August 2022 | Caldwell Canadian Value Momentum Fund Commentary

August Recap:

The Caldwell Canadian Value Momentum Fund (“CVM”) declined -0.8% in August versus a decline of -1.6% for the S&P/TSX Composite Total Return Index (“Index”). At the sector level, Health Care, Consumer Discretionary and Utilities were relative outperformers while Information Technology (“IT”), Real Estate and Financials were relative underperformers. The Health Care sector’s performance was skewed by the outperformance of one stock (Bausch Health) while sector returns were only slightly positive for Consumer Discretionary and Utilities. Increasing concerns regarding the potential for an economic recession adversely impacted the more cyclical sectors noted above.

Top performers in CVM’s portfolio for the month of August were Element Fleet Management (“EFN”, +12.5%), Boralex (“BLX”, +6.9%) and Capital Power (“CPX”, +3.3%). EFN moved higher on above-consensus earnings results, driven by strength in all business lines. Servicing, Financing and Syndication revenue all surpassed expectations supported by increased client utilization and an aging vehicle fleet, higher net interest margins and a robust order backlog driven by new vehicle production shortages. Strong momentum in the business gave EFN confidence to raise 2022 guidance for the second consecutive quarter while comments suggest 2023 guidance may also be raised down the line. BLX posted strong second quarter (“Q2”) results buoyed by higher spot power prices in Europe (and in France particularly). The company is working to terminate contracts on some assets early to take advantage of higher prices which would provide further upside to cash flow generation over the near to medium term. Strong cash flow generation supports its organic development pipeline - including existing request for proposals in France, Quebec and Ontario - potential acquisition opportunities and debt repayment with the goal of reaching investment grade credit status. CPX posted strong Q2 results, raised full year guidance and increased its dividend.

During the month of August, the Fund initiated a position in Martinrea International (“MRE”), a leading tier one auto parts supplier. Companies in cyclical industries that have reduced costs during a downturn can see significant margin and earnings upside as the cycle turns. MRE’s profitability was pressured by significant new business launch costs over the last 18 months however margins should improve going forward as rates of production in the auto industry stabilize. Looking ahead, we believe an aging fleet, strong demand for new cars and historically low dealership inventories should support a sustained, multi-year recovery in vehicle production, contributing to greater operating leverage and improvements in profitability.

The Fund held a 20.6% cash weighting at month-end. CVM has generated substantial value to investors over its long-term history driven by the combination of strong company-specific catalysts and a concentrated portfolio. We continue to look forward to strong results as we progress through 2022 and beyond.

1Standard performance as at August 31, 2022:
Caldwell Canadian Value Momentum Fund (Series F): 1 Year: -3.0%, 3 year: 9.1%, 5 year: 8.7%, Since Inception (August 29, 2014): 8.1%.
S&P500 Total Return Index: 1 Year: -3.4%, 3 year: 8.7%, 5 year: 8.1%, Since Inception (August 29, 2014): 5.8%.

2Actual Investments, first purchased: EFN 10/26/2018, BLX 6/27/2022, CPX 5/19/2022.

3Categories defined by Canadian Investment Funds Standards Committee (“CIFSC”).
The CVM was not a reporting issuer offering its securities privately from August 8, 2011 until July 20, 2017, at which time it became a reporting issuer and subject to additional regulatory requirements and expenses associated therewith.

Unless otherwise specified, market and issuer data sourced from Capital IQ & Morningstar Direct.

As the constituents in the CIFSC Canadian Equity category largely focus on securities of a larger capitalization and CVM considers, and is invested, in all categories, including smaller and micro-cap securities, we have also shown how CVM ranks against constituents focused in the smaller cap category. The above list represents 6 of a total of 400 constituents in the CIFSC Canadian Equity category.

The information contained herein provides general information about the Fund at a point in time. Investors are strongly encouraged to consult with a financial advisor and review the Simplified Prospectus and Fund Facts documents carefully prior to making investment decisions about the Fund. Commissions, trailing commissions, management fees and expenses all may be associated with mutual fund investments. Rates of returns, unless otherwise indicated, are the historical annual compounded returns including changes in unit value and reinvestment of all distributions and do not take into account sales, redemption, distribution or optional charges or income taxes payable by any unitholder that would have reduced returns. Mutual funds are not guaranteed; their values change frequently and past performance may not be repeated.

FundGrade A+® is used with permission from Fundata Canada Inc., all rights reserved. The annual FundGrade A+® Awards are presented by Fundata Canada Inc. to recognize the “best of the best” among Canadian investment funds. The FundGrade A+® calculation is supplemental to the monthly FundGrade ratings and is calculated at the end of each calendar year. The FundGrade rating system evaluates funds based on their risk-adjusted performance, measured by Sharpe Ratio, Sortino Ratio, and Information Ratio. The score for each ratio is calculated individually, covering all time periods from 2 to 10 years. The scores are then weighted equally in calculating a monthly FundGrade. The top 10% of funds earn an A Grade; the next 20% of funds earn a B Grade; the next 40% of funds earn a C Grade; the next 20% of funds receive a D Grade; and the lowest 10% of funds receive an E Grade. To be eligible, a fund must have received a FundGrade rating every month in the previous year. The FundGrade A+® uses a GPA-style calculation, where each monthly FundGrade from “A” to “E” receives a score from 4 to 0, respectively. A fund’s average score for the year determines its GPA. Any fund with a GPA of 3.5 or greater is awarded a FundGrade A+® Award. For more information, see www.FundGradeAwards.com. Although Fundata makes every effort to ensure the accuracy and reliability of the data contained herein, the accuracy is not guaranteed by Fundata.

Publication date: September 14, 2022.

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