Value Investing

Polaris Global Value Fund Q1 2015 Letter To Investors

Polaris Global Value Fund letter to investors for the first quarter ended March 31, 2015.

Dear Fellow Shareholder,

The Polaris Global Value Fund (“the Fund”) outperformed the MSCI World Index, net benchmark in the quarter, up 5.17% while the Index advanced 2.31%. A rebound in the material sector drove performance, with the majority of sector holdings posting double?digit returns. Closely following was healthcare, as U.S. companies Anthem and UnitedHealth Group added new customers on the back of the Affordable Care Act (ACA). In fact, seven of 10 sectors were in absolute positive territory for the quarter.

Polaris Global Value Fund

Top individual stock contributors included the aforementioned healthcare firms, as well as generics pharmaceuticals company Actavis PLC. Consumer staples stocks MEIJI Holdings, a Japanese dairy products company, and Greencore Group PLC, an Ireland?based producer of convenience foods, also positively impacted results. Energy stock Thai Oil recovered; however, its non?oil refining counterparts did not fare as well, with Maurel et Prom and Tullow Oil among the underperformers. U.S. information technology companies declined as the dollar strengthened and foreign customers shied away from U.S. software/hardware purchases for fear of NSA oversight.

Polaris Global Value Fund

Overall, we were pleased with performance, as nearly two thirds of our portfolio holdings achieved gains. These results reaffirm our commitment to fundamental stock picking, identifying companies across country, sector and market capitalization that prove resilient in volatile markets, and rebound in healthier macro?economic conditions. Our efforts have been noticed, as the Fund is the recent recipient of two 2015 Lipper Fund Awards in the global multi?cap value fund category. The Fund posted the strongest trend of returns for the 3? (out of 75 funds) and 5?year (out of 57 funds) periods as of December 31, 2014. The Fund has been recognized by Lipper many times in the past, including 2014, entering the rankings for 3?, 5? and 10?year periods.

Polaris Global Value Fund

Polaris Global Value Fund: Portfolio Holdings

More than 85% of the material sector stocks had positive returns this quarter, a turnaround from the end of 2014. Although declining oil prices resulted in lower methanol demand for energy applications, Methanex Corp.’s competitive cost structure enabled the company to maintain its leading market position. The stock price of U.K. beverage can maker Rexam rose as it entered talks regarding a possible sale to U.S. competitor Ball Corp. Multiple tailwinds aided Norwegian fertilizer company Yara International. The company maintained good product pricing across its business lines, while benefitting from lower gas prices. Additionally, Yara’s South American expansion is going as planned. Praxair Inc. was one of the few materials sector stock in negative territory, as it reported below consensus earnings and noted softness in order books due to lower oil prices.

Polaris Global Value Fund

Polaris Global Value Fund: Anthem

Anthem, the second largest U.S. health insurer, had strong underlying performance, deploying its capital in the form of share buybacks and quarterly dividends. Similarly, UnitedHealth reported better?than?consensus fourth quarter 2014 earnings, with upside in both Optum and the health care segment. As referenced above, profits at both companies should continue to grow in 2015 on increased customer enrollment due to ACA. Merger and acquisition activity boosted the stock price of Actavis PLC, as the company announced the completion of the $70.5 billion Allergan, Inc. transaction after the 2014 Forest Labs buyout. French pharmaceutical company Transgene declined during the quarter, even though it announced Phase III trials for TG4010 and Pexa?Vec. To support these developments and others immunotherapy products in the pipeline, the company continues to burn through nearly $49 million a year, and has yet to find a partner to help develop TG4010.

Polaris Global Value Fund: MEIJI Holdings

MEIJI Holdings led the consumer staples sector, announcing price hikes for some of its dairy products to help offset higher raw material costs. Investors were most excited not by the dairy/confection business, but by MEIJI’s advances in the drug business. MEIJI entered into a licensing agreement with Roche and Fedora for the development and commercialization of a beta?lactamase inhibitor that fights antibiotic resistant bacteria. Greencore Group PLC continued to execute well on its convenience foods business in the U.S. and England; the company reported good quarterly results and provided upbeat guidance.

Polaris Global Value Fund: Hannover Re and Munich Re

In the financial sector, Germany reinsurers Hannover Re and Munich Re had notable returns, attributable to increased premiums and investment income in combination with fewer claims in a benign storm season. Healthy cash generation resulted, and both companies have dedicated reinvestment strategies that include dividends and share buybacks. A new CEO was announced at Standard Chartered. The bank reported modest positive results and stabilized credit quality across its books. This news offset negative sentiment surrounding the New York Department of Financial Services investigation and potential further credit weakness in its slower growth markets.

Polaris Global Value Fund: Webster Financial

Webster Financial Corp. was up more than 10% after acquiring J.P. Morgan’s health savings account (HSA) business, gaining more than $1.3B in new HSA deposits. Ameris Bancorp’s stock price rose following the January purchase announcement of 18 Bank of America branches in southern Georgia and northern Florida, as well as the acquisition of Merchants & Southern Bank in Florida. By contrast, other U.S. regional banks including Astoria Financial, International Bancshares and Peoples Bancorp declined slightly despite decent earnings results.

Polaris Global Value Fund: Deutsche Telekom

All of the Fund’s telecom holdings posted solid returns, led by Deutsche Telekom. The company announced good earnings and highlighted increased subscribers in its U.S. T?Mobile division, although profitability remained challenging. Consolidation in the German telecom market has moved in favor of incumbent providers like Deutsche Telekom. In mid?February 2015, union members ratified an agreement to end a four?month?long strike by 1,700 workers at FairPoint Communications, a landline telecom provider in New England. Investors were pleased with the development, and the stock price rose more than 20%. Another U.S. telecom, Frontier, reported 2014 free cash flow above guidance on broadband net additions.

Polaris Global Value Fund: Michelin

As referenced in the fourth quarter 2014 report, we purchased French tire manufacturer Michelin. We anticipated greater replacement tire demand, as lower gas prices encouraged more driving. This premise held true, as Michelin reported inventory restocking and higher demand in passenger car, light truck and truck segments in North America and China. U.K. homebuilders, Barratt Developments, Persimmon and Taylor Wimpey, also boosted the consumer discretionary sector. U.K. home prices rose 10% in 2014 on the back of affordable mortgages and a shortage of homes under construction in the country. The ongoing recovery of the U.K. economy, employment and wage growth and reform of the stamp duty on property purchases will continue to provide a supportive backdrop to the homebuilders. Christian Dior benefitted from the Hermes spin?off completed last quarter. As a shareholder of Christian Dior, the Fund received shares of Hermes, which proved to be a richly?valued stock that we subsequently sold. At the other end of the spectrum, Duni AB and GTECH SpA had modest declines. GTECH SpA was in the final stages of a merger with International