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The business of music publishing

Music publishing is the business of acquiring the rights to, and licensing of, musical compositions. Whilst composers are, in most circumstances, the original owners of the copyright, they will generally enter into an agreement with a publisher, who either acquires the copyright and carries a liability to pay the composer a share of the future publishing incomse or administers the copyright on a limited term contract for a fee.

The principal functions of a music publisher include:
-persuading artists or record companies to record the compositions its owns or controls ( first releases and "covers");
-marketing the compositions to films, televisions and advertising agencies for use;
-collecting fees and royalties and making payments to composers;
-administration of the compositions, including registration of copyrights where applicable;
-protecting the copyright from unauthorised use; and
-publishing print music.

The global revenue received by music publishers generated from the ownership of music copyright was estimated at US$6.0 Billion in 2005.

Music publishing revenues are derived from the following primary sources:
-Mechanical - Royalties from the use of the copyright in a recording, including both physical recordings (eg CDs,DVDs, videos) and non-physical recordings (eg digital downloads, mobile phone ring tones). These are also commonly referred to as phonomechanical or reproduction revenues
-Performance - Royalties or fees for the right to use the musical composition in combination with an image ( e.g in films, televisions programmes, advertising and video and computer games).
-Other - Roylaties received from other uses such as printed music.

Music copyright royalties generate a global spread of income, but it is estimated that over 85% of music publishing revenue is derivied from the US, Canada, the western countries in the EU and Japan. This revenue concentration greatly facilitates the ability to enforce the international protections offered by music copyright.

The music publishing market is dominated by the publishing businesses associated with the major record companies:
- EMI Music Publishing
-Sony/ATV Music Publishing
-BMG Music Publishing
-Universal Music Publishing
-Warner/Chappell Music

Together, these five businesses comprise approximately 65% of the music publishing market with the remainder independent publishers and copyright owners. Vivendi S.A, the 100% owners of Universal Music Publishing, entered in an agreement for the purchase of BMG Music Publishing in September 2006, effectively reducing the number of major music publishers to four.

Biodiesel - Investment Risks

A change in law or regulation could adversely impact the biofuel industry

The renewable energy industry often benefits from government subsidies and favourable tax regimes. Without government support, most renewable energy projects may not be able to compete with conventional means of electricity generation, such as gas and coal fuelled generation, due to higher cost of production. In the enevt that government support is reduced, this may have an adverse effect on the commercial viablity of renewable energy production.

In particular, in Australia from 2011, current government subsidies for ethanol will be reduced. The ongoing competitiveness of biofuels production in Australia thereafter will depend upon the then price of petroleum products, environmental issues, the price of feedstocks and whether the government provides new incentives for production and use. Similarly, the US ehanol and biodiesel industry is dependent upon a large number of US Federal and state legislation and regulation and changes could materially and adversely affect the results of operations and the financial position of such entities.

US Federal tax incentives have resulted in the cost of production of ethanol being more competitive with regular petroleum - specifically, the"blenders credit" which provides a current subsidy to blenders or resellers of US$0.51 per gallon. The blenders credit expires and is eligible for renewal in 2010 but there is no assurance that it will be so renewed or if so on what terms it would be renewed. The limitation or reduction in the blenders credit could have a material adverse effect on the operations and financial positions of parties who have an economic exposure in the ethanol industry.

The ethanol and biodiesel industry may be adversely affected by environmental health and safety laws regulations and liabilities.
The production of ethanol and biodiesel is subject to various applicable laws in the jurisdictions in which they are produced. These laws related to , amogst other thingsm the discharge of materials in to the air, water and ground, the use of water resources, the production, storage and handling and transportation of hazardous materials and the health and safety of the employees of the producers. The application of these laws can often require expensive pollution control equipment or operational changes to limit actual or potential impacts to the environment. A violation of law can result in substantial fines, criminals sanctions and facility shutdowns. A plant site may suffer environmental problems that could be expensive and time consuming to correct, which may delay or halt plant operation or construction and delay its ability to generate revenuw.

The ethanol and biodiesel industry could be adversly affected by technological advances. The development and alternative renewable fuels becoming more attractive for production and use. Any advances in technilogy and changes in public acceptance of renewable fuels could reduce demand for biofuel or the prices for biofuel and this could have a material adverse effect upon the operations of financial performance of parties in which there is vested interest.

Non-availability of, or increases in the prices of key commodity inputs could adversely affect the profitability and cash flow of a biofuels facility
The results of operations, financial position and business outlook of a biofuel plant are highly dependent on commodity prices, which are subject to significant volitity and uncertainty, and the availability of suppliers, and cash flow available to service debt could fluctuate substantially.

Increases in market prices for commodities such as corn, plam oil or sugar and changes in port prices for ethanol, biodiesel and substitiutes such as oil may materially and adversly affect returns on biofuel projects.

