Manager's Commentary

Net Asset Value Update

As at August 31, 2009, the Net Asset Value (“NAV”) for Pender Growth Fund was $6.39. This is a decrease of 6.72% since December 31, 2008. There was a dramatic decline in the early part of the year, when markets hit their lows on March 9. Since that time, the NAV of the Fund has remained relatively flat. The decrease during the early part of the year was a result of the decrease in the carrying value of the Fund’s investments, particularly the public companies. Since that time, even though the equity markets have improved dramatically we have not enjoyed the benefit of this recovery in the junior public technology market. Typically, in a recession/recovery cycle, larger cap stocks recover before smaller companies.

Portfolio Update

Currently the Fund has 43.2% cash in its portfolio. This served to buffer the NAV as markets decreased last fall and winter and now provides the Fund with a strong balance sheet in order to support its existing investments as well as deploy capital into new opportunities. Since June 30th, the Fund has made two new investments and has completed a follow on investment in one of our previous holdings.

We invested $750,000 in Cytiva, a web-based software company that provides applicant tracking systems to businesses. This is a company we followed for over four years; we believed in the business, respected the proven management team, and finally capitalized on an attractive valuation after the market correction.

We also invested $750,000 in Lat49 a web-based geo-contextual advertising platform that allows website publishers to place highly targeted ads on maps on their website. The company has a scalable technology platform that has achieved significant initial revenue traction with an impressive customer list that includes some of the largest newspaper publishers in the United States.

For more information on these two investments, please visit our website at www.penderfund.com/news.

We also completed a follow on financing in IP Applications (‘IP Apps’). Over the past year, IP Apps has shown significant progress in launching, marketing and selling its subscriber and billing management software to software companies that deliver their software over the web. This is a large, rapidly growing market that could make IP Apps an extremely valuable company over the next 24 months.

Outlook

There is a lot of uncertainty in the equity markets today. For value investors, volatility leads to opportunity. We continue to spend considerable time looking at potential new investments for the Fund. The number of companies that have entered the Pender Value Zone has increased dramatically and we are focusing on companies that provide excellent potential at a reasonable price.

We are going to continue to focus on the information technology sector. We believe that it provides considerable opportunity to create significant businesses without a requirement for massive amounts of capital. We believe that it is more challenging to find such opportunities in either the clean technology space or life sciences.

We continue to be neither bullish nor bearish on the economy, but we are very pleased with the current positioning of the Fund. In changing times like today, competition is fierce and small nimble companies have an advantage as they are able to move more quickly and capitalize on new opportunities. With the strength of the Fund’s balance sheet, we will continue to look for new opportunities and support existing companies that are deserving. We are in a position to meet all redemptions in cash until the end of the 2009 RRSP season.

David Barr
August 28th, 2009