GRI Equity - integral investing

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Perspective

Education, Education, Education. It keeps coming up, but then being pushed down again. During the past few weeks we've seen a flurry of commercial opportunities related to education. For us the most interesting has been work related to a Pestalozzian, or natural, approach to education. And we think that a systemic reengineering of global education to reflect such an approach is the way to resolve global challenges.

We allow ourselves to notice many of the problems of the world - which are not usually appreciated because most people are too busy working to pay the rent or for their holiday to be bothered about other people's concerns. Unfortunately we have a condition, a "disease", that makes it difficult to ignore starving children when we have enough to eat, or a boiling planet while we can breathe. Empathy.

We all benefited from a full education in the traditional model of teacher say, student listen. (I know only one peer who had a Steiner education.) Today most people in rich countries benefit from this. 200 years ago few did; some rich, privileged children but that is all. Unfortunately this approach is grossly inadequate for our world today: The technology we play with, from cars to computers, from washing machines to warheads, requires a thoughtful engagement. The human footprint exceeds the carrying capacity of the planet. We are unable to share, and kill for pride. We eat more than we can stomach. We steal from impotent people under the guise of righteousness (eg WTO). All of this and more, not because we are bad - we are fundamentally good. But because we allow a primitive organism (our bodies) to react as if we live in primordial jungle. Our physiological being is well adapted for this environment in which humans lived not so many generations ago (say 400). Our emotional intelligence lags far behind our technical capacities. We see examples of this dangerous combination everyday in all of our lives. Anger is not useful when you have your finger on a button that can destroy the world. Greed is not useful when the biosphere is over-extended. But we certainly have the capacity and understanding to manage ourselves.

All of the global and local problems that occur in our world seem at their root to require the reeducation of the players involved (including ourselves). Climate change, poverty, pollution, inequality can all be resolved with the technology we have, but not without a mature choice by everyone. And for us to be able to make those choices we need liberation of our mental and emotional intellect, not their control. Children know what is right and wrong and adapt to new ideas and situations, but we brainwash them to grow up as primitive organisms, like ourselves, fighting for more than can be consumed. Compromising honesty by hiding behind "truth". We must reengineer our values to effect change in the generation allowed to get us from jeopardising the biosphere to enlightened coexistence in nature.

The natural approach to education is to learn by experience, to start with self and simple and move out and to complex, and to have a nurturing environment. The simple motto is head, heart and hands" succinctly intimating development of body, mind and spirit, of practical, intellectual and ethical capacities.

Investment, Finance & V. C.

Stock markets continued their declines into June. A number of concerns continue to weigh on investors forecasts, but there is little concensus about which will force a correction, if any. The US dollar, China, US housing bubbles, inflation, commodity prices, emerging market volatility, nuclear posturing, terrorism all affect market sentiment. There appear to be imbalances in the market and therefore investors should be cautious, especially index or fund investors. We continue to maintain, however, that stock pickers can continue to make good investments, and in fact the recent declines offer an opportunity to do so.

The argument for value investing is further bolstered by James Montier, of DKW, who published a desktop analysis of the traits of value funds. He recently did a small survey of value investors to produce this table.

It is worth noting the apparent characteristics: concentrated portfolios (while there is a minimum level of diversification, portfolios hold a few well researched stocks rather than a many), they hold cash (they invest because they like the stock not just because they need to), there is a longer time horizon (the churn rate of around 20% indicates an average holding of around 4 - 5 years).

Aswath Damodaran, a professor of finance at the Stern School of Business at New York University who provides a wealth of outstanding content on his website, offers guidance on a stock market investor's best response to dropping stock prices:

The strong performance of Japan has led to a funadamental change in its economic structure as interest rates and inflation are beginning to look up. The end of the policy of low interest rates and stable exchange rates with the dollar is ending the Japanese Yen carry trade, wherein institutional investors borrow Yen cheaply to invest in dollars, knowing that the central bank of Japan is going to keep interest rates low and keep exchange rate stability.

The demand for dollars has been bolstered by the oil trade, which is in dollars. Interest rates are now becoming sensible which will dampen the US economy. All in all, liquidity is drying up.

