GRI Equity - integral investing

If you want 1 year of prosperity, grow grain. If you want 10 years of prosperity, grow trees. If you want 100 years of prosperity, grow people.
-Old Chinese Proverb (from David Batstone's The Wag).

The year end is a season for children. It is the season of peace, trust and giving. Not easy behaviour for most of us. But let us refocus our energies in this regard. The quake in Asia needs our remediation. And poverty alleviation is a theme for the coming year with a good pre-launch by Band Aid's 20 year anniversary reissue.

To donate to relief from the quake, please see a list of organisations here: http://news.bbc.co.uk/2/low/asia-pacific/4131881.stm. The death toll attributable to the tsunami will reach 200,000.Consequential damage like infection and disease may bring the death toll to half a million. At least 2 million people are displaced most having lost their homes and livelihoods.

And for those directly involved in relief, the World Conference on Disaster Reduction in Kobe (remember the quake that broke Barings), Japan, January 18-22, 2005 may be of interest. Details here: http://www.unisdr.org/wcdr/.

Perspective

Since reengineering my career six years ago, I have experienced extremes in very different environments, some of which were destined to test the economics of sustainability. In many ways 2004 was a breakout. The contrast of the world of venture capital and the world of sustainable living seem at first to be diametrically opposed. And bridging the two has helped practice empathy and equity. The sense of where we are today should be tempered by the perspective of a positive realist.

What has changed in 2004 is that some uncertainty, or risk, has been removed. It is more certain that human behaviour must evolve more quickly than in the past in order to preserve life. Climate change (volatility) is a fact. Climate change is damaging the biosphere.

There are many ways that we can change. If your conscience does not prick you to change, there is evidence that change is necessary and beneficial. Typical human activity (industrialization, farming, cattle raising, collection of firewood, hunting, etc.) is more devastating to biodiversity and abundance of local flora and fauna than is the Chernobyl nuclear power plant disaster ( http://www.nsrl.ttu.edu/chernobyl/wildlifepreserve.htm).

It is accepted that we must all “be the change that we want to see in the world”(Ghandi). It is accepted that we who have the means must set the example.

The reality is that we are rather comfortable. Yes, 2 billion people (depending on your definition) are living in poverty but they're not reading this. And there are a few million who spend millions on themselves but they usually give as much. The majority of us fall in between. And we decide what the world looks like by our spending, investing, voting and social engagement.

Its the story of the Emperor's New Clothes or “people believe what they want to believe”. It may be that the natural disaster in Asia will be the crisis that reawakens us, but the invasion of Iraq failed to do so. Within living memory humanity experienced a similar situation of popular comfort masking a darker reality: in the 1930s Germany's righteous pose evolved into the Second World War from 1939 to 1945. Good Christian US businesses continued financing Germany till 1942. Let's be the exception to that old saw “what we learn from history is that we don't learn from history”.

Since 2001 there has been a focused expenditure on military endeavour with the principal resource consumption being the invasion of Iraq. The death enforced by nature's quake on 26 December is greater than the damage caused by the invasion of Iraq. If humanity spent as much on peace and equity as we've done on belligerence, we would be in a better position to deal with risks and alleviate suffering. And terrorism is less likely to be one of those risks.

If the invasion of Iraq and the Asian quake don't move us, perhaps the world of money will provide an impetus. The risk of major defaults by core players in the world of money and economics is rising. Asian currencies, the weight of China, the dollar, developing country debt, a long term bear market are a few references. Unfortunately the consequences of losing the blood of economics will make a lot of people a lot worse off.

Religion, spirituality, ethics are critical ingredients of the social contract of modern times or the new world order. The void of spirituality left as traditional religions are tested development must also be filled. It can not be filled with money. It is a significant resource in stable human societies and needs to be rejuvenated. People know this. So do investors who see wellness and LOHAS as key growth markets for venture capital.

"How can we explain to the generations to come why we did so little, when so much was within our reach?"

