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May 2009 Newsletter

May 1st, 2009

May marks the 5th year anniversary for Van Arbor Asset Management and our flagship Canadian Advantage Fund. We would like to thank all our clients, with a special thank you to our clients since inception. Since May 2004, the Canadian Fund has risen 69% (versus the TSX’s 19%) giving a 5 year annualized return of 11.1% (versus the TSX’s 3.5%).

CANADIAN ADVANTAGE FUND

The Canadian Fund had another outstanding month, rising 30.12%, while the TSX rose 6.93%. That brings our year to date return to 39.4% versus the TSX’s 4.3%. We attribute most of the strong returns to our patient positioning over the last few months, capitalizing from fear which drove down valuations to severely depressed levels. What we are seeing now is a positive correction from severely undervalued to just undervalued! So, don’t let these big returns scare you, valuations and sentiment suggest that with a continued improving economic environment, there is quite a bit of upside over the next few years. Last month’s gains were led by the energy, technology, industrial materials, and financial sectors, while precious metals and defensive positions lagged. The market is indicating that a possible economic recovery is sooner than many were discounting. This has been given credence from better than expected economic data, earnings reports, and general sentiment improving. The Fund’s stellar month was due in part to every stock in the portfolio outperforming the TSX. Some of our big winners in April were Teck Resources Ltd, Cameco Corp, and Transat Inc, rising 77%, 27%, and 45%, respectively.

WORLD ADVANTAGE FUND

The World Fund also had another great month, rising 12.4%, while the MSCI World Index rose 5.1%. The Global economy appears to have stabilized from its sharp fall over the last few quarters and in some regions is showing signs of growth. Asia, in particular China, appears to be at the forefront with their 15% GDP stimulus package ramping up domestic demand. Their manufacturing index just showed an expansion for the first time in nine months, helping explain the increasing demand for raw materials. Western economies are showing signs of stabilization after last year’s financial crisis. The general economy from here will likely still remain weak in the short term; however, equity markets are looking forward to the fall/winter where economic activity and profits appear to be heading towards a more positive turn than most have been expecting. The situation remains fluid, but with interest rates near zero and global stimulus hitting the pavement, there is no shortage of catalysts to get the economy heating up. With respect to the Fund, last month saw great returns from Norwegian bank DNB Nor (38%), British diversified miner Anglo American PLC (25%), and Swiss oil service company Transocean Ltd (15%).

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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