Canadian investment opportunities are becoming increasingly scarce as numerous mergers, takeovers and privatizations have shrunk the availability of quality public corporations. Examples of this takeover trend include: Dofasco, Inco, Falconbridge, Hudson Bay Company, LionOre Mining, Placer Dome, Four Seasons and Sleemans.

The shrinking Canadian marketplace and the dwindling supply of Canadian common shares presents a serious dilemma for portfolio managers entrusted to invest vast pools of money in Canada. Unexpectedly, and to its credit, the Government of Canada, a couple of years ago, wisely eliminated the 30% maximum foreign content provisions of Canadian pensions and retirement plans. This event and a recent meteoric Canadian dollar are now providing a huge impetus for Canadian investment managers to look beyond Canada’s borders toward the United States, Asia and Europe.

Admittedly, we have been somewhat early with this international equity diversification. Although we have suffered some foreign currency devaluation, particularly in our ABC American-Value Fund, due to a rising Canadian dollar, we have not lost our nerve. In fact, we believe, even more strongly, that now is an opportune time to invest in the U.S. and abroad. Accordingly, we have been accumulating a number of significantly undervalued American, Hong Kong, Australian and European equities. While we are mentally prepared to give up 5%-10% of currency depreciation due to the surprisingly strong Canadian dollar, we believe that many of our undervalued selections have the potential to provide appreciation in the form of capital gains of 40% - 50%.

In summary, our present investment strategy could be described using a chess analogy: “We are prepared to give up a rook to steal a priceless queen.” Accordingly, over the balance of 2007 we expect to gradually add a number of dirt-cheap international common shares to all five of our ABC Funds portfolios.

Irwin A. Michael, CFA