Our outlook increasingly is focusing on Asia, Africa and South America. Many of the more interesting opportunities that we see are in Asia and South America and the growth of MicorEnterprise in Africa is underway. PestalozziWorld, a children's education charity which we work with, has successfully launched an institute to provide the infrastructure for education of baccalaureate candidates from around Asia and is increasing its attentions in Africa. Already sponsoring education for over 100 children in Kenya the foundation is looking to Malawi also. And exciting developments in our technology and research business Astraea have emerged. Systems thinking has found institutional confirmation as the way forward. An introduction to holonics, as whole systems thinking or big picture thinking is termed, is available to our readers here.

2004 Summary – a difficult year?

Iraq, all year long. Abu Gharib came to light. Hostages were executed. Guantanamo increasingly under scrutiny from without (Red Cross) and within FBI and judiciary. Authorities concluded that there were no WMD and no link between Iraq and Al Quaeda.

In the Middle East a divisive wall was built with lax international criticism. Arafat died.

The killing in Sudan continued and made a few headlines, but was overshadowed by Iraq.

Elections everywhere: Malaysia, El Salvador, Taiwan, Hong Kong, Ireland, Philippines, Canada, Japan, Mexico, India, Indonesia, Venezuela, Philippines, Australia, Afghanistan, Mozambique, US, Ukraine – twice!

Natural disasters and freak weather: storms in US, locusts in Africa, quake and tsunami in Asia.

Russia slipped back into old ways as former-KGB, current President took control of private enterprise.

Open source software broke in to the mainstream with endorsements and purchases by governments and businesses around the world.

Geopolitics

Political terrorism has a distasteful ethical dimension and has played a part in much news in 2004. The war in Iraq has of course occupied our minds daily. Other consequences, like travel restrictions, are becoming part of life. Bombings in Madrid reinforced pacifist feelings, coincidental with the Spanish elections.

National elections have occupied a majority of humanity in the past year. The most significant being the USA because of the weight of the US economy in the global economy and its military engagement in Iraq. But the Ukrainian election setting the example in forward thinking and acting. Indonesia continued its democratic emergence.

Russia has not been mentioned often in our roundup but the increasing evidence of corruption at the highest level bears attention. We have seen Yukos attacked and controlled by Putin and then an election in Ukraine heavily influenced by Putin (possibly to the extent of vote tampering). While many remain eager to invest in Russia the local money appears to be flowing the other way. Oligarchs have expatriated some $ 12 billion in 2004 compared to only $ 2.3 billion last year. There are no signs that the political system in Russia is going to liberalise and those with significant business interests will have to toe the party line if they are to survive an increasingly draconian regime. Its financial situation however is strong, six years after a $ 40 billion debt default. Oil revenues have played a part in that and the government's increasing control of Yukos is part of that strategy. Expectations for an upward revision of the country's credit rating are strong.

The Bhopal anniversary came in December and some shareholders of Dow Chemical (parent company of Union Carbide) filed a resolution asking Dow to quantify and analyze the impacts that the Bhopal issue may reasonably pose to the company, its reputation, its finances, and its expansion in Asia and elsewhere. (Background on Bhopal is here)

"The conflict in the Sudan's Darfur region that began in 2003, and which continues unabated . . . has precipitated one of the worst humanitarian and human rights crises in the world today. Since early 2003, some 1.8 million people have fled their homes and 70,000 have died. In September, the United States government concluded that genocide has been committed in Darfur and that the Khartoum government and the government-sponsored militias bear the responsibility for it." So reads a letter written by Mark Anson, chief investment officer of the $177 billion California Public Employees Retirement System (CalPERS). The letter, sent to all companies in CalPERS' portfolios as well as to all its portfolio managers, asks for disclosure on the extent to which companies CalPERS holds engage in any business with the Khartoum government.

Turkey accelerating its progress to joining EU. It has expressed interest for 40 years and implemented many social changes to comply with EU ethical standards. This has not been easy because the poor human rights culture is endemic and is expected even by educated residents. As a large secular state whose population is muslim it offers an important example of integrating diverse views and it is appropriate that it should be welcomed and encouraged by the international community.