A federal appeals court ruled that the SEC lacks the authority to regulate hedge funds, stalling the commission's efforts to oversee a rapidly growing industry that now has $1.1 trillion in assets.A three-judge panel ruled unanimously that the commission exceeded its power by treating investors in a hedge fund as "clients" of the fund manager. The commission has authority over any manager with at least 15 clients, and it used that to require hedge fund managers to register. The ruling, unless overturned on appeal, means that Congressional action would be required to grant the SEC the authority to force hedge fund managers to register, or for the commission to impose any other rules on such funds. The ruling does not leave such funds totally above the law since they are treated like any other investor in determining whether they violated securities laws. (So, the decision will not affect an SEC investigation into possible insider trading by a major hedge fund manager, Pequot Capital Management). It is likely that some more stringent regulation will come into force, either under current regulators or a newly created body, because of the industry size and impact.

The US housing market is cooling. There may not be perceived to be a crash in the market, in part because there has been disagreement over the extent of the bubble, but many indicators are coming off peaks and those peaks were significant deviations from historical trend. They include a drop in the housing affordability index to a 15 year low, inventory is at a long term high and well above recent trends driven by natural demographics, the increasing trend of sales of single family homes has peaked and started to drop, and the increasing trend of mortgage applications has dropped off. This is all good news in many ways because it indicates that any housing bubble is deflating slowly, so there will be less of a shock to the system. Consumer spending is also under pressure. This combined with the cooling housing market pressage a slowing US economy in the coming quarters.

Responsible Investing

Earlier this month, Toronto-based Corporate Knights magazine released its surveyof 54 Canadian socially responsible investing mutual funds, ranking the 43 funds with more than a one-year history. The survey ranks the funds on a 100-point scale, basing half of the score on the strength of their social and environmental practices, and the other half of the score on one- and three-year financial performance. Top-ranking funds include the Ethical Canadian Dividend Fund (94), Dejardins Environment Fund (84), Inhance Balanced Fund (82), and Ethical Special Equity Fund (80). The survey was initiated three years ago with a dual purpose: first, to test the assumption that SRI automatically underperforms, and second, to differentiate funds calling themselves SRI. This year's survey debunks the assumption. It finds that three-quarters of the SRI funds surveyed outperformed the broader universe of about 3,800 Canadian funds on a one-year basis as of March 31, 2006, according to the Fund Library Research Group and Funddata Canada. The analysis compared SRI funds to their peers in the same sub-asset class - for example, SRI special equity funds to the roughly 120 special equity funds in the broader Canadian fund market. Also on a three-year basis, exactly half the socially responsible mutual funds outperformed their peers and half underperformed, indicating that over time socially responsible mutual funds perform no better or worse than the average fund.As for the second purpose, the survey seeks to give social investors a sense of the range of rigorousness and commitment to social and environmental sustainability of the various funds labeled SRI.

The Financial Times, in association with the IFC, announced the 2006 Sustainable Banking Awards. Category winners included:

Congratulations to all! First adopted in 2003 and based on IFC standards, these voluntary environmental and social-screening criteria provide a framework by which banks can measure the sustainability of the projects they finance. The standards apply to development projects with a capital cost of at least $50 million in all industry sectors. So far, the IFC reports that 41 financial institutions have adopted the Equator Principles, representing more than 80% of the global-project loan syndication market.

When institutions adopt the Equator Principles, they use a common set of terms to measure a project's environmental and social risk. Borrowers must meet applicable safeguard policies set forth by the IFC and World Bank. For high- and medium-risk projects, borrowers must also sign covenants requiring compliance with all required environmental and social-management plans. None of that sounds unreasonable, and critics actually contend that the Equator Principles don't go far enough. Groups such as BankTrack, a European-based non-governmental organization, complain that the principles are limited to project financing only, and that they're difficult to account for or enforce. Institutions which have adopted the Equator Principles reviewed their doctrine this past spring, with plans to establish a revised version in early July.

The Financial Times hopes that the sustainable banking awards "will not only acknowledge leadership and innovation in sustainable banking, but also stimulate debate over how banks can create social and environmental values without sacrificing profitability." There's room for improvement here, especially among U.S. institutions. Besides Citigroup, only three other U.S. banks have adopted the Equator Principles so far: Bank of America, JPMorgan Chase, and Wells Fargo.

Shell tops the list of the worlds most sustainable and ethical oil companies for the third year running. In the 2006 study Shell achieves the highest score of any oil company ever, achieving 89.01%. This is the result of the third in-depth study measuring oil companies' compliance with over 280 key areas of sustainability, corporate governance, ethics, social responsibility and transparency by the Madrid-based ethics research and rating company Management & Excellence S.A.

