The Manager's Commentary - December 2009

NAV Update
Since launching the Pender Small Cap Opportunities Fund on June 1, 2009, the NAV of the Fund has increased to $10.80 as at December 31, 2009. The investment strategy of the fund is to invest in companies with the opportunity for significant capital appreciation over a three to five year time period. While six months is a short period of time for a fund of this type, we are satisfied with the NAV to date.

Portfolio Updates
The Fund currently has 13 positions representing 70.7% of the portfolio. The remainder of the Fund sits in cash as we continue to search for additional opportunities while staying cautious in these uncertain times.

Over the last six months, we have built positions in companies such as Sierra Wireless, Seacliff Construction and Xenos Group. Xenos is an excellent example of the investment strategy of the fund. It is a company we have followed for several years and performed significant due diligence on. We determined a price range that a third party would pay for the company, then purchased a position at a significant discount to that valuation. On December 8, 2009, Xenos agreed to be sold to Actuate Corp. for $3.50 per share. This was a gain of 55.6% over our cost of acquisition. Mr. Market will never tell you when the market price of the shares will reflect the intrinsic value of the company, but ultimately, they should. In this case we benefited from a catalyst occurring in a relatively short time frame, giving the NAV of the Fund a nice increase.

Outlook
We continue to be neither bullish nor bearish on the economy and have positioned the Fund accordingly. A small fund with a significant cash position can move quickly when opportunities arise.

The Fund has a 43.9% weighting in the technology sector. We have done this for two reasons: we have been investors in the sector for some time and so are familiar with many names and, we believe that technology companies should thrive in a cost conscious world. We will continue to pursue opportunities in this sector.

With the dramatic increase in markets from the lows of March 09, we expect to see volatility in the markets in 2010. This increases our level of excitement as volatility gives rise to a larger universe of buying and selling opportunities as individual securities become mispriced. This will cause short term fluctuations in the market value of our investments, but with patience and vigilance, we expect to see the market values of these companies reflect the intrinsic value over a three to five year time horizon.

Dave Barr
December 31st, 2009