A debate currently rages about whether Kofi Annan enjoys the moral authority to lead the United Nations. Concerns have been raised because the Oil for Food scandal happened under his command. The UN is not perfect but it is an operating multilateral global leader. The following editorial in the Financial Times is an appropriate position.

Risk and Terror

Simultaneously preaching democracy and practicing torture is a bit disingenuous. There is continuing mistreatment, by legal if not physical means, of the Guantanamo detainees with allegations of prisoner abuse have also come from a senior FBI agent. And the language of salvation belies a black intent. "War on terrorism". "War on Iraq". No war is acceptable. Peace on terrorism sounds like the solution we really want.

We have allowed the use of hard power when soft power is the wise solution. The resulting deaths, unhappiness and economic chaos are increasing and only a soft power solution will be sustainable.

There are many who see war to be justified in certain circumstances. I used to be one of those people and still respect that view. But it is wrong. War is unjustified in a world such as ours. While integrating violence in to a panoply of social management tools may be appropriate, it is only appropriate at the lowest levels of intelligence – smacking a puppy for wetting the floor, even disciplining a child that is learning independence but not yet intelligent. Killing people has no place in our world (unless it is justifiable suicide - read Peter Singer for the leading thinking here).

Investment, Finance & V. C.

Demand for Sustainable Investing Methodology

The Financial Times reported on the growing demand for authenticity in businesses' approach to globally responsible behaviour. There is a growing case for governance to be more than a simple matter of ticking boxes, divorced from wider issues of corporate responsibility. Getting good governance into the culture of the company is necessary, according to Patricia Peter, head of corporate governance at the UK's Institute of Directors. "It's about having an effective board, a well-managed company and good risk and reputation management. Corporate responsibility and corporate governance are both elements of the board's overall role." The OECD's revised principles on corporate governance, which cover the rights of stakeholders, such as employees and suppliers says: "The governance framework should recognise that the interests of the corporation are served by recognising the interests of stakeholders and their contribution to the long-term success of the corporation."

Similarly the UK's Environment Agency has published a report on the link between environmental care and financial performance. The Conclusion is clear: good environmental governance can benefit financial performance and, conversely, poor performance can have damaging financial consequences. The EA said Business and investors should be paying much greater attention to standards of environmental governance if they want the best financial returns. Publishing new research on the value of corporate environmental governance, the Agency said there is a clear link between sound environmental governance polices, practices and performance and the financial performance of businesses. The research, carried out by Innovest Strategic Value Advisors, provides strong evidence of higher financial returns, business opportunity and competitive advantage, with differences in financial performance between environmental leaders and laggards being quite marked.

Quoting the EA "This clearly has very important implications for financial investors. It means that better financial returns can be obtained from investing in companies which integrate environmental considerations into corporate governance policies and processes. Some company analysts, institutional pension fund managers and others were rather skeptical of earlier studies. We hope that they will act on these new findings and take greater account of corporate environmental governance in their future decisions." The report is available here with additional backup here.

The question remains whether financial markets can bear the tension of increasingly complex responsibilities often with seemingly conflicting objectives. This is where integral systems thinking has application because it facilitates that chaotic decision making process. And where green investment methodology pays dividends.

Avanzi SRI Research/SiRi Company has just published the up-to-date version of the well-know survey Green Social and Ethical Funds in Europe (2004). As for past versions, Avanzi SRI Research/SiRi Company survey takes a census of European funds (at 30th June 2004) using ethical, social or environmental screens for portfolio selection.

During the last 12 months, the number of socially responsible investment products has continued to grow and SR funds assets realised a marked increase, also benefiting from positive returns of financial markets. Among the main findings, the report highlights the increase of available retail SRI funds (+13%). On 30 June 2004 there were 354green, social and ethical funds operating in Europe (they were 313 at the end of June 2003), with United Kingdom, Sweden, France and Belgium making up 64% of the total.

