PERFORMANCE ANNOUNCEMENT

As Of: June 6, 2005

A Changing World

High Population Nations Show Their Muscle

    Due to communist regimes, or extreme poverty, the economies of Africa, Indonesia, India, and China were considered weak and relatively inconsequential to western investors. However, as capitalism has spread and the purchasing power of individuals in the more populous nations grows, the use of resources and the ownership of assets will pass from the United States to other nations. This is an unalterable demographic fact. Even if it takes decades for the standard of living in countries like China to rise toward that of the United States, ten Chinese with 1/10th of the purchasing power of one American have an equivalent power in the marketplace. The shift may happen faster than we expect.

    What are some of the trends that investors may witness?

• Eventually companies like Coca Cola and Dell computer will be majority owned by foreign shareholders.
• The growth in energy use and the price of basic materials has only started to increase.
• As the global market grows, purchasing preference will initially be given to small consumer electronic items due to low price, function, and portability. (Think cell phones, MP3 players, PDAs, etc.)
• Companies with consistent cash flow models are apt to be among the most attractive in the future. (Think telecommunications, cable, internet services, gaming & gambling, etc.) For example, the average monthly revenue per cable subscriber at Comcast has grown from $42 per month in 1999 to $77 per month in 2004.
• The risk of credit and currency fluctuations in the global market, combined with the demand for resources, will drive investment toward hard assets as a store of value.
• As the purchasing power of individuals in countries like India and China grows, their purchases will gravitate toward quality global brands. Companies like Proctor & Gamble and Fortune Brands* are directly in the way of this trend.
• Countries will have to develop more policies to control access to and the pricing of essential resources. Additionally, countries will have to rethink policies regarding ownership of strategic enterprises such as transportation, telecommunications, utilities, technology, etc.
• All of this global repositioning will cause volatility, mispricing, temporary surpluses and shortages, and some inevitable fraud and scandals.

    These changes offer opportunities to both the long term trend investor, and the shorter term trader. The people at greatest risk are those who think it will be business as usual. Wake up! The world is changing.

*Note: Companies mentioned above are examples only. These are not recommendations.