The Manager's Commentary - September 30, 2009

At the end of September the Pender Corporate Bond Fund (PCBF or Fund) was approximately 70% invested in 23 different investments across 13 unique sectors. For the invested portion of the Fund, the monthly current income generated was 7.7%.

The goal of the PCBF is to preserve capital first and generate returns second. With this in mind, the PCBF was structured so that the manager is not forced to reach for yield and take on undue risks to achieve a fixed distribution level like most closed-end funds and many open-ended funds.

While equity markets continue to rally (the S&P 500 is up more than 50% since its March lows) we are acutely aware of the dichotomy that is building between expectations (the stock market) and reality (main street). In our opinion, the stock market has been driven by companies being able to exceed earnings expectations. However, these positive earnings surprises have come through cost cutting and not revenue growth. We are reluctant to believe that the level of cost cutting can continue and that, at some point, revenue growth is going to have to take over in support of growing earnings expectations.

Despite the rally we’ve seen over the last six months in both stocks and bonds of large “index” companies, we continue to find many opportunities in small and mid-sized enterprise value companies. While the PCBF has been able to generate a good return over its first three months of operations, it is not from investing in the “index”. Performance to date has been driven by security selection and this is how the fund will continue to differentiate itself amongst its larger over-diversified peers.

Matthew Shandro
September 30th, 2009