Total assets under management realised a marked growth, achieving a total of € 19.0 billion, benefiting from positive trends of financial markets. The much more intense growth of SRI assets relative to "traditional" funds went in any case beyond that, being influenced by the launch of new SR products by key asset managers or the re-design of existing products to include social responsibility elements. View the survey here.

Investment Tools

There has been just published two new tools useful to multifaceted screening. The EuroSIF Transparency Guidelines for asset managers is available here.

Also an issue management tool which provides a framework for screening a number of regulatory and performance issues.The document was developed by the World Business Council for Sustainable Development to provide corporate members with a practical and user-friendly tool on a few key codes, standards and frameworks relevant to the sustainability agenda. It provides a "snap-shot" of the landscape and a perspective from a thinktank/professional association focused on this topic. See it here.

Venture Capital

Venture capital was up in 2004 for the first time since the Internet meltdown. It's no surprise that throughout history identifying daring breakthroughs just as the venture capital cycle renews can make an investing fortune!

The 2004 report on the impact of venture capital in the US came out and can be read here.

Fees and their disclosure have been topics of hot debate. The California First Amendment Coalition offers some interesting notes, including fees paid, on CALPERS, on e of the largest VC investors in the world, and is worth a browse here: http://www.cfac.org/.

Interest Rates and Currencies

Interest rates continue to edge up. Some observers have noted the possibility of an inverted yield curve which is a strong indicator of recession.

The dollar remains weak and gold is serving as a safe haven for dollar denominated investors. Our US portfolio grew 28% which is attractive for US dollar investors, and for investors denominated in Euro, Yen or Yuan would alleviate the pain of a falling US$ in 2004.

Trade and FDI

“We have the cash, we have the drugs, we have the science - but do we have the will? Do we have the will to make poverty history?” That is a crucial question. According to Bono, the rock star and now venture capitalist who posed it, the coming year will go a long way towards providing an answer. Free trade is intimately connected with alleviation of poverty. (For those interested the Evian Group offers a number of discussion fora and leading practitioners in the area of trade, poverty alleviation. Contact Dr Jean-Pierre Lehmann.)

Salvation of WTO trade discussions were salvaged and we can expect radical changes in the coming year as textile quotas are lifted and China and India dominate the trade. China will drive trade in a number of areas. Chinese demand has become either the dominant price-setter or a big swing factor for international commoditities, such as most base metals, shipping, coking coal, soybeans and other agricultural commodities. China is growing at close to 10% and is a driver of Asian growth as well as the back stop for developed economies. “Now everything is made in China,” says Noriko Hama, professor at Doshisha University in Kyoto, Japan. “Include (in that) Japan’s economic cycle.”

The US needs to moving from military focus to economic focus, but this is not yet assured. Employment needs remain unsatisfied which is pushing wage inflation continuing to make offshoring attractive.

Energy

Oil prices are still hovering at $ 40 to $ 50 a barrel. Yukos has all but been gobbled up by Putin under the noses of those that fight for democracy. The f at cats are getting fatter and we can find out who and why by following the cash. In general who benefits from high oil prices: governments, producers, distributors, services. Who loses: transport, energy intensive manufacturing, home owners.

In November 1985, oil was $30 a barrel, recalled the noted oil economist Philip Verleger. By July of 1986, oil had fallen to $10 a barrel, and it did not climb back to $20 until April 1989. "Everyone thinks Ronald Reagan brought down the Soviets," said Mr. Verleger. "That is wrong. It was the collapse of their oil rents." It's no accident that the 1990's was the decade of falling oil prices and falling walls.

Energy independence makes good sense from many angles. There would be less spent on foreign oil, of whose sale some ends up financing terrorism. The value of oil would fall too. Investment in a broader range of science and technology would yield dividends in industry and an educated population. When energy is available change is easier.

A prediction for fundamental trend: energy and capital pricing is converging rapidly. Carbon pricing is analagous to a gold standard - based on a consultant's best guess. This is a fair place to start and the evolution to freer markets will allow the energy to be recognised as the common denominator or currency of economic systems, as it is in nature.

