IFP Global Franchise Fund (Hedged) (MAQ0631AU) Report & Performance

• The Fund returned 1.07%, net of fees, in July 2023, compared with a return for the Benchmark of 2.84%.

• Another positive month for the benchmark saw all sectors advance, with Financials, Communication Services and IT making the largest contributions. The largest relative sector detractors from the Fund included holdings in Financials, including Aon and S&P Global, and holdings in Communication Services, including Fox and Nintendo. Relative contributors included holdings in Real Estate, namely Zillow, and holdings in Industrials, including RB Global and TransUnion.

• RB Global was among the top individual contributors to performance in July. The company’s shares appeared to benefit from a number of analyst upgrades during the month. Franchise Partners believes it is too early to assess the success of the acquisition of IAA, however there are signs that market conditions are improving. North American used equipment market trend data indicate used equipment prices are easing, which is starting to lead to increased auction volumes. In addition, Franchise Partners’ analysis of thirdparty data suggests that IAA’s market performance has not been adversely affected by the integration.

• Aon was among the top individual detractors from performance in July. The company reported solid second quarter results, however industry-wide weakness in M&A services revenues affected Aon more than its peers due to the larger size of this segment within its business mix. Franchise Partners thinks this M&A services slowdown is due to short term, cyclical reasons rather than structural ones. The company remains on course to achieve at least mid-single-digit organic revenue growth and operating margin expansion, and double-digit free cash flow growth for the full year. Further, Aon’s core business continues to perform well, with average retention rates of approximately 95%.

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

• The Fund returned 5.80%, net of fees, in June 2023, compared with a return for the Benchmark of 5.59%.

• A strong month for the index saw most sectors move higher, led by Consumer Discretionary, Industrials and Materials. The largest relative sector contributors to the Fund included holdings in Communication Services, such as Fox and News Corp.; holdings in Industrials, led by RB Global; and holdings in Financials, including Aon and S&P Global. Relative detractors included holdings in Consumer Discretionary, which lagged the rise of the broader sector, and holdings in IT, namely Salesforce.

• RB Global was among the top individual contributors to performance in June. Shares in the company recovered following weakness in May driven by the market rotation towards more cyclical stocks. Franchise Partners continues to think RB Global is a high-quality company with attractive market shares that benefit from strong brands and two-sided network effects, as well as databases with extensive buyer and inventory data.

• Salesforce was among the top individual detractors from performance in June. Salesforce’s shares declined following the release of first quarter results that were in line with management’s guidance, but which did not meet the market’s elevated expectations. Given the greater than 50% share price appreciation since the start of the year which has, in part, been driven by the market’s elevated expectations, Franchise Partners took the opportunity to reduce the position size last month.

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

• The Fund returned -2.18%, net of fees, in May 2023, compared with a return for the Benchmark of -0.22%.

• A strong performance by the IT sector disguised an otherwise tepid month for the index, with the Energy, Consumer Staples, Financials and Health Care sectors, amongst others, detracting. For the Fund, the largest relative sector detractors were an underweight to IT, as well as holdings in Consumer Staples, particularly BAT and Philip Morris, and an overweight to the sector. Relative contributors included a lack of exposure to Energy, and holdings in Financials, namely S&P Global.

• Salesforce was among the top individual contributors to performance in May. Shares in the company appeared to benefit from the broader market rotation towards faster growing, more cyclical stocks, particularly those in the IT sector and specifically companies focused on artificial intelligence. Given the share price rise, Franchise Partners took the opportunity to reduce the position size in Salesforce towards the end of the month.

• BAT was among the top individual detractors from performance in May. Shares in the company appeared to be affected by the broader weakness in the Consumer Staples sector, as well as the unanticipated announcement that CEO Jack Bowles has been replaced by CFO Tadeu Marroco. Franchise Partners understand the market’s negative reaction to the CEO’s unexpected departure but believe Marroco is a solid appointment and do not think the company’s strategy is likely to change significantly. Bowles’ departure follows a recent large fine from the US Department of Justice for engaging in commercial activity in sanctioned countries in the AsiaPacific region in the early-to-mid-2010s. The company has subsequently overhauled its global compliance function and increased senior executive oversight to help prevent a repeat of this activity.

