Pacific Capital Management Ltd.

The objective of our investment program is to achieve superior capital growth through investing in a diversified portfolio of publicly traded stocks in the markets of the Asia ex-Japan region. The markets include South Korea, Taiwan, China, Hong Kong, the Philippines, Malaysia, Singapore, Thailand, and Indonesia.

The Asia region has recently emerged out of its greatest economic peril over the period of 1997 through 1998. With assistance from IMF, crisis countries such as S. Korea and Thailand have delivered positive GDP growth this year. The region's better than expected economic performance has been aided by recent turnaround in Japan's economy and world economic growth. Robust export growth, increasing domestic demand, and healthy current account surpluses are providing support to the region's currencies and liquidity. In line with the positive macro environment, Asian stock markets have advanced over 40% this year.

We believe that a carefully constructed portfolio of stocks traded on the Asian markets will produce long-term superior growth. The investment strategy will incorporate both "top-down" assessment of macro economic factors and "bottom-up" selection of stocks.

The portfolio is expected to be a diversified one. Diversification has the advantage of reducing a portfolio's volatility. It is achieved by investing in companies across a range of different businesses. The portfolio will normally be fully invested. However, in periods of market volatility, cash may be raised to as much as 50% of the total assets in the portfolio.

How We Invest

We seek to identify companies that are leaders in their industries, that have produced attractive earnings growth in the recent past (including the crisis years), that possess strong financial strength and that are likely to achieve rapid earnings growth in the future. We would not invest in a non-"blue chip" stock unless we know the owner and the management of the company personally. Our investment style is research intensive, and our due diligence and analysis of a company's operations is comparable to the level of work in private equity investing. In addition, insights on companies and industries are gained through an extensive network of contacts built by Mr. Kwei over years of investing in the Asian region.

We use a variety of valuation techniques when determining the appropriate entry price for a stock. When data can be gathered and earnings forecasts can be developed internally, we use a discounted cash flow model to arrive at the present value of the stock. In many cases, however, not enough information is available for such a rigorous analysis. We would then use the price to earnings multiple as a tool and consider its prevailing value vs. its past and vs. its peers in the industry. In asset intensive businesses such as real estate investment and development, we would rely primarily on the calculation of net asset value as the valuation benchmark.

The Manager will follow a conservative investment policy, looking for stocks that are trading at good value and avoid ones that are highly speculative. Unless the fundamentals of a company have changed, its stock is likely to be held. Therefore, turnover of the portfolio will not be high.

Once a stock is selected, we will monitor the company's development continually. We have contacts with our core holdings on a regular basis and meet with their management at least annually.

We pay a lot of attention to macro forces that affect the performance of markets. Liquidity flow is a very important measure. We also monitor closely political and economic conditions in the various countries and either avoid totally or significantly underweight those markets that exhibit adverse developments. Investor sentiment often drives short-term performance of markets. While we try to maintain a long-term outlook on investments, we will at times take short-term profits or cut losses when market conditions are exceptionally volatile.

Due to our long experience in Asia, we often learn about potential corporate actions and will take advantage of them before their upside potential is reflected in the market. These so-called special situations are "icing on the cake" and will provide out-performance for our portfolio.

Summary

Our investment approach takes into account the following major factors:

1. Fundamental stock picking supported by intensive research and analysis and based on criteria stated above;

2. Close monitoring of political and economic conditions as well as liquidity flows for asset allocation purposes; and

3. Taking advantage of special situations to gain extra profits.

We believe that if we do our job well in the above-mentioned factors, we will enjoy a consistent and superior investment record over the long run.