Manager’s Quarterly Commentary – Felix Narhi – Q2 2015 – Pender Strategic Growth & Income Fund

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Class A units were down 0.97% during the quarter and were valued at $12.02 at June 30, 2015. IAC/InterActiveCorp, Manulife Financial and Magna International led the equity gainers for the quarter, while TransForce, Fossil Group and Canadian Natural Resources were the biggest detractors. During the quarter we initiated a new position in Berkshire Hathaway. We exited three positions: Gildan Activewear, 3M and McDonalds. We sold all three holdings on valuation, after their prices increased to our fair value estimate. We also trimmed our position in Canadian National Railway on valuation. The Fund ended the quarter with 31 equity holdings.

New Addition

Berkshire Hathaway (BRK.B) is the holding company of legendary value investor, Warren Buffett. Through its subsidiaries, the firm primarily engages in the insurance and reinsurance of property and casualty risks business. The firm also owns numerous non-insurance operating subsidiaries including a railroad, utility and energy generation and distribution businesses, as well as large investments in several publicly traded firms like Coca-Cola & Wells Fargo. Berkshire meets many of the criteria of our ideal long-term investment: the company represents a collection of high quality businesses, the management team is talented and shareholder friendly, and the stock is attractively priced relative to our assessment of its intrinsic value. We believe investors will continue to benefit from Buffett’s outstanding stewardship of their capital over the near-term and the company has been set up to succeed when he is no longer at the helm. The company is unusually decentralized. Buffett has little to no involvement in the day to day operations of the vast majority of Berkshire’s many high quality businesses. They are run very well by their respective operators and generate strong cash flows without his direct involvement. Buffett focuses almost exclusively on capital allocation, or generating the highest return on the free cash flow not needed by Berkshire’s many businesses. He has hired two managers (Todd Combs & Ted Weschler), each with terrific investing track records to gradually take on more responsibility in that capacity. The Board of Directors is an all-star list of accomplished business leaders and there are a number of highly capable internal CEO candidates that will be able to take on the role post-Buffett. Although BRK.B is more mature now and its large size is an anchor on growth, we believe it has the potential to compound its intrinsic value at an above average pace over the medium term.

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August 10, 2015