New year message

After a dramatic year in 2008, we enter the New Year reaffirming our faith in the African and Middle Eastern story. At Silk Invest we have spent the year building our platform and planning the launch of our funds. The fact that financial markets faced unprecedented events and almost stopped functioning did not deter us. We believe 2009 will be another challenging on a macro and on corporate levels but we also believe that we are now well positioned to address these challenges. Our portfolio managers believe the key question for 2009 will be how to go re-engineer growth and improve fundamentals but they have strong conviction in the now attractive fundamental value that we find in our markets.

We shall be planning a number of marketing trips in early 2009 to highlight our view that Arab and African markets have very strong fundamentals and are well positioned to strongly outperform both developed as developing markets. In our opinion, the key catalysts for this are:

Growth - While predicting around 1% growth for the global economy, the World Bank still predicts growth of around 4% for both regions

Population - The population mix and its annual growth of 2-3% is sustaining the growth in demand in especially the consumer sector

Corporate earnings - Current market valuations price in a deterioration of earnings of close to 50% while most companies in the region are still expecting positive earnings growth

Trade - Although the global trade growth will be minimal in 2009 growth among developing growth is still strong

On the risks side, most investors mention the impact of lower potential commodity prices on these economies. While commodity prices may affect certain sectors or countries, we think that the overall impact is limited. First, most of these countries are in much shape due to the combination of low sovereign debt levels, strong financial reserves and the size of their wealth funds. Second, not all countries in this region are resources rich and in fact different of our key investment markets will benefit from lower commodity prices. Third, even in the commodity rich countries, lower prices will lower inflation pressure and will lower the costs of the petrochemical and logistics industries in these countries. Fourth, FDI may go down but remittances have historically been very resilient and have grown through different cycles.

Silk Invest is closing the year with an even bigger commitment to frontier markets. Over the last weeks we have strengthened our proposition by integration frontier markets hedge funds specialist Danfonds under our platform. Attached you can find a press release which we will send out to the media. Our new team of 15 specialists makes us the most credible proposition in the market and we hope it will allow us to strengthen our relationship in the coming year. We will contact you in the coming weeks to further introduce our team and in the mean time please also check our updated website www.silkinvest.com.

In conclusion our key hypothesis is that these frontier markets will show a strong corporate earnings quality and that investors will be less driven by panic but more by fundamentals.