Biofuel plants may be subject to supply or infrastructure constraints
Biofuel plants are large are large consumers of agricultural production which may be subject to periodic supply constraints. Growth in the sale and distribution of ethanol and other biofuels is dependent on the changes to and expansion of related infrastructure which may not occur on a timely basis, if at all, and our operations could be adversly affected by infrastructure disruptions. The ability to successfully operate a biofuels plant is dependent on the availability of water at anticipated prices, the availability of electricity and natural gas at anticpated prices, and the availability of corn or other vegetable oils at anticipated prices.

Overcapacity in the renewable energy or biofuels market could adversly affect the returns of the biofuel plants
Increasing supply of renewable energy may occur as major projects reach production. Mew plants under construction may result in excess production capcity in the ethanol or biodiesel industry. Currently in the US, plans for as much as 3.5 billion per year of additional ethanol capcity and 1.4 billion gallons per year of additional biodiesel capacity have been announced. An oversupply could adversely impact returns

Commercial Aircraft Economics

The aviation industry is of a cyclical nature. The industry is partially explained by economic factors. The key characteristics of the aviation industry that affect commercial aircraft are outlined below:

Relationship with general economic activity: Under favourable economics conditions, travel increases both for business and leisure reasons. Diring periods of an economic downturn, air travel slows. Special unpredictoable events, like terrorism or Severe Acute Respiratory Syndrome ("SARS"), have temporary negative impact on air travel but such an impact is usually failrly short-lived and/or regional in nature. Since demand for aircraft is worldwide, a regional slowdown in one part of the world is usually dealt with by moving aircraft to other areas. The postive long term relationship between travel and the level of economic activity is not disrupted by such short term aberrations.

Cyclicality: The aviation industry is highly cyclical, with such cyclicality reltaing to both the business cycle and also seasonal variations. Leisure activity is at much higher levels in the summer months ( at least in the northern hemisphere) resulting in higher seasonal demand for aircraft and usually higher profitability than in winter months. Air traffic has historically been substantially more volatile than the economy and in the absense of external shocks such as the terrorist attacks of 2001, has generally gorwn at a rate faster than the worldwide economy.

Lag between aircraft ordering and delivery: There is a sizable lag between the time airline want new aircraft and place orders and the time those ordered aircraft are manufactured and delivered. Aircraft orders are generally a functions of demand for seats and the financial condition of the airline industry. It is generally necessary for both of these conditions to occur in order to generate aircraft orders.

Highly regulated: A high level of technical government supervision exists in the commercial passenger airline industry which makes its difficult for start up airlines to enter the market. Many national authorities insist on local ownership. There has been a movement towards privatisation and deregulation in the global aviation industry in recent years, which may provide opportunities for improved growth and profitability of the global airline industry.

Limited choice of aircraft suppliers: There are two manufacturers of widebody and standard narrowbody jet aircraft, namely Airbus and Boeing and effectively two western regional jet aircraft producers, namely Embraer and Bombardier. The limied choice of suppliers and even models of aircraft facilitates a relatively liquid secondary market for common aircraft types which has a positive effect on aircraft resale and release rates.

World Aircraft Fleet

As noted above, the world's aircraft are divided into three jet categories:
Widebody jets, which are characterised by a twin-aisle fuselage, with capacity for a large number of passengers, from the mid-200's to 400 and above. Currently operating examples include the Boeing 747, Boeing 777 and Airbus A340.

Narrowbody jets, which are characterised by a single-aisle fuselage, with capacity for a smaller number of passengers than wide bodied jets. Currently operating examples include the Boeing 737 and Airbus A320.

Regional jets, which are generally single-aisled narrowbody aircraft that are smaller than traditional narrowbody aircraft, typically seating between 50 to 70 and up to 90 passengers.Currently operating examples include the Bombardier CRJ200 and Embraer ERJ145.

According to Avitas, the active globalWestern-manufactured commercial aircraft fleets at the end of 2005 consisted of more than 16,000 passengers jets and nearly 2,000 cargo jets. Furthermore, Avitas expects this to increase to approximately 31,000 jet aircraft ( being 28,341 passengers and 2,860 cargo) by 2015.

Factors affecting aircraft values
Changes in the value of aircraft are a moajor determinant of the economic returns received by aircraft lessors. The single largest determinant of aircraft value is the age of the aircraft. Other key drivers of the value of an aircraft include:

Macroeconomic factors - specifically, the growth rate of the revenue passenger kilometres, or RPKs, which measure the passenger demand for air transport. Since passenger demand usually has a high correlation with the global economy, RPK growth is a good indicator for the economic cycles in the airline industry. During periods of a business cycle trough most values diminish - some more than others. During periods of an economic boom, aircraft values may rise, again not at the same rate for all types.

