Van Arbor Newsletters

March 2010 Newsletter

2010-03-02T11:02:00.009-08:00

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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February 2010 Newsletter

2010-02-01T11:58:00.002-08:00

CANADIAN ADVANTAGE FUND

January was a mainly flat month for the Canadian Fund, nudging down 0.23%, while the TSX Index dropped 5.90%, resulting in a net outperformance of 5.67% for the Fund. The main drag on the market last month were the energy and materials sectors, as a strengthening US dollar and monetary tightening in China dampened the appetite for commodities. The Canadian Fund doesn't currently have much exposure in these areas as we have transitioned to better earning and valuation opportunities in less cyclical areas of the economy. Overall, the current portfolio does not resemble the TSX index very much as our attention has shifted to under owned Canadian companies that offer better rewards relative to the big index movers. Some of the big winners last month were Cogeco Cable (+13.60%), which beat earnings expectations by nearly 50% last month, as well as Loblaw's (+3.57%) which continues to offer excellent valuations relative to the rest of the market.

WORLD ADVANTAGE FUND

The World Fund started the year off in the green, rising 1.73%, while the MSCI World Index fell 2.5%. The positive month was mostly attributed to our positioning in US dollar priced assets which saw healthy currency gains as well as strong earnings. The two big winners last month were grocer Safeway (+5.45%) and Japanese utility Tokyo Electric Power (+4.28%), both of which benefited from very attractive valuations and improving fundamentals in their sectors. Going forward, we continue to see global opportunities from a company and currency standpoint and believe this offers an opportunity to grow the Fund independently of the overall direction of the general market. This should help the Fund continue to perform well on a relative and absolute basis in the current market environment.

January 2010 Newsletter

2010-01-01T08:46:00.007-08:00

ANNUAL UPDATE

Welcome to the next decade. Investors were tested to extremes this past decade; yet, wherever there is crisis, you can be sure there is opportunity close by. So as we all collectively stared into the abyss a year and half ago and our discipline was tested, we chose to focus and trust our independent analysis on the opportunities that were presenting themselves in 2008. The end result was a truly outstanding year for our Van Arbor Funds. The Canadian Fund led the pack in 2009, doubling in value and more importantly outperforming the TSX Index by nearly 70%. The World Fund also stood out with its 43% return, beating the World benchmark index by nearly 35%. There is no doubt that 2009 offered better opportunities than most years; however, we like to look at the full two year cycle to gauge our performance over the down and up market. The more important statistic we like to look at is the performance of the Funds since the TSX peaked in the summer of 2008. Since then, the TSX remains 20% below its peak value, yet both the Van Arbor Canadian and World Fund have increased in value by nearly 40% since the TSX peak. We are proud of that statistic because it exemplifies our focus on capital preservation alongside capital appreciation.

As investment managers', our job is to learn from the past yet look towards the future. So with that being said, we are happy with our past performance but are focused on the opportunities that are shaping up ahead. In the short term we have shifted our attention to areas of the market which have been ignored over the last year. We did very well on materials, energy, and infrastructure companies last year as we were anticipating a strong cyclical rally fueled by fiscal stimulus, monetary reflation, and extreme pessimism. Being value investors, we are always looking for the best absolute and relative current opportunities, and thus have shifted some of our interest to the companies left in the dust in last year's rally. Companies from the utility, telecom, and consumer staples sectors are trading at great prices relative to the overall market. As the economy stabilizes, these companies will catch up in valuations to the rest of the market and thus offers an opportunity for steady returns over a reasonable time frame.

Over the medium to long term, we see this decade offering great investment prospects outside the typical index portfolio. We saw that last year, in both Funds, our portfolio looked very different than the typical index and was the reason why we were able to greatly outperform the market. The next few years will likely be the same, as we focus on the best opportunities from the material, utility, and infrastructure sectors for example, rather than trying to match the composition of the index. The Global economy is coming out of the economic crisis non-uniformly. Economies in Asia and emerging nations are seeing strong V-shaped recoveries, while other areas of the market are seeing a more tempered recovery due to consumer and business deleveraging. The medium term result will be a lumpy recovery that favors specific areas of the economy, which we will be focusing on. The next three years will likely continue to be a stock picker's market, which is an environment where we believe Van Arbor will continue to do well in.

CANADIAN ADVANTAGE FUND

The Canadian Fund had a good quarter to cap off a great year, rising 3.4% over the last three months while the TSX rose 2.8%. Economic and market stabilization were the main themes in the last quarter of 2009, with investors digesting the large gains from the March bottom. The recovery now enters a more mature stage of growth with earnings and economic data expected to show nice improvements. We continue to like underrepresented companies in Canada with strong cash flows that are trading at bargain prices. December saw some nice gains from grocers George Weston (+9%) and Metro (+8%), as prices have stabilized, costs remain historically low and profit margins are improving. The key going forward from our perspective will be stabilization giving a lift to the less cyclical companies in Canada which didn't get a chance to participate in last year's rally.

WORLD ADVANTAGE FUND

The World Fund saw some stock gains last quarter that were tempered a bit by the strength of the Loonie. Overall, the Fund and the market ended the quarter almost flat; yet for the year the World Fund did well rising 43% even as the Loonie rose 15% versus most foreign currencies. We started last year with a bias towards positioning for a weaker US Dollar; however, this year we anticipate some US Dollar strength with the Fed removing excess monetary stimulus as the recovery gains a greater foothold. This should be a net benefit to the Fund, but also offers an opportunity to go around the Globe and pick up companies at discounted prices in Canadian Dollar terms.

Market data from Bloomberg, as at 12/31/09

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

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December 2009 Newsletter

2009-12-01T16:04:00.001-08:00

CANADIAN ADVANTAGE FUND

November was another steady month for the Canadian Fund, gaining 2.2% and making it the ninth consecutive positive monthly return. The S&P TSX Index just recouped October's losses, rising 4.9% for the month. Most of the market attention last month was on the materials sector, especially gold which continues to defy gravity. Given that gold is not consumed nor has any economic usefulness other than being an alternative currency, we remain skeptical of its current value as an investment relative to other areas of the market which have more solid "real" foundations. Lost in the glitter last month, was the exceptional earnings reports from Canada's food sector, which although is a small part of the market, is increasingly becoming a larger portion of our portfolio. Grocers in general showed that food demand is steadily increasing while price competition remains even. Some of our biggest winner's last month were grocers Loblaw's (+10.8%) and Metro (+7.6%), both of which delivered solid earnings with visible improving fundamentals. Even as the market has flattened out since September, we continue to see a stock picker's market with select value opportunities plentiful outside the attention grabbing index movers.

WORLD ADVANTAGE FUND

The World Fund had a steady month as well, rising 0.4%, while the MSCI Index bounced back by 1.9%. A decent month for the Fund, considering the Canadian Dollar's 2% strength versus most foreign currencies. With the US Dollar stabilizing at a 12 month low versus the Loonie, we believe the sale in foreign equities remains an attractive opportunity for most Canadians to capitalize on our popularity in the foreign exchange market. Of course, the US is not the only area with select opportunities, as Japan has piqued our interest along with Hong Kong. In particular, those Asian country's utilities look very attractive going into 2010, with very nice dividend yields, better economic production/electricity demand prospects, as well as sitting at multi decade low valuations. Our biggest winners in November were Japanese utility Kansai Electric (+9.9%) as well as international retailer Wal-Mart (+9.8%), which continues to grab market share from retailers around the World. This will likely be a common theme next year, with quality companies in less cyclical areas of the economy regaining earnings momentum and thus offering better capital appreciation opportunities relative the general market.

