We will preface this newsletter with two administrative issues:

First, at the request of some of our less �wired� clients, we are resuming our practice of mailing a hard copy of our quarterly newsletter along with our statements. We will continue to send the HTML email version and archive downloadable PDFs in the �Archives� section of our website http://www.demgt.com. If you have not been receiving the electronic version each quarter, please notify us immediately so we can verify our records.

Secondly, we are now required by the SEC to provide our annual disclosure document in a plain English format to all current and prospective clients. Although our firm has changed very little over the past year, we hope you find the enclosed version of our 2011 ADV Part 2 easier to read and understand. We will provide you with an updated version with revisions if anything materially changes with our firm.

On to the first quarter of 2011�We are only ninety-two days into the new year and already the world has experienced major political uprisings in the Middle East, US imposed military action in Libya, and an unprecedented earthquake/tsunami/nuclear disaster in the world�s third largest economy. Back home in the United States, we have seen intense budget battles and union protests in Wisconsin, a potential US Government shutdown, further deterioration of the real estate market, and continued stubbornly high unemployment. Had we foreseen any one of these events, we may have been tempted to reduce our equity exposure in an effort to preserve some of 2010�s gains. Fortunately for all of us, we have no ability (nor desire) to predict future events. As is always the case, the equity markets quickly digested these events and weighed their effect on the only thing that ultimately determines stock prices: Profits.

Despite inevitable short term gyrations, stock prices always follow profits over the long run. For example, in 2007, the five hundred companies that comprise the S&P 500 earned a total of $90 per share. During the worst of the financial crisis in 2009, profits plunged to $7 per share. However, by August of 2011, these same companies are projected to earn an aggregate profit of $91 per share. The stock market�s fluctuations over the past few years have mirrored the profit fluctuations of its underlying companies.

Why and how have corporate profits rebounded so quickly? It turns out that Adam Smith�s famous �invisible hand� of capitalism has been hard at work for the past few years. Rather than fret the economy and lick their wounds during the Great Recession, great companies have been slashing costs, making investments, refinancing debt, developing new products, and expanding into new markets. They have been working feverishly to position themselves to take full advantage of the current global macro-economic recovery. Natural selection has ensured that great companies are now posting record profits, increasing their dividend payments, and experiencing surging stock prices. This exact same scenario is playing out for publicly traded companies in capitalist countries around the world.

Capitalism allows any investor to stake a claim to a share of these profits by simply deploying capital intelligently. As shareholders in thousands of the worlds� greatest companies, we are effortlessly rewarded each and every time a Coca Cola is served, an ITunes song is downloaded, fuel is pumped at an Exxon station, or Heinz ketchup is squeezed on a hotdog. In very simple terms, capitalism results in a return on capital. Our disciplined, low cost, globally diversified approach is designed to maximize the returns that are available for the taking.

Don Davey
Senior Portfolio Manager
Disciplined Equity Management, Inc.