Current Fund Commentary - Quarter 3, 2011

The Redwood Diversified Income Fund was down 9.13% in the third quarter, broadly in line with the benchmark, down 9.1% and remains ahead of the benchmark year to date (down 5.6% vs. 9.3%). Equity markets, including yield names, traded lower in the quarter with the focus on the financial health of European banks as Investors feared the worst with respect to holdings of troubled European sovereign debt. The financial problems in Europe impacted North America as evidence by the decline in the TSX of 12.6%.

Highlights in the quarter included a trade in CIBC which earned a 7% return, and the purchase of Noranda Income Fund ahead of the re-initiation of distributions at an annualized yield of 9%.Portolio stalwart, Keyera  was up 4% and continues to yield a secure 4.3% dividend with good potential dividend growth in the near-term.

We are cautiously optimistic for a strong finish to the year and into 2012 as European counties have indicated financial support for their domestic banks. Emphasis remains on high quality income producing equities, high  quality REITs, and former income trusts. Until bond yields become more attractive we believe better value resides in stable dividend paying equities.