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Ee presentation 12 march 3 15 final

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  • 1. Gabrielle GourgeyInstitutional Portfolio ManagerMFS Investment ManagementCONSISTENCY IN TOUGH MARKETSThe benefits of taking a longer-term view inEuropean EquitiesSee important disclosures on final page of presentation.See the fund’s offering documents for more details, including information on fund risks and expenses.The views expressed in this presentation are those of the speaker and are subject to change at any time. These views do not necessarily reflect the views of MFSor others in the MFS organization.FOR INVESTMENT PROFESSIONAL for sale in the United States or Canada or to US or Canadian citizens or residents.MFS Meridian Funds are not available AND INSTITUTIONAL USE ONLY.MFS International Ltd.FOR MFS INTERNAL USE ONLY.For Investment Professional Use Only. Not intended for retail investors. NOT GUARANTEED • MAY LOSE VALUEFOR DEALER USE ONLY. Should not be shown, quoted, or distributed to the public. 0 26170.4
  • 2. Weve been adding value for centuries…….For Investment Professional Use Only. Not intended for retail investors. 1
  • 3. …And can you imagine living without…For Investment Professional Use Only. Not intended for retail investors. 2
  • 4. Global GDP growth is what drivesEuropean earnings growth Correlation coefficient (1991 onwards) 0.6 0.5 0.5 0.4 0.3 0.2 0.1 0.1 0.0 Global growth and European earnings European growth and European earnings Sources: Macquarie Research, IMF and FactSet. As at 31 December 2012.For Investment Professional Use Only. Not intended for retail investors. 3
  • 5. Where has all the growth gone? Performance of Real GDP vs. Average of Last Six Expansions 130 Average of indexed values so trough in RGDP = 100 125 120 Average of Last Six Post-World War II Expansions* 115 Current Expansion 110 105 *Dates used for determining economic expansions are those designated by NBER. The data has been 100 adjusted for ease of comparison with the currency cycle. Expansion starting dates used: November 1970, March 1975, July 1980, November 1982, March 1991 and 95 November 2001. 90 -8 -7 -6 -5 -4 -3 -2 -1 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Quarters after end of recession Source: Ned Davis Research Group of 9/30/12For Investment Professional Use Only. Not intended for retail investors. 4
  • 6. Clearly a global phenomenon… 50% % of World GDP coming from countries with a budget deficit >6% 45% 40% 35% 30% 25% 20% 15% 10% 5% 0% 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010Source: Wolfe Trahan as of 12/31/11For Investment Professional Use Only. Not intended for retail investors. 5
  • 7. Developed world economies: Budget deficit Budget deficit as a % of GDP (2012F) 2% 0%-2%-4% -3.3%-6%-8% -8.2% -8.7%-10% -10.0%-12% Euro area UK US Japan Sources: Macquarie Research and IMF. As at 31 December 2012.For Investment Professional Use Only. Not intended for retail investors. 6
  • 8. Developed world economies: Government debt Government debt as a % of GDP250% 237%200%150% 107%100% 88% 90% 50% 0% Euro area UK US Japan Sources: Macquarie Research and IMF. As at 31 December 2012.For Investment Professional Use Only. Not intended for retail investors. 7
  • 9. Europe PER premium/ discount to US MSCI Europe Premium/Discount to MSCI USA 30% 20% 10% 0% -10% -20% -30% 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 Source: Factset. As at 31 January 2013.For Investment Professional Use Only. Not intended for retail investors. 8
  • 10. Europe: 12-month forward PER MSCI Europe forward price-to-earnings ratio 30x 25x 20x +1SD 15x Average 10x -1SD 5x 0x 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013Source: Factset. As at 31 January 2013.For Investment Professional Use Only. Not intended for retail investors. 9
  • 11. Short-term focus of the marketResearch coverage for two global large cap companies Financial Services Technology 2014 # of estimates 28 # of estimates 49 Well covered by sell- Earnings Per side analysts Share Range £0.63 - £0.83 Range $40.20 - $58.18 Estimates Minimal coverage 2016 # of estimates 1 # of estimates 4 Earnings Per Opportunity to Share Range £0.94 Range $35.12 - $76.00 express different Estimates view Lengthen the investment time horizonSource: FactSet. As at 21 February 2013For Investment Professional Use Only. Not intended for retail investors. 10
