Tag: alternative investments

Challenging markets always unveil significant opportunities.

Maxam Diversified Strategies Fund – Q3 2022 Commentary

Dear fellow investors,

The current investment environment continues to be dominated by high inflation, rising interest rates, ongoing supply chain issues, fears of a recession, an energy crisis in Europe and geopolitical tensions. As a result, both equity and bond markets have declined in unison through the first three quarters of 2022 – a rare occurrence that has wreaked havoc on the traditional “60/40” balanced portfolio.

Equities and bonds did stage a summer rally through mid-August before turning south for the final six weeks of the third quarter. Central banks, notably the U.S. Federal Reserve (the “Fed”), threw cold water on investors by reiterating that they will be steadfast in their efforts to break the back of inflation. With no “Fed put” or “Fed Pivot”¹ currently in sight, market participants seem to be coming to terms with the Fed’s resolve.

A challenging and shifting market environment always delivers and unveils compelling opportunities. With security prices down significantly, it has most certainly become a more fertile investment environment.

The Maxam Diversified Strategies Fund² declined -0.91% in the third quarter of 2022. Here is the tale of the tape for September, Q3 and year-to-date:

Exposures.

We believe the fund’s exposures position us well to take advantage of the current environment.

Exposure is diversified across sectors, strategies, and individual securities. As at the end of the third quarter the fund was invested across all 11 sectors with no sector weight larger than 14% of net exposure (excluding arbitrage), and the fund’s top 10 holdings accounted for 27% of assets.

The fund’s net allocation to arbitrage was 28%. In addition to providing a stable return profile that exhibits low correlation with the general market, the fund’s arbitrage allocation is highly liquid and can be used to opportunistically take advantage of value and special situations-oriented investments as they arise in a volatile market.

Shorts and hedging exposure was 13% as at the end of the quarter, consisting primarily of single-stock shorts in companies that we think are likely to decline due to company-specific reasons or market dynamics. We also have some market hedge exposure expressed via put and VIX call spreads that should help provide some protection against a general market decline.

The fund’s allocation to arbitrage, a market neutral strategy, has provided some protection relative to the decline in equity markets, as has the fund’s short exposure.

Notable positive contributors to the fund during the third quarter included water infrastructure and technology company H20 Innovation Inc, financial services company Westaim Corp, and high-quality fashion retailer Aritzia. Individual holdings detracting from results included HLS Therapeutics, Superior Plus and VitalHub.

Balance sheet analysis is often a starting point for us, and it is a particularly key consideration today during an environment characterized by higher rates and deteriorating credit availability. We also like to invest in businesses where leaders have real skin in the game and strong alignment with shareholders – even better if we see recent insider buying.

For example, we are currently buying shares in a financial services company that is trading at less than 6x next year’s earnings, is demonstrating accelerating revenue growth and has a well-covered dividend of approximately 4%. Oh, and insiders have been buying recently as well.

The significant decline in equity markets has undeniably created a more fertile investment landscape for us and, as value-oriented and flexible investors, we find our opportunity set has greatly expanded.

Looking ahead.

Sometimes it is worthwhile to look backwards to look forward.

We’ve experienced and invested through more than a few market declines and events over the years. From the bursting of the tech bubble in 2000, the financial crisis in 2008-09, the sovereign debt and Eurozone crisis in 2010-11, the growth scare and trade wars in 2018, the Covid crash in early 2020, and more.

Our experience and knowledge grew through those challenging markets and, I believe, we emerged as better investors. Investing requires constant learning and humility – without hubris.

We have also studied previous investment periods and regimes, the 1970’s (energy, conflicts) and the early 1980’s (inflation and rapid interest rate hikes) come to mind.

Each of the aforementioned market events and periods were different in their own right, but they all presented substantial and unique investment opportunities. And this time will be no different. As we have said in previous communications, “there are no bells and whistles at market tops or bottoms”. Today’s fears and concerns will eventually become yesterday’s opportunities.

This is an attractive environment for our investment style and strategy in our opinion – one that we believe increasingly favours our value-oriented and active approach.

We’re excited about deploying capital, selectively and patiently.

Thank you for your trust and confidence. Please don’t hesitate to reach out with any questions.

Sincerely,

Travis Dowle, CFA

President & Fund Manager

Maxam Capital Management Ltd.