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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November 2009 Newsletter

2009-11-01T15:11:00.001-08:00

CANADIAN ADVANTAGE FUND

The Canadian Fund finished slightly positive for the month of October, while the TSX Index fell 4.25%, an indication that it remains a stock picker's market. Financials, industrials, and cyclical companies were the largest drag on the index as recovery optimism waned a bit. Earnings reports were mixed with bottom line profits improving but top line sales disappointing. Economic data continues to confirm a cyclical rebound is in the works; however, the magnitude of economic growth is uncertain as we transition from government spending led growth to private sector led growth. Not all areas of the market were weak in October, as previously ignored non-cyclical areas of the market, which we have been transitioning into, regained some attention with strong earnings reports and actual sales growth. Some of our biggest winners last month were Maple Leaf Foods (+18%) and Rogers Communications (+5%), both of which reported better than expected quarterly earnings. We expect the next few months to remain a stock picker's market with company and sector selectivity driving absolute and relative gains for the Fund.

WORLD ADVANTAGE FUND

The World Fund managed to stay positive in October, with a gain of 0.23%, while the MSCI World Index fell 1.37%. Some volatility returned to markets towards the end of the month as currency fluctuations along with mixed earnings reports led the market to give up earlier monthly gains. One of the biggest drivers of the recent market run up has been the weak US dollar, which showed some signs of life recently. Many areas of the market have benefited from the weaker US dollar and may be at risk of a pullback if the US dollar were to strengthen. There are many opportunities in areas of the market that are unaffected by currency volatility but are under represented in major indices. As some of the hotter sectors cool down, we expect attention to once again return to some great "boring" companies like US grocer Safeway, US utility Exelon, and Japanese utility Tokyo Gas Co. Our attention is also focused on the strength of the Canadian dollar, which has given the Fund an opportunity to buy foreign equities at discounted prices.

October 2009 Newsletter

2009-10-01T09:12:00.001-07:00

MARKETS AT A GLANCE: QUARTERLY UPDATE

Building on the last two quarters of positive performance, the Van Arbor Funds had another great quarter with the Canadian Fund returning 14.55% (TSX 9.65%) and the World Fund returning 8.25% (World Index 7.82%). With three fourths of the year complete, both Funds remain the top ranked Canadian Equity and Global Equity Funds in Canada over multiple time frames. Even though 2009 has been a great year so far, we would like to highlight the fact that both Funds are one of the best performing mutual funds (all classes) in Canada over the last 12 months. We highlight this, because although we are enjoying a strong year to date on the upside, we also managed the downside last year just as well. So, while markets are almost returning to their value last fall, both Funds are up just over 40% from before the crash. Just another reason why having an actively managed portfolio that focuses on capital appreciation as much as capital preservation matters in a market that may not favor passive investing.

The rest of the year promises to be an exciting opportunity to see selective relative gains in areas of the market which have been largely ignored, while also looking towards positioning for the best opportunities as we approach next year. From our perspective, there are plentiful of ideas that we are positioning into now which we believe will start to show some leadership going into next year. Some examples of the type of companies that we are transitioning into are stable cash flow producing companies in less cyclical sectors of the economy, which have been mainly ignored over the recent market rally. Many of these companies are mispriced in our opinion as the market has placed too low a valuation on their stable revenues and very attractive dividend yields. At the same time they offer less volatility than the overall market and economy, thus giving us a great risk/reward opportunity.

Economic Update

The Canadian economy continues to show its resilience relative to other developed nations around the World. Some of the consumer, financial, and housing problems plaguing our southern neighbor have failed to materialize here. A more conservative attitude towards credit, housing and consumption has all helped the domestic economy avoid large booms and busts. At the same time, Canada is gaining an international reputation as an alternative to the US as a place to invest in terms of currency, bonds, equities, and even housing. All of which will keep inflation on the radar as international investment flows provide support to demand. The one downside to the economy has been the appreciating Loonie, which continues to hurt the export sector. From our perceptive the high value of the Loonie today is an excellent opportunity for Canadians to use their strong currency to purchase now cheaper foreign assets via the World Fund, which invests in the US, Europe, and developed Asia.

*Rankings Source: GlobeFund and Morningstar

CANADIAN ADVANTAGE FUND

The Canadian Fund had a relatively flat September, rising 0.85% while the TSX rose 4.57%. Much of the one month portfolio lag was due to the portfolio transitioning into new ideas which better fit our current analysis. In terms of the market, the energy and material sectors were the best performers last month as markets continue to price in the rebound in economic activity. We have been transitioning out of some of these sectors as they have become more fairly valued and more importantly because we see better select value opportunities in other segments of the Canadian market place. Some examples of newly established positions that we like are Loblaw's and Shaw Communications. Both have been largely ignored over the cyclical rally, yet both offer excellent cash flow generation along with very attractive dividend yields. Characteristics which we believe the market is mispricing in terms of value and thus offers a good opportunity for capital appreciation relative to risk.

WORLD ADVANTAGE FUND

The World Fund fell modestly last month, ending down 1.87% while the MSCI World Index rose 1.49%. The strong Canadian Dollar didn't help the portfolio last month, being the only negative contributor to return. We expect foreign currencies like the US Dollar to begin to appreciate over the coming months, which is all the more reason why we advocate diversifying equity holdings into international assets as a way to capitalize on the strength of the Loonie. Last month was also a transition month for the portfolio as we locked in some profits from some of our many ideas in the material and industrial space. At the same time we have been positioning into other areas of the market like US grocers, Japanese utilities and Hong Kong infrastructure companies. Given the diverse selection of companies, sectors and currencies throughout the developed World, we are finding no shortage of opportunities which fit our current analysis and which we believe offer our clients excellent capital growth as we move into 2010.

September 2009 Newsletter

2009-09-01T13:37:00.001-07:00

CANADIAN ADVANTAGE FUND

The Canadian Fund finished the summer on a strong note, rising 2.94% while the S&P TSX Index ended almost flat, up 0.75%. That caps off the Fund's sixth straight monthly gain, helping us produce a 92% gain year to date, which coincidentally is the best return in Canada for a Canadian equity fund (Globefund, Morningstar). Strength from a few select energy, material, and industrial companies this month helped us edge out the relatively quiet TSX Index. The best performers last month were infrastructure company Aecon Group (9.0%) and oil service company Calfrac Well Services (10.7%).The market continues to build confidence in a more stable economy that is being helped by postponed consumption, rebuilding of inventories, and government stimulus. Most of this was confirmed with the first monthly increase of Canadian GDP in ten months. As the economy levels off, we are looking towards the economic landscape in 2010 and the opportunities that offer the best prospects for growth at a reasonable price.

