The Manager's Commentary - October 2010

Quarterly Update

What a difference a few months make! The commodity bulls are off and running and the S&P TSX was up 13% from June 30th to October 31st. We were able to take advantage of this as the Fund held 28% of its assets in the resource sector on June 30th. Since then, we have reduced our resource weighting and focused on Canadian small cap technology companies. At the end of October, we had a 67% weighting in technology.

*S&P/TSX CAPPED COMPOSITE INDEX

When investing in small cap stocks, the stock price can remain unchanged for extended periods of time. In order for the stock to appreciate, it requires a “catalyst”. Catalysts include, an analyst picking up coverage or changing a recommendation, strong financial results or the acquisition by a third party. These catalysts can cause sudden and dramatic changes in the market price of the company.

We have added to our holdings in QHR Technologies, which now represents the single largest holding in the Fund. We have initiated positions in three new technology companies that we have been following for several years: Cyberplex, Sylogist, and Vendtek Systems.

The Fund currently has approximately 7% of its assets in cash. We continue to monitor our existing positions and may add to these positions if warranted and we continue to monitor several companies that are close to meeting with our investment criteria. With that being said, we are comfortable holding cash with the major indices currently touching their two-year highs.

Dave Barr
October 31st, 2010