Strategy

The Fund will invest in latter stage privately held companies that enable, directly or indirectly, the delivery of highly reliable power (also known as "computer grade power" or "high 9's power"). This degree of power reliability is in high demand by a variety of businesses whose core infrastructure is based on silicon. This reliable power theme has been developed by Mark Mills and Peter Huber in their monthly newsletter titled The Digital Power Report. They have termed it the Powercosm Paradigm.

The Adviser will bear portfolio management responsibilities and shape general investment strategy for the Fund while conducting detailed financial analysis of target companies. The Subadviser will monitor the Paradigm, seek out companies that fall within the Paradigm and perform the primary screening process to determine whether a potential investment exhibits characteristics that align with the Paradigm.

The investment objective of the Power Fund (the "Fund") is to maximize total return for investors in the Fund (the "Limited Partners") by investing in privately held US and foreign companies that, in the opinion of the Adviser, exhibit the ascendant technologies of the Powercosm Paradigm (the "Paradigm"). The Paradigm addresses the business opportunities created by the demand for highly reliable or "high 9's".

The governing principle for investing in the power space and the investment litmus test for the Fund is whether or not the firm's product or service delivers or assists in the delivery of electrons that will keep a business up and running with at least 99.999% reliability. Determining whom the most significant winners will be in the sector, and why, will be the key that unlocks opportunities for private investors. We believe that the market for high 9's power has staying power and will be deep enough to allow savvy investors a chance to enjoy significant value enhancement by owning a piece of these undiscovered companies.

As more and more companies' functionality and, ultimately, profitability rests on the unwavering performance of their Information Technology (IT) systems, power quality will increasingly become a critical operational and procurement issue. Customers with a need for high 9's power are not an anomaly. As Messrs. Huber and Mills stated in a September 7, 2000 Wall Street Journal op/ed, "the country is 'siliconizing' everything - and behind every digital bit stands a bucket of electrons, behind every chip a power supply." There are the obvious businesses such as web hosting, semiconductor fabrication plants and highly computer-dependent businesses such as Ameritrade and Lands End that require very "clean" power.

With power densities of 100 to 150W/square foot, these businesses eclipse the power needs of "Old Economy" companies that typically require anywhere from 40 to 70W/square foot. Because of the productivity and efficiency gains enabled by IT systems and telecommunications, in the near future virtually all enterprises will require high 9's delivery of power for the smooth functioning of their operations. Even the so-called "brick and mortars" of the world will be transformed to the point where they require clean power.

In their effort to guarantee themselves reliable power, firms will pursue a number of different technologies and services that will enable them to ensure clean power for their operations. The technologies will range from fuel cells, flywheels and microturbines to superhigh conductivity cables and energy storage units. The suppliers of these technologies will in turn need components from companies that focus on this market. The component suppliers produce super-fast and high-power density power chips, capacitors and power "bricks" and a variety of other proprietary products that are critical to the end user. In addition to the technology, a whole service industry has developed and will continue to develop around creating clean power solutions for companies. These services include installing and maintaining software and other systems that monitor power usage, and even buying and selling futures contracts on power.

Many of these companies are still private and are turning to venture capital to take them to the next level. It is these firms that will be the target of the Fund.