the United States. Indexes are unmanaged and their results include reinvested dividends and/or distributions, but do not reflect the effect of sales charges, commissions, account fees, expenses or taxes. AI-44440
- 21. © American Funds Distributors, Inc. If used after June 30, 2011, this presentation must be accompanied by a current American Funds quarterly statistical update. The return of principal in bond funds, as well as in funds with significant bond holdings, is not guaranteed. Fund shares are subject to the same interest rate, inflation and credit risks that are associated with the underlying bonds owned by the fund(s). Bond prices and a bond fund’s share price will generally move in the opposite direction of interest rates. Lower rated bonds are subject to greater fluctuations in value and risk of loss of income and principal than higher rated bonds. Diversifying investments does not insure against market loss. Investing outside the United States involves additional risks, such as currency fluctuations, periods of illiquidity and price volatility, as more fully described in the prospectus. These risks may be heightened in connection with investments in developing countries. Capital Research and Management Company manages equity assets through two investment divisions. These divisions make investment decisions independently. AI-44440
- 22. © 2011 American Funds Distributors, Inc. AI-99997
Editor's Notes
- Figures are past results and are not predictive of results in future periods. Investments are not FDIC-insured, nor are they deposits of or guaranteed by a bank or any other entity, so they may lose value.
- [Note to presenter: Begin by thanking audience.] We’ve probably all had our mornings start like this: You get up, you have breakfast (maybe a bowl of cereal or a cup of coffee), you brush your teeth, just like you always do. You get in your car and go to work — or, if you’re retired, maybe you run some errands. Perhaps you pull over at some point to take a call from a friend on your cell phone. As Americans, we probably use products and services from around the world every single day. But what about the rest of the world? In the United States, there are currently more than 300 million people. [Note to presenter: Advance slide to show image of the world] But if you expand your picture, think about the 6.9 billion people around the world who either do the same things, or aspire to do them.
- The world is open for business, and it’s not just about the U.S. anymore in equity markets. In fact, in 2009, U.S. companies paid foreign income taxes nearly equal to their domestic income taxes, reflecting the prominence of global markets on the bottom line. [Source: Standard & Poor’s.] The question is, are you participating? [Note to presenter: The image shows a ship being loaded with containers, either at sunrise or sunset. It may suggest that the workers have been up all night loading the ship, or perhaps worked through the day and now are continuing into the night. The visual message is that no matter the hour of the day, the world remains open for business.]
- Today I’d like to discuss three things: How current global opportunities are an example of history in the making. How an extensive global research effort can help reduce the risks of investing outside the U.S. That it’s no longer a question of if , but how to put global investments to work in your portfolio.
- I want to give you some examples of history in the making. A little over 200 years ago, the U.S. was still an emerging market, a primarily agrarian country with a developing economy. But by the mid-20th century, through hard work and innovation, the U.S. had become a world superpower. In the 1950s, the country invested heavily in infrastructure, building up highways, housing and industry. Our interstate highway system, championed by President Dwight D. Eisenhower and signed into law in 1956, has been called one of the greatest public-works projects in history. [Source: Federal Highway Administration] From the Industrial Revolution to the modern era, our ingenuity and perseverance has helped raise the standard of living in this country and improved the lives of millions of people. Though there have been many ups and downs along the way, the American economy in general has expanded substantially over the years.
- Today, a global version of America’s economic ascent is happening around the world. The rise of the consumer, which contributed so much to long-term economic growth in the U.S., is occurring on a global level. Only it seems that the recent changes have been taking place much faster. Here are some examples: In 1999, one out of 100 people in Russia had a cell phone account. [Note to presenter: Advance slide to show current number of cell phone accounts per 100 people in Russia. Actual number is 163.] Today, there are considerably more cell phone accounts than people. This is not to suggest that every person has a cell phone; many people have multiple accounts for work and home use and to take advantage of different pricing options. [Source: World Bank] In 2009, China surpassed the U.S. as the world’s largest car market for the first time, and 2010 saw the trend continue. In 2008, first-time buyers were responsible for 80% of car purchases in China. [Sources: USA Today and The New York Times ] Sales of breakfast cereal in China were up an average of 44% per year between 2003 and 2008. [Source: EuroMonitor] India has been spending hundreds of millions of dollars to expand the country’s highway system and better connect its rapidly growing cities. Per-capita usage of toothpaste in India increased from about 2.7 ounces in 2003 to more than four ounces in 2009, or roughly 50% per person. That may not seem like much until you consider that there are more than 1.1 billion people in India. Put differently, the total amount used is a little more than 50 Olympic-sized swimming pools full of toothpaste. [Source: Colgate-Palmolive (India) Limited/A.C. Nielsen] A 2009 report predicted that the number of European families with high-definition (HD) televisions may grow from 116 million in 2010 to 220 million in 2018. [Source: Euroconsult and NPA, “HDTV in Europe, Key Economics & Prospects to 2018”] We’ve seen companies around the world creating and selling products and services in numerous markets around the world. And that trend is not just happening outside the U.S. In fact, foreign-owned companies now employ more than 5.5 million workers in the U.S. and pay them more than $400 billion in compensation. [Source: U.S. Bureau of Economic Analysis] [Note to presenter: This is a good place to include a local example of globalization.] Here’s what Alan Berro, a portfolio counselor with American Funds, has to say about these changing global trends: “Twenty years ago, nobody imagined that the whole world would be communicating over cell phones and computers. Today, communication and access to information are probably the greatest drivers of peace and prosperity in the world.” [Note to presenter: The What's Right With the World brochure contains additional information and charts illustrating the transformation of the global economy and why adopting a global investment strategy may be appropriate.]
