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February 2009 Newsletter

February 1st, 2009

CANADIAN ADVANTAGE FUND

Even with a fresh start to the New Year, the current bear market continued on, now entering its 16th month, albeit as some signs of stability were emerging in credit and commodity markets. The Fund ended the month down 9%, in line with most World markets; however, more than the 3.4% decline in the S&P; TSX Index, which was buoyed by a few stocks, namely surging gold stocks. Energy, industrials, and financials led the way down as early optimism gave way to the gloomy economic headlines. The market was also weighed down by uncertainty surrounding the coming US stimulus package and financial bailout. Both government measures should be sorted out this month, which may give a boost to confidence. Talk of trade protectionism also did not help the Canadian market with a “buy American” provision being contemplated in the US stimulus package. Overall, January was a disappointing month; however, we remain optimistic that cheap valuations, a resumption of confidence, and large monetary and fiscal stimulus will help lead to a recovery sooner rather than later. When that recovery does come we expect the Canadian Fund to see strong gains with extremely cheap companies in early cycle sectors leading. The main weakness for the Fund last month can be attributed to a few energy companies, especially in the oil services sector, suffering from energy prices making new lows and uncertainty of future production projects . January did see some winners in the Fund with Pan American Silver rising 6.6% along with rising precious metal prices and Brookfield Asset Management rising 4.6% as their war chest of cash for acquisitions is beginning to get some positive attention.

WORLD ADVANTAGE FUND

The World Fund managed another relatively decent month, ending mostly flat while the MSCI World Index fell 8%. The Fund continues to perform exceptionally well in this volatile environment. Over the last six months the Fund is down 1.5% versus the 26.9% drop in the MSCI World Index. The benefit of having large cap diversification in sectors, countries, and currencies has proved to be very useful as of late. In general, the market is still trying to separate itself from the dismal economic headlines and is beginning to look across the valley to the coming recovery. It is clear that almost every nation now has a fiscal stimulus plan in the works and coupled with very low interest rates, the odds of an economic recovery later this year are improving. Some expect 25-30 trillion dollars will be spent on infrastructure in the next 10-15 years and that means there are great opportunities in globally positioned companies. A likely benefactor is Swiss heavy electrical company ABB Ltd, which provides energy efficient building upgrades and large scale electrical infrastructure, all being a focus of investment in the coming years. Some of the winners in the month of January were energy companies Transocean Ltd and Noble Corp, both rebounding sharply as their long term contracts are helping provide some earnings visibility in an uncertain environment.

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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