Small-Cap Equity Fund

June 30, 2024

Market Context

• The Canadian small-cap market (Morningstar Canada Small Cap Index) rose 3.4% in the quarter. U.S. small-caps were down 2.7% in Canadian dollar terms.
  
• Energy and basic materials were the best performing sectors. Consumer, industrial, and healthcare stocks, on the other hand, were laggards.

Portfolio Specifics

• The fund consists of 21 companies, ranging from very small (Diversified Royalty) to medium-sized businesses (Generac Holdings). While the majority of holdings are Canadian, there are five U.S. companies which make up 20% of the portfolio’s stocks.
  
• The portfolio turned in a small negative return in the quarter (-0.5%) and is up 8.4% year-to-date. Interfor (timber), Enghouse Systems (software) and Henry Schein (dental equipment) had challenging quarters, but strong performance from resource holdings Capstone Copper (copper miner), Torex Gold Resources (gold miner), and MEG Energy (oil & gas producer) provided an offset. All three of these holdings have been stellar performers this year, with Capstone and Torex both up more than 45%.
  
• Three new stocks were purchased. Andlauer Healthcare Group is a Canadian company providing specialized transportation and logistics support for healthcare companies. Many medications (including GLP-1 drugs) need to be transported at a specific temperature and Andlauer is a leader in this process. ATS Corporation designs and manufactures factory automation systems. And U.S.-based Greenbrier Companies is a leader in manufacturing rail cars.
  
• Park Lawn and Vail Resorts were sold. Park Lawn announced that it was going to become a private company at a 60% premium to where it was trading. Vail, which we purchased late last year, was a frustrating experience. Our manager, Galibier Capital, concluded that increased weather variability and the ski resort operator’s lack of focus on customer service would not bode well for long-term investors.
  
• Galibier announced in the quarter that it has agreed to be acquired by Guardian Capital, a larger Canadian investment firm that manages private client and institutional assets. The transaction will not impact Galibier’s investment philosophy and its team will remain intact. Moreover, the terms of the transaction mean the most senior principals are incentivized to remain with the firm for at least five years. Galibier will get the benefit of a larger team and more resources to help with operational support and growth. Overall, we view the transaction positively.
  

Positioning

• The portfolio has a unique composition, with key areas of investment being capital goods, industrial services, food & beverage, and consumer discretionary companies. This is in contrast to the small-cap market’s heavy focus on resource companies.
  

Commissions, trailing commissions, management fees and expenses all may be associated with mutual fund investments. Important information about the Steadyhand funds is contained in our Simplified Prospectus. Please read the prospectus before investing. Mutual funds are not guaranteed, their values change frequently, and past performance may not be repeated.