WORLD ADVANTAGE FUND

The World Fund had a great couple of months over the summer, adding to July's gain with a 4.39% return in August while the MSCI World Index ($C) rose 5.61%. Not to outshine the Canadian Fund, but the World Fund has been standing out on its own with a 12 month return of 39.13%, making it the best Global equity fund and one of the top five Canadian mutual funds during that period (Globefund, 12 months ending July 31st). Our European holdings were the biggest gainers last month as economic data was much more positive than expected with demand from Asia helping the region. The biggest winner's were Danish shipper A P Moller - Maersk (15.1%) and German steel maker ThyssenKrupp (9.5%). Last year we witnessed the synchronized global recession, which has been transformed into the global synchronized recovery. The recovery stills remains lumpy with Asia faring better than developed western nations. From our standpoint, there is a plethora of opportunities and options available to us across the globe, regardless of the shape of the recovery; hence, we continue to see the World Fund building on its success as we approach the second decade of the 21st century.

August 2009 Newsletter

2009-08-01T15:31:00.001-07:00

CANADIAN ADVANTAGE FUND

July was a solid month for the Canadian Fund, rising 10.34% while the S&P TSX Index ended up 3.97%. Second quarter earnings season was the real catalyst for July's gains, as results came in much better than expected. In general, top line sales growth was still weak, but bottom line earnings were helped by good cost and inventory control. The market was led by materials and industrials, as manufacturing indices suggest a production revival is afoot. The replenishing of inventories and subsequent increase in production bodes well for industrial metals, resources, and early cyclical companies as we move into the year end. Canada is one of the better positioned countries in the World that will benefit for the coming cyclical recovery. Some of our biggest winners last month were from the materials sector, as industrial demand for metals is helping revive demand and sales growth for companies like Teck Resources (TCK/B) and Thompson Creek Metals (TCM). On the financial side, Brookfield Asset Management (BAM/A) had a strong month, rising 15%, as their strong cash flows and growth strategy are starting to get some positive attention.

WORLD ADVANTAGE FUND

The World Fund also had a great month, rising 5.68% in July while the MSCI World Index ($C) squeaked out a gain of 0.59%. The Loonie rebounded strongly last month by 6.93%, dampening foreign asset values; however, we managed to avoid much of the US dollar weakness by holding a diversified basket of currencies from Europe, Asia, and Australia. Worldwide economic recovery appears imminent as manufacturing, industrial demand, and consumer spending is all beginning to rebound. Asia continues to lead the way with China posting 8% GDP growth in the second quarter. The US is also showing signs of demand revival, which should be enough to end the two year long recession. The economic recovery will be lumpy and slow for certain areas of the economy like consumer discretionary; however, there are some real opportunities around the World that are capitalizing on the cyclical economic rebound. Some of our biggest winners last month were Swiss heavy electrical equipment company ABB Ltd, German steel maker ThyssenKrupp, and US aluminum producer Alcoa.

July 2009 Newsletter

2009-07-01T18:29:00.002-07:00

MARKETS AT A GLANCE: QUARTERLY UPDATE

A little bit of confidence went a long way over the last three months, helping markets around the World awaken from their Armageddon levels. The speed and broadness of the rally was an indication of how deeply oversold and undervalued stocks have become. Since our last quarterly commentary, the Van Arbor Funds have enjoyed their best quarter since inception. The Canadian Fund rose 58%, while the World Fund ended up 23%. Being value managers, it is always nice to see the market return some value to excellent companies that were brought down to unwarranted levels. Even as we write, there remain outstanding value opportunities leftover from last year's financial panic. In many cases, companies are trading below their net asset value. The one difference that we are finding over the last few months is that selectivity is of more importance going forward, as not all sectors offer the same prospects for a recovery in earnings.

This summer promises to be an enlightening time, as we get the opportunity to look under the hood, with companies reporting second quarter earnings. Outlook and some indication of demand will be the key things we are looking for. From a cyclical perceptive, it appears that the severe drop in demand and inventory drawdown over the last year is beginning to lead to a restocking of products and a revival from postponed purchases. Fiscal stimulus coupled with a much rosier growth outlook from China, should help markets continue their march towards a more normal valuation and subsequent higher market level. Even though markets have rallied off their recent bottom, the TSX for example would still need to rise nearly 50% to get to its 2008 all time high.

Canadian Economic Update

The Canadian economy remains in a rut, as the US recession continues to hamper the manufacturing, forestry, and auto sector. The few rays of light have been coming from the commodity and energy sectors, who are seeing a revival in prices as Asian economies are recovering much faster than expected. We expect that the current leadership from the resource sector will help benefit the broader economy, especially relative to the US economy, which may take longer to recover. Canada is also starting to get some positive international media coverage, with our financial system receiving kudos for its risk management, leading to greater investor confidence from aboard.

World Economic Update

The World economy is showing signs of bottoming after its worst global recession since World War II. The focus has now shifted from how deep the recession will be, to what the recovery will look like. Our main focus remains on a greater economic revival out of high savings rate countries in Asia and emerging markets. At the same time we see a recovery, albeit a slower one, in areas like the US and Europe, which have to spend some time rebuilding balance sheets through a higher savings rate. These larger themes are playing out in the economic data with countries like China showing signs of expansion, while the US sees signs of contraction ending. Thus, the investment implications over the next couple of years favors selectively before a broader recovery takes hold.

CANADIAN ADVANTAGE FUND

The Canadian Fund finished the quarter strong, with a 2.7% return in June, while the TSX index ended almost exactly flat. The second quarter of 2009 was indeed our best quarter to date, as leadership emerged from the material, energy, and industrial sectors, all of which has been where we have been establishing positions over the last few months. Value still remains in this market, as asset values, valuations, and sentiment remains well below normal levels. We have had to trim some of our big winners over the last couple of months as they returned to fairer values; however, we have found some very selective new opportunities as replacements that offer great value prospects over the medium term. Last month was a fairly balanced month for leadership, as investors digest the recent market rally and look out to the economic recovery which appears to be developing.

WORLD ADVANTAGE FUND

The World Fund also finished the quarter strong, rising 1.4% in June, while the MSCI World Index ($C) rose 5.4%, helped in part by the US dollar rising 4.8% versus the Loonie. Markets were mixed, as investors await a better indication of the shape and speed of economic recovery that is being led by a return in confidence. The Fund itself is fairly balanced with regards to international exposure. The Fund is currently invested equally in the US and Europe, with some select investments in Australia and Japan. Direct and indirect infrastructure companies remain our core holdings as economies around the globe are spending around 2% of GDP targeting infrastructure. Material and oil service stocks are also favored as their value coupled with global prospects has improved over the last few months.

June 2009 Newsletter

2009-06-01T08:39:00.002-07:00

CANADIAN ADVANTAGE FUND

The Canadian Fund had its third strong month in a row, rising 18.1%, while the TSX rose 11.2%. The Canadian Fund is now up 65% so far this year, while the TSX is up 15% year to date. Even with those strong returns, we continue to see excellent value opportunities created from last year's panic that drove stocks to unwarranted levels. As confidence continues to increase, we are not only seeing a greater appetite for quality stocks, but also valuations are starting to creep back to historic norms from a severely undervalued state. Valuations aside, the economic front is also improving as stabilization in financial markets is helping the economy recover from its worst recession in decades. Along with those early signs of recovery, we are seeing leadership emerge in early cyclical sectors like materials and energy, which coincidentally were the biggest gainers last month. Oil is now comfortably in the $60 range, but remains we below its $147 peak last year. Some of our big winners in May were Talisman Energy (18%), Sino-Forest (22%), and Major Drilling International (28%).