Climate Change

"It is our judgment that climate change represents the largest single environmental challenge this century. It will have an impact on all aspects of modern life. It is therefore a major issue for our customers and our staff, as well for every organisation on the planet, no matter how large or how small." - Sir John Bond, HSBC group chairman

The earthquake centred west of Sumatra, Indonesia that rocked our world will claim up to half a million lives. Natural terrorism bears heavily on human systems. This disaster is a complete accident, but is an ironic illustration of a real theme that occupied significant news during the year: climate change. Climate change has been indicted for increasing climate volatility which has impacted actuarial calculations by multiples. Anecdotal evidence, like our mild winter or early summer, doesn't really bear on the big picture but has provided a regular reminder that habitats are changing and nature is being impacted by our behaviour.

Atmospheric CO2 concentrations are higher than they’ve been in 420,000 years. To stabilize climate, the world must cut its use of coal and oil by 70 percent in a very short time. According to some estimates 2011/12 is when the convergence of falling oil production and increasing climate change becomes an unmistakable and irrevocable trend. These statistics may be debatable, but with the stakes so high is it worth taking the risk? And the alternative is already better than the status quo, so there is little to loose.

Two different but complementary paths for addressing any future climate change have emerged from the Buenos Aires Climate Change Conference. One envisions steep near term reductions (next 20 years) in the emissions of GHG as a way to mitigate projected global warming. Another advocates a technology-push approach in which emissions continue to rise and then GHG concentrations and emissions are cut steeply beginning in about 20 years. Over that time, the sees the development of new energy efficient technologies, the creation of low cost methods for capturing and storing carbon dioxide both as emissions and atmospheric concentrations, and the invention of low carbon energy supplies. As you would expect the former appears to be a minimal course of action and the latter is asking for trouble.

The good news is that we still have a choice and we can choose to go down the path of sustainability or unsustainability.

Europe's summer of 2003 seared itself into the record books as the hottest, deadliest summer the continent has endured in at least 500 years. Temperatures in Paris topped 104 degrees.Even nightfall brought little or no relief. It is thought that the unusually hot summer caused tens of thousands of excess deaths across Europe. A new analysis from researchers at the Hadley Center for Climate Prediction and Research and Oxford University in UK suggests more than half of the risk that the heat wave would occur can be traced to human influence on climate. If concentrations of heat-trapping "greenhouse" gases from power plants and factories continue to increase, even at a modest pace, they say, by 2040 more than half of Europe's summers are likely top those record temperatures of 2003. By 2100, the summer of 2003 could even stand as an unusually cool one.

Emissions of greenhouse gases have more than doubled the risk of European heatwaves similar to last year's, according to the study Details of the study appear in the latest issue of the journal Nature. The researchers say it may soon be possible to hold nations and companies responsible for such events. "This study suggests a way in which one might be able to link greenhouse gas emissions to actual harm," Oxford's Professor Myles Allen told the BBC. With other forms of environmental damage, it is relatively straightforward to assign responsibility and so determine who is liable for reparations. Climate change is much more complex in that it is a global phenomenon, and has many causes. This study is one of the first attempts to link rising levels of greenhouse gases to specific weather events. This approach could one day allow individuals harmed by climate change to seek compensation. The analogy is made with how the courts deal with cigarette-smoking.

People have always got lung cancer, before they started smoking. But obviously smoking significantly increases the risk of lung cancer; and on those grounds courts have, in a number of jurisdictions, decided that smoking was therefore an effective cause. Much depends on how much the court would want the factor in question to have increased the risk before they are prepared to intervene. Professor Allen notes "the interesting result coming out of this paper is that we are seeing human contributions to risk of a half, three-quarters or so, which is the kind of substantial increase in risk which starts to get the courts interested". These scientists believe that more sophisticated computer models of climate will soon make it possible to assign blame for environmental harm stemming directly from increasing temperatures.