  • 12. Identifying opportunities Returns (EUR) – 2012 Returns (EUR) – 3 years to 31-Dec-12 80% 180% 161% 70% 160% 70% 140% 60% 56% 120% 50% 100% 81% 80% 40% 60% 30% 40% 22% 20% 18% 20% 0% 10% 3% -20% 0% -20% -40% MSCI Europe MSCI Spain Inditex Amadeus MSCI Europe MSCI Spain Inditex Amadeus Sources: Bloomberg and SPAR • Cumulative returns shown are for the period from the IPO, 28-Apr-10 to 12-Dec-12 ‘Spain’ represents the Spanish market (MSCI Spain Index – gross total return in EUR) For illustrative purposes only. Not all companies represented are holdings of the fund. These portfolios are actively managed, and current holdings may be different. This is a list of the positions mentioned above and the percentage (based on the equivalent exposure of unaudited net assets) they represent in the portfolios as of 31 December 2012: Inditex: MFS Meridian Funds – European Research Fund (0.9), MFS Meridian Funds – European Core Equity Fund (1.4) Amadeus IT Holding: MFS Meridian Funds – Continental European Equity Fund (3.1), MFS Meridian Funds – European Value Fund (1.8), MFS Meridian Funds – European Research Fund (1.3), MFS Meridian Funds – European Smaller Companies Fund (2.8), MFS Meridian Funds – European Core Equity Fund (1.6), MFS Meridian Funds – European Concentrated Equity Fund (3.5) Adding value through stock selectionFor Investment Professional Use Only. Not intended for retail investors. 11
  • 13. What is quality?Rigorous research uncovering quality companies Market position – brands, differentiated High return on capital products employed Technology – patents, proprietary knowledge Pricing power Distribution – effective route to market Sustainable / growing profits Markets – secular growth, low volatility High operating margins Balance sheet – robust financial structure Strong free cash flow Quality businesses help sustain earnings growthFor Investment Professional Use Only. Not intended for retail investors. 12
  • 14. Consistency of outperformanceHigh quality, low P/E five-year rolling outperformanceover MSCI Europe universe80%70%60%50%40%30%20%10% 0% 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Source: Factset. Universe MSCI Europe Dec 1994 through Dec 2012 recalculated every 3 months Quality represented by equal-weighted composite factor of 3 yr average ROE and 3 yr Assets/ Equity with each component scored, summed and quintiled to form buckets Q1 through Q5 at 3 month intervals All returns are equal-weighted Combining high quality with low P/E helped drive excess returnsFor Investment Professional Use Only. Not intended for retail investors. 13
  • 15. Are consumer staples overvalued?Forward 12-Month Price-to-Earnings Ratios 25x 22.8x 20x 17.5x 16.2x 15x 13.4x 14.0x 13.9x 12.8x 12.8x 12.2x 12.2x 11.9x 10x 5x 0x 1 Quality often not reflected in valuationSource: Factset. As at 31 January 2013.For Investment Professional Use Only. Not intended for retail investors. 14
  • 16. Disciplined portfolio construction • We are long term thinkers - Invest, dont speculate • Focus on understanding sustainability of business model – Analyse, dont forecast • Wary of downside risk – size positions appropriately • Fundamental research drives stock selection Stock picking has helped drive performance in European EquitiesFor Investment Professional Use Only. Not intended for retail investors. 15
  • 17. Historical quarterly performance MFS® MeridianSM Funds – European Research Fund1 vs MSCI Europe Index July 1999 – December 2012 MFS® MeridianSM Funds – European Value Fund1 vs MSCI Europe Index January 2003 – December 2012 Strategies have added value in diverse market environmentsFor Investment Professional Use Only. Not intended for retail investors. 16
  • 18. Historical quarterly performance MFS® MeridianSM Funds – European Smaller Companies Fund1 vs MSCI Europe Small Mid Index^ January 2002 – December 2012 MFS® MeridianSM Funds – 2 UK Equity Fund1 vs FTSE All-Share 5% Capped Index 2 January 20071 – December 20122 ^ Effective 18 February 2013, the benchmark changed from the MSCI Europe Small Cap Index to the MSCI Europe Small Mid Cap Index Strategies have added value in diverse market environmentsFor Investment Professional Use Only. Not intended for retail investors. 17