WORLD ADVANTAGE FUND

The World Fund followed through with another great month, rising 8.4%, while the MSCI World Index ($C) fell -0.3%. A few interesting statistics on this one year anniversary of the Fund: the World Fund has beaten the market every month since inception, leading to a one year return of 25% versus a loss of 29% for the World Index. In terms of May, much of the loss on the World Index was attributed to the soaring appreciation of the Canadian dollar, which rose 8%, reducing the value of foreign securities. The World Fund managed to avoid much of the currency effect by holding a diversified basket of companies in different currencies and at the same time not overly concentrating on the US economy and US stocks. We currently like commodity producing countries like Australia and Norway, which are seeing improvements in their economies as commodities continue to perform well due to improving demand from Asia and investor's appetite for an inflation hedge. May's big winners were infrastructure company Fluor (24%), miner Anglo American (19%), and oil driller Noble (25%).

May 2009 Newsletter

2009-05-01T09:18:00.002-07:00

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%).

April 2009 Newsletter

2009-04-01T09:32:00.002-07:00

MARKETS AT A GLANCE: QUARTERLY UPDATE

For the first time, in a long time, some constructive signs are emerging from equity markets and the economy. Confidence appears to be pulling markets from the depths of despair to a more reasonable view of tempered optimism. The fact that both our Canadian & World Fund have now turned positive for the year is an indication of the possibility for returns ahead of an actual economic recovery. Leadership in early cycle sectors, financials, and commodities are an indication that risk aversion is waning and opportunity seeking is growing.

The big turnaround this month was sparked by better than expected economic news, thus driving stability to markets around the World. Improving sentiment was the spark igniting the fire, but where will the fuel come from? Some reasons that could contribute to a sustainable market recovery is the record amount of cash sitting in money market and savings accounts, cheap valuations, as well as monetary and fiscal stimulus that is likely to fan inflation. Cautiously optimistic seems to be the view at the moment.

Canadian Economic Update

Canada is in the midst of its worst economic contraction since the 80's as the Great Recession in the US permeates all corners of industry. Central Canada is suffering from a manufacturing slump, as exports and auto sales have dropped off. Alberta is dealing with cyclical issues centered on their oil & gas industry. BC has helped mitigate some of the weakness in the forestry and mining industries with Olympic & transportation spending projects; however, it is still feeling cyclical effects. The one ray of light may be that the rate of economic decline is slowing. Historically, when there is a sharp contraction in consumer and business spending, it is usually followed by a sharp initial rebound as many purchases are postponed/delayed rather than forever cancelled.

World Economic Update

The Global economy is set for its first worldwide contraction, estimated to be up to 1%, since World War II. The US and Europe are setting up for a possible U-shaped recovery as they work off some of their high levels of debt. Some signs are emerging from areas like Asia that suggest their economies are more likely to follow a V-shaped recovery. China, for example, has pumped the equivalent of 15% of GDP in mainly infrastructure stimulus projects. Their nearly 50% gross savings rate is getting a lot of attention as it offers them the flexibility to stimulate the economy as well as shift their reliance on exports for economic growth to domestic/consumer demand. Chinese economic leadership will likely bode well for commodities and commodity producing countries like Canada over the next few years.

CANADIAN ADVANTAGE FUND

March was a big month for the Canadian Fund, gaining 20.7%, while the S&P TSX Index rose 7.4%. The very broad rally was led by financials, energy, and materials. There was no shortage of buying opportunities over the last few months as fear and panic drove shares to unreasonably cheap levels. Fortunately we have been accumulating positions in excellent companies that were trading well below fair value. Patience paid off, as some value returned to our portfolio; however, we still view our portfolio as very undervalued with many of our holdings still trading below book value. In a testament to the kind of value we are seeing, our stake in Petro-Canada was acquired by Suncor (with a 30% premium), which may mark the start of a consolidation wave. Some highlights from the numerous winners last month were double digit gains in oil producer Nexen, infrastructure company Aecon, and materials producer Pan American Silver.

WORLD ADVANTAGE FUND

The World Fund had another solid month, gaining 10.4%, and is now outperforming the MSCI World Index by 35.7% since June. Global companies in strong countries have been showing great leadership throughout the credit crisis. The big turnaround in equity markets in March has really been felt across the Globe as a flight to equities helped lift markets around the World. Our focus on large global companies has been well rewarded in terms of diversification and now we are starting to see the other side of that coin with strong absolute returns. One winner last month was Norwegian bank DnB Nor, gaining 18%, as their solid balance sheet has helped them emerge as a safe and profitable global financial leader. Material producers like British Anglo American PLC and Australian BHP Billiton also had good month, rising 18% and 11% respectively.

March 2009 Newsletter

2009-03-01T14:51:00.001-08:00

CANADIAN ADVANTAGE FUND

February saw the Canadian Fund fall 2.4%, while the S&P TSX Index dropped 6.3%. The decline was led by the financial and industrial sectors, which we are currently underweight, falling by 10% each. The US led financial crisis that started in 2007 has spread globally with economies around the World retrenching from consumer spending and business investment. The market is now pricing in a severe recession; however, the timing and speed of recovery is still uncertain and thus keeping market's volatile. Even with stocks sitting at 10 year lows and with favorable valuations, investor confidence has not yet returned. The materials sector has been the greatest performer so far this year as demand from Asia, infrastructure spending, and investor's appetite for hard assets is all helping the sector remain positive for the year. Last month saw a few select winners like copper producer First Quantum, pipeline servicer ShawCor, and Suncor Energy ending the month with double digit returns. Our selective investment methodology has helped us outperform the general market by 5% over the last 12 months as we seek the best opportunities in the market, rather than tracking the index, that are likely to show leadership going forward.

WORLD ADVANTAGE FUND

The World Fund had another decent month, ending down 1.6%, while the MSCI World Index ($Cdn) fell 8.0%. The theme developing in equity markets around the World is that large cap diversified companies in select industries, like infrastructure and basic materials, are outperforming their weaker peers in the financial and consumer sectors. The World Fund, mainly flat since June 1st and beating its benchmark by 30% in the same period, continues to benefit from investing in strong countries with good cash reserves like Switzerland and Norway. Having the ability to seek out the best opportunities in each country and sector from a global perspective has proved to very useful in the current uncertain environment. Some of the winners last month were Freeport-McMoRan Copper & Gold, benefiting from higher commodity prices, as well as Swiss oil service contractor Transocean which has long term contracts locked in at last year's record oil prices.

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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February 2009 Newsletter

2009-02-01T15:49:00.002-08:00

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.

