* The chart illustrates the performance of a hypothetical $10,000 investment made in the fund on commencement of operations. Figures include reinvestment of capital gains and dividends, but do not reflect the effect of any applicable sales charges or redemption fees, which would lower these figures. This chart is not intended to imply any future performance of the fund.

Why invest in this fund?
• Potential for enhanced returns
• Excellent diversification tool
• Provides exposure to broad European market
• Low expense ratio
• Dollar denominated
• Managed by investment team based in Europe

Investment strategy
This fund offers exposure to the broad Western European markets considering stocks of all market capitalizations. It invests in a wide range of industry sectors, seeking companies with good long-term prospects and innovative products. Our approach can be characterized as bottom-up: first, we use a quantitative model that screens and ranks securities based on valuation and momentum. Then we per-form an in-depth review of the top-ranked securities, which includes understanding the firm’s financial statements and visiting selected companies.

Western Europe as diversification tool
Some of the classical arguments in support of adding a region to one’s portfolio are the possible benefits of diversification and the opportunity for enhanced returns. While these two arguments remain valid, there are other, Europe-specific reasons why this region is a good investment: European corporations have transformed to improve competitiveness, and different economic cycles make if possible to take advantage of different opportunities.

Meet the manager
Frank Heise joined Metzler in 2006 as Senior Portfolio Manager. He is a member of the equity strategy team and is primarily responsible for the European core product. Previously, Mr. Heise held the position of senior fund manager at Union Investment GmbH in Frankfurt. He was responsible for European institutional mandates and mutual funds, as well as for the development of the investment style and strategy. As an equity analyst he covered high dividend stocks and the telecommunications sector. Mr. Heise holds a degree in business administration from the University of Trier/Germany.

Quarter-End Commentary
The Western European equity markets continued to recover during the first two months of the second quarter of the year. The broad market finished April up by +2.4% and by +0.8% in May. June was a challenging month, however, after high oil prices put the market into a freefall once again, recording a loss of -10%. Consumers and businesses alike became increasingly pessimistic about the near-term future of the Euro zone economy, while indicators of economic activity pointed to deterioration.  Sentiment was also against risky assets, as retail investors were net sellers of stocks.
 
Looking into the third quarter of the year, the overall environment has become more challenging for equity markets. Economic growth is slowing down and inflation remains stubbornly high. In addition, profit margins are under pressure from the strong euro exchange rate, high commodity prices and the increase of interest rates. To an extent, however, Western Europe’s equity markets have already priced in the risks of a strong deterioration of the inflationary environment, so the downside risks from the financial market crisis are somewhat limited, even though the full extent of write-downs is still unknown. Against this background, we see limited risks of a further sell-off in European equities, which might further be buoyed by reasonable valuations.