¹ From Investopedia.com: 1) The term “Fed put,” a play on the option term “put,” is the market belief that the Fed would step in and implement policies to limit the stock market’s decline beyond a certain threshold. 2) A Fed pivot occurs when the Federal Reserve, which is the U.S. central bank, reverses its policy outlook and changes course from expansionary (loose) to contractionary (tight) monetary policy—or, conversely, from contractionary to expansionary. A Fed pivot typically happens when economic conditions have fundamentally changed in such a way that the Fed can no longer continue its prior policy stance.

² Maxam Diversified Strategies Fund, Series F, net of fees and expenses. Please contact us regarding other classes of fund units or visit our website www.maxamcm.com

Maxam Capital Management Ltd. is the manager for the Maxam Arbitrage Fund. Important information about the Fund is contained in the Fund’s Simplified Prospect us, which should be read before investing. This presentation is neither an offer to sell securities nor a solicitation to sell securities. Disclosed historical returns for periods greater than one year are annualized unless otherwise noted and are net of fees and expenses. Commissions, trailing commissions, management fees and expenses all may be associated with mutual fund investments. Please read the Simplified Prospectus before investing. Any indicated rates of return are the historical annual total returns including changes in value and reinvestment of all distributions and does 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. This document is not intended to provide legal, accounting, tax, or investment advice. Please consult an investment advisor and read the prospectus for the Maxam Arbitrage Fund prior to investing. Please contact us for more information at: (604) 685 0201 info@maxamcm.com www.maxamcm.com

Stability for your portfolio.

Maxam Arbitrage Fund – Q3 2022 Commentary

Dear fellow investors,

The Maxam Arbitrage Fund¹ gained +0.24% in the third quarter of 2022.

Following a risk-on rally from mid-July to mid-August, equity markets (and bonds) had a terrible final six weeks of the quarter after central banks, notably the U.S. Federal Reserve, threw cold water on investors by reiterating their commitment to keep raising interest rates to battle stubborn inflation.

Arbitrage again held up very well relative to the equity and bond market weakness – demonstrating its value as an alternative source of returns and a portfolio diversifier. We continue to see attractive arbitrage spreads to deploy capital into.

State of the arb market.

The challenging investment environment continued to impact merger arbitrage with spreads on existing deals generally moving wider during the quarter on average. Higher interest rates are taking their toll on the credit markets and impacting spreads on deals requiring financing, most notably leveraged buyout transactions.

Also continuing to impact arbitrage spreads and deal timelines is the increased scrutiny that U.S. and some foreign regulators are applying to select transactions – typically involving larger cap companies in industries deemed more sensitive to competition concerns. However, in late September we saw one of the U.S. antitrust agencies, the Department of Justice (the “DOJ”), lose their attempt to block two transactions: UnitedHealth’s acquisition of Change Healthcare and U.S. Sugar’s acquisition of Imperial Sugar. A positive sign for arbitrageurs.

Despite the challenging environment we continue to see transactions close on terms and generally within expected timelines. Notable closings occurred in some of the arb community’s most-watched deals, including: Vista Equity Partners leading a consortium in a leveraged buyout of Citrix Systems; Ali Group’s acquisition of Welbilt Inc; and Thoma Bravo’s leveraged buyout of Sailpoint Technologies.

Existing transactions and new deal announcements during the third quarter continued to provide us with a robust opportunity set to invest in – highlighted by attractive merger arbitrage yields of near 13% annualized on average².

The fund invested in 22 new deals during the quarter, had 15 successful deal closures and experienced no deal breaks. As of September 30, the fund held 39 merger arbitrage positions, diversified across market cap, deal type and industry.

Owned deals that successfully closed during the quarter included³: Citrix Systems; Welbilt Inc; Sailpoint Technologies; FAX Capital Corp; GTY Technology Holdings; Points International; and Redline Communications.

Some new positions initiated during the second quarter included³: Global Blood Therapeutics; Great Bear Royalties; Sierra Wireless; Hill International; Avalara Inc; Ping Identity Holdings; and Recipe Unlimited.

SPAC’s – a lot going on!

New SPAC issuance continued to slow with only eight new IPOs in the third quarter. Through the first three quarters of 2022 there have been 77 SPAC IPOs, a far cry from 447 over the same period last year⁴.

The dramatic slowdown in new SPAC issuance is due to more than a few factors: the risk-off market environment, the uncertainty caused by the SEC’s proposed rule changes⁵ and SPAC redemption rates – the percentage of SPAC common shares redeemed for the cash held in trust – continuing to be high, at over 80%, during the third quarter⁶.

