MFS Investment Management

International Equities Manager Profile

PRODUCT

MFS Global Equity Trust (Unhedged)

ORGANISATION

Massachusetts Financial Services (MFS) is a subsidiary of Sun Life Assurance Company of Canada and is America’s oldest mutual fund organisation with a history of money management dating from 1924. In 1932 MFS established an internal equity research department and proprietary research approach. MFS has since grown to be one of the most respected names in investment management managing over AUD $222.4 billion as at 31 March 2011. MFS employs over 1600 staff worldwide and is represented in 18 countries. BNP Paribas Investment Partners provides distribution and client servicing for MFS in Australia.

 Investment Philosophy

The Manager’s philosophy is based on the belief that original, fundamental, bottom-up research is the best means of uncovering high quality companies with above average, sustainable earnings growth and attractive investment opportunities.

Investment Strategy

The Manager believes that stock selection is the most reliable method of adding value to a client's portfolio. Their “on the ground” research provides an effective opportunity to identify inefficiencies in global markets and to invest in high quality companies at attractive valuations which have above average sustainable growth.

The Trust invests in all types of ordinary shares and equivalents of US and non-US issuers. Allocations are based on companies as opposed to countries, which may lead to country significant over/underweightings relative to the MSCI World Index.

Investment Process

Screening

Screens are applied to reduce a universe of 5,000 global securities available for issue around the world to 2000 - 2500 securities which are actively followed by the MFS equity research analysts. This screening is used to exclude companies with unattractive fundamentals (eg. negative, low, or volatile earnings per share growth), that are relatively illiquid, or are domiciled in countries with obvious political risk or economic crises.

Valuation

Earnings models are used to project 24-36 month earnings forecasts and to identify potential change in stock valuations. Buy, hold, or sell ratings for every security are assigned along with a 12-18 month price target for each “buy”. At any given time, approximately 550-650 stocks merit a “buy” rating.

Relative Value Analysis

Relative value analysis compares the valuations and expected growth rates of “buy” rated securities to determine which securities will be included in the portfolio. In-depth cash flow analysis is employed to ensure accuracy in comparing companies on a global basis. Relative value analysis completes the portfolio construction process with the selection of approximately 80 - 120 stocks.

Sell Discipline

The Manager may sell a stock if it is determined that the sell target price has been reached, the fundamentals decline, or another stock is seen to offer better value.

Portfolio Construction

The fund invests, under normal market conditions, at least 80% of its total assets in common stocks and related securities, such as preferred stock, convertible securities and depository receipts, of foreign (including emerging markets) issuers. The fund invests in at least three different countries and exposure to a single industry is limited to 25% of a portfolio. The maximum allocation to any given security is 5% of the portfolio at purchase. Companies, rather than countries, are selected based on the above analysis. However, neither Trust will have more than 15% of their assets invested in companies from Emerging Markets.

Currency Management

Currency Hedging is rare and usually only undertaken for defensive purposes and as a part of the security selection process. Therefore, there is no overall currency management strategy for the Trust and the Trust is considered to be “unhedged”

Risk Management

The Manager monitors the Trust’s risk exposure for the purpose of determining that investment guidelines and diversification parameters are being followed. The MFS compliance department measures and evaluates the accounting, financial, and operational activities of MFS and its affiliates from a regulatory perspective. Managers within the equity department review risk exposures on a regular basis and work with the portfolio management teams to keep risk exposures consistent with the Trust's investment discipline and preset standards.

 PERFORMANCE to 30 June 2011 (in AUD and net of fees)

* Inception: 30 June 1997

ASSESSMENT

The Trust is well diversified and risk managed by investing across an average of more than 20 countries and 13 sectors. The Trust is managed by an experienced and well-resourced team of equity security professionals, with a proven investment process that is structured and clearly defined.

The Trust has seen strong performances throughout all observed timeframes since inception, consistently outperforming the benchmark by around 3% p.a.