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

The Fund returned -5.62%, net of fees, in December 2022, compared with a return for the Benchmark of -5.49%, with equity markets troubled by central bank messaging on the trajectory of interest rate rises.

All market sectors declined in December, led in particular by IT, Consumer Discretionary and Communication Services. For the Fund, the largest relative sector detractors were holdings in Real Estate, namely Zillow, and in Materials, driven by Corteva. Relative contributors included holdings in Consumer Discretionary and in Consumer Staples, which proved defensive compared to their wider sectors; in particular, Philip Morris, within Consumer Staples, was positive for the month.

Philip Morris (PMI) was among the top individual contributors to performance in December. The company announced that it has acquired more than 93% of Swedish Match and will delist the shares and consolidate the two companies’ operations. Franchise Partners continues to think the acquisition makes good financial and strategic sense and should help accelerate the transition of PMI’s legacy combustible cigarette portfolio towards next generation products. It will also give PMI a strong foothold in the US market through Swedish Match’s established sales and distribution capabilities.

Bristol-Myers Squibb was among the top individual detractors from performance in December. Weakness in the company’s share price appeared to be driven by profit taking following strong performance during 2022. Franchise Partners continues to think Bristol is one of the better-invested large cap pharmaceutical companies and that it has one of the best drug pipelines in its peer group. Franchise Partners believes the pipeline is underappreciated by the market and should allow Bristol to successfully navigate its sizable but known upcoming patent expirations.

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

The Fund returned 3.76%, net of fees, in November 2022, compared with a return for the Benchmark of 2.02%, with markets maintaining their positive trajectory despite ongoing inflation and interest rate uncertainty.

Cyclical sectors, led by Materials, Industrials and Financials, drove the index higher in November. For the Fund, the largest relative sector contributors were holdings in Consumer Discretionary, such as Richemont and eBay, and in Communication Services, such as News Corporation and Fox. Relative detractors included holdings in Materials, namely Corteva, and an underweight to Industrials.

Richemont was among the top individual contributors to performance in November. The company released strong half year results, with underlying sales growing by 16% driven by the company’s high margin jewellery brands, Cartier and Van Cleef & Arpels. This revenue growth was well balanced geographically, with US and European revenue growth more than offsetting China, which remains affected by lockdowns. Franchise Partners continues to believe that Richemont is well placed in the attractive luxury jewellery segment. Cartier and Van Cleef & Arpels are among the strongest brands in the segment and have substantial pricing power.

Salesforce was among the top individual detractors from performance in November. Shares in the company were likely affected by broader macroeconomic concerns that are starting to impact other leading software companies. Broker surveys conducted in November also showed signs of weakness in software customer demand. The company further announced the surprise departure of co-CEO Bret Taylor. However, founder and fellow co-CEO Marc Benioff has navigated multiple executive transitions over the past two decades. Management has demonstrated strong cost discipline which led to margin expansion in the quarter.

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

• The Fund returned 7.31%, net of fees, in October 2022, compared with a return for the Benchmark of 7.81%, with the MSCI World Ex Australia Index recording its strongest monthly bounce since May 2013.

• All market sectors moved higher in October, with IT, Health Care and Financials the largest contributors to index returns, and Energy a notably strong performer. For the Fund, the largest relative sector contributors were holdings in Consumer Discretionary, such as Booking Holdings and eBay, and in IT, such as Oracle and Salesforce. Relative detractors included a lack of exposure to Energy, and holdings in Industrials, which lagged the rise of the broader sector, as well as an underweight to the sector.

• Oracle was among the top individual contributors to performance in October. The company issued long-term guidance at its annual analyst day that significantly exceeded market expectations for both revenues and margins. This was the first long-term guidance that Oracle had released in over a decade and reflects the strong progress made in transitioning both its application and database business to the cloud.

• Fox was among the top individual detractors from performance in October. Shares in the company declined following the announcement that its largest shareholder, the Murdoch Family Trust, is exploring a re-combination with News Corp. As the larger company, it appears the market is concerned that Fox would pay a premium to acquire News Corp. Franchise Partners are shareholders of both companies and think each of their share prices are materially undervalued. While Franchise Partners think there are operational benefits from a combination, the investment team believe it would be in the best interests of both companies for News Corp to have first completed the sale or spin-off of its valuable real estate portal assets. Franchise Partners will continue to actively engage with both companies on the potential equity combination.

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