A high SPAC redemption rate and a more difficult market for PIPE transactions means less cash retained by the continuing public company at merger close, which, combined with other factors, has likely contributed to the uptick in SPAC liquidations. Recall that SPAC warrants expire worthless in a liquidation scenario, which is why we continue to employ a conservative approach to SPAC warrants, routinely harvesting them post unit split, rather than hoping a deal the market likes will be completed.

SPAC liquidations, which occur when a SPAC does not consummate a deal and returns all of the capital held in trust to investors, totaled 21 during the third quarter, a marked increase over just eight through the first two quarters of the year⁴.

We expect the SPAC liquidation trend to continue and even accelerate through the balance of the year. In addition to the factors mentioned above, the United States’ new Inflation Reduction Act includes a 1% excise tax on U.S. companies buying back their shares starting on January 1, 2023. While likely not intended to be the case, the excise tax is thought to apply to U.S. SPAC liquidations and redemptions. Prevailing opinion is that SPAC sponsors will be responsible for the tax and not SPAC investors from funds held in trust, however we think liquidations are likely to accelerate before year end in the face of such uncertainty.

We have acted to shift our SPAC exposure accordingly, and we have benefited from identifying and owning some SPACs that have moved to liquidate early. All else being equal, the pulling forward of liquidation dates can be beneficial to a SPAC arbitrageur’s annualized returns.

The SPAC liquidation cliff is getting closer. Approximately 72% of listed SPACs have liquidation dates prior to the end of Q1 2023². This presents us with an attractive set-up for our systematic and quantitative approach to harvesting SPAC yields.

There is a lot going on in the world of SPACs, and we continue to deploy capital into what we think is a very attractive reward-to-risk set-up. Unlevered SPAC yields are near 7% annualized on average⁷ – a return that is backed by short-term government securities (i.e. T-bills) held in trust.

As of September 30, the fund was well-diversified across 122 SPACs.

Looking ahead.

With central bankers continuing to signal additional interest rate hikes ahead, the case for arbitrage remains particularly attractive.

Rising interest rates are a clear negative for bonds, however they can act as a tailwind for arbitrage because of the low duration nature of the strategy due to deals typically completing within 3-6 months. And arbitrage returns are generated by investing in specific and definitive corporate events and transactions – such as the completion of announced mergers and acquisitions, and the redemption or liquidation of SPACs – differentiating the return profile from traditional equities.

Risk management is central to our quantitative, data-centric and disciplined investment process as we deploy capital into the arbitrage opportunity set.

Maintaining a nimble approach is an advantage in terms of both seeking returns and managing risk. We enjoy the flexibility and advantage of investing across the capitalization spectrum, providing us with a larger opportunity set. And while every merger deal is different, we look favourably on certain mid and smaller capitalization transactions in the current environment because regulatory risks are typically lower, and the deal timelines are shorter. Regardless of deal size, we are always focused on transactions that we believe will reach successful completion.

Thank you for your trust and confidence. Please don’t hesitate to reach out with any questions.

Sincerely,

Travis Dowle, CFA
President & Fund Manager
Maxam Capital Management Ltd.

¹ Maxam Arbitrage Fund, Class F, net of fees and expenses. Inception date October 1, 2020. Please contact us regarding other series of fund units or visit our website www.maxamcm.com

² Maxam internal database.

³ Notable owned deals successfully closing, and new positions initiated, during the third quarter is not an exhaustive list.

⁴ Source: https://spacinsider.com/2022/10/03/third-quarter-2022-spac-ipo-review/

⁵ We discussed the SEC’s proposed rule changes for SPACs in our Q1 commentary: www.maxamcm.com/maxam-arbitrage-fund-q1-2022/

⁶ ICR SPAC Market Update and Outlook, Q3 2022.

⁷ Maxam internal database and https://spacinsider.com/stats/

Maxam Capital Management Ltd. is the manager for the Maxam Arbitrage Fund. Important information about the Fund is contained in the Fund’s Simplified Prospect us, which should be read before investing. This presentation is neither an offer to sell securities nor a solicitation to sell securities. Disclosed historical returns for periods greater than one year are annualized unless otherwise noted and are net of fees and expenses. Commissions, trailing commissions, management fees and expenses all may be associated with mutual fund investments. Please read the Simplified Prospectus before investing. Any indicated rates of return are the historical annual total returns including changes in value and reinvestment of all distributions and does 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. This document is not intended to provide legal, accounting, tax, or investment advice. Please consult an investment advisor and read the prospectus for the Maxam Arbitrage Fund prior to investing. Please contact us for more information at: (604) 685 0201 info@maxamcm.com www.maxamcm.com

Taking advantage of the volatility, selectively.