Following up on its collaborative report with Merrill Lynch last year on how climate change will impact the auto sector, the World Resources Institute (WRI) has again paired with a Wall Street firm to produce climate-related research. Citigroup and WRI released a report entitled Investing in Solutions to Climate Change that identifies twelve companies set to benefit from global warming by offering products and services in four areas of climate change mitigation. Recommended companies include Archer Daniels Midland, Caterpillar, Cypress Semiconductor, GE, Itron, Johnson Controls, Monsanto, and Waste Management.

Britain’s leading environmentalist, Jonathon Porritt, warned independent health food and natural product retailers that the supermarkets “are determined to co-opt your market”. Unless independents fought back, he said, they would see their customers taken away from them by increasingly environment and health-aware multiples. Porritt made his comments at the 1st National Health Store Conference in London where he gave the Keynote talk. He said that there had been a major shift in approach among the big supermarkets in Britain and in America. The most important single development had been a statement from Wal-Mart ceo, Lee Scott, on his company’s new commitment to sustainability. Porritt added: “In the past Wal-Mart cared nothing about sustainability, all they wanted was lowest cost. Something fundamental has changed at the world’s biggest retailer and it’s sending waves through the whole retail sector. It’s no coincidence that three months after Lee Scott’s announcement, Tesco also decided to have its own green rebirthing. “What this means is that the great juggernaut of consumerist, industrialist, productivist economies are moving towards an understanding of the importance of sustainability.” But Porritt said that the greater responsiveness by the supermarkets to health, environment and fair trade issues presented a major challenge to independents — particularly the natural products trade. He said: “As the big cats of the retail jungle gird up their sustainable loins they are seeking to trespass on your territory. They will be thinking about stopping customers coming to you, and getting them into their stores. He said that whilst the supermarkets “don’t particularly care about the values” behind being green, or sourcing products locally or ethically, their financial muscle meant that they could “move quickly and purposefully on the big issues.” The risk for independents was that the supermarkets would appear to be out-greening the original health food pioneers. But as well as risks there were big opportunities for natural products retailers — the biggest being using "your business to marry human health and vitality with ecological health and vitality”. That, said Porritt, “is one of the most significant ideas you can possibly concentrate on”. He added if that independents grasped the nettle and acted seriously on local and ethical product sourcing, became demonstrably more sustainable than the supermarkets and helped their customers with effective ‘choice editing’ (“cutting out the crap”) “the health food trade will be a great place to be.” The reality is that while it is difficult for big retailers to be authentic in their delivery of sustainable options because their business model is designed to cut corners, consumers are not generally enlightened enough to afford the extra care in consumption, yet.

ADVANCE (Application and Dissemination of Value-Based Eco-Ratings in Financial Markets) is an international project supported by the LIFE Environment programme. ADVANCE applies the Sustainable Value-concept on a large European scale for the first time. The Sustainable Value-concept allows to assess and manage sustainable performance similar to economic performance. For this purpose it makes use of the tools and techniques used in the financial markets to assess and manage economic capital. Sustainable Value expresses sustainable performance in monetary terms (e.g. in €). At the same time Sustainable Value acknowledges the complementarity of economic, environmental and social capital. Put differently, Sustainable Value is based on what is called strong sustainability. To demonstrate the applicability of the Sustainable Value-concept ADVANCE has assessed the environmental performance of 65 European companies of the manufacturing sector using the Sustainable Value approach. The results of this survey can be found on this website.

After a spectacular trial, former Enron bosses Kenneth Lay and Jeffrey Skilling have both been found guilty on charges including massive fraud and conspiracy.

Venture Capital

Bill Joy, the co-founder of Sun Microsystems and now a partner at the storied VC firm Kleiner Perkins Caufield & Byers and one of Silicon Valley's most original and respected thinkers, was interviewed by Maria Bartiromo of BusinessWeek and reckons Green is the next big thing. As readers know we've said that for a while, but here it is in his words:

"I think the greatest legal creation of wealth today is in the green area - not just in the U.S. but in the developed world. We have been looking at a lot of things related to new fuels, such as ethanol, fuel cells, advanced battery technology, and new ways of using biotech to make fuels.... There will be an enormous amount of new [green] technology, new wealth, and we are trying to create the Googles, the Microsofts of the new era. [Even] the garbage stream has a high value."

