Balanced Fund Report – May 2015

Caldwell North American Equity Strategy – Monthly Update May 31st, 2015

Portfolio Deletions
ANN (Taylor) Inc. (ANN-us)

Reason We Sold the Stock: After over a year of takeout rumors, ANN announced it was being purchased by Ascena Retail Group. We sold into the jump in share price, which rose 20% on the day. ANN was a very successful investment for our clients with a cumulative price return of +50.7% since our initial purchase on May 15, 2013, versus a gain of 28.3% for the S&P 500 over that time.

Company Updates: A Few Highlights
Kohl’s Corp (KSS-us)

After a strong performance in Q1, where same store sales accelerated to 3.6%, the stock sold off on the Q2 report as same store sales came down to 1.4%. The interesting part to the story is that management is much more confident in the business today than it was at the start of the year. Numerous traffic-driving initiatives (beauty, customized loyalty) are outperforming management’s expectations and there is much enthusiasm as they roll these initiatives across their store network. While retail sales have been slow to improve, low oil prices continue to help consumer pocketbooks and the employment picture continues to improve with a rising quit rate (people having the confidence to quit their jobs to take other opportunities) and early signs of wage inflation. The selloff has brought KSS shares back down to a compelling valuation and we are taking this opportunity to add to our position.

Utilities – Another Example of Successful Capital Protection

Capital protection is at the heart of our investment process. By starting each step of our investment process with an assessment of risk, and our willingness to be different from the market, we have successfully avoided many painful parts of the market for our clients. The most recent example is the Utilities sector, which is down 6.1% in Canada and 9.7% in the U.S. year to date in response to rising bond yields. We are pleased to report that our clients have zero exposure to this segment of the market.

We appreciate your continued support. Feel free to reach out to us at any time.

Best Regards,
Investment Management Team



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