Maxam Diversified Strategies Fund – Q2 2022 Commentary

Dear fellow investors,

The market environment continues to be dominated by high inflation, rising interest rates, fears of a recession and geopolitical tensions. Equity bellwether S&P 500 index just posted its worst six month start to a calendar year since the 1970s, and broad bond indices are down double digits.

June alone was a particularly cruel month for equity investors. North American equity indices declined between -9% and -15% during the month as additional high inflation readings led to more hawkishness from central banks and increased bearish sentiment. Correlations moved to ‘one’ across companies, sectors, and geographies – there was ‘nowhere to hide’, so to speak.

We believe that the significant market correction in 2022 is presenting us with compelling investment opportunities – fear-driven selling, growth companies at value prices, wide arbitrage spreads – and we are taking advantage, selectively.

The Maxam Diversified Strategies Fund¹ declined -7.8% in June and -9.1% through the first six months of the year. Here is the tale of the tape for June and year-to-date:

What’s priced-in?

You’d be hard pressed to watch the news or check a stock quote today without seeing a headline that included: inflation, higher interest rates, recession, or bear market.

Bank of America’s Bull & Bear indicator, compiled from their regular survey of global fund managers, closed out June at “maximum bearish” for a third consecutive week². The survey also noted that allocations to equities hit their lowest level since October 2008 and uninvested cash was the highest in more than two decades³. Investor sentiment is awful.

Glass half-full view: when EVERYONE is talking about all of the bad news and the challenges for the economy and markets, some of it is certainly already reflected in securities prices. While it is admittedly difficult to know how much bad news is already priced-in, we are seeing compelling investment opportunities in select companies that we are taking advantage of.

Exposures.

The fund remains well-diversified across sectors, strategies, and individual securities. As at the end of the quarter, the fund was invested across 10 industry sectors with no sector weight larger than 14% of net exposure (excluding arbitrage), and the top 10 holdings accounted for 25% of assets. The fund’s net allocation to arbitrage was ~25% on June 30, a high mark for the year. In addition to providing a stable return profile that is uncorrelated with the general market, the fund’s arbitrage allocation is also highly liquid and can be used to opportunistically take advantage of value + catalyst situations that become available in a volatile market.

Through the first five months of the year, the fund held in very well relative to the broad markets and our peers, down approximately -1.5%¹. The fund’s arbitrage holdings held their value, and our shorter-duration, value-oriented names outperformed the more speculative growth companies that have been hardest hit in this sell-off (we discussed short vs long duration equities in our Q1 commentary). And then in June, as mentioned above, we saw correlations move to ‘one’ as investors indiscriminately sold securities, regardless of fundamentals or outlook in many cases.

So, we have very poor investor sentiment, equity markets that are already down – some in bear market territory – signs of capitulation and non-fundamentals-based selling. On top of that, some market prognosticators are saying the four most dangerous words in investing: “this time it’s different.”⁴

The Covid pandemic was something different, or at least more extreme that what investors have seen over the last 100 years or so. However, economies, companies and investors have dealt with recessions, inflation, higher interest rates and geopolitical turmoil many times before.

What we think is not different this time, is taking advantage of opportunities, selectively.

We’ve recently added to our position in H20 Innovation Inc., a water infrastructure and technology company whose shares were down -32% through the first six months of this year. We like this founder led business that has highly recurring revenues and is delivering strong organic and acquisitive growth.

Another existing holding that we’ve been opportunistically adding to is VitalHub Inc. – an enterprise software company providing solutions to the health care industry. VitalHub’s share price is about 20% lower than where it started the year, despite a strong balance sheet, healthy growth, and completing an accretive acquisition.

We have also begun initiating new positions in some companies that we’ve been following for years (including some that we used to own) that are now trading at prices we believe represent excellent reward-to-risk levels. We’ll plan to highlight some of these new positions in future commentaries.

Opportunity knocks.

To be clear, I am not calling a bottom for the equity markets (that’s realistically unknowable), but we are currently seeing security prices that we believe reflect compelling value and opportunity.

We’re taking action, selectively – not with an eye on where we will be next week or next month, but with a view on where values will be as the issues the market is grappling with begin to subside and as our holdings perform.

Instead of trotting out Warren Buffett’s famous “be greedy when others are fearful” quote, we’ll cite another that we think is equally wise today, from legendary investor, Shelby Davis:

‘You make most of your money in a bear market, you just don’t realize it at the time’.

