MFS INTERNATIONAL DIVERSIFICATION SM FUND

Transcription

1 MFS INTERNATIONAL DIVERSIFICATION SM FUND A diversified portfolio of MFS international stock funds The fund has a target weighting of 100% international stocks, provides convenient access to five distinct international equity funds in a single investment, and is systematically rebalanced. Benchmark: MSCI All Country World (ex-us) Index (net div). Fund objective Seeks capital appreciation. Summary of Results For the quarter ending June 30, 2018, Class I shares of the MFS International Diversification Fund (the fund ) provided a total return of -0.25%. This compares with a return of -2.61% for the fund s benchmark, the MSCI All Country World (ex-us) Index (net div). The MFS International Diversification Fund Blended Index** (the Blended Index ), generated a return of -2.40%. The Blended Index reflects the blended returns of broad market indices, rebalanced quarterly, with percentage allocations to each index designed to reflect the asset class allocations of the fund. **The Blended Index is comprised of the following indices, rebalanced quarterly: the MSCI EAFE Index (net div) (30%), MSCI AC World (ex-us) Growth Index (net div) (25%), MSCI EAFE Value Index (net div) (25%), MSCI AC World (ex-us) Small Mid Cap Index (net div) (10%); MSCI Emerging Markets Index (net div) (10%) MSCI EAFE (Europe, Australasia, Far East) Index measures the non-us stock market. MSCI All Country World (ex-us) Growth Index is a market capitalization index that is designed to measure equity market performance for growth securities in the global developed and emerging markets, excluding the U.S. MSCI EAFE (Europe, Australasia, Far East) Value Index measures non-us value stocks. The MSCI All Country World (ex-us) Small Mid Cap Index is a free float weighted index that is designed to measure equity market performance of small and mid-cap companies across global developed and emerging market countries. MSCI Emerging Markets Index measures emerging market stocks. MSCI All Country World (ex-us) Index measures developed and emerging market stock markets. Index returns do not take into account investment related fees and expenses. It is not possible to invest in an index. NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE Page 1 of 5

2 Key performance points Contributors Stock selection and underweight in financial services Stock selection in technology Individual Stocks: L'Oreal, Linde, Terumo and Symrise Detractors Underweight in energy Individual Stocks: Taiwan Semiconductor Manufacturing, GEA Group, AmBev and BHP Billiton Significant impacts on performance Contributors Financial Services Stock selection in the financial services sector contributed to relative results. However, there were no individual stocks within this sector that were among the portfolio's largest relative contributors during the period. Technology An overweight position in shares of tourism and travel IT solutions provider Amadeus IT (Spain) lifted relative performance. The stock performed well after management reported strong first-quarter margins, which resulted in earnings that exceeded market expectations. Additional Factors An overweight position in personal and household products company L'Oréal (France) contributed to relative performance. Shares advanced on strong adjusted sales growth, driven by strong performance in the firm's L'Oréal Luxe and Active cosmetics segments. An overweight position in industrial gas supplier Linde (Germany) lifted relative returns. Investors appeared to have responded positively when management reported better-than-expected first-quarter earnings results. Management also reiterated that its merger with Praxair is expected to close in the second half of An overweight position in medical products and equipment manufacturer Terumo (Japan) boosted relative performance. The company reported strong sales growth during the period that more-thanoffset management's cautious guidance update. Additionally, Terumo adopted International Financial Reporting Standards (IFRS), which had a positive impact on profit levels. An overweight position in global flavors and fragrances supplier Symrise (Germany) aided relative performance. The company reported sales growth, which was higher than expectations, aided by its scent & care segment and strong performance in aroma molecules and cosmetic ingredients. Significant impacts on performance Detractors Energy Not owning shares of global energy and petrochemicals company Royal Dutch Shell (United Kingdom) hampered relative results. Shares responded to rising oil prices, and the company reported solid earnings during the period. The firm's integrated gas division beat market expectations, owing to strong volumes, which more than offset weaker oil production levels. Page 2 of 5