Already, a number of legal cases have been filed citing damage from climate change. In December a petition was filed with Unesco (United Nations Educational, Scientific and Cultural Organisation) asking it to rule that governments must cut back greenhouse gas emissions in order to conform with their legal obligations under the World Heritage Convention.

One can ask “How can we know?” then act pragmatically without bearing it in mind. Paula Dobriansky who led the US delegation to Buenos Aires says that “science tells us that we cannot say with any certainty what constitutes a dangerous level of warming, and therefore what level must be avoided". This is a self-serving evasion and dangerous.

Or one could be involved in this fast growing market which is underwritten by science, governance and consumer demand. Kyoto ratification and its implementation will make the carbon trading market, which is attracting whales as well as minnows, significant.

The Venture Capital Journal (USA) covered their December issue with a story on emergingVoice Over Internet Protocol. This industry is certainly now established though the economic dynamics will not be normal but reflect the challenges of open source marketing. Coincidentally we have successfully tested Skype, a free VOIP, conversing with Australia. One PC was MS, one Linux. The quality was comparable with IDD!

Sony Corporation and Samsung Electronics have agreed to share patents on technology used in the development of new products which will involve a wide range of commercial licenses but will not include technology related to Sony's PlayStation video game console. The deal, aimed at spreading the huge cost of product development, excludes Samsung's home networking technology. The Japanese and South Korean firms already co-operate in some areas.

We upgraded our linux systems in December with no problems. Another positive experience with open source product.

Integral Systems and LOHAS

John Mauldin, a seasoned hedge fund advisor, commented on decision making in a recent newsletter as follows:

I am struck by the sheer complexity of the world economy. It is a puzzle with seemingly obvious answers yet exceedingly difficult to solve; or a riddle with many answers, none of which are exactly right; or maybe it is more like a great mystery, where there are clues on every page, but it is only when we come to the end that we can recognize that we had been given a clue.

Many of you may have had similar feelings and sensibly brushed them aside less chaos engulfs one's thought process. While we can not profess to have an answer, the science of integral thinking or holonics tackles this demanding issue head on. You may see an introduction to holonics by Astraea our research and technology business here. It will not tell you which stocks to buy and sell but it will help you evolve your capacity to deal with complexity and the unknown – a critical aptitude for investors and business owners.

A beta version of the revised and updated World Income Inequality Database (WIID) was released in December. The database is still subject to major revisions and a final version, including more extensive documentation, will be published in June 2005. Details can be found at http://www.wider.unu.edu/wiid/wiid.htm

The World Resources Institute published Eradicating Poverty Through Profit in December. It focuses on the bottom of the pyramid - the 4 billion people earning less than $2 a day. BOP can mean either “Bottom” of the Pyramid or “Base” of the Pyramid. Central to BOP arguments and business models is the belief in the BOP as an untapped market from which business can profit while at the same time serving the needs of the poor. See papers here.

Plans to allow contamination of human food crops with biotech or GM experimental crops grown on test sites have been published by the US Government's Food and Drug Administration (FDA). The proposal has been criticised by anti-GM campaigners, Friends of the Earth (FoE), who say it will have “unknown consequences for human health and the environment.” The US proposals will reduce the legal liability on biotech companies and will act as a disincentive for them to control GM field tests, making contamination more likely. The FDA has allowed a period of 60 days from 25 November for responses to its proposals. The US Government is not proposing any maximum threshold for inadvertent contamination of food, feed and seed stocks from experimental sites. The new policy sets out loose safety assessment guidelines under which a company may voluntarily consult with the FDA to have its experimental GM crop material deemed acceptable as a contaminant in food. Experimental GM crops include crops engineered for herbicide or insect resistance, altered nutritional properties or pharmaceuticals. “Allowing conventional food to be contaminated by experimental crops is a recipe for disaster,” says Bill Freese, research analyst for FoE in the US.

The story of Magnet America illustrates how we fail to walk the talk despite our intentions. Magnet makes and sells Yellow ribbons which are popular symbols of support for various causes, in particular US soldiers in Iraq. They were doing very well until other vendors started importing substitutes 70% cheaper from China. Magnet's sales have evaporated. Previously consumers were supporting US labour and taxes contributed to supporting soldiers. Now Chinese business owners benefit and the intention of the ribbons is barely served.

