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November 2008 Newsletter

November 1st, 2008

CANADIAN ADVANTAGE FUND

October’s unprecedented volatility led to a roller coaster for financial markets across the World. Driven strongly by emotion, we saw a clear departure from fundamentals as almost every asset class moved in tandem down. Canada took the brunt of the sell-off as energy, commodities, and financials saw extreme movements downwards as panic trumped any sense of rational pricing. The Canadian Fund’s diversified value stance couldn’t side step the market turmoil this month, with the sell-off pushing us down 14.3%, which was slightly better than the 17.2% drop in the S&P; TSX Index. The one positive we can take out of this autumn’s turmoil is that valuations now point to an undervalued market. We now see value in some companies that we have been watching for awhile with excellent potential for positive returns with a medium to long term view. Short term we expect more volatility; however, we are beginning to see improvements in the credit markets and time will eventually give way to a recovery in the stock market which should precede a recovery in the overall economy.

WORLD ADVANTAGE FUND

The World Fund was down modestly in October, declining 2.6%, while the MSCI World Index fell 7.1%. The non-commodity focus of the fund as well as the jump in the US Dollar versus the Loonie helped keep the fund relatively flat through much of the market turmoil. The fund’s diversified holdings mostly fell in tandem with the sell-off in all asset classes; however, we did see some promising signs of a return to fundamentals toward the end of the month as quality companies that were oversold came back into focus. We expect the World Fund to continue its success and outperformance relative to other markets as its selective approach to sectors and countries should thrive in the current economic environment.

US ADVANTAGE FUND

The US Fund ended the month down 10.9%, while the S&P; 500 Index fell 16.9%. The Fund’s holdings continue to perform better than the overall market; however, the general sell-off forced everyone down as market redemptions pushed the better performing companies this year down. During this month, we saw currency volatility at extreme levels, as an example the US Dollar soared by 16.7% versus the Loonie. Overall, we are satisfied with the US fund’s performance in the current environment with the Fund down 16% for the year versus 34% for the S&P; 500 Index. In Canadian dollar terms, the 25% rise in the value of the US dollar is a true testament to having a diversified portfolio in other countries and currencies to offset any weakness from Canadian portfolios.

EURO ADVANTAGE FUND

The S&P; Euro was down 5.1% in October, but managed to once again perform better than the overall market with the S&P; Euro Index falling 13.3% last month. There was general weakness in Europe along with the rest of the World, but we did see some positive gains from a few select companies like Sanofi-Aventis, Bouygues and Royal Dutch Shell. While the Euro Fund is down 20.6% for the year, we count that as somewhat successful relative to the 39.0% drop in the S&P; Euro Index. Europe in general remains one of the more undervalued regions of the World with a price/earnings multiple of 8.7, which we believe represents a great value opportunity that will eventually be exploited in our international World Fund.

Note: The US Fund and Euro Fund unit holders are meeting this month to vote to close the Funds. Van Arbor will be consolidating the two regional Funds into the World Fund which invests in the US, Europe and developed Asia.

Van Arbor Asset Management is an 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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