Most non-U.S. stock markets posted fourth-quarter losses in U.S. dollar terms due to the further weakening of non-U.S. currencies, particularly the euro and the yen. The yen declined more than 8% versus the dollar, and the euro and British pound sterling each fell about 4%. The appreciating U.S. dollar detracts from returns for dollar-based investors in foreign markets. Growth stocks generally held up better than value shares, and small-caps outperformed large-caps based on MSCI indexes. From a sector perspective, consumer discretionary and telecommunication services performed best, while energy, materials, and health care performed worst.
The International Growth & Income Fund returned −4.71% in the quarter compared with −3.53% for the MSCI EAFE Index and −5.03% for the Lipper International Multi-Cap Value Funds Average. For the 12 months ended December 31, 2014, the fund returned −5.32% versus −4.48% for the MSCI EAFE Index and −6.50% for the Lipper International Multi-Cap Value Funds Average. The fund's average annual total returns were −5.32%, 5.77%, and 4.83% for the 1-, 5-, and 10-year periods, respectively, as of December 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 International Growth & Income 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 country and sector allocations are driven primarily by bottom-up stock selection but are also influenced by an assessment of macroeconomic prospects. The portfolio's overweight to consumer discretionary decreased during the quarter, as we reduced positions in several auto-related holdings. Conversely, an underweight to consumer staples increased during the period and overtook health care to become the largest underweight in the portfolio. We focused our selling in tobacco and food retailing shares.
Valuations in international developed equity markets appear full, and while equities gave back a little ground during the fourth quarter in U.S. dollar terms, opportunities remain sparse. Markets may have farther to pull back before valuations appear more broadly attractive; as a result, we remain hesitant to chase higher stock prices and valuations. New opportunities in Europe have become especially difficult to find, and we have instead sought to defend or add to positions in specific names where we think strong businesses remain undervalued. Our view on Japan has not shifted materially, and while the snap elections in December should afford the Abe government several more years of governing, we believe that the long-term prospects for Japanese equities rely on the success of the government's structural reforms.