January 2009 Newsletter

2009-01-01T14:54:00.002-08:00

MARKETS AT A GLANCE: QUARTERLY UPDATE

2008 is now officially in the books as the worse year for markets since 1931. With the financial crisis turning into a panic of liquidity and confidence, almost every asset class moved down in tandem, from stocks to commodities to corporate bonds. Fear was by far the most powerful force in the latter half of the year as the yield on US treasuries trades near zero while equities, on a valuation basis, are at their cheapest levels this decade. 2009 begins with a new sense of optimism that fear has pushed prices too low and the reward relative to risk is now very favorable. The market has already discounted a fairly severe economic scenario for this year; therefore, 2009 begins with a focus on when the recovery will begin. The massive amounts of liquidity and government stimulus being directed towards the economy will at least act as a good cushion and platform for a larger recovery to take place eventually. Markets are forward looking and we expect that record low valuations in the market and a general easing of fear will help drive equity markets higher. On a valuation basis, a significant gain from here is reasonable given the low prices being placed on assets and earnings, regardless of the strength of the economy. For example, many of our holdings would need to double in value just to return to their 10 year average valuation.

In Canada, we expect the Bank of Canada to further cut interest rates from the already historic low levels. The fall in interest rates and the significant drop in gas prices cannot be overlooked as a great stimulus measure for most Canadians. Overall, we expect the Canadian economy to slow down as consumers and businesses reduce overall spending. This reduction in spending will slow the recovery process; however, a modest economic recovery is anticipated later in the year. The stock market has already discounted most of the slowdown that will occur at the beginning of the year and is now looking towards the end of 2009 to an improving economic landscape.

The scope of the US led economic downturn has officially reached almost every corner of the globe as the US, Europe and Japan are in recession. Emerging markets like China, India, and the Middle East are also showing signs of slowing down but still maintaining modest growth rates. The pervasiveness of the financial crisis was the main focus of the market last year and now the focus turns to the economy and the measures to re-ignite demand. Governments across the World are using past lessons of financial crisis and are not taking chances in doing too little. It has become clear that governments would rather take the risk of overinflating their economies rather than seeing their economy remain moribund. Thus, most economies around the World will begin to re-inflate and we may actually see inflation return down the road from all the proactive measures being undertaken, which bodes well for stocks and commodities.

CANADIAN ADVANTAGE FUND

The Canadian Fund ended December down 3.5%, capping off a very volatile year. For the year, the Canadian Fund was down 36.06% versus the 35.28% drop in the S&P TSX Index. Our focus of capital preservation was hard pressed with panic selling effecting every stock and sector. 2008 was a large retrenchment year for equities and as a result there is now a plethora of extremely under valued companies throughout the Canadian equity landscape. Valuations for many growth companies are at their book values and some are trading at their cash levels! The economic landscape is likely to remain weak for most of 2009; however, the major benefit of the rapid panic selloff is that most companies are already discounting a severe recession. Given that equity markets are forward looking, we believe there is an opportunity in 2009 to see strong returns based on the current undervaluation and the global stimulus packages in the works. In terms of the portfolio, December some positive gains from Agrium, Pan American Silver and Methanex, on improving fundamentals.

WORLD ADVANTAGE FUND

The World Fund ended December up 3.5%, closing the year only down 4.3% versus the 24% drop in the MSCI World Index for the same period. We are satisfied with the performance of the World Fund in such a tough market and we hope to continue that success in 2009. Having the flexibility to hold companies and currencies outside of Canada continues to be a great benefit in terms of diversification. The opportunities outside of Canada and commodities in general are enormous and we have built a solid portfolio that we expect to continue to perform well again this year. Some of the best performing holdings last month were Aetna, China Mobile and American Electric Power.

December 2008 Newsletter

2008-12-01T10:49:00.002-08:00

CANADIAN ADVANTAGE FUND

Another volatile month in financial markets kept the Canadian Fund in negative territory; however, for the first time in awhile we saw positive developments ranging from government stimulus and liquidity injections to a bottom forming process occurring in equities and commodities. In general, every sector in November was weak with financials and energy shares leading the way down. The rapid decline that we have seen over the last three months has been disconcerting, as financial deleveraging and fear have prevented any sustainable rally. Given the positive developments from coordinated government spending and liquidity injections, we are beginning to see some level of stability work its way through the equity market. Patience will be rewarded with markets trading at undervalued levels unseen in the last ten years. Most of our holdings are trading at very attractive valuations, which suggest long term returns from these levels are an opportunity within a reasonable time frame.

WORLD ADVANTAGE FUND

The World Fund fared relatively well considering the 5.1% fall in the MSCI World Index and 7.5% fall in the S&P 500 Index. The Fund continues to hold its value in a tough market, outperforming the MSCI World Index by 19% since its inception in June. A focused portfolio in relatively defensive sectors such as Health Care and Consumer Staples has helped the Fund manage the financial storm of the last few months. Going forward we continue to see our holdings as leaders in the current environment and thus should continue to outperform the overall equity market. Relative to the Canadian market, the World Fund has less of a commodity focus and actually benefits from a weakening Canadian Dollar. Some of the winners last month were AT&T and McDonald's, which both have clear earnings visibility and in McDonald's case are actually raising their earnings outlook.

US ADVANTAGE FUND

November was the last month of the US Fund, initially launched in May of 2004. The US Fund, as a regional Fund, closed on a vote by Unitholders on November 22nd. Although the US Fund ended in negative territory, we take some hint of success by beating the S&P 500 Index by 10% since inception and almost by 20% this year alone. We hope to continue that success and expertise in US equities as part of the broader World Fund.

EURO ADVANTAGE FUND

November was also the last month of the Euro Fund, which was initially created in August of 2005. The Euro Fund, as a regional Fund, closed on a vote by Unitholders on November 22nd. The Fund itself fared relatively well since inception, outperforming the S&P Euro Index by 6% since inception and by over 10% this year alone. Europe remains a very attractive place to invest given its success of having a strong European Union as well as its drive to be a key regional hub to capitalize on growth in Asia, Eastern Europe and the Middle East. We look forward to transferring our expertise in Euro equities to the World Fund which can invest in Europe as part of its mandate.

November 2008 Newsletter

2008-11-01T11:53:00.001-07:00

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.

October 2008 Newsletter

2008-10-01T08:54:00.003-07:00

On September 22nd, Van Arbor Asset Management proudly announced that ZLC Private Investment Management, a division of ZLC Financial Group (www.zlc.net), acquired a 70% interest in Van Arbor.

Building on our strong alliance established last year, Van Arbor and ZLC's interests are now aligned with a commitment to provide quality investment fund solutions to shareholders, clients, advisors and institutions. Combining our strengths will allow Van Arbor to expand its potential across Canada as a premier fund management firm.