Thank you for your trust and confidence. Please don’t hesitate to reach out with any questions.

Sincerely,

Travis Dowle, CFA

President & Fund Manager

Maxam Capital Management Ltd.

¹ Maxam Diversified Strategies Fund, Series F, net of fees and expenses. Inception date June 30, 2009. Please contact us regarding other classes of fund units or visit our website www.maxamcm.com

²https://ca.investing.com/news/stock-market-news/bofas-bull-and-bear-indicator-is-at-maximum-bearish-for-a-third-week-in-a-row-432SI-2713789

³ https://www.reuters.com/markets/europe/funds-full-capitulation-they-slash-stock-allocation-bofa-poll-2022-07-19/

⁴ According to famous investor Sir John Templeton, “The four most dangerous words in investing are, it’s different this time.”

Maxam Capital Management Ltd. is the manager for the Maxam Arbitrage Fund. Important information about the Fund is contained in the Fund’s Simplified Prospect us, which should be read before investing. This presentation is neither an offer to sell securities nor a solicitation to sell securities. Disclosed historical returns for periods greater than one year are annualized unless otherwise noted and are net of fees and expenses. Commissions, trailing commissions, management fees and expenses all may be associated with mutual fund investments. Please read the Simplified Prospectus before investing. Any indicated rates of return are the historical annual total returns including changes in value and reinvestment of all distributions and does 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. This document is not intended to provide legal, accounting, tax, or investment advice. Please consult an investment advisor and read the prospectus for the Maxam Arbitrage Fund prior to investing. Please contact us for more information at: (604) 685 0201 info@maxamcm.com www.maxamcm.com

Stability for your portfolio.

Maxam Arbitrage Fund – Q2 2022 Commentary

Dear fellow investors,

The Maxam Arbitrage Fund¹ declined -0.6% in the second quarter of 2022, in what was a very challenging period for both equities and bonds.

The fund has held up very well during the market correction – demonstrating its value as an alternative source of returns and a portfolio diversifier. Over the last 12 months the fund gained +2.2% whereas the iShares Core CAD Universe Bond ETF declined -11.7%².

Merger and SPAC arbitrage yields are attractive right now, presenting investors with an opportunity to earn returns from a strategy that is uncorrelated with traditional equities and bonds.

State of the arb market.

The overall market narrative continues to be dominated by high inflation, rising interest rates, fears of a recession and geopolitical tensions.

Arbitrage spreads widened during the quarter to levels not seen since the Covid crash in March-April 2020. In addition to tracking the broad risk-off environment, spreads were pressured by a more expensive and difficult market for high yield financings and leveraged loans.

In particular, yields on leveraged buyout transactions widened in early June when reputable private equity firm Thoma Bravo announced that they had renegotiated and reduced the price they had agreed to pay for Anaplan Inc. from $66.00 to $63.75 per share. This deal re-price remains a ‘one-off’ at time of writing with other notable leveraged buyout transactions recently closing on terms.

Also continuing to impact arbitrage spreads and deal timelines is the increased scrutiny that U.S. regulators are applying to mega-cap deals and companies in industries deemed more sensitive to competition issues. 

Despite a challenging market environment, new deal announcements continued to be plentiful during the second quarter, providing us with a robust opportunity set to take advantage of. However, while it is difficult to forecast future deal activity, we are mindful that the present risk-off nature of the markets coupled with rising interest rates and wider credit spreads may be a headwind.

Constructively, market volatility and lower valuations will lead to new opportunities for dealmakers as companies look to make strategic acquisitions and position themselves for future growth. And private equity firms have significant amounts of capital that needs to be deployed which may help temper any slowdown.

Nimble.

Being nimble is an advantage in terms of both seeking returns and managing risk. We enjoy the flexibility and advantage of investing across the capitalization spectrum, providing us with a larger opportunity set. While every merger deal is different, we look favourably on mid and smaller capitalization transactions in the current environment because regulatory risks are typically lower, and the deal timelines are shorter.

Regardless of deal size, we are always focused on transactions that we believe will reach successful completion.

The fund invested in 15 new deals during the quarter, had 14 successful deal closures and experienced no deal breaks (although we did own the Anaplan re-price). As of June 30, the fund held 35 merger arbitrage positions, diversified across market cap, deal type and industry.

