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March 2010 Newsletter

March 2nd, 2010

CANADIAN ADVANTAGE FUND
The Canadian Fund ended February with a flat return for the month as well as year to date. The TSX index recouped some of its big losses in January but remains down 1.34% for the year. Cyclical companies were the biggest gainers last month as January’s declines proved premature with mostly positive economic data fueling hopes of a continued cyclical recovery. After last year’s large gains, markets seem content to trade in a range until the private sector takes the baton from government spending led growth. In the meantime, we have a preference towards non-cyclical companies that were largely ignored over last year’s rally. On a relative basis, valuations in the utilities and telecommunications sector are a fraction of the large index sectors and should do well in the current market environment. On the earnings front, fourth quarter reports came in better than expected, but the picture remains mixed with good bottom line profit growth mixed with slowly recovering top line sales growth. Our focus remains on companies with good sales prospects that are trading at reasonable prices. Coincidentally these companies are underrepresented in the broad index; therefore, the current portfolio has less exposure to broad market movements and more exposure to individual company related fundamentals.

WORLD ADVANTAGE FUND
The World Fund was down slightly in February but remains up for the year by 1.27%. The MSCI Index ended the month flat and remains down 2.45% for the year. Much of the attention last month was focused on government debt concerns in Europe, as Greece aims to reduce its budget deficit and come up with a better fiscal plan. The World Fund currently has no exposure to European markets as we are focused more on companies in the US and Asia. Fundamentally, the global economic recovery continues to be led by low debt countries in Asia and emerging markets, which are showing signs of a V-shaped recovery. The best way to get exposure to these economies, in our view, is not by investing directly in the emerging nations companies but rather in multinational companies that sell goods to these areas. Companies that have goods that these nations demand should see better growth relative to domestically focused companies. This is one of the main reasons we highly recommend Canadian investors to diversify towards international exposure in order to benefit from the emerging prosperity of these new consumer nations.

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