  • 19. Integrated global research platform Extensive integration Incentives aligned Supportive culture • 8 global sector teams, incorporating • Rigorous hiring process to find • Long-term focus with emphasis on fundamental, quantitative and credit independent thinkers who want to work in-depth business analysis perspectives in a team environment • Optimal sized team and low staff • Strong communication – regular team • Compensation based on: turnover enable investors to know each meetings, frequent travel together and other well off-sites – Long-term, consistent stock-picking – Collaborative investment process London Toronto Boston Tokyo Mexico City Hong Kong Singapore Sao Paulo Sydney 4 Collaborative culture builds better insightsFor Investment Professional Use Only. Not intended for retail investors. 18
  • 20. Thinking ahead — Focus on European fundsMorningstar rankings as at 31 December 2012 Europe OE Start of Fund MFS® MeridianSM Funds Morningstar 1 year 3 years 5 years 10 years Performance Category UK Large-Cap Blend 23rd 2nd 2nd 4th UK Equity Fund – I1GBP 17/12/2001 127/566 9/498 6/451 12/280 Equity Continental European Equity Fund – I1GBP Europe ex-UK Large- 49th 12th 3rd 5th 17/12/2001 Cap Equity 203/416 43/350 10/299 10/180 European Value Fund – I1EUR Europe Large-Cap 41st 2nd 1st 1/10/2002 - Blend Equity 588/1436 23/1202 6/963 European Research Fund – I1EUR Europe Large-Cap 13th 6th 8th 12/3/1999 - Blend Equity 175/1436 68/1202 74/963 European Smaller Companies Fund – I1EUR Europe Flex-Cap 1st 1st 2nd 5/11/2001 - Equity 2/369 1/315 5/245 Europe Large-Cap 5th 10th 14th European Core Equity Fund – I1EUR 1/10/2002 - Growth Equity 8/155 12/120 14/95Keep in mind a high relative ranking does not always mean the fund achieved a positive return during the period.Results, sales charges, and expenses will differ for other classes of shares.©2013 Morningstar, Inc. All Rights Reserved. The information contained herein: (1) is proprietary to Morningstar and/or its content providers; (2) may not be copied or distributed; and (3) is not 4warranted to be accurate, complete or timely. Neither Morningstar nor its content providers are responsible for any damages or losses arising from any use of this information.For Investment Professional Use Only. Not intended for retail investors. 19
  • 21. MFS® MeridianSM Funds –– U.K. EQUITY FUND Portfolio performance (GBP) as of 31 December 2012 Portfolio FTSE All-Share 5% Capped Index 15.71Percent (%) 13.14 11.28 10.54 9.33 8.09 6.69 2.94 1 Year 3 Years 5 Years 10 Years A proven history of performance For Investment Professional Use Only. Not intended for retail investors. 20
  • 22. MFS® MeridianSM Funds –– EUROPEAN VALUE FUND Portfolio performance (EUR) as of 31 December 2012 Portfolio MSCI Europe Index (net div) 18.65 17.29Percent (%) 11.17 9.68 6.20 5.93 3.60 -2.34 1 Year 3 Years 5 Years 10 Years A proven history of performance For Investment Professional Use Only. Not intended for retail investors. 21
  • 23. MFS® MeridianSM Funds —EUROPEAN RESEARCH FUNDPortfolio performance (EUR) as of 31 December 2012 A proven history of performanceFor Investment Professional Use Only. Not intended for retail investors. 22
  • 24. MFS® MeridianSM Funds —EUROPEAN SMALLER COMPANIES FUNDPortfolio performance (EUR) as of 31 December 2012The performance shown is attributable in part to unusual market conditions. These conditions may not be repeated in the future. A proven history of performance For Investment Professional Use Only. Not intended for retail investors. 23
  • 25. MFS® MeridianSM Funds —CONTINENTAL EUROPEAN EQUITY FUNDPortfolio performance (GBP) as of 31 December 2012 Portfolio MSCI Europe (ex-UK) Index (net div) 18.89 15.95 12.65 8.50 5.85 5.70 1.22 -1.59 1 Year 3 Years 5 Years 10 Years A proven history of performanceFor Investment Professional Use Only. Not intended for retail investors. 24
  • 26. MFS® MeridianSM Funds — EUROPEAN CORE EQUITY FUND Portfolio performance (EUR) as of 31 December 2012 Portfolio MSCI Europe Index (net div) 30.07Percent (%) 17.29 15.20 8.92 6.20 5.93 4.44 -2.34 1 Year 3 Years 5 Years 10 Years A proven history of performance For Investment Professional Use Only. Not intended for retail investors. 25