Owned deals that successfully closed during the quarter included³: Cerner Corp; Ferro Corp; IntriCon Corporation; Intertape Polymer Group; Noront Resources; Anaplan Inc; Questex Gold & Copper Ltd; SOC Telemed Inc; Veoneer Inc; and Intersect ENT, Inc.

Some notable new positions initiated during the second quarter included³: Covetrus Inc; FAX Capital Corp; GTY Technology Holdings; Points International; Redline Communications; and Sailpoint Technologies.

SPAC yields rise.

Just as traditional IPOs are less likely to come to market during unfavourable market conditions, so too are SPACs. New SPAC issuance continued to slow during the second quarter with less than 20 new SPAC listings, a steep drop from the 54 seen in the first quarter of 2022⁴ (and a far cry from the pace of more than 600 in calendar 2021).

In addition to the weaker market environment, the SEC’s proposed new, and more stringent, rules for SPACs (discussed in our Q1 commentary) are likely making it more difficult for SPAC sponsors to find and consummate deals. SPAC redemption rates, where investors elect to redeem their SPAC shares for the cash held in trust, continued to be high at approximately 80%, during the second quarter⁴.

A high rate of SPAC redemptions makes it very difficult for investors who bank merely on upside from well-received deal announcements, or for those who speculate on SPAC warrants – which will expire worthless if a deal is not completed. We continue to take a very conservative approach to SPAC warrants, routinely harvesting them post unit split, rather than hoping a deal the market likes will be completed.

From a SPAC arbitrage perspective, the risk-off environment and still well-supplied market with almost 600 SPACs currently seeking acquisitions⁵ provides us with a very attractive reward-to-risk set-up. SPACs are trading at unlevered annualized yields near 5% on average⁶ – a return that is backed by short-term government securities (i.e. T-bills) held in trust.

We also note the SPAC cliff on the horizon – almost 95% of listed SPACs are due to liquidate within the next 12 months⁷, presenting us with an attractive set-up for our systematic and quantitative approach to harvesting SPAC yields.

As of June 30, the fund was well-diversified across 158 SPACs, and we are currently deploying capital at attractive yields.

Looking ahead.

Merger and SPAC arbitrage yields are attractive right now, presenting investors with an opportunity to earn returns from a strategy that is uncorrelated with traditional equities and bonds.

Arbitrage is an attractive strategy for the long-term, and its unique characteristics make it a particularly attractive strategy in the current environment. Rising interest rates are a clear negative for bonds, however they can act as a tailwind for arbitrage because of the low duration nature of the strategy – deals typically complete in just a few months.

In addition to providing a compelling alternative to bonds as interest rates rise, arbitrage strategies also provide excellent diversification to traditional equity market exposure because returns are generated from the successful completion of specific and definitive corporate events. As arbitrageurs we expect to profit regardless of the behaviour and direction of the stock market.

Risk management is central to our quantitative, data-centric and disciplined investment process as we deploy capital into a robust and attractive opportunity set.

Thank you for your trust and confidence. Please don’t hesitate to reach out with any questions.

Sincerely,

Travis Dowle, CFA
President & Fund Manager
Maxam Capital Management Ltd.

¹ Maxam Arbitrage Fund, Class F, net of fees and expenses. Inception date October 1, 2020. Please contact us regarding other series of fund units or visit our website www.maxamcm.com

² iShares Core CAD Universe Bond ETF, ticker XBB.

³ Notable owned deals successfully closing during the quarter is not an exhaustive list. New positions initiated during the second quarter is not an exhaustive list.

⁴ SPAC statistics sourced from: Maxam internal database and https://icrinc.com/insights/icr-q2-2022-spac-market-update/

⁵ https://www.spacanalytics.com/

⁶ Maxam internal database and https://spacinsider.com/stats/

⁷ Maxam internal database

Maxam Capital Management Ltd. is the manager for the Maxam Arbitrage Fund. Important information about the Fund is contained in the Fund’s Simplified Prospect us, which should be read before investing. This presentation is neither an offer to sell securities nor a solicitation to sell securities. Disclosed historical returns for periods greater than one year are annualized unless otherwise noted and are net of fees and expenses. Commissions, trailing commissions, management fees and expenses all may be associated with mutual fund investments. Please read the Simplified Prospectus before investing. Any indicated rates of return are the historical annual total returns including changes in value and reinvestment of all distributions and does 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. This document is not intended to provide legal, accounting, tax, or investment advice. Please consult an investment advisor and read the prospectus for the Maxam Arbitrage Fund prior to investing. Please contact us for more information at: (604) 685 0201 info@maxamcm.com www.maxamcm.com