Commodity prices have surged significantly over the last couple of years, fueled by a strong global economy, especially strong demand from China. Many analysts expect commodity prices to rise further. At A1GLOBALINVESTOR we do not share that view and expect lower commodity prices in 2006 and 2007, compared to 2005. We expect global demand for commodities to continue to rise in line with global GDP growth (see economic background section), but we expect global supply for many commodities to increase even faster. There can be no doubt that prices are above production costs for many commodities at the moment. The recent earnings release of BHP Billiton, a main copper, coal, iron-ore, and oil producer, shows an earnings increase of 89% for the latest financial year ending June 30th 2005, mainly due to higher prices. BHP Billiton and other commodity producers have increased their investment budgets dramatically to increase production capacity. It surely takes time until the additional production capacity is available but we believe that by the end of 2006 and 2007 supply will have increased significantly enough to bring down prices.