Aircraft surplus or shortage - a surplus of unutilised aircraft can have a significant negative impact on aircraft lease rates and values. Likewise, a shortage of in-demand aircraft, for example newer fuel-efficient aircraft in times of high oil prices, can significantly boost aircraft values.

Aircraft-specific factors - factors specific to the aircraft type, such as popularity of a particular variant, engine type and vintage significantly affect aircraft value. For example, aircraft capable of carrying a greater load a longer distance or at a lower cost than their competitiors tend to retain value better.

Size of secondary market- a very important factor affecting the value of aircraft is the size of the secondary market. How many units of a given aircraft type existand among how many airlines is of paramount importance. An aircraft that has unique characterisits for one customer only will no keep its value if there is no large market to deploy it. The optimal aircraft with regard to keeping its value is one that can be redeployed with minimum cost, effort and time: an aircraft that is used by many other airlines which can almost immediately convert it to their own operation.

Commodity Sector - PRC agricultural industry

China is a developing country with a large population of 1.3 billion. Since 1978, the PRC government has been instituting reforms in its agricultural industry in the rural parts of the PRC. As a result of these reforms, China has been able to support 20% of the world’s population on 7% ofthe world’s total cultivated farmland.

Today, China leads the world in the production of grain, cotton, rapeseed, peanut, meat and fruit. Its grain output in 2005 reached 484.01 million tons, an increase of 3.1% from the previous year. Since 1978, the PRC government has granted various preferential policies to the Chinese agricultural industry. In 2004, in its bid to address the widening income gap and living standards between the urban and rural population, alleviate rural poverty, encourage grain production and increase agricultural productivity, the PRC government reversed its earlier stance of taxing theagricultural sector. Instead, subsidies, tax cuts and infrastructure spending were introduced.

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A summary of the measures taken by the PRC government is as follows:
Direct subsidies
Provide small payments to grain farmers based on historical grain acreage; introduced in 2004. Subsidise purchase of high-quality seeds and agricultural machinery.
Agricultural tax cuts
Eliminate taxes on farmers.
Improved market infrastructure
Establish and support wholesale markets, commodity
exchanges and futures markets. Promote e-commerce and improve cold storage and transportation facilities.
Rural infrastructure investment
Fund water-efficient irrigation, drinking water, electrification projects, methane plants, a rural road network, antipoverty efforts, and develop “production bases” for grain or other commodities.
Loans for farmers and agribusiness
Direct rural credit cooperatives to extend more loans to farm households. Give preferential bank loans to selected agribusinesses that contract with farmers.
Land protection
Strictly enforce rules regarding conversion or sale of cropland for non-agricultural use.
Consolidate and increase funding for research institutes developing crop and livestock varieties with improved quality and yields.
Food safety standards
Establish and enforce standards for chemical residues and other harmful substances in food. Establish animal disease monitoring and control systems and safe livestock feed production. Promote organic and “green” agriculture.

On 31 December 2005, the PRC central government issued the Several Opinions Concerning the Advancements Towards Constructing a New Socialist Countryside (“2006 Opinion”). The 2006 Opinion was numbered as the first document issued by the PRC central government for 2006. The document numbered as the first document issued by the PRC central government for each of 2004 and 2005 were also opinions in relation to rural development.This is believed to signify the strong policy emphasis of the PRC central government on ruraldevelopment.

After the issue of the 2006 Opinion, the NPC approved the full draft of the Guidelines for the 11th 5-Year Plan for National Economic and Social Development (the “Plan”) at the 4th Session of the 10th National People’s Congress concluded on 13 March 2006.

The Plan defines its primary objective to, inter alia, “promote efforts to increase the overall PRC grain output capacity to approximately 500 million tons, in order for the PRC to be self sufficient in grain production”. In order to achieve its aim, the Plan has prioritised (a) the provision of legal and environmental protection to arable land; (b) the acceleration of technological innovation; and (c) the upgrading of the agricultural industry’s infrastructure.

Farm equipment industry
As shown in the chart below1, the arable land area in the PRC has been declining since 1996, mainly due to wastage of land resources and the illegal acquisition of land for non-farming activities in the rural areas: As part of the Plan, the PRC government has announced its policy intention to support the continued mechanisation of the PRC agricultural industry as a means to increase productivity and to raise rural income levels. The PRC government has encouraged development of the agricultural industry by investing funds and resources towards the advancement of technology and sciences related to the agricultural industry in order to improve the PRC agricultural industry’s international competitiveness.
In conjunction with the Plan, the Ministry of Agriculture has also issued the “11th 5-Year and 2015 Plan for the Mechanisation Development of China’s Paddy Rice Production” (the “2015 Plan”). The 2015 Plan aims to increase the respective mechanisation and harvest rates for PRC paddy rice production from 6.8% and 29.3% in 2004, to 20% and 55% in 2010, and 45% and 80% in 2015.