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International Blended Equity


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Objective

Seeks to outperform the MSCI EAFE Index, a broad, market-weighted measure of the performance on non-U.S. stocks through a blended active and passive management approach.

Strategy

The International Blended Equity Fund is invested in the stocks of companies that are located outside of the United States. The companies within this equity fund are generally large in nature and are in developed countries. Sixty-seven percent of the fund is actively managed, meaning that it attempts to outperform its benchmark, the EAFE Index. Thirty-three percent of the fund is passively managed, meaning that it is intended to perform in line with the benchmark, the EAFE Value Index. The benchmark for this fund, the EAFE Index, is broadly representative of stock markets in Europe, Australia, and the Far East. The net return of the International Blended Equity Fund will be the results of the performance of the international equity markets, plus the extent to which the fund manages to outperform, minus investment and administration expenses.


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The assets are invested according to the three approaches to provide a well-diversified option to MMBB’s members who seek exposure to the international equity markets.

  • 33% Value: Value-based investing, which seeks to identify stocks that are selling at a price believed to be lower than fair market value and which may enjoy capital appreciation when they begin to sell at a higher value. This component of the International Blended Equity Fund is passively managed by Parametric Portfolio Associates LLC.
  • 33% Growth: Growth-oriented investing, which seeks to identify stocks with strong future earnings growth and therefore the potential for increases in their stock price. This component of the International Blended Equity Fund is actively managed by OFI Global.
  • 34% Core: This portion of the International Blended Equity Fund allows the manager to pick stocks from the international equity market universe, whether value or growth, with the intention of outperforming the MSCI EAFE Index. This component of the International Blended Equity Fund is actively managed by MFS.
  • The preponderance of holdings is expected to, generally, represent large capitalization companies. Most of the holdings are expected to represent the economies of mature countries, but there may be a small amount of exposure to emerging markets (countries in more embryonic stages of development), which carry more risk (see more here ). Since they are riskier, they are used only on an opportunistic basis and do not have a target allocation. At any point in time they are expected to comprise less than 5% of the total portfolio.

Opportunities

Because this fund has a 67 percent allocation to active managers, most of the portfolio managers make conscious decisions about which stocks to include. These decisions are made in an attempt to produce higher returns than the equity market performance generally as measured by the MSCI EAFE Index, the benchmark for this fund.

The International Blended Equity Fund engages a diversified roster of managers with contrasting investing styles. When one manager is performing less well there is the possibility that another will be performing better. This can provide a smoother investment experience than being concentrated in a single manager or style. In addition, because this fund covers many countries outside the United States, it has a broad range of choices from which to access good investments.

The International Blended Equity Fund provides an opportunity to access good investments outside of the United States because the world is becoming increasingly global and the U.S. is only one part of the world economy. This fund is well-diversified among various regions of the world and diversified among industries within regions.

It is possible that during times when the U.S. equity market is in decline, non-U.S. markets may decline less or even turn in positive returns.

This fund may hold a portion of its investments in emerging markets, such as China, Russia and Brazil, which are perceived to have fast-growing economies and thus may provide opportunities for higher returns than in developed countries, such as England or Japan.

Risks

All securities investments risk the loss of capital. Since this fund is invested predominantly in equities (stocks), the chance of losing a percentage of your original investment is much higher than with some other investment options. See historical returns and volatility to compare risk and return among MMBB’s investment options.

All stock markets can be volatile. Although, over long periods of time, investors in stocks may enjoy higher returns than investors in other options. They can also lose more money than those investing in other options. Sharp and unpredictable changes in value, either positive or negative, can be especially acute over shorter periods of time.

The International Blended Equity Fund is actively managed. The decisions that the portfolio managers make with respect to which stocks to include and which to exclude may not turn out as expected and may detract from total fund return rather than enhancing it. This fund’s return may vary meaningfully from its benchmark, especially over periods shorter than one year.

International equity investing carries certain additional risks. Currency risk is one of the primary additional risks for investors in international equities. Currency risk refers to the possibility that the foreign currencies in which investments are denominated will fall in relation to the U.S. dollar. (Conversely, foreign currencies could rise in relation to the dollar and benefit the investment return.)

Political, social and economic developments in foreign countries can reduce investment returns. This includes the establishment of foreign exchange controls or other government-imposed investment restrictions.

The International Blended Equity Fund may be expected to have a small percentage of investments (estimated at less than 5%) invested in emerging markets, such as China, Russia and Brazil. In contrast to developed countries, such as England and Japan, emerging markets may be especially volatile, rising or falling even more sharply than the U.S. or developed non-U.S. stock markets.

Emerging markets are typically less liquid, as well. If a portfolio manager decides to sell some shares of emerging market companies, there may not be ready buyers. This means that the portfolio may not be able to sell their shares when they want to sell them. Should this occur at a time when prices are declining, the manager’s loss may be greater than if he were able to sell immediately.

Circumstances in emerging markets are constantly changing, and some of the other issues that portfolio managers contend with are corporate governance, accounting standards and the local conventions of doing business.

The performance of the International Blended Equity Fund for varying lengths of time is reported below. The longer the time period, the more likely it encompasses varying economic and market conditions.

TOTAL RETURN AS OF March 31, 2019
1-Mo YTD 1-Yr 3-Yrs 5-Yrs 8-Yrs 10-Yrs
International Blended Equity 0.36% 10.20% -3.50% 5.71% 2.01% 3.81% 8.28%
MSCI EAFE Index 0.63% 9.98% -3.71% 7.27% 2.33% 4.13% 8.96%

While it is valuable to view investment performance over long-term time horizons, looking at shorter time periods can give one insight as to how returns may fluctuate over shorter time periods. The table below displays calendar year returns.

CALENDAR YEAR RETURNS
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Int’l Blended Eq 12.16% -43.44% 33.28% 6.59% -10.92% 20.00% 20.19% -6.01% 1.28% -2.49% 23.85%
MSCI EAFE 11.17% -43.38% 31.78% 7.75% -12.14% 17.32% 22.78% -4.90% -0.81% 1.00% 25.03%

Past performance is no guarantee of future results. Investment return and principal value will fluctuate so that shares, when redeemed, may be worth more or less than their original cost. Performance is for the stated time period only; performance through the current date may be lower or higher than displayed above due to market fluctuations, manager performance or other reasons.

From time to time MMBB contracts with one or more external managers to execute the investment strategy for the International Blended Equity Fund. Recently the roster for this investment option included:

Parametric
OFI Global Asset Management
MFS

Annual Expenses (As of December 31, 2017)

Fund Expenses — Year 2017
Investment Management Fees0.40%
MMBB Administrative Charge0.50%
Other Expenses0.13%
Sales Charge (Load) on PurchasesNone
Deferred Sales Charge (Load)None
Short-term or Other Redemption FeeNone
Distribution, or 12b-1, FeeNone
Dealer Commission (percent of offering price)None
Low Balance Account Service FeeNone
Total Annual Operating Expenses1.03%