With the markets around the world in turmoil, September was a challenging month for equity money managers. Although losses were suffered, which we are never pleased with, the Van Arbor Funds relative to the performance of their respective markets can be seen in the following table:

MARKETS AT A GLANCE: QUARTERLY UPDATE

The winds of change are blowing and uncertainty reigns supreme. Elections, economic uncertainty and the acceleration of the credit crisis all weighed heavily on markets as equities & commodities fell sharply throughout the World. Canada, one of the last bastions of prosperity, was not immune as fear once again temporarily trumped fundamentals. It is true that most global economies are slowing and markets have been pricing the economic weakness that lies ahead; however, it is also true that there is opportunity created as forward looking markets usually recover 6-9 months ahead of any recessionary/slowdown bottom. Given that the strongest returns, from our investing style, usually come early in the recovery phase, we will be focusing during the next few months in taking advantage of new opportunities created. Overall, we are encouraged with our relative performance as our disciplined focus of holding quality value stocks coupled with the importance we put on capital preservation has helped us avoid many of the pitfalls of chasing growth stocks. Our defensive stance has positioned us to capitalize on adding great value companies as they become more reasonably priced. We remain diligent in focusing on quality companies that offer good earnings visibility, are less cyclical and offer stable returns relative to the TSX Index. At the same time we believe that there will be great opportunity for upside potential once fundamentals trump fear.

Contrary to popular belief, the US remains one of the better places to invest in the current market environment. The selection and diversity of large, safe and stable earning companies has offered superior opportunity for growth in a weak economic environment. One of the reasons that the US Fund and our new World Fund have fared better than the markets as of late has been the ability to diversify holdings appropriately as well as gain from the rebound in the US dollar. It may be surprising to think that the US dollar has continued to perform so well; however, given that the US led the global slowdown, it is likely to recover before Europe, Canada and Asia. Interest rate cuts have already been priced into the US dollar, while Canada and Europe are still cutting or haven't even started to cut interest rates yet, which will help the US dollar perform relatively well. Economically, we are seeing growth slowing down around the world, which may not bode well for commodities and growth style investing, but should favour value style of investing.

CANADIAN ADVANTAGE FUND

With the Canadian Fund falling 6.1% last month, relative to the S&P TSX Index's 14.5% drop, we can only highlight our 8.4% outperformance for the month and 11.5% for the quarter versus the market. The positive relative performance can be attributed to our disciplined defensive positioning, a bias towards value over high price multiple growth stocks and our patience in taking profits and building into new positions. September in general was one to forget with the previous market leaders from the energy, material and technology sectors falling around 20% for the month, due mostly to expectations of slowing global demand growth. The Canadian market took a big step forward in pricing in some of the risks that we have been anticipating and is beginning to move a lot of company's stock prices closer to reasonable levels and higher expected returns once the markets stabilize. Not all was down last month as a few of our gems, like Alimentation Couche Tard, rose 7.6% as their earnings benefit from declining oil prices and a stronger US dollar. Going forward we are somewhat defensively positioned, expecting more short term volatility, but we are also moving new opportunities into the portfolio as they present themselves in the current fearful market.

WORLD ADVANTAGE FUND

We would like to take this opportunity to introduce our newest fund, the Van Arbor World Advantage Fund. Initially incubated in October 2007, the World Fund gained Fund status as of June 1st, 2008. The primary motivation in starting the Fund was to combine our success in the Canadian, US and Euro Fund into one fund that can seek the best opportunities throughout the World. The Fund is focused on large cap global companies that trade throughout the developed world including the US, Canada, Europe and Asia (Japan, Hong Kong, Australia, New Zealand and Singapore). Having the flexibility to hold companies and currencies where we think the best opportunities are has proven very successful at maximizing returns while at the same time being able to create a much more diversified portfolio of stocks and currencies. The Fund, priced in Canadian Dollars, has been one of our best performers as of late being down 2.6% since June 1st compared to the 17% fall in the MSCI World Index (in Canadian Dollars). We believe that the World Fund enables investors to tap into the best companies in the World, while also having exposure to foreign currencies as the Canadian Dollar seems to be coming off its multi decade high.

US ADVANTAGE FUND

Once again the US Fund performed well in a tough market, down 3.2% as the S&P 500 Index dropped 9.1% in September. When you factor in the 12.5% gain in the US dollar for the year, the US Fund is actually up in Canadian dollar terms by 6.2% in 2008 versus the negative 10.6% return of the S&P 500 Index (in Canadian Dollars). The Fund has found much solace in companies like Wal-Mart, Altria and Proctor & Gamble as their stable earnings stream and consistent returns are being rewarded in the current economic environment. As for the US economy, it remains in a state of flux as the credit crisis puts pressure on the economy and cyclical companies, but it should be noted that some company's earnings are benefiting from falling input costs as commodity prices ease.

EURO ADVANTAGE FUND

Taken into context, the 8.2% fall in the Euro Fund for the month fared much better than the 14.6% drop in the S&P Euro Index. Year to date the fund now sits 13.2% higher than the market, in one of the toughest years in the Euro Zone market. Faced with somewhat high inflation and a Central Bank reluctant to cut interest rates, the Euro Zone has underperformed other World Markets. Financial and industrial companies have been weighing heavily on the Euro market, but we have found decent performance from our overweight positions in the health care and consumer staple sectors.

Van Arbor Asset Management Acquired by ZLC Private Investment Management

2008-09-23T12:54:00.002-07:00

Van Arbor Asset Management Ltd. ("Van Arbor") today announced that it's shareholders have entered into a definitive agreement to sell a 70% interest in Van Arbor to ZLC Private Investment Management Inc., a division of ZLC Financial Group.

"Building on our strong alliance established last year, Van Arbor and ZLC interests are now aligned with a commitment to provide quality investment fund solutions to shareholders, clients, advisors and institutions," said Andrew Parkinson, Managing Director and Portfolio Manager. "Combining our strengths will allow Van Arbor to expand its potential across Canada as a premier fund management firm."

"We believe that the acquisition of Van Arbor strengthens our position and greatly increases the asset management services and resources offered to our retail, institutional and high net worth client segments," said Garry Zlotnik, President of ZLC Private Investment Management. "With a long history in the Canadian marketplace, ZLC has a proven capability and we are committed to growth of unique financial offerings."

About Van Arbor Asset Management (www.vanarbor.com)

Vancouver-based Van Arbor Asset Management Ltd. is focused on creating wealth for its clients using a disciplined, proprietary investment methodology with an emphasis on preserving capital while generating superior long-term returns. Van Arbor offers the Van Arbor Canadian Advantage Fund, the Van Arbor US Advantage Fund, the Van Arbor Euro Advantage Fund and the Van Arbor World Advantage Fund direct and through financial advisors across Canada.

About ZLC Private Investment Management (www.zlcpim.net)

ZLC Private Investment Management was launched in April 2000 as the Asset Management division of ZLC Financial Group (formerly Zlotnik, Lamb & Company). ZLC Financial Group can trace its proud history back to 1945, and the passion for capital preservation that has driven its success is a great strength ZLC Private Investment Management has inherited.

For more information or to obtain a copy of the Offering Memorandum please contact or Andrew Parkinson, Managing Director, andrew@vanarbor.com at 604-895-7122 or Steve Hanson, Managing Director, steve@vanarbor.com at 604-895-7126.

September 2008 Newsletter

2008-09-01T09:33:00.000-07:00

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.

