The Manager's Commentary

NAV Update

As of July 31st, the NAV of the Fund was $11.42. Although summertime is usually a quieter time in the investment world, markets have been volatile with big moves in both directions (depending on the latest Wall Street Journal headline). This provides a great opportunity to be active and take advantage of price swings as you will read below.

Portfolio Updates

At July 31st, the Fund held 17 positions representing 95.1% of the portfolio.

Since June 1st, the Fund has added three new positions. We made two investments in the technology sector: Cyberplex - as part of a transformative acquisition to create a market leader in Canadian online advertising and Sylogist - a very well managed software company with impressive growth year over year. They even pay a dividend! The third investment was Western Coal - an excellent opportunity to capitalize on the long term growth of China.

We have also been active on the sell side. We exited our position in SeaCliff construction ahead of the takeover by Churchill Corp. and we decreased the Fund’s positions in Metalline Mining, Mosaid Technologies and Sierra Wireless.

There have been two very good developments for the Fund since June 1st. First, E-xact Transactions announced a go-private transaction at a 66% premium to the Fund’s purchase price. Second, Menu Foods announced it was being acquired at a $4.80 per share - a 75% increase over the Fund’s purchase price. These two events serve to demonstrate the Fund’s strategy to purchase relatively unknown companies at significant discounts to their intrinsic values or the value that an independent third party would pay for the businesses.

Outlook

Well, the fog still hasn’t cleared from my crystal ball. I think it may be broken so I’m going to drop it off at the crystal ball repair shop. Until it’s fixed, my outlook will remain quite dull. I have no idea what’s going to happen short term. With indexes bouncing 200 points up one day and 200 points down the next, I’m pretty sure no one else does either (although there are some pretty convincing people on BNN and CNBC who will tell you they do).
Here’s my outlook: Companies that increase their earnings over the next three to five years are going to be worth more than they are today. With that, I’m going bargain hunting....

Dave Barr
July 31st, 2010