- As countries around the world transition from agricultural to industrial to service economies, the world continues to see improvements in life expectancy, education, nutrition, disease control and overall quality of life. All of these advancements can create investment opportunities. Once people get used to having cars, cell phones and hot showers, they don’t give them up easily. As American Funds portfolio counselor Alan Berro explains, “Despite the downturn, there remains an insatiable demand around the world for food, transportation, health care and education. You can’t put the genie back in the bottle.”
- We’ve talked about some of the global changes that are underway and the inherent investment opportunities created by those changes. But as you know, any investment, and particularly investments outside the U.S., carry certain risks. The prices of some securities outside the U.S. may experience large swings in response to a variety of circumstances. These circumstances can include: Certain events, overall market changes and conditions affecting the general economy Political, social or economic instability at the local, regional or global level Currency and interest rate fluctuations Different accounting, auditing, financial reporting and legal standards and practices in some countries Changes in tax policies, expropriation and higher transaction costs Various administrative difficulties, such as delays in clearing and settling portfolio transactions or in receiving payments of dividends These risks may be heightened in connection with investments in developing countries. Let’s talk about how to mitigate some of those risks by way of a deep, extensive global research effort. [Note to presenter: The images show American Funds investment professionals at work doing research over the years. The world has changed dramatically since we started investing outside the United States more than five decades ago. What hasn’t changed is our commitment to firsthand investment research.]
- Global research is an essential part of American Funds’ history as an investor. For nearly 60 years, we’ve been searching the world for long-term opportunities, making us one of the oldest global investors today. In 1934, we had holdings in two companies based outside the U.S.: Sun Life Assurance and International Nickel Co. of Canada. In 1953, we made our first investments outside North America, in Royal Dutch Petroleum and Unilever. Less than a decade later, we opened an office in Geneva, becoming one of the first U.S.-based investment firms to have a research office overseas. Capital Strategy Research, one of our affiliates, opened a research office in Beijing in 2009. Since 1973, we haven’t brought an equity fund to market that didn’t include a global component. Global research is at the core of every investment decision we make, including when to introduce new funds. So what does that research process look like? We always rely on firsthand research because we believe you need to know a company to determine its true worth and long-term potential. We take a bottom-up approach — focusing primarily on companies, not industries or countries. Our research process includes meeting with company management, thoroughly reviewing financial statements and making on-site visits. We also meet with a company's suppliers, buyers, bankers and competitors to gain an objective, well-rounded view. Our investment professionals often make visits in groups that include both fixed-income and equity analysts, who then report back to larger “global clusters” so that multiple perspectives can be heard. Here’s how Martin Romo, an American Funds investment analyst, describes one of the global clusters: “In the commodities group, it’s not just the energy analysts getting together, but also the chemicals and metals analysts, because a lot of time you’re getting different signals about the strengths of the markets or the pricing. It’s always helpful to check within and across industries and regions to make better decisions and determine whether the investments we’ve made will bear fruit over time.” Because of our presence as a global investor, our investment analysts often receive greater access to companies than analysts from smaller firms. Our global research effort emphasizes integration. Many of our investment professionals work from research offices located around the world, which adds a local perspective on some of the companies in which we invest. Visiting U.S. and non-U.S. companies and their affiliates around the world also helps us create a more comprehensive mosaic of what’s happening in the global economy and how individual companies are faring. While other companies are cutting back on research, we remain committed to maintaining our extensive global research network. Our investment professionals hail from 38 countries and speak more than two dozen languages. As part of this global research effort, in 2010, they visited with executives from companies domiciled in more than 50 countries. While the risks associated with global investing cannot be eliminated, we believe they can be reduced through an extensive global research process that emphasizes an intensive understanding of individual companies. Such an inclusive research effort isn’t cheap, but it has provided exceptional value to investors. Our management fees have remained among the lowest in the mutual fund industry.