In the UK the youngest cabinet minister on record was appointed. Congratulations for breaking tradition Ruth Kelly.

Another breakthrough occurred in a Saudi bank. Lubna al Olayan, who heads one of Saudi Arabia's most powerful financial companies, has been elected to the board of directors of a major Saudi bank, Saudi Hollandi Bank, making her the first female in the kingdom to occupy such a position. Her circumstances are exceptional but is doing what many Saudi women would like to do also.

Women form more than half all university students in the Kingdom, but less than 5% of the workforce because strict laws about the segregation of the sexes make it expensive for employers to hire women for whom they have provide separate premises. There are restrictions on social engagement such as the recent announcement that women would not be allowed to vote in next year's local elections.

A material made from the vegetarian food tofu could help repair broken bones and teeth. The de-fatted soybean curd would act like polyfiller to fill in defects and has the added advantage of encouraging new bone to grow as it biodegrades and releases natural anti-inflammatory agents. Inventor Dr Matteo Santin of Brighton University has teamed up with experts from the University of Naples and WessexBio to develop the material.

The kingdom of Bhutan has become the first country in the world to ban outright the sale of all tobacco products. And Ireland's ban on smoking in public places was voted the best thing of 2004!

Top

Activities, Books and Gatherings

2004 was a very busy year on all fronts and we are fortunate to have so many people involved and supporting our related businesses. Thank you everyone. I would like to extend appreciation personally to all, especially our clients, advisors, friends and family that have made our progress possible. And please let me highlight here a couple of people who went out of their way to make a difference - thanks to Sander Tideman, Michael Braungart and Alan Kallir.

2004 was a breakout year in some ways as we refined our foundation technology - holonics or integral thinking. It is intended that we will formalise specific investment and management tools built upon integral systems design technology in 2005. Investment performance has met expectations. The principal issue now is building additional capacity to enable us to service increasing new client requests.

Amazing things happened in December. A friend of mine discovered he has a half-brother, previously unknown on the other side of the world. Unexpected opportunities to see and chat with friends and family appeared, which was a holiday in itself. We were blessed with an unusual snowfall on Christmas morning which gave a fantastic start to that weekend. At Ballin Temple while preparing ground and infrastructure for the coming season we discovered an aqueduct in the garden with bridge across it which had been submerged under 10 to 50 cm of soil!. The discovery of this Victorian engineering is exciting. (Photos here.)

Books read have served as leisure more than industry and Pratchett has been consumed again. Equal Rights, which I first read a decade and a half ago, has more relevance now that then - in particular the parody of magic in Discworld (the refelction of earth) to capital in our world is unnerving, whether or not intended by the author. And the language and metaphors reflect so well the leading thinking of subatomic physics and spirituality that I wonder what else I've missed.

On the media front The Ecologist has been a great buy this year. It has its frailties but consistently shocks and regularly introduces new ideas. Editorial changes at BusinessWeek and Far Eastern Economic Review presage change. The jury will be out for a while, but there have already been significant changes in the presentation and editorial policy of FEER. Some of the published letters decried the changes and certainly something has been taken away. What has been put in may be more than supplementary.

A recent recommendation is Christine Arena's Cause for Success: 10 Companies That Put Profits Second and Came in First. "Cause for Success presents fascinating insights into a new paradigm for business success in the twenty-first century. It shows how a leading set of ‘high-purpose’ companies moved beyond charitable giving and used constructive social engagement as the central means of improving their performance in the marketplace. " Bradley Abelow, global head of operations of Goldman Sachs.

Astraea, our research and technology business, is developing intensive executive modules in integral thinking and wholesystems change which we hope to deliver in 2005. Contact us if you are interested. These will be designed for senior executives and will demanding intellectually, physically and emotionally. It will be particularly relevant for people or businesses going through life changes.

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.

Private and Confidential

December Round-up