SKIING THROUGH THE CREDIT CRUNCH

END OF YEAR REPORT TO HISI INVESTORS & SHAREHOLDERS
Dear all, your Chairman and Board are happy to report our best investment returns again this year as ever - despite remaining well diversified in terms of concentration risks and to maximise our market turbulence gains, with zero exposure at any time to the wrong side of price peaks, or to any bursting asset balloon bubbles. Our investment strategy is not that of Berkshire Hathaway's fundamental values, but always firmly based on market prices. This is never a straight line expectations business, always steadily up by stages before finally zigzagging down fast. Ours is a chairlift & super-G giant slalom strategy (Alpine). We made good money on shipping stocks and gold in '07 and first half '08, swapped out and then shorted commodity shippers after June. In line with our Madoff principle that if we cannot explain how we make our steady but excessive returns you should not invest with us, we are happy to explain this year's strategy. The signs that this could be our best year were clear in late 2007. We leveraged and borrowed heavily, doing everything experts have been telling everyone has been the ultimate cause of the credit crunch. We borrowed stock to short-sell financials and other predictable fallers. We sold the company's and our shareholders' art collections. We did not engage in any complex hedging strategies, relying instead on business confidence survey data for our main leading edge indicators. As you all know we sold all our property portfolio in 2006 except for what was leased out at fully secure long term rentals. We sold shares and bought US 10 year and longer maturity AAA bonds gaining 62%. On UK gilts we made 64%. In the first half we did carry trade deals, borrowing in Yen and depositing in Australia, making 75%. We also rode the MSCI BRIC Index and the MSCO World index, making 38% and 72% respectively. We continued to short the S&P making large gains on 90% of deals. We bought oil futures taking 50% profit at mid-year when we sold, recognising that this had peaked as soon as Goldman Sachs made a simple straight line trend prediction. It was obvious at that very moment that oil was bound to fall and the dollar would peak rapidly. We next sold oil short making over 70%. Our offshore operations remained strongly in cash, while onshore was heavily borrowed. Once the commodity and emerging markets bubbles looked fit to burst in the second half, we got out of foreign equities and shorted whatever the excellent US retail statistics told us to. Certain stocks remained good value, however, such as Tunisa, some Central Asian stocks and Far East stock temporarily based on news, and any stocks with smallest free-float like Volkswagon and Hermes, making over 100%. The easiest bets were shorting the S&P and the FTSE in the third, and into the fourth quarters. During the year with sterling clearly over-valued, we rode the dollar as funds fled back to it, making 28%, and then shifted into Euro for another 20% gain, before liquidating all positions and buy long dated treasuries for a quiet Christmas and to lock in our 500% aggregate gains for the year including a final 12% gain on shorting the dollar in recent days, having recognised that it would not cross the long term 90 resistence level. Thanks to our buying several large shareholdings in banks that we very successfully shorted (either with derivative puts or CFDs according to the rules prevailing at the time, and never holding or going short more than 1% of any stock, a healthy, and perfectly legal, market practise) we are happy to announce that we have purchased more tax loss than required to offset all tax liabilities for this year, and that our current tax account is therefore showing a large three digit percentage profit. We also have a raft of 3yr corporate bonds from solid blue-chips paying 9% and similar bond holdings with banks where the bonds are guaranteed by Government. I am happy to report that shareholders have voted their full confidence in the re-election of the full Board and a vote of thanks to our esteemed Chairman, everyone's favourite Bank Manager, Mr Gale Gordon. All that remains therefore is for Hindsight Investment Securities Inc. to wish you all a prosperous 2009 when we fully expect the beneficial investment climate to continue for at least the first three quarters much as we have enjoyed the same in 2008! The US recession is already 1 year old, the UK recession about 6 months and we expect both to last another 9 months, possibly 12! Staff and managers and any shareholders who have signed the new zero funds withdrawel and 100% profits reinvestment clauses are welcome to join us at the company chalets at Val d'Isere, Gstaad and Wengen.