Presented in the paragraphs below are our thoughts on the current
investment environment:

A prominent bond fund manager recently made the following comment:  
“...the private capital markets have forfeited their privileged right to operate
relatively autonomously because of incompetence, excessive greed, and in
minor instances, fraudulent activities.”  This statement was made as an
obvious response to numerous revelations during an absolutely dreadful
quarter for the financial markets in which the only mainstream asset class to
post positive returns was short-term Treasury notes.  For the stock market,
the First Quarter of 2008 was the worst since 2002, and the correction
prompted many market observers to draw comparisons to past periods of
extreme market distress.  It culminated in the collapse of investment bank
Bear Stearns and aggressive actions by our Federal Reserve to restore both
confidence and liquidity to a seemingly fragile capital markets system.  In
certain respects, our large financial institutions squandered the trust implicit
in and necessary for a market-based system to function smoothly.  The
quote references the likelihood that regulation, oversight, and supervision
will be significantly tighter going forward.  We view this prospect as a
welcome development, although it implies slower economic growth.

Technically, the sell off was precipitated by forced liquidations among highly
leveraged speculators satisfying margin calls.  The magnitude of the
correction was exacerbated by uncertainty, fear, and misinformation.  High
quality and low quality assets alike were liquidated in an indiscriminate
manner as an unwinding of credit instruments and opaque derivatives
spiraled dangerously out of control.  Such are the characteristics of a major
financial crisis that could ultimately result in economic calamity.  With the
Fed’s innovative and creative actions and their activist approach to the Bear
Stearns debacle, we believe that much of the uncertainty has been resolved.  
We are also comfortable suggesting that the technical bottom for the market
occurred with the Bear Stearns announcement.

Fundamentally, we anticipate more bad news with regard to the credit
markets.  A technical bottom is not equivalent to fundamental improvement
-- i.e., on the contrary, we anticipate the period of balance sheet repair for

financial institutions to be quite extended.  Congress is working on a
resolution to arrest the principal cause of the credit issues – i.e., a decline
in the value of home prices.  It is likely that the final structure of the
rescue plan will prove controversial as some will benefit to a far greater
degree than others.  It has become quite obvious, however, that monetary
policy will not be sufficient to resolve these market difficulties; so, we look
forward to the passage of a timely fiscal package designed to alleviate these
credit concerns.  The combination of both policy actions should eventually
restore confidence in the markets, improve liquidity, and reduce risk
aversion.  

In the midst of chaos, there is often investment opportunity.  We continue to
seek and make selective investments in that regard, even among the
Financials.  Generally, we want to be positioned for an eventual recovery,
and we remain confident of our long term investment themes:  a) global
infrastructure build out; b) global demand for commodities, especially
agriculture and energy; and c) favorable economic fundamentals outside the
US, especially Asia and Brazil.  We are also most encouraged by the recent
bounce in the Dollar.  In the near term, we anticipate making tactical
adjustments in response to heightened volatility.  We appreciate that recent
market activity is unnerving; please do not hesitate to contact us.  We look
forward to discussing our views with you.