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May 2008 Newsletter

May 1st, 2008

CANADIAN ADVANTAGE FUND

The Canadian Advantage fund rose for the third month in a row, adding 2.1%, while the S&P; TSX Index finished 4.5% higher as commodity stocks soared. The rapid assent of commodities reached new highs last month but showed some signs of weakening towards the end of the month. We started to see more broad based strength in April as the telecommunication, industrial and financial sectors rose 9.5%, 6.3% and 4.5%, respectively. Strong earnings reports from Rogers, Petro-Canada and Shopper’s Drug Mart helped bring back some attention to non-commodity equities. Value it seems is starting to return to some of the more diversified and consistent companies that have been largely ignored in the recent commodity mania. On the economic front, the Bank of Canada cut rates again last month on growth concerns, which was confirmed with the 0.2% decline in GDP in February.

US ADVANTAGE FUND

The US Advantage Fund added 2.1% in April, while the S&P; 500 Index rose 4.7%. We saw a fairly broad based rally in the US as almost every sector ended the month in positive territory. We saw mixed first quarter earnings from General Electric which showed weaker results from their financial business segment offset gains made from their better performing infrastructure and export businesses. Outstanding earnings results from Coke, United Technologies, and PepsiCo showed how important having large international exposure was in this type of environment. In general, we are seeing large multinational companies with significant international revenues benefit from foreign demand growth, which is more than making up for flat US growth. The weakness of the US dollar also helped boost export demand as well as increase the value of foreign currency profits. Shares of Wal-Mart continued to be our best performing stock this year as sales are benefiting from changing consumer spending habits towards thriftier outlets.

EURO ADVANTAGE FUND

The Euro Advantage Fund rose 2.8% last month, while the S&P; Euro Index was up 2.1%. The Euro equity market saw a fairly broad rally similar to that in the US, with the energy sector leading. Shares of Total SA rose almost 15% as the undervalued energy company saw foreign investors buy a large stake in the company. Shares of Merck KGAA also rose 15% as the company’s earnings came in better than expected. Euro Zone inflation showed signs of moderating as the rise in the Euro has helped reduce the cost of imports. As we saw in Canada, currency gains can rapidly cool down inflation and may provide some room for the monetary bank to cut rates in the future in order to stimulate growth. This month saw shares of Man AG sold, while a position was established in Spanish utility Iberdola SA.

Van Arbor Asset Management is an independent Asset Management company dedicated to creating wealth using a disciplined, proprietary investment strategy with an emphasis on preserving capital while generating superior long-term returns.

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