The Cleantech Venture Network reports that $ 513 million in venture capital was raised by US clean technology companies in Q1, a quarterly record, and an increase of 52.9% compared to the first quarter of 2005. The sector placed fifth overall in VC investments for Q1 and exhibited its seventh quarterly gain. In 2005, cleantech VC investments totaled $1.63 billion, growing nearly 35% from 2004, according to the network (related coverage from Red Herring: Green Tech Cleans Up and Cleantech Funds Jump 60%). For energy-related VC activity alone, the research firm Clean Edge and VC firm Nth Power found that investments in the United States rose 28 % to $917 million from 2004 (see Clean Energy Boom Forecast). According to the New Energy Finance report, the past 18 months have demonstrated that venture capital and private equity investors can achieve good exits from investments in clean energy, with “extraordinary returns” not just in solar technology, but also in wind and biofuels. “This is a particularly healthy sign for the industry,” said the report. “We believe that venture capital and private equity investment in clean energy is set to grow very substantially. We expect steady growth in early stage investment as a flow of technology innovation makes it out of the universities, national labs, and incubators.” And for a storied review read Bloomberg's review of the sector here: VCs Bet on Solar, Biofuel Money-Losers in Green Energy Frenzy.

In related news, Nth Power, the well respected San Francisco-based firm focusing on the energy sector, held a $70 million first close on its $200 million-targeted fourth fund.

Nanosolar Inc, a Palo Alto, Calif.-based provider of lower-cost solar energy panels, raised around $75 million in Series C funding. Return backers include Mohr, Davidow Ventures, Benchmark Capital, Mitsui & Co. and Onpoint, while new shareholders include SAC Capital, GLG Partners, Swiss Re, Grazia Equity, Christian Reitberger (original Q-Cells backer) and Capricorn Management. The company also secured around $25 million in government factory subsidies.

Worldwide private equity investments in clean energy have slowed so far in 2006, while venture capital investments are up about 64 percent. Private equity deals totaled $2.05 billion through the end of May, averaging about $ 409.8 million per month, according to a report from New Energy Finance, a London-based research firm. That compares with private equity volume of $ 5.69 billion for the full year of 2005, or an average of about $474 million per month. In contrast, $636 million of venture capital was invested in clean energy for the first five months of this year—an average of $127.2 million per month—compared with $965 million invested in 2005, or $80.4 million per month. “The last two quarters of 2005 saw an unprecedented number of large private equity deals completed, and these need to be digested,” said the report. “Perhaps most significantly, however, a number of sectors of the clean energy industry are suffering from supply bottlenecks.” New Energy Finance still expects the total investment volume for the full year of 2006 will exceed that of 2005. Private equity and venture capital investments more than doubled to $ 6.7 billion in more than 220 deals in 2005, from $2.8 billion in 182 deals in 2004. New Energy Finance expects those investments to grow to $ 6.9 billion in 2006, and to $22.3 billion in 2012. That will mean a total of more than $100 billion in deals between 2006 and 2012, with “just under” $64 billion of that expected to be equity, according to the report.

European actitivty and performance figures were released by EVCA. Final activity figures for 2005 show fundraising reached €72 billion in 2005, a record for the industry in Europe and over two and a half times the 2004 level. Pension funds took the lead as the main source of capital in 2005, overtaking banks for the first time since 2001.The final amount of equity invested reached €47 billion, beating 2004’s record by 27.3%, with divestments at cost reaching record levels as well, at €30 billion. The final performance figures for 2005 show steadily improving returns across all parts of the industry. Since inception, the private equity industry has returned 10.3%, net of management fees and carried interest, with buyouts and venture capital returning 13.7% and 6.3% respectively. (Not very sexy, but a realistic presentation of the risk return profile.)

We saw signs of Indian investment activity expanding from technology and infrastructure to retail and consumer opportunities. Goldman Sachs has reportedly invested $100 million in Indivision Capital, a private equity fund established by Indian apparel retailer Pantaloon, which is about to reach a final close on a $400 million fund that will focus on investments in retail and consumer companies in India. Pantaloon hired Atul Kapur, a managing director at Goldman Sachs, to manage the fund.

China's private equity market is booming, with US$4.96 billion of private equity investments completed in the first five months of 2006, compared to US$4.04 billion for all of 2005. China's private equity boom has been driven by strong returns and a series of high-profile exits over the past two years. The Asia Private Equity Review reports that US$1.86 billion was returned to LPs in 2005 through 48 exits, including high profile transactions, such as Baidu's listing on NASDAQ, which gained 354% on its first day of trading, and China Construction Bank's debut on the Hong Kong Stock Exchange, which raised US$8 billion. According to APER, almost half of the 2005 exits had IRRs of more than 200%. Driven by these staggering returns, private equity investments are expected to surpass US$6 billion in 2006, which may push China past Japan in terms of invested private equity capital.

