Polaris Global Value Fund commentary for the fourth quarter ended December 31st, 2015.


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Dear Fellow Shareholder, January 7, 2016

The Polaris Global Value Fund (“the Fund”) underperformed the MSCI World Index, net benchmark in the quarter, at 4.99%, while the Index was 5.50%. Although slightly lagging the benchmark, the Fund achieved strong absolute performance and positive returns in all 10 sectors. Performance contribution was widely dispersed throughout sectors, with most notable results from consumer staples, financials and information technology.

Polaris Global Value Fund

Polaris Global Value Fund

Polaris Global Value Fund - Portfolio Contributors

Consumer staples holding Greencore Group was the top contributor to the portfolio, benefiting from continued growth in U.K. food-to-go sales and supply contracts, partially offset by increased start-up costs in U.S. facilities. U.S. based Ameris Bancorp and BNC Bancorp, as well as two German reinsurers, bolstered financial returns. Sector performance would have been higher if not for the sub-par results at Standard Chartered, Svenska Handelsbanken and DNB Bank. IT companies Wincor Nixdorf, Microsoft Corp., Samsung Electronics and Xerox Corp. cracked the top 20 individual stock performers. Infosys, Ltd. and Brooks Automation, Inc. detracted from IT sector gains. In healthcare, Irish pharmaceutical company Allergan had another quarter of double-digit gains, bolstered by merger discussions with Pfizer. With one of the industry’s largest drug pipelines in registration, Teva Pharmaceuticals’ stock ticked up on reported earnings and recent merger and acquisition (M&A) news.

On a year-to-date basis, the Polaris Global Value Fund continued to exceed the MSCI World Index, net, at 1.55% vs. -0.87%. We are pleased with the outperformance in this volatile year, as well as our benchmark-beating performance over all longer time periods as reflected below.

Polaris Global Value Fund

Polaris Global Value Fund

The Polaris Global Value Fund's U.S. holdings led financial sector performance, with many banks anticipating that a December 2015 Federal Reserve rate hike would improve net interest margins. However, the impact on bank earnings will likely be muted in the near term. M&A activity was the true impetus for stock performance this quarter, with double-digit gains from Ameris and BNC. Ameris announced a buyout of Jacksonville Bancorp Inc. and the successful integration of branches from Merchants & Southern Bank of Florida. BNC continued the pace of acquisitions, issuing new shares to complete the takeover of CertusBank NA branches and the purchase of High Point Bank Corp. German reinsurers Hannover Re and Munich Re had fewer catastrophic claims to pay out in 2015, favorably affecting earnings.

In contrast, Standard Chartered, with its heavy Asian emerging markets exposure, was a financial sector detractor. The bank’s new CEO launched a $4.8 billion rights offering, on the heels of their dividend cut in August. This was a precautionary move to shore up capital ahead of potential higher non-performing loans and regulatory issues. DNB Bank management expressed caution about 2016 and the likelihood of increasing impairment losses linked to oil-related activities; this issue proved impactful to fellow Norwegian bank, SpareBank 1 SR. Svenska Handelsbanken AB, one of the largest banks in Sweden, dealt with weaker net interest income due to a negative yield environment in its local economy.

Information technology was buoyed by Wincor Nixdorf, Samsung Electronics, Microsoft and Xerox Corp. U.S.-based Diebold succeeded in a takeover offer for Wincor, which is intended to make Diebold the world’s largest ATM maker. Samsung Electronics posted good performance in its semiconductor business, largely helped by a weak Korea Won. Samsung also initiated positive corporate governance changes including a stock buyback and increased dividends. Microsoft highlighted better than expected earnings and good cash flows, due to continued cost controls and better operations in most of the business lines. Activist investor Carl Icahn disclosed in a regulatory filing that he acquired 8% of Xerox Corp. Xerox Corp. has been working to transition from its business from legacy office equipment to service-oriented enterprise. Hewlett-Packard completed the split of its business during the quarter, resulting in Hewlett-Packard Enterprise Co. and HP Inc. The Polaris Global Value Fund retained investments in both holdings. The Enterprise business reported new contracts.

In the third quarter, Infosys, Ltd. was up nearly 20%, after announcing strong earnings while outlining efforts to alleviate employee attrition. In the fourth quarter, the company relinquished half of its prior quarter gains. Weaker currencies impacted revenues, as did sluggish year-end corporate tech planning. However, Infosys, Ltd. continues to meet its growth objectives under CEO Dr. Vishal Sikka. Brooks Automation, Inc. was down after announcing a $127 million acquisition of BioStorage Technologies within their loss-making health sciences division.

Replicating results from last quarter, Allergan was again the top contributor in the healthcare sector. With valuable drugs like Botox and a rich R&D pipeline, Allergan was approached by Pfizer. Pfizer held preliminary and friendly discussions to acquire Allergan, which will offer Pfizer both a low tax legal address in Dublin. Teva Pharmaceutical achieved strong quarterly profits, noting better-than-expected Copaxone sales. The company’s strategic initiatives, including the takeover of Allergan’s Actavis generic drug business and the joint venture with Takeda in Japan, were well received. This will further cement Teva’s position as the global leader in generics and help the company negotiate with its customers. Quest Diagnostics delivered another good quarter, with increased revenues and operating income. The company also announced diagnostic solutions for two recent FDA-approved therapies for non-small cell lung cancer. Quest subsequently conducted two shareholder-friendly actions: a $500 million share repurchase authorization and a quarterly cash dividend. Novartis was the Polaris Global Value Fund's only healthcare stock in negative territory, as the Swiss drug maker mulled the sale of its contact lens care unit due to a market shift to daily disposable lenses.

Polaris Global Value Fund - Portfolio Detractors

Commodity price declines continued to impact the global energy market. Recognizing the tenuous condition of the sector, the Polaris Global Value Fund made substantial changes to its holdings. Oil exploration and production companies Tullow Oil, Marathon Oil and Maurel et Prom were sold. Refining companies were retained, based on the premise that lower crude oil input prices will help refining margins. This proved true during the quarter, with refiners Thai Oil and Marathon Petroleum each up more than 20%. Strong gains in the sector were partially offset by Australian engineering and design company, WorleyParsons, Ltd. The company was negatively affected by continued weakness in oil and mining. The company’s new CFO intends to focus on cost structure and to provide better forecasts as the firm navigates the volatile energy and mining industries.

After multiple quarters of strong performance, British homebuilders retracted slightly, with the exception of Bellway PLC. Most were weaker on profit taking, despite the U.K. government’s plans to double the housing budget and extend its housing schemes. Investors rewarded Bellway for its corporate initiative to raise the full year dividend by 48%. Duni AB, a Swedish supplier of paper goods and tableware, was up on earnings news, growth in its core table top disposables, efficient operation of its paper mill and favorable exchange rates. In June 2015, Duni closed

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