August 2008 Newsletter

2008-08-01T10:04:00.004-07:00

CANADIAN ADVANTAGE FUND

With a continued defensive stance, the Canadian Advantage Fund ended the month of July almost flat, down 0.7%, sharply outperforming the S&P TSX Index which fell 5.8%. A strong relative outperformance attributed to our diversified core holdings focused on non-commodity sectors of the Canadian marketplace. The energy and material sectors finished the month down 12% as concerns of a slowdown in overseas growth dampened enthusiasm for commodities. The market seems to be undergoing a change in sentiment from growth to value, which definitely favours our investment approach. Once commodity and energy stock valuations come back to attractive levels we expect to accumulate industry leaders. The next few months will likely have a few road bumps but we are optimistic that our core holdings will deliver superior long term returns while preserving capital as the market stabilizes and turns around.

US ADVANTAGE FUND

Solid returns from our holdings in the health care and consumer staples sector helped lift the US Advantage Fund up 2.6%, while the S&P 500 Index fell 1%. Energy, materials and utilities were the main drag on the index last month as growth names fell sharply while value names saw steady gains. The month of July was once again volatile in the financial and energy sectors, which we remain underweight. Our US portfolio continues to significantly outperform the market indices, by over 10% year to date, while keeping volatility low. The US dollar seems to be stabilizing after hitting record lows and looks set to rally as international currencies are just beginning to feel a slowdown and will eventually need to follow the US in cutting interest rates. We see the US dollar gaining more ground on the Canadian Loonie in the second half of this year, which is all the more reason we see US equities as very attractive with plenty of diversified opportunities.

EURO ADVANTAGE FUND

The Euro Advantage Fund finished July relatively flat, up 0.3%, while the S&P Euro Index fell 1.5%. July marks the sixth month in a row that we have outperformed the index as blue chip value companies continue to lead a tough Euro market. The portfolio's diversified approach should continue to deliver stable returns as the Euro market begins to turnaround. Last month's best performers were technology provider Indra Sistemas and drug maker Sanofi-Aventis both rising 6%. Our focus towards industry leader equity selection remains even more important in this macroeconomic challenging environment and should continue to help lead to strong relative outperformance.

July 2008 Newsletter

2008-07-01T09:41:00.001-07:00

MARKETS AT A GLANCE: QUARTERLY UPDATE

The Canadian economy finds itself in a relatively advantageous position as the strength of the Canadian dollar has helped spurn inflation through cheaper import costs. Looking at inflation numbers across the globe, one can't help but envy the position of Canada as the demand for our country's resources has supported growth and tamed core inflation. The Bank of Canada has had a relatively easy time of cutting rates to an almost three year low as inflation remains in check; nonetheless, the rate cutting seems to be on hold as rising global inflation expectations will not be tolerated for too long by central banks. Fortunately, we have also benefited from domestic and resource based growth, which have helped mask weakness from our large neighbour. A resiliency we may be unfamiliar with relative to other more recent business cycles. It may be that the year ends with higher interest rates in Canada; however, the economy in general should be balanced from any slowing of export demand by domestic stimulus from relatively low interest rates and a healthy job market.

The slowdown/recession debate continues in the US as weakness in the housing and credit markets has slowed growth but so far mildly. It appears that the US economy is more in a state of disentangling from the credit and housing bubble. The bad news is that there is no quick fix and time will sort through the weakness. The good news is that the economy is not in a dire jobless or stagnate state and has two stimuli from a boom in export demand as well as aggressive interest cuts by the Federal Reserve. The US economy is by no means out of the woods, but rather balancing a shift in economic growth from the housing sector to the export sector. The largest concern now is not so much the housing market but the effects of high commodity prices on delaying a recovery. The second half of the year may actually see a rebound in the US dollar as an election focused on the domestic economy and a more hawkish Federal Reserve help stabilize the value of the dollar.

The European Central Bank (ECB) followed up on its threat to act on fighting inflation by hiking interest rates by 25 basis points this month. The monetary authority has been adamant in tackling inflation expectations and has diverged from US interest rates. The ECB's focus on inflation clearly stands in contrast to the US interest rate policy of focusing on growth and inflation. What is clear is that some regions of Europe are slowing at the same time as inflation is rising. The slower growth and the rising Euro currency's effect on lowering import costs will undoubtedly eventually lead to lower inflation; however, the ECB's intent on taming short term inflation will be the priority before concerns about growth. Where does that leave the Euro Zone? Possibly short term higher rates for the sake of preventing much higher rates if inflation got out of control. The wait and see approach should eventually benefit the Euro Zone as taking short term pain will help prevent a long term upward shift in inflation expectations.

CANADIAN ADVANTAGE FUND

The Canadian Advantage Fund ended the last month of the second quarter down 2.6%; however, the quarter still finished positively with a 2.9% return. Considering the volatility in markets so far this year, posting a modest gain was favorable relative to other World markets. June ended with narrow leadership once again as only two of the ten sectors in the market posted a positive gain. The portfolio has behaved very well lately as we establish positions in stable companies best suited for long term growth. As our holdings favor a more value style of appreciation, they have not yet moved much in either direction. We anticipate that those same holdings will eventually be the leaders as the broad market eventually shifts into recovery mode. In the meantime, we have found good opportunities away from the business cycle like cheese and dairy producer Saputo Inc, which rose 7.8% with another solid earnings report and a confidence boost from better than expected cost controls.

US ADVANTAGE FUND

The summertime blues hit Wall Street in June as equity markets gave back their gains since March. The US Advantage Fund continued its relative outperformance falling 5.8% as the S&P 500 dropped 8.6%. We thus ended the first half of 2008 down 6.3% while the S&P 500 index fell 12.8%, relatively decent considering what has faced the markets so far this year. The portfolio remains one of quality large cap names that have proven their earnings prowess even in uncertain times. As earnings season begins this month, we expect more of the same leadership from multinationals with diverse earnings and foreign demand. One of our best leaders last month was biotech Genentech which posted a 7.1% return as their cancer drug Avastin is becoming more widely used as a treatment option.

EURO ADVANTAGE FUND

Euro markets also saw their gains since March being replaced by new lows. The Euro Advantage Fund was down 5.1% in June, while the S&P Euro Index fell 8.8%. Overall, the Euro fund ended the second quarter down modestly by 2% even as the Euro Index fell almost 9%. Much of the relative performance could be attributed to the consistent performance from our mostly large cap portfolio which favors more stable earnings from the health care and utility sectors. Shares of drug maker Stada Arzneimittel was our best performer in June, rising an impressive 9% as the market fell almost 9%.

June 2008 Newsletter

2008-06-01T09:02:00.001-07:00

CANADIAN ADVANTAGE FUND

The surge in the price of oil to over a $130 a barrel helped keep the spotlight on the Canadian dollar and commodity stocks in general. The Canadian Advantage Fund benefited as well, rising 3.5% in May. The energy, materials and technology sectors had most of the momentum last month; however, our portfolio also saw solid gains from banking and utility stocks. Over the medium term we see opportunities in non-commodity stocks offering the better long term return prospects as they have been mostly ignored as evidenced by their low valuations. We expect that our more diversified approach will lead to outperformance as economic and energy volatility favors a value style of investing over growth/momentum investing. On the earnings front, solid earnings reports out of Cameco Corp and TD Bank helped reinforce their positions as industry leaders in the uranium and banking industry.