  • 27. MFS® MeridianSM Funds —EUROPEAN CONCENTRATED FUNDPortfolio performance (EUR) as of 31 December 2012 Portfolio MSCI Europe Index (net div) 22.82 21.07 21.08 17.29 1 Year Since inception (22-Aug-11) 2012MFS® MeridianSM Funds -European Concentrated Fund 21.07MSCI Europe Index (net return) 17.29 A proven history of performanceFor Investment Professional Use Only. Not intended for retail investors. 26
  • 28. Risk disclosure MFS Meridian Funds: UK Equity Fund (1,2,5,6), Continental European Equity Fund ( 1,2,5,6), European Value Fund (1,2,3,6), European Research Fund (1,2,6), European Smaller Companies Fund (1,2,4,6), European Core Equity Fund (1,2,6), European Concentrated Fund (1,2,5,6). 1 The fund may not achieve its objective and/or you could lose money on your investment in the fund. 2 Stock markets and investments in individual stocks are volatile and can decline significantly in response to issuer, market, economic, political, regulatory, geopolitical, and other conditions. 3 Investments in value companies can continue to be undervalued for long periods of time and be more volatile than the stock market in general. 4 Investments in small-cap companies can be more volatile than investments in larger companies. 5 The fund’s performance could be more volatile than the performance of more diversified funds. 6 Because the portfolio may invest a substantial amount of its assets in issuers located in a single country or in a limited number of countries, it may be more volatile than a portfolio that is more geographically diversified. Please see the prospectus for further information on these and other risk considerations.For Investment Professional Use Only. Not intended for retail investors. 27
  • 29. Fund regulatory details See the funds offering documents for more details, including information on fund risks and expenses. For additional information, call European Union: MFS International (U.K.) Ltd., Paternoster House, 65 St. Pauls Churchyard, London, EC4M 8AB UK. Tel: 44 (0)20 7429 7200. Switzerland: Carnegie Fund Services S.A., 11 rue du General-Dufour, 1204 Geneve, Switzerland. Tel: 41.22.705.1177. MFS Meridian Funds from time to time may be registered for sale in other jurisdictions or otherwise offered where registration is not required. MFS Meridian Funds are not available for sale in the United States or Canada or to US or Canadian citizens or residents. Unless otherwise indicated, logos, product and service names are trademarks of MFS and its affiliates and may be registered in certain countries. MFS International Ltd. This material is for use only in Germany, Switzerland, United Kingdom.For Investment Professional Use Only. Not intended for retail investors. 28
  • 30. CONSISTENCY IN TOUGH MARKETS THE BENEFITS OF TAKING A LONGER-TERM VIEWFOR INSTITUTIONAL AND INVESTMENT PROFESSIONAL USE ONLY
  • 31. AppendixFor Investment Professional Use Only. Not intended for retail investors. 30
  • 32. MFS European equity team MFS European based investment resources Years ofTitle Name Industry ExperienceDirector of Equity Europe Christopher Jennings CFA 15Portfolio Managers Peter Fruzzetti 19 Roger Morley 16 Benjamin Stone 17 Barnaby Wiener 19Institutional Portfolio Gabrielle Gourgey 18Managers Victoria Higley, ASIP 18 Ben Kottler, CFA 23Research Analysts Matthew Barrett, ASIP 17 Consumer Staples Filipe Benzhino 6 Business Services Shanti Das-Wermes 3 Mid-Cap Consumer Staples Philip Evans 4 Leisure Anne-Christine Farstad 11 Telecom Services, Insurance, Banks David Falco, CFA 9 Chemicals Ward Griffiths, CFA 9 Consumer Cyclicals Pablo de la Mata, CFA 9 Autos, Technology, Healthcare Stuart McPherson 26 Capital Goods, Metals & Mining Sandeep Mehta 5 Non-US Small-Cap Specialist James Neale 15 Energy Florence Taj 17 Financial, Banks, Brokers, Specialty Finance, UtilitiesTraders Jennifer Blanchette 18 Alan Brown 14Additional resource: Nicole Neubelt 15Investment ProductSpecialist For Investment Professional Use Only. Not intended for retail investors. 31
  • 33. Diverse European equity product range - 26276.2As of 31-Dec-12.For Investment Professional Use Only. Not intended for retail investors. 32
  • 34. Multi-faceted approach to risk Risk management integral to investment process Risk management integral to investment processAs of 31-Dec-12.For Investment Professional Use Only. Not intended for retail investors. 33