Polaris Global Equity (Hedged) (MAQ2806AU) Report & Performance

• The Fund returned 4.39%, net of fees, in July 2023, compared with a return for the Benchmark of 2.84%, as value stocks outpaced their growth counterparts amid a rebound in Financials and Materials and relative slowdown in outsized technology sector gains.

• The Energy, Financials and Materials sectors led the market higher in July, amid a strong month for value investing. The largest relative sector contributors for the Fund included holdings in Financials, such as Webster Financial and Popular, and holdings in Materials, including Smurfit Kappa, Lundin Mining and Yara. Notable relative detractors included holdings in Communication Services, led by Interpublic Group.

• Webster Financial and Smurfit Kappa were among the top individual contributors in July. Despite seeing pressure on net interest margins and slight adjustments on guidance, Webster had robust growth in both loans and deposits. Investors were optimistic about the stock, positing even further improvement in the second half of 2023. Smurfit Kappa posted record first quarter earnings, driven by easing of input costs and resilient pricing levels, setting a positive outlook for the remainder of the year. The company is now setting its sights on wider expansion efforts in North Africa, after the launch of its first plant in Morocco. The market became bullish on Smurfit Kappa’s business cycle on the back of restocking demand projections over the next twelve months.

• Teleperformance and Interpublic Group were among the top individual detractors in July. Teleperformance scaled back guidance on top-line expectations for the second consecutive quarter. Margins held up, but the company noted a pullback in client spending, as focus rotated to leaner operations and lower fixed costs. Interpublic Group reversed full-year organic revenue guidance from 2-4% to 1-2%. The advertising holding companies saw spending drop among its notable technology and telecommunications clients, overshadowing net new business gains among other industry players.

• During the month, Polaris completed the final sale of Brookline Bancorp. Brookline had one of the highest loan-to-deposit ratios in the portfolio and, due to recent acquisitions, had more commercial real estate exposure than Polaris deemed appropriate. Polaris’ recent addition of Cullen Frost provided the opportunity to sell Brookline while maintaining the portfolio’s exposure to banks.

• The Fund returned 5.00%, net of fees, in June 2023, compared with a return for the Benchmark of 5.59%, with growth stocks again dominating market returns and technology companies leading the charge as investors speculated on slowing inflation.

• The Consumer Discretionary, IT and Industrials sectors saw the largest gains in June, with Utilities and Communication Services lagging the wider market. For the Fund, the largest relative detractors were holdings in Consumer Discretionary, such as Bellway and Taylor Wimpey, and holdings in Health Care, including AbbVie and Jazz Pharmaceuticals. Relative contributors included holdings in Industrials, led by Marubeni and Allison Transmissions, and in Energy, such as Williams Companies.

• Marubeni and Allison Transmissions were among the top individual contributors in June. Marubeni continued to perform exceptionally well through the first half of the year, attributable to underlying business fundamentals and a boost from Berkshire Hathaway’s investment in five leading Japanese trading companies, of which Marubeni is one. Shares in Allison Transmissions rose after the ISM New Orders Index rose 7% in June. The ISM is one of the leading indicators of freight trends, which may bode well for Allison’s order volume in the coming months. The company also released its ESG report, which highlighted its outstanding electric vehicle technology innovation and propulsions solutions.

• Bellway, Taylor Wimpey and AbbVie were among the top individual detractors in June. Shares in UK homebuilders Bellway and Taylor Wimpey declined as questions swirled about home volumes in a stubbornly high interest rate environment. Bellway offered a trading statement in which management reiterated previous guidance; however, there was little communication around promotional strategies or margins. AbbVie will lose its monopoly on arthritis drug Humira as the first generic biosimilar is slated to hit the market in the second half of 2023. Investors sold down the name, but AbbVie has an impressive drug pipeline with three of four new drugs performing in line with expectations. AbbVie’s aesthetics division, Allergan, continued to gain ground through popular names like Botox, Juvederm, Kybella, SkinMedica, and CoolSculpting, amongst others.