US ADVANTAGE FUND

The US equity market saw positive gains in all sectors, except financials, with technology leading the way. Our US advantage Fund rose 2.3%, which was again better than the overall market. The equity landscape continues to be very selective as economic weakness is not spilling over to all companies. We continue to find great opportunities throughout US equities, especially in multinationals with foreign demand generating solid earnings at a reasonable price. As economic weakness in the domestic economy remains uncertain, equity selection will be even of more importance going forward. First quarter earnings was evidence of this as our holdings in technology, consumer staples and industrials all benefited from foreign demand.

EURO ADVANTAGE FUND

The Euro Zone equity market was mostly negative for the month; however, our Euro Advantage Fund ended May up 0.4% even as the fall in the Euro versus the Loonie dampened returns by 2.1%. The Euro Advantage Fund continues to perform well recently and is now up just over 10% for the last three months. Inflation in the Euro Zone showed no signs of falling as energy, food and wages continue to put pressure on prices. There are some signs that the economy is slowing and until inflation eases, interest cuts as stimulus for growth are on hold. Our Euro Fund has begun to noticeably outperform the benchmark index as economic uncertainty favors a more selective approach. Our biggest winners in May were shares of Adidas AG and utility RWE AG, rising over 10% as their earnings outlook remains attractive.

May 2008 Newsletter

2008-05-01T08:39:00.001-07:00

CANADIAN ADVANTAGE FUND

The Canadian Advantage fund rose for the third month in a row, adding 2.1%, while the S&P TSX Index finished 4.5% higher as commodity stocks soared. The rapid assent of commodities reached new highs last month but showed some signs of weakening towards the end of the month. We started to see more broad based strength in April as the telecommunication, industrial and financial sectors rose 9.5%, 6.3% and 4.5%, respectively. Strong earnings reports from Rogers, Petro-Canada and Shopper's Drug Mart helped bring back some attention to non-commodity equities. Value it seems is starting to return to some of the more diversified and consistent companies that have been largely ignored in the recent commodity mania. On the economic front, the Bank of Canada cut rates again last month on growth concerns, which was confirmed with the 0.2% decline in GDP in February.

US ADVANTAGE FUND

The US Advantage Fund added 2.1% in April, while the S&P 500 Index rose 4.7%. We saw a fairly broad based rally in the US as almost every sector ended the month in positive territory. We saw mixed first quarter earnings from General Electric which showed weaker results from their financial business segment offset gains made from their better performing infrastructure and export businesses. Outstanding earnings results from Coke, United Technologies, and PepsiCo showed how important having large international exposure was in this type of environment. In general, we are seeing large multinational companies with significant international revenues benefit from foreign demand growth, which is more than making up for flat US growth. The weakness of the US dollar also helped boost export demand as well as increase the value of foreign currency profits. Shares of Wal-Mart continued to be our best performing stock this year as sales are benefiting from changing consumer spending habits towards thriftier outlets.

EURO ADVANTAGE FUND

The Euro Advantage Fund rose 2.8% last month, while the S&P Euro Index was up 2.1%. The Euro equity market saw a fairly broad rally similar to that in the US, with the energy sector leading. Shares of Total SA rose almost 15% as the undervalued energy company saw foreign investors buy a large stake in the company. Shares of Merck KGAA also rose 15% as the company's earnings came in better than expected. Euro Zone inflation showed signs of moderating as the rise in the Euro has helped reduce the cost of imports. As we saw in Canada, currency gains can rapidly cool down inflation and may provide some room for the monetary bank to cut rates in the future in order to stimulate growth. This month saw shares of Man AG sold, while a position was established in Spanish utility Iberdola SA.

April 2008 Newsletter

2008-04-01T12:47:00.002-07:00

MARKETS AT A GLANCE: QUARTERLY UPDATE

The benefits and costs of having a strong Canadian dollar are being more broadly felt across the economy. The remarkable fall in consumer prices, especially food costs, has been a huge benefit in tempering inflation as import prices have fallen quickly. The Bank of Canada welcomed the inflation relief as other countries are facing much higher rates of price increases. The labour market continues to add jobs at an impressive rate with unemployment still sitting at a historic low. The strength of the energy, mining and consumer sectors has helped prop up the economy even as the US economy slows. The main weakness in growth has been the export sector with manufacturing and automotive demand suffering from the strong Loonie. The Bank of Canada appears intent on slowing the rise of the Loonie by cutting interest rates twice so far this year. Further rate cuts seem evident as weakness in the US economy puts more pressure on the export market; however, the strength of the domestic economy coupled with demand for commodities will keep the economy relatively buoyant.

The US economy faced numerous challenges in the first quarter of 2008 as developments in the housing and credit market continued to add pressure to the US economy. The Federal Reserve's swift actions of interest cuts and added liquidity to the financial system should help prevent a severe slowdown from developing. Rising inflation and slowing growth has helped push the US dollar to record lows against most major currencies. The weak dollar is helping boost the export and manufacturing sectors as US goods become relatively inexpensive for foreigners. Lower borrowing costs and the weakness in the dollar remain key to driving growth in the second half of the year.

The Eurozone economy has so far avoided many of the concerns surrounding a slowing US economy and a Euro at record highs. The focus remains on inflation as rising food and oil costs has prevented the European Central Bank from cutting rates in step with the US. Unemployment continues to fall, especially in Germany where low unemployment is helping support a strong consumer sector. As the effects of a high Euro and slowing US demand begin to be felt, slower export growth seems evident. There haven't been many signs of weakness in the domestic economy; therefore, moderate growth rather than contraction seems to be the more likely direction of the Eurozone economy.

CANADIAN ADVANTAGE FUND

The Canadian Advantage Fund rose 0.6% last month, while the S&P TSX Index fell 2.1%. Leadership shifted out of the energy and material sectors and into the financial, telecommunication and utility sectors. As commodities retreated after hitting record highs, the focus shifted to non-cyclical diversified companies whose valuations look very attractive in the current environment. We continue to favor large cap companies with consistent earnings and dividends which we expect to lead going forward. Some of the best performers last month were Shoppers Drug Mart, Fortis and Research in Motion.

US ADVANTAGE FUND

The US Advantage Fund rose 1.6% last month, while the S&P 500 index fell 0.6%. Industrials, consumer staples and utilities were the best performing sectors last month while financials and health care were the main drag. The weakness from the housing and credit market is beginning to spillover into the consumer discretionary and financial sectors; however, we continue to see ample strength from defensive sectors and those benefiting from the weak US dollar. Large multinationals with international exposure have so far been the biggest winners to date as foreign denominated earnings are helping boost their bottom line. Our best performers last month were Proctor & Gamble, General Electric and Exelon, rising 6%, 12% and 9% respectively.

EURO ADVANTAGE FUND

The Euro Advantage fund rose 6.7%, while the S&P Euro Index rose 5.9%. The Euro equity market was stable and resilient last month, benefiting from greater confidence in the domestic economy. The Euro reached a three year high versus the Canadian dollar, which helped contribute most of the gains for the month. Fears of Eurozone growth contracting eased as strong domestic data showed a healthy consumer. Inflation and a rising Euro remain the main concerns going into next quarter; however, expectations of a moderate pace of growth seems to have helped restore some confidence into the Euro equity market.