Another characteristic of this boom is the establishment of China entities or JVs by US, European, and Israeli venture capitalists. Veteran Silicon Valley champions, such as Granite Global Ventures and Doll Capital Management, have made a string of China venture bets, often as affiliate investors represented by local Chinese partners. This year, Accel Partners teamed up with IDG Technology Venture Investment for a US$290 million China-dedicated fund, and Ignition Partners teamed up with Qiming Venture Partners. Sequoia Capital has announced a new US$200 million China fund and led a US$30 million investment into a Chinese start-up called Worksoft. Normally it would be worrying to see distant arms length investments in unknown frontier environments, but there is evidence that moves are being made with local talent too, of which there should be enough because of the past 2 decades of activity (and mistakes) that have been made by foreign and local VC investors in China.

Interest Rates and Currencies

The US Federal Reserve raised interest rates by a quarter of a percentage point to 5.25% as inflation concerns continue. This is the 17th rise in a row, to its highest level in more than five years. It is increasingly difficult for the Fed to guage the appropriate level because the effects of rises in rates often lag by 12 - 18 months. Nevertheless, we continue to expect at least another couple of rises this year.

Larry Summers has made some poingnant observations about the policy of many central banks to hold a bulk of reserves in US dollars, which has helped bolster the currency in spite of a large deficit.The dollars Americans spend on foreign products eventually end up in the hands of central banks overseas, and the central banks invest the proceeds largely in U.S. government securities. They do so in part because they want to protect themselves against financial crises of the sort that struck Thailand, Indonesia, South Korea, Russia, Brazil and Argentina a few years ago. For a developing country, accumulating a big war chest of dollars can help discourage speculators from trying to drive down the value of its currency. But the upshot, in Summers's view, is "the central, global financial irony of our times": Countries that need capital to finance rapid development are shipping more money to the United States than is flowing in the opposite direction -- and it is their official policies to do so. "It is striking to estimate the cost to developing countries" of their Treasury-heavy portfolios. He notes that t he return "will be zero" on the US Treasury bills after inflation and currency changes are factored in. He has also noted that developing countries are passing up much more lucrative investments -- "this, in societies where hundreds of millions of people are still desperately poor."

Suppose, he said, "you were on Mars, and you had not seen planet Earth, but you had studied economics, and someone said there are these substantial number of countries that are growing at 4, 5, 6, 8, 10 percent a year that are relatively poor, and there are these other countries that are rich, aging, growing at 2 percent a year, 3 percent a year, 4 percent a year perhaps, with slowly growing populations." Although such a Martian economist would assume otherwise, "the flow of capital is actually very substantially from poor countries to rich countries, and in particular it is from poor countries to the world's richest and most powerful nations -- on a scale never before contemplated or seen.

Joe Stiglitz similarly commented: "There is obviously something peculiar about a global financial system in which the richest country in the world, the United States, borrows more than $2 billion a day from poorer countries - even as it lectures them on principles of good governance and fiscal responsibility."

But the reserves that have piled up, Summers said, are "far in excess of what is necessary" to defend against a crisis - probably more than $ 2 trillion too much, he estimated, based on the most commonly used guidelines. Moreover, "no one could suppose that these are going to be high-return investments," because the interest rates on U.S. Treasurys are about 2 percent after inflation, and for developing countries even that paltry yield would be wiped out if - as many analysts expect - the dollar declines against other currencies. But he pointed out that at an annual return of 5 percent - a conservative estimate for the long-run yield on a sensible stock portfolio - the $2 trillion in excess reserves could produce average annual yields of about $100 billion. That is more than all the rich countries in the world spend on foreign aid to poorer countries each year.

If these observations are taken to heart by central bankers, there would be a diversification of currency holdings which would stimulate a healthy rebalanceing of currency flows globally. This would also help move global economics towards the use of a global currency like the Terra and eventually the currency of nature - energy.