• During the month, Polaris completed the final sale of Hyundai Mobis. The South Korean auto parts company was sold opportunistically following a strong stock price recovery.

The Fund returned -3.26%, net of fees, in May 2023, compared with a return for the Benchmark of -0.22%, as investor enthusiasm for technology drove further disparity between growth and value performance year-to-date.

• The growth-oriented IT sector saw the only significant gains in May; most index sectors, led by Energy and Materials, moved lower. For the Fund, the largest relative detractors were an underweight to IT and holdings in Consumer Discretionary, such as Sally Beauty Holdings and Crocs. Relative contributors included underweights to Consumer Staples, Utilities and Real Estate.

• SK Hynix and MKS Instruments were among the top individual contributors in May. SK Hynix benefited from a number of tailwinds, including new investment powering the AI infrastructure buildout, troughing of the semiconductor cycle and market share leverage, as competitor Micron was banned as a supplier to the Chinese government. Despite a ransomware attack in February, MKS reported better than anticipated first quarter results with decent revenues from its electronics, packaging, and specialty industrial divisions. MKS also announced progress in the integration of Atotech, a chemical consumables company acquired in July 2021.

• Tyson Foods and Sally Beauty Holdings were among the top individual detractors in May. Tyson struggled with high input costs, primarily labour, that could not be fully offset with higher prices. While the company’s prepared foods business remained steady, its pork, chicken and beef businesses came under pressure. US beauty supply/hair colour retailer Sally Beauty reported modestly positive sales growth but lower margins, as wages increased for in-store employees. Sally Beauty’s high-touch sales expertise is a competitive differentiator making these investments necessary. Concerns about weakening consumer spending also weighed on shares.

• During the month, Polaris completed the initial purchases of Cullen/Frost Bankers, Tecnoglass, Teleperformance, and TotalEnergies. San Antonio-based Cullen/Frost is a leading independent bank in Texas. Founded in 1868, the bank has had 29 straight years of dividend increases. Its conservative culture is evidenced by its low loan-to-deposit ratio and ample liquidity, positioning itself for further profitable growth as peers pull back on lending. Tecnoglass is a US-listed Colombian architectural glass supplier for commercial and residential construction, primarily servicing the attractive US southeast market, including Florida and Texas. The company has a sizeable cost advantage on labour and energy, resulting in significant market share gains and sector-leading margins. Teleperformance is a global leader in customer interaction management, serving thousands of customers in 170 markets globally. Healthcare and financial services are their two largest verticals. TotalEnergies is adeptly navigating the transition from a traditional oil and gas company to an integrated energy company, comprising an upstream business that branches out into an LNG business with global reach and an enviable renewable energy portfolio. TotalEnergies recognised the opportunity to transition earlier than peers and is well positioned to serve the growing needs of the electric economy

• The Fund returned 0.02%, net of fees, in April 2023, compared with a return for the Benchmark of 1.61%, with a benign month for global markets reflecting an environment of countervailing forces, including persistent inflation, tightening liquidity, and ongoing geopolitical risks, alongside a resilient labour market and surprisingly good corporate earnings.

• A rising market tide lifted all sectors in April, with Health Care and Financials contributing most to index returns. For the Fund, the largest relative detractors were holdings in Energy, led by Marathon Petroleum, and holdings in Health Care, which lagged the rise of the broader sector. These results were partially offset by holdings in Consumer Discretionary, including Bellway and Taylor Wimpey.

• Sallie Mae (SLM), Bellway and Vinci were among the top individual contributors in April. SLM reported a strong first quarter, following a disappointing Q4 where weakening credit trends led to an outsized provision. Credit performance has improved, loan growth was 12% and the company’s floating rate assets resulted in margin expansion. The UK housing market has seen a slight improvement as the spring selling season has progressed with prices remaining relatively steady, and in this environment, Bellway confirmed guidance for the full year with the expectation of lower volumes, but within market expectations. While most of the attention for Vinci is focused on their toll road concession business, the strength of its construction and electrical contracting segments was a positive surprise in the first quarter.