3 Additional Factors An overweight position in shares of Taiwanese semiconductor products manufacturer Taiwan Semiconductor Manufacturing held back relative returns. Although the company reported in-line second-quarter earnings results, the stock price declined after management delivered disappointing revenue guidance, due to weak order demand in the high-end smartphone market. The portfolio's overweight position in mechanical engineering firm GEA Group (Germany) dampened relative performance. The stock fell after the company reported a significant decline in earnings before interest, taxes, depreciation and amortization (EBITDA), not long after confirming its guidance outlook. Management cited weakness in its Solutions segment, which suffered from a drought in dairy processing orders, which further pressured the stock. An overweight position in beverage manufacturer AmBev (Brazil) negatively impacted relative performance. The stock came under pressure after the company reported earnings before interest, taxes, depreciation and amortization (EBITDA) well below market estimates, due to a larger-thanexpected decrease in sales volume, mostly in Brazil. However, the company provided an encouraging outlook for the upcoming year, aided by strong execution during the World Cup, which should help support beer growth. Not owning shares of mining giant BHP Billiton (United Kingdom) held back relative performance. The stock advanced after the company announced a number of new near-term projects that boosted organic growth expectations. The company also noted that its strategy to completely exit the US Shale business remains on track for completion before the end of this calendar year. Targeting daily cash flows enabled the portfolio to maintain its strategic investment allocations. New cash invested in the portfolio each day is directed into underlying funds that have fallen below target levels because of market conditions. Performance review as of 6/30/18 Portfolio % Q Year 3 Years 5 Years 10 Years Class A without sales charge Class A with 5.75% maximum sales charge Class I Class R Class R MSCI All Country World (ex-us) Index (net div) Blended Index** Blend constituents: MSCI EAFE Index (net div) MSCI AC World (ex-us) Growth Index (net div) MSCI EAFE Value Index (net div) MSCI AC World (ex-us) Small Mid Cap Index (net div) MSCI Emerging Markets Index (net div) Lipper International Multi-Cap Core Cat. Avg Page 3 of 5

4 + Primary Benchmark **See Blended Index definition in Summary of Results section Fund Expenses Class A Class I Class R4 Class R6 Gross Expense Ratio Net Expense Ratio Gross expense ratio is the fund's total operating expense ratio from the fund's most recent prospectus. Net expense ratio reflects the reduction of expenses from fee waivers, and reimbursements. Elimination of these reductions will result in higher expenses and lower performance. These reductions will continue until at least September 30, Performance data shown represents past performance and are no guarantee of future results. Investment return and principal value fluctuate so your shares, when sold, may be worth more or less than the original cost; current performance may be lower or higher than quoted. For most recent month-end performance, please visit mfs.com. Performance results reflect any applicable expense subsidies and waivers in effect during the periods shown. Without such subsidies and waivers, the fund's performance results would be less favorable. All results assume the reinvestment of dividends and capital gains. The performance is as of the date shown; it may not include the fund's entire investment portfolio and is subject to change. Performance for Class R shares includes the performance of the fund's Class I shares, adjusted to take into account differences in sales loads and class-specific operating expenses (such as Rule 12b-1 fees), if any, for periods prior to their offering. Please see the prospectus for additional information about performance and expenses. Sales Charges Class I shares ("I") have no sales charge or Rule 12b-1 fees and are available only to eligible investors. Class R4 shares ("R4") and Class R6 shares ( R6 ) have no initial sales charge or CDSC. Shares are available only to certain retirement plans. Important risk considerations The fund may not achieve its objective and/or you could lose money on your investment in the fund. Stock markets and investments in individual stocks are volatile and can decline significantly in response to issuer, market, economic, industry, political, regulatory, geopolitical, and other conditions. Investments in foreign markets can involve greater risk and volatility than U.S. investments because of adverse market, economic, industry, political, regulatory, geopolitical, or other conditions. MFS strategy of investing in underlying funds exposes the fund to the risks of the underlying funds. Each underlying fund pursues its own objective and strategies and may not achieve its objective. Please see the prospectus for further information on these and other risk considerations. Page 4 of 5

5 This portfolio is actively managed, and current holdings may be different. This is a list of the underlying fund and the percentage (based on the equivalent exposure of unaudited net assets) they represent in the portfolio as of 6/30/18: As of 6/30/18 MFS Research Intl Fund 29.94% MFS Intl Value Fund 25.02% MFS Intl Growth Fund 24.92% MFS Emerging Mkts Equity Fund 10.00% MFS Intl New Discovery Fund 9.96% % Cash & Cash Equivalents 0.15% Amadeus IT 1.51%, L Oréal 1.45%, Linde 1.04%, Terumo 0.92%, Symrise 1.01%, Royal Dutch Shell 0.00%, Taiwan Semiconductor Manufacturing 0.78%, GEA Group 0.63%, Ambev 0.30% and BHP Billiton 0.00%. Equivalent exposure measures how a portfolio's value would change due to price changes in an asset held either directly or, in the case of a derivative contract, indirectly. The market value of the holding may differ. The views expressed are those of MFS and are subject to change at any time. These views should not be relied upon as investment advice, as securities recommendations, or as an indication of trading intent on behalf of any other MFS investment product. No forecasts can be guaranteed. Source: SPAR, FactSet Research Systems Inc. Source: MSCI. MSCI makes no express or implied warranties or representations and shall have no liability whatsoever with respect to any MSCI data contained herein. The MSCI data may not be further redistributed or used as a basis for other indices or any securities or financial products. This report is not approved, reviewed or produced by MSCI. Before investing, consider the fund's investment objectives, risks, charges, and expenses. For a prospectus, or summary prospectus, containing this and other information, contact your investment professional or view online at mfs.com. Please read it carefully. MFS investment products are offered through MFS Fund Distributors, Inc., 111 Huntington Avenue, Boston, MA Page 5 of 5