Trade and FDI

The Doha trade round continues its pathetic deteriration despite efforts of WTO head, Pascal Lamy, to rejuvenate them. In November 2001, two months after 9/11, Ministers met in the Qatari capital amid mounting global economic difficulties and declared themselves ready to launch the round to demonstrate North-South solidarity in the face of terrorism. Developing countries insisted their interests, ranging from better access to farm produce markets in richer economies to access to cheap AIDS drugs, should be a prime concern. The EU and the United States agreed their farm subsidies would be included in negotiations. A farm trade pact was to be concluded by March 2003, and the whole round by the end of 2004. Neither deadline was met; and have been repeatedly postponed. It may be difficult to conclude any negotiation after the ned of this year when US presidential authority to negotiate (given by Congress) expires. Now in desperation, Lamy has brushed aside suggestions from the United States and others that negotiators had until the end of July to close the chapter on farm and industrial goods, the two biggest obstacles for a new free-trade treaty. He believes the number 20 could hold the key - G20's proposal on farm tariffs, below $20 billion for U.S. subsidies and a "Swiss 20" formula for developing country industrial tariff cuts. It sounds tidy and maybe a deal can be reached, but the track record is appalling and given the failure of example set by rich countries we see little reason to be optiistic.

Another apparently less significant WTO issue is the ruling by the WTO that European states can not regulate GMO. (Read more here.) It is completely inappropriate that the WTO has the authority to settle such disputes - because it is undemocratic, secretive, biased towards big business and is more to do with science than trade. While this may seem like an unimportant issue, even to close watchers of the WTO, especially compared to the current failure of Doha round of trade negotiations, but it is at least as important because the impact of this ruling has the potential to destroy natural systems in a short time.

Worldwide sales of products carrying the Fairtrade mark have gone up by over a third to around $1.4bn last year, according to the Fairtrade Labelling Organisation. Over 500 producer groups are certified to supply Fairtrade products, which include coffee, tea, chocolate, sugar and fruit. The highest selling product is Fairtrade coffee, which enjoys 4percent of total coffee sales.

Activities, Books and Gatherings

We have a particular interest in education and found an unusual number of interesting opportunities and news in June, some of which are being developed to commercial enterprise. Most of these are connected with J.H.Pestalozzi, noted by many to be the founder of modern education. Pestalozzi's approach rested on three main ideas: teach by experience, start with self and work outwards, and create a nurturing environment.

Related to this PestalozziWorld is looking for a Chief Operating Officer/Deputy to take over some of the Founder’s functions running children’s charities in India, Nepal, Malawi and Zambia. The applicant should be London based and have an office at home. Such a person may have had a successful business or armed forces career, including management/marketing responsibilities, and now be looking for new challenges. He or she will have a pension or other income and be motivated by a desire to help some of the less fortunate in the developing countries. The new person will be offered a minimal monthly fee. Travel (low cost!) will be necessary as will an ability to work and communicate with many different people and the drive to get things done. Please let me know if you are interested or send us a CV in confidence which we will forward to the founder.

Many thanks to Hazel Henderson for listing our review on Ethical Markets. It is an honour to be invited into her community.

In the month of the World Cup we heard about an entertaining book: "How Soccer Explains the World: An Unlikely Theory of Globalization", by Franklin Foer. Apparently, once you start reading it, you won´tbe able to stop, even if football is not your favourite sport.

An interesting site for data miners is GapMinder.org whose dynamic representation of statistics you will appreciate. While it is currently a non-profit educational offering, it is useful for business, market and financial analysis too. You may find that it can add colour to presentations.

This report has been prepared for information purposes and is not an offer, or an invitation or solicitation to make an offer to buy or sell any securities. This report has not been made with regard to the specific investment objectives, financial situation or the particular needs of any specific persons who may receive this report. It does not purport to be a complete description of the securities, markets or developments or any other material referred to herein. The information on which this report is based, has been obtained from publicly available sources and private sources which may have vested interests in the material referred to herein. Although GRI Equity and the distributors have no specific reasons for believing such information to be false, neither GRI Equity nor the distributors have independently verified such information and no representation or warranty is given that it is up-to-date, accurate and complete. GRI Equity, associates of GRI Equity, the distributors, and/or their affiliates and/or their directors, officers and employees may from time to time have a position in the securities mentioned in this report and may buy or sell securities described or recommended in this report. GRI Equity, associates of GRI Equity, the distributors, and/or their affiliates may provide investment banking services, or other services, for any company and/or affiliates or subsidiaries of such company whose securities are described or recommended in this report. Neither GRI Equity nor the distributors nor any of their affiliates and/or directors, officers and employees shall in any way be responsible or liable for any losses or damages whatsoever which any person may suffer or incur as a result of acting or otherwise relying upon anything stated or inferred in or omitted from this report.

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Private and Confidential

June 2006