The Manager's Commentary - June 2011

Second Quarter Review – June 30, 2011

Fellow Unitholders,

Social Media Bubble?

There is a lot of discussion in the media about whether or not we are in the midst of a bubble for Social Media as companies such as LinkedIN, Groupon, and Facebook complete or consider IPO’s at lofty valuations. The companies that are commanding these lofty valuations are consumer focussed and are showing rapid user adoption rates. They are typical “growth” investments. History will tell us whether or not they deserve these valuations. It will turn into a true bubble if the “marginal” players in these industries start to attract the level of interest currently enjoyed by these market leaders.

On the other side of the spectrum are the boring “old-school” technology companies such as Microsoft, IBM and Cisco and many smaller companies that sell primarily to businesses. These businesses trade at very modest multiples on cash flows and earnings, despite strong operating performance year over year. You know where I’ll be looking for the best risk adjusted returns!

Portfolio Updates

The Second Quarter of 2011 saw the Risk On/Risk Off trade hit the Off button. The S&P/TSX Capped Composite Total Return Index was down 5.15% in Q2, yet Class A units of the Fund were able to eke out a respectable 1.57% gain. Year to date the Fund is up 6.38% as compared to a 0.16% gain for the index.

In this quarter, we took advantage of the volatility and market fluctuations as we initiated five new positions and added to several other holdings in the portfolio. Cytiva was sold in the quarter, as previously discussed and we reduced our exposure to one holding. At the end of the quarter the Fund had a cash position of approximately 35% and the portfolio continues to have a strong technology weighting at 60% of the portfolio.

Dave Barr
June 30, 2011