Sarbit U.S. Equity Fund

Sarbit U.S. Equity Fund Commentary

Portfolio Sub-Advisor: Sarbit Advisory Services Inc.

Fund Commentary - December 31, 2011

The Fund underperformed the benchmark during 2011. During the year, the Fund had an overweight position in Consumer Discretionary, Consumer Staples and Telecommunications Services sectors, and a market weight in Financials sector compared to the benchmark. The Fund was underweight the Energy, Health Care, Industrials, Materials and Utilities sectors. However, the Portfolio Sub-Advisor focuses on a bottom-up investment approach, taking positions in winning companies at discounted prices, with minimal attention paid to sector allocation.

The Portfolio Sub-Advisor strongly believes in holding a concentrated position in few names. The top five holdings - Six Flags Entertainment Corp., CVS Caremark Corp., Berkshire Hathaway Inc., Iconix Brand Group, Inc. and Coinstar Inc. - make up almost 50% of the Fund's weightings. The Portfolio Sub-Advisor believes these companies have measurable qualities that make them strong candidates to increase in value.

Detracting from Fund performance over the course of the year were holdings in Gap Inc., Smart Technologies Inc. and Iconix Brand Group, Inc. Gap Inc. continues to be well-managed but the competition is fierce in the consumer clothing retail market. Revenue remained disappointingly flat and the Portfolio Sub-Advisor decided to liquidate the position and allocate capital to more promising investments. More than half of the decline in the Fund was due to the decrease in share price of Smart Technologies Inc. The stock decline was due to the constriction in state school budgets to buy and replace old chalk boards.  Iconix Brand Group, Inc. despite its impressive longer-term track record, experienced a decline of 15% in its stock price in 2011. Since 2008, revenue has grown at a compound annual growth rate (CAGR) of about 19%, while during the same time, free cash flow has positively compounded at 27% during a terrible economic period. The stock, based on its year-end price, is trading at only 6.5 times 2012 estimate of free cash flow of $2.50 per share, the Portfolio Sub-Advisor believes this company continues to have great potential to grow.

The largest individual contributors to performance during the past 12 months were Six Flags Entertainment Corp., CVS Caremark Corp. and Iron Mountain Inc. Six Flags Entertainment Corp., which the Portfolio Sub-Advisor bought mid-year, gained almost 36% and was the largest contributor to the Fund's returns in 2011. Despite tough economic times, families continue to attend amusement parks as it represents an affordable vacation. CVS Caremark Corp. represents the largest dispenser of pharmaceuticals in the U.S. The company has projected earnings growth of 10-15% over the next five years, driven by a rapidly aging population, a host of drugs coming off patent, "Obamacare", and increasing adherence of patients taking their medications. Iron Mountain Inc. was sold at a healthy profit to the Fund because of the entry of a private equity firm that forced the company to change its activities. At the sale price, the Portfolio Sub-Advisor felt the stock was more than reflecting its future prospects.