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September 2008 Newsletter

September 1st, 2008

CANADIAN ADVANTAGE FUND

The Canadian market finished the summer quite differently than how it started as leadership from energy and material stocks reversed reflecting softer global growth expectations. The Canadian Fund escaped much of the commodity malaise over the last two months and remained flat, which was significantly better the 5% drop in the TSX Index. August saw attempts at new leadership from consumer and telecommunication stocks as compelling valuations helped lift a core group of names. We saw strong returns from our new position in gas/convenience retailer Alimentation Couche Tard, which rose 16% as they directly benefit from lower oil prices. We also saw selective gains from our diversified holdings in the health care and consumer staple sectors. On the economic front, the weakness in the commodity sector may take some wind out of Canadian economic growth. Some of that expected slowdown will be tempered by the rate cuts which the Bank of Canada enacted earlier in the year. Overall we expect new leadership to emerge in the Canadian marketplace which should favour a more diversified value approach.

US ADVANTAGE FUND

The US Fund followed up a great July with another positive performance in August, which brings our year to date performance to a modest 2% decline compared to the over 12% decline in the S&P; 500 Index. The strength of the US Dollar put pressure on commodity prices while increasing the attractiveness of US denominated stocks. It appears that the long term slide in the US dollar has reversed as other developed economies appear to be weakening behind the US. US stocks coupled with a strengthening US dollar should continue the relative outperformance compared to other global markets. Last month saw some solid gains from quality companies like Altria and Coca-Cola as earnings visibility have become more sought after in the current economic environment.

EURO ADVANTAGE FUND

The Euro Fund continues to relatively outperform the S&P; Euro Index, as we finished August with the seventh month of outperformance. We have found selective gems throughout the Euro Zone area in the more defensive health care, consumer staple and utility sectors. The European Central Bank seems to have shifted its stance over the summer from inflation fighting to one of concern over economic growth. Inflation seems to be cooling as the strength of the Euro currency has cut import prices while softening economic growth. This reduction in inflation risk should help eventually lead to some much needed interest cuts and subsequent economic stimulus.

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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