Ninepoint International Small Cap Fund Market View

March 13, 2020

Dear Clients and Colleagues

As the COVID-19 outbreak is escalating, Global Alpha has strengthened safety measures to protect our employees and the broader community. The corporate Business Continuity Plan and travel restrictions are in place and staff are working remotely on a rotational basis for the time being. Further, several large investment conferences in Japan, the United Kingdom (UK) and the United States (US) were cancelled. Instead, we are having more virtual meetings with companies over the phone or webcast.

The coronavirus is certainly putting remote work to a critical test on an unprecedented global scale. With thousands of millions of people self-isolating and working from home, some experts warned that the broadband network might not cope and require enhancement.

Internet Initiative Japan, one of our core holdings, is a total network solution provider in Japan. Founded in 1992, it provides internet connection, hosting, virtual network access and system integration to both public and private sectors. It boasts more than 50% market share in blue chip companies and has the largest internet infrastructure network in Japan, which comprises of over 20 network operation centres. Despite the coronavirus shock, the company maintained the guidance of high single digit revenue growth and double-digit profit growth.

While we are hopeful the pandemic will end soon, we believe that work place dynamics will change for the long term as a result and flexible work arrangements will become more common. It is interesting to look back at the history; in 1908, the first 5-day work week was established in the US. By 1940 a maximum 40-hour work week was mandated by the new Fair Labor Standard Act, with many countries adapting to harmonize with international markets.

But now, times have changed. According to the following data:

- US Census data released in 2018 reported that 5.2% of US workers were based entirely at home.

- Data and insights company Kantar conducted a poll in 2018; comprised of 33,000 people globally, the poll showed that 32% valued a job where they could work from home.

- Millennials were the first generation that grew up with a steady access to technology. Many studies showed that this generation favor flexibility over salary. They don’t think office is the only place to be productive and successful.

Obviously, today’s workforce find value in flexible working hours and remote work. We believe several key factors have been contributing to such trend:

- Cheaper cost of teleconferencing
- Technology advancement including 5G and cyber security
- An attractive benefit to attract and retain talents
- Increased productivity
- Reduced carbon footprint from less commuting
- Reduced expenses for real estate costs and leased office space

While some people cheer for the ability to work at home due to no commute or dress codes, others may still prefer a place with office ambience and interaction with people. Flexibility is key. IWG plc (IWG), another core holding, has experienced such growing demand consistently in the past decades. IWG, formerly Regus, is the world’s largest provider of flexible workspace. Founded in 1989, it offers workstations, office support services, and communication access through over 3,380 business centres in 120 countries. In addition to utilizing the facilities, customers can request professional support services such as catering, mail delivery and office supplies, etc. Small and medium size enterprises account for 70% of its client base, but a large number of blue chips use its services as well, such as Google, BT, HSBC and Deloitte, etc.

AudioCodes, a new addition to the portfolio, also contributes to the innovation of digital workplace. Founded in 1993 in Israel, it is a global provider of advanced voice over IP and data networking products and applications. Its extensive product range includes IP phones, session border controllers, media gateways, multi-service business routers, call recording, voice dialing and more. Customers are in over 100 countries and 50 of the Fortune 100 enterprises use AudioCodes technology.

Are you reading this commentary from home? Stay healthy and have a nice weekend.

The Global Alpha Team

MONTHLY RETURNS (%) AS AT FEBRUARY 29, 2020, SERIES F

1M YTD 3M 6M 1YR INCEPTION
Fund -8.6% -10.1% -8.3% 1.6% 2.2% -0.9%
Index -8.5% -9.3% -7.6% 1.4% 1.0% -3.5%

1 All returns and fund details are a) based on Series F units; b) net of fees; c) annualized if period is greater than one year; d) as at February 29, 2020; e) since inception (March 15, 2018). The index is 100% MSCI EAFE Small Cap NR USD (CAD) and is computed by Ninepoint Partners LP based on publicly available index information.

Ninepoint Partners LP is the investment manager to a number of funds (collectively, the “Funds”). Commissions, trailing commissions, management fees, performance fees (if any), and other expenses all may be associated with investing in the Funds. Please read the prospectus carefully before investing. The indicated rates of return for Series F of the Funds for the period ended February 29, 2020 are based on the historical annual compounded total returns including changes in [unit/share] value and reinvestment of all distributions or dividends and do not take into account sales, redemption, distribution or optional charges or income taxes payable by any securityholder that would have reduced returns. Mutual funds are not guaranteed, their values change frequently and past performance may not be repeated. This communication does not constitute an offer to sell or solicitation to purchase securities of the Funds.

The Fund is generally exposed to the following risks. See the prospectus of the Fund for a description of these risks: ADR risk; Concentration risk; Credit risk; Currency risk; Cybersecurity risk; Emerging markets risk; Foreign investment risk; Inflation risk; Liquidity risk; Market risk; Regulatory risk; Securities lending, repurchase and reverse repurchase transactions risk; Series risk; Small company risk; Specific issuer risk; Sub-adviser risk; Tax risk.

The information contained herein does not constitute an offer or solicitation by anyone in the United States or in any other jurisdiction in which such an offer or solicitation is not authorized or to any person to whom it is unlawful to make such an offer or solicitation. Prospective investors who are not resident in Canada should contact their financial advisor to determine whether securities of the Funds may be lawfully sold in their jurisdiction.

The opinions, estimates and projections (“information”) contained within this report are solely those of Ninepoint Partners LP (“Ninepoint”) and are subject to change without notice. Ninepoint makes every effort to ensure that the information has been derived from sources believed to be reliable and accurate. However, Ninepoint assumes no responsibility for any losses or damages, whether direct or indirect, which arise out of the use of this information. Ninepoint is not under any obligation to update or keep current the information contained herein. The information should not be regarded by recipients as a substitute for the exercise of their own judgment. Please contact your own personal advisor on your particular circumstances.

Views expressed regarding a particular company, security, industry or market sector should not be considered an indication of trading intent of any investment funds managed by Ninepoint Partners LP. These views are not to be considered as investment advice nor should they be considered a recommendation to buy or sell.

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