The market declines which had started earlier this year, have gotten much more severe during September. Forced selling

mainly by large institutional investors drove prices in the commodity sector sharply lower. Funds, like the ones of Pinetree,

Ospraie and RAB Capital, have all been forced to liquidate large positions during market conditions with only very few buyers

around. This has resulted in some extreme declines. Our benchmark, the Toronto Stock Exchange Venture-index, declined an

extra 29% during September, and is now 61% down since July 1st. It has declined a total of 69% since its top in April this

year. Affected by these developments, our Net Asset Value declined over 13% in September and is now down almost 15%

since our start on July 1st. Fortunately, our high level of cash, currently still 25%, has enabled us to take advantage of the

recent low prices and undervaluation. We expect an even stronger flight to precious metals and other hard assets, which can

be of benefit to our portfolio.

At the end of September, over 40% of our funds were invested in exploration companies, most of which are Canadian listed.

These companies are developing the very best discoveries in gold, silver, base metals and uranium. 22% is invested in gold and

silver producers, which are the safest equity investments in the current investment climate. Because of the very uncertain

outlook for credit and financial markets we have decided to concentrate more on companies with a strong cash flow. Another

13% is invested in gold and silver. We have also increased our positions in Freewest and Noront Resources, both working on a huge chromium discovery in

Ontario. Given the current undervaluation apparent in the sector, many analysts expect a wave of mergers and acquisitions

during the next twelve months. Noront is currently being targeted by a hedge fund which owns 10% of all outstanding shares.

They are seeking control of the company by replacing part of the current management .