Introduced close to the end of a great year in the Canadian stock market in 2010, The Smedley Special Opportunities Fund has completed four months with flat performance since its debut in late December. The initial funding was fully invested after about six weeks. Performance, in spotty market conditions, has included Net Asset Value (NAV) rising as much as 4.1% and down 0.2% year to date at April 30, 2011. As an indication of the volatility of markets, year-to-date returns of individual securities in the ten largest holdings at April 30, 2011, six of which were up, ranged from 65.8% for Blinkx plc to -16.8% for Xinergy Ltd.

The Fund has spread risk among 36 holdings at this early stage of its development. We surmise that the number might decrease slightly as more confidence builds in particular stocks. Switches in holdings might occur as better short- to medium-term momentum prospects seem to support our attempted high absolute return. The focus on arising special opportunities should also create changes in the overall portfolio.

For both the short- and longer-term, we presently expect further up-trends in the following 
top three holdings:

Glentel Inc. is a long-term success story in institutional and retail hardware, systems and solutions in communications – including a big piece of the growing smart phone handset business for BCE, Rogers and RIM, Playbook now included, sold in hundreds of outlets across Canada. And Glentel now has the iPhone 4 in the U.S. through the Diamond chain of outlets acquired last year. Diamond is a Verizon agent. Glentel has a successful history trading in the U.S. in other business. Glentel operates under many banners in Canada, mainly in shopping centers. Revenues, earnings and dividends have grown consistently through the years.

Morguard Corporation has appreciated modestly since purchase but is trading at about 25% discount to its NAV. This company has a comprehensive range of real estate services across Canada and a portfolio of approximately 46 million square feet of commercial and industrial properties plus 12,600 residential units in Canada and the United States. Morguard also controls the Morguard Real Estate Trust.

The shares of the two largest holdings in the Fund are small traders. Blinkx plc, the third largest holding, has 332 million shares and is a big trader on the U.K. AIM market. Spun off from Autonomy Corporation plc, a very successful U.K. based intelligence software company, Blinkx has become in a short time a world leader as a video search engine, claiming a data bank of 35 million hours of online video. Blinkx is on a high velocity growth track and recently paid $30 million to buy Burst Media of the U.S. to expand into online television used by hundreds of millions of viewers. Blinkx appears to be breaking into profitability.

Investors are free to buy what we choose to describe as the best holdings in the Smedley Special Opportunites Fund. However, our portfolio is subject to changes at any time and we shall be striving to be early and ahead of most investors.

Information on other holdings and answers to questions are readily available.

Michael Smedley, Executive Vice-President & CEO, Director and Chief Portfolio Officer

Certain financial information contained in this report, including investment growth rates, rates of return and other such statistical information are historical values; past performance is no assurance or indicator of future returns. Share prices, net asset values and investment returns will fluctuate. Stated historical returns assume the reinvestment of all distributions. Such financial information does not reflect any broker commissions, transaction costs or such other fees and expenses which may have been applicable or income taxes payable by any shareholder, which would have the effect of reducing such historical returns. Stated returns for periods greater than one year are compound average annual rates of return.

This report is for information purposes only and does not constitute an invitation to invest. The reader should assume that the Company and all individuals and entities (including the Manager and members of its staff) who have contributed to this publication may have a conflict of interest. Readers should therefore not rely solely on this report in evaluating whether or not to buy or sell securities discussed herein. Prospective investors of any security should review the offering documents relating to any investment carefully before making an investment decision and should consult their own professional advisor for advice based on their specific circumstances.