• Marathon Petroleum and Northern Trust were among the top individual detractors in April. Marathon Petroleum is producing record earnings due to wide refining margins, but concern about weaker gasoline and diesel demand led to profit taking by investors. Results at Northern Trust were pressured by expense growth and the expectation that its net interest margin will be pressured by higher deposit costs.

• There were no initial purchases or final sales within the portfolio during the month.

• The Fund returned -1.93%, net of fees, in March 2023, compared with a return for the Benchmark of 2.52%, with the collapse of USbased Silicon Valley Bank and Signature Bank initially causing market jitters, before fears of a global banking crisis dissipated and global markets rebounded.

• In a weaker month for value investing, the IT, Communication Services and Health Care sectors outperformed, while Financials were a notable outlier. The largest relative detractors from the Fund were holdings in Financials, including Webster Financial, Popular, and M&T Bank, and an overweight to the sector, and holdings in IT, which lagged the rise of the broader sector, and an underweight to the sector. Holdings in Real Estate, namely Daito Trust Construction, and an underweight to the sector were the largest relative contributors.

• Microsoft and OpenText were among the top individual contributors in March. Microsoft hosted an event on the future of artificial intelligence, introducing Security Copilot as next-generation AI for cybersecurity. Market scepticism originally surrounded OpenText’s acquisition of UK-based Micro Focus, but by February 2023, the deal closed and OpenText announced robust quarterly earnings, with strong cloud bookings and revenue. With concerns assuaged, OpenText’s stock price has rebounded.

• Webster Financial and Popular were among the top individual detractors in March. Much, if not all, of the declines in the two US regional banks stemmed directly from the SVB/Credit Suisse failures and concerns about a broader banking crisis, which hasn’t come to pass. Most US banks are on solid footing, having shored up balance sheets and capital ratios after the Global Financial Crisis; SVB and Signature were outliers, heavily dependent on tech and cryptocurrency clients and overextended with longer-term maturity bonds.

• During the month, Polaris completed the initial purchase of Canadian Tire, and the final sale of Intel. With extensive capital expenditures and increased competition, US-based semiconductor chip manufacturer Intel’s cash flow profile has begun to deteriorate; a turnaround will likely be protracted. Canadian Tire is one of the oldest and largest general stores in Canada, and has a diversified business model, with ownership of their own real estate, credit card operations and other retail lines including Sport Chek, Mark’s and Helly Hansen.

• The Fund returned -1.08%, net of fees, in February 2023, compared with a return for the Benchmark of -1.63%, as the US Federal Reserve signalled its intention to keep interest rates higher for longer.

• Cyclical sectors including IT, Industrials and Financials supported the market in February, while Real Estate, Energy and Utilities lagged. The largest relative contributors to the Fund were holdings in Industrials, including SKF and Allison Transmission, and in Communication Services, led by Publicis Groupe. Holdings in IT, such as Intel and Samsung Electronics, and an underweight to the sector were the largest relative detractors.

• Publicis Groupe and SKF were among the top individual contributors in February. French advertising company Publicis released fullyear earnings, highlighting 2022 organic growth backed by its productive Epsilon and Sapient divisions. Seemingly resistant to macroeconomic concerns, the company laid out upbeat full year 2023 organic growth guidance, pointing to continued client investment in non-traditional marketing venues, such as data, technology, and digital transformation. Swedish bearing and seal manufacturer SKF reported strong fourth quarter 2022 results, signalling that the company caught up on the cost curve and is set to benefit from organic growth on pricing, mix, and volume. The company noted solid industrial and auto sector demand, specifically highlighting their ball bearing applications in the burgeoning electric vehicle (EV) marketplace.

• Lundin Mining and SLM were among the top individual detractors in February. Lundin Mining declined in lockstep with the overall mining industry. The downward trend was further aggravated by news that the Canadian firm’s copper reserves decreased, excluding the recently acquired Josemaria Resources project. SLM, a provider of education loans, reported lacklustre earnings with higherthan-expected provisions, elevated net charge-offs and a weak 2023 outlook.

• There were no initial purchases or final sales within the portfolio during the month.