- We rely on a comprehensive global research process that is at times nontraditional. [Note to presenter: You can describe the Andreas Brock story here, or skip ahead to one of the other stories at the bottom if you prefer. ] And our investment professionals aren’t always looking at the most glamorous of companies. We talked about some of the advancements taking place around the world. What about the giant leap that occurs when a family gets indoor plumbing for the first time? One of our investment analysts, Andreas Brock, who was born in Sweden and works in our London office, became interested in a European company that makes everything a plumber needs, from outdoor pipes to high-tech toilets. The company was renowned for its training courses, and in fact trained 30,000 plumbers a year on how to use its products, which Andreas saw as a great competitive advantage, because these were often the guys driving the purchasing decisions. While meeting with the CEO, Andreas asked if he could participate in one of the training sessions. The CEO was a bit surprised because no other analyst had asked to do that, but he said, “Why not?” During the training, Andreas learned more about all the company’s products. [Note to presenter: The photo is of Andreas bending a piece of plumbing pipe during the training course.] He went down to the testing center, where they had 100 toilets flushing every 10 seconds, more than 100,000 times each. He also went to the production center, where he saw there was a screen with the stock price. He said, “As an investor, it’s a good sign when I know my interests are aligned with the workers in the production center.” Andreas came away from his experience impressed with the passion and humility of the workers and the management team, and with a deeper understanding of both the company and the industry. That’s the type of bottom-up, fundamental research that is essential to how we invest at American Funds. [Note to presenter: Additional, optional stories follow.] [Jeanne Carroll, an investment analyst and portfolio counselor based in our New York office who covers the global paper industry, regularly visited the same paper mill in Indonesia. While she was there, she would also visit the local grocery store. At first, bicycles were parked outside and the store’s shelves held mostly consumer staples in plastic bags or crude boxes. On more recent visits, she noticed numerous scooters outside and a much wider array of consumer products for sale. Though she was there to visit the paper company, she was also able to report back on changing consumer trends in the country.] [While meeting with a construction company in South Korea, a group of American Funds investment professionals discussed a new highway the company was building. After the meeting, the group considered which other companies could benefit from the new road. We wound up investing in a company that owned a casino near the end of the highway.]
- As American Funds investment analyst Martin Romo says, “We’re a private company. We have the ability to continue to invest in our research. We’ve seen a lot of our competitors cut back on travel and conferences, and we don’t intend to do that. We’re going to continue to commit the resources to go see companies, get the research we need and incorporate that into the judgments and the companies we’re putting in the portfolios.”
- Now that we’ve talked about global opportunities and how an extensive research effort can mitigate some of the risks of global investing, it is no longer a question of if , but how to put global investments to work in your portfolio.
- One global investment option is New Perspective Fund. When New Perspective Fund was created in 1973, global markets were uncharted territory for most U.S. investors. The fund seeks long-term growth of capital through investments all over the world, including the U.S. It focuses on opportunities generated by changing global trade patterns and economic and political relationships. Here’s how Walter Stern, the fund’s founding chairman, describes the early days: “Information about companies was extremely hard to come by and travel was cumbersome at best. More critically, a decade-old interest equalization tax was still in place, which taxed purchases on stocks of companies based outside the United States at 15%. That law was already under challenge when the fund began — it would be rescinded in January 1974 — but for many people it cast into doubt the viability of a global fund.” American Funds portfolio counselor Jody Jonsson says, “I believe in what New Perspective Fund stands for, very high-quality, tested, global companies. These are not IPOs. These are companies that have been around for a while. They’ve established business operations in multiple countries.” She also says that, “When I look at the top holdings in the fund, I think they are superb companies — companies that have enduring franchises, deep moats around their businesses and strong balance sheets. They are able to control their own destiny to a large extent and are well-positioned to capitalize on recovery. But even if we don’t get recovery or if we get a halting recovery, these are companies that I believe are still likely to be very strong and thrive and take market share from their competitors. I’m very excited about their prospects.”
- There have always been reasons not to invest. Despite all the global challenges of the past 37 years — including the oil embargo, the Asian currency crisis, 9/11, and more recently, the global credit crisis — here’s how a $10,000 investment in New Perspective Fund would have grown during the fund’s lifetime. [Note to presenter: You can invite the audience to open up the World of Difference brochure to look at this mountain chart more closely.]
- I think you would agree that most investors are looking for investments with historical returns that are both positive and better than the market. Over its lifetime, through the year ended December 31, 2010, New Perspective Fund has outpaced all but one of the world’s top stock markets, as represented by MSCI Country indexes. In addition to having provided an attractive average annual total return, the fund also had the lowest relative volatility compared to these top markets. You can see that, over longer periods, New Perspective Fund has made a strong case for global diversification.
- Here’s how American Funds portfolio counselor Rob Lovelace describes our company-by-company approach to investing: “We don’t pick countries. We don’t pick industries. We find individual companies with the potential for superior results. Everything else flows from that.”
- To summarize: We are watching the world change in real time. You can take part in these historic global changes. At American Funds, our research effort is comprehensive, valuable and efficient. But it’s not always traditional. Our research process allows us to manage some of the risks inherent to global investing and to identify investment opportunities around the world. New Perspective Fund, which has the flexibility to invest all over the world, is one way to put global investments to work in your portfolio.
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- American Funds: The right choice for the long term.