The NFJ Global Dividend Value Fund delivered double-digit gains in the third quarter, finishing in line with its benchmark, the MSCI All County World Free Index. On an absolute basis, the Fund’s exposures to financials and industrials stocks contributed most to gains for the period. Relative to the benchmark, stock selection decisions in the industrials, consumer discretionary and utilities sectors benefited returns. An overweight position and stock selection decisions in the consumer staples sector detracted from relative returns as did selections among energy companies.

Capital Markets

Global equity markets advanced solidly in the third quarter, adding to gains for the year and recovering more of the value lost in the 16-month bear market that ended in March. Although economic growth remained subdued, investors showed newfound enthusiasm for riskier assets, bidding up stock prices especially in the beaten-down financials and materials sectors. The utilities, telecommunications and consumer staples sectors registered gains for the period but underperformed the broad global market. A weakening dollar added to international equity returns for U.S. investors. Among developed economies, the market advance was strongest in continental Europe. Developed Asia underperformed other regions with Japan turning in relatively flat performance. Stocks in emerging markets also outperformed broad global equity indexes.

Signs of a nascent economic recovery and an upturn in demand served to boost share prices for companies in the industrials sector, which had been extremely hard hit by the recession. The Fund’s positions in aircraft manufacturer Boeing and engineering and construction firm KBR significantly outperformed in the period. Boeing shares advanced on better-than-expected quarterly results and several new defense contracts with the Navy and Air Force. Analysts also noted that a weakening dollar may benefit Boeing sales by making their aircraft more price-competitive against European rival Airbus. KBR’s stock rose on reported earnings in excess of estimates and the company’s optimistic assessments of potential new energy projects in Australia, New Guinea and Iraq.

In the consumer discretionary sector, shares of clothing company VF Corp rose when the company reported higher than expected earnings for its lifestyle clothing brands including Vans, Reef, Kipling and lucy. Although the company’s net income declined from the same period of 2008, the company’s cost-cutting initiatives proved effective at preserving profits in a weakening environment. International media and education company Pearson PLC saw its shares advance as it affirmed forecasts for 2009 growth. The company, which includes the Penguin Books imprint as well as Pearson Professional Centers and Pearson VUE Authorized Test Center Selects, announced plans to invest more than 1 billion pounds ($1.5 billion) in new product development in 2009.

Brazilian utility Saneamento Basico advanced on a solid increase in quarterly income and upgraded ratings. The company is benefiting from a favorable tariff adjustment, the appreciation of the Brazilian currency and a lower-risk regulatory environment for water and sewage utilities in South America’s largest country.

In the energy sector, the Fund’s exposure to the integrated oil companies Total, Marathon and Conoco Phillips detracted from returns relative to the benchmark. As a group, oil refiners experienced a profit margin squeeze in the period. They faced higher costs in the form of rising prices for crude oil with no corresponding increase in revenues as gasoline prices at the pump remained relatively stable.

Among consumer staples companies, Belgian supermarket operator Delhaize reported higher quarterly profits. However, the stock retreated after company management predicted a deepening price war in the U.S., where a majority of Delhaize’s revenue is generated. Competitors in the U.S. have pledged to cut their own prices, raising concerns that Delhaize’s advantage might be eroded.