Transcribed December 08, 2005

Hi, this is Ann-Marie Fleming with HomelandDefenseStocks.com

We're here today with Scott Sacknoff, who manages the SPADE(r) Defense Index. The Index provides a financial benchmark for homeland security, defense, and space and whose value and charts can be obtained using the ticker symbol, 'DXS'. In this conversation we will chat about the recent 9/11 Commission report card, future government budgets and the launch of the first exchange-traded fund to be focused on our sector. This interview is part of a series of conversations we will be having with Mr. Sacknoff over the coming year.

Q1> To begin, earlier this week Tom Kean, former New Jersey Governor and Chairman of the 9/11 Commission, released a report card grading the government on its efforts to make the U.S. safer. What did you think of it?

A> The report card highlighted a number of successes and deficiencies but anytime one puts out an analysis such as this, you will always find people who agree or disagree about specific items. For the most part, I am sure it was an eye-opener that will lead to a lot of discussion on how the government can move quickly and fix the issues that the report identified.

From an investor standpoint, this is a good thing that comes at a good time. Although Congress is likely to keep funding homeland security initiatives, for political reasons if nothing else, the report could lead them to increase funding for specific initiatives related to border security, scanning equipment, information technology and sharing.

Q2> What other issues is Congress focusing on?

A2> Jane Harman, the Ranking Member of the U.S. House of Representatives Permanent Select Committee on Intelligence last week gave a speech at the California Space Authority's, 'Transforming Space' meeting in Los Angeles. During the speech she stated that the committee is especially concerned with 'franchise terrorism'. The term invokes the idea of a fast-food franchise, which is independently operated but which works toward a common goal. Essentially the idea is that not every terrorist cell will directly take orders and execute the plans of the Al Qaeda leadership. They will plan and fundraise on their own. The committee sees this as a major intelligence issue for it is easier to disrupt a central leadership organization than identify local groups operating independently.

Q3> We've heard of coming cuts in the budget for the Department of Defense. What impact will this have?

A3> As you know, there is a lot of overlap between defense and homeland security, particularly in the area of intelligence gathering, first responder situations, and border monitoring. There are two things that investors in the sector need to keep in mind. First, that when a decline in a government budget is reported, it isn't necessarily a decline but a reduction in what has already been approved. For example, the current Department of Defense budget had forecast the agency to grow by nearly $90 billion between now and FY-11. Recently, a number of articles have cited that the defense budget could drop by $30 billion. This would still translate into an additional $60 billion in defense spending. Likewise, these articles have mentioned declines in potential orders for new aircraft and systems. Since firm contracts have not been issued, the decline is of potential orders and the issuing of a procurement contract would add to actual near-term revenues for these firms.

Secondly, investors need to keep in mind that there is always talk in Washington DC about what programs to fund and what to cut. At the end of the day, all that matters is what the President signs into law.

Q4> Since we last chatted, a new financial product targeting investors in homeland security and defense has launched, can you tell us about it.

A4> Earlier this year, we licensed the SPADE Defense Index to Powershares Capital Management, one of the leading firms developing exchange traded funds. On October 26, 2005, they launched the Powershares Aerospace & Defense Portfolio ETF. Traded under the symbol 'PPA', it is the first (and only) exchange-traded fund focused on this sector. When an investor purchases shares of the fund, they get a basket of more than 50 companies involved with homeland security and defense that is designed to track the performance of the SPADE Defense Index. Investors interested in the interest should visit our website www.spadeindex.com for more details.

Q5> And how is the Index doing?

A5> The SPADE Defense Index has outperformed the S&P500 in each of the last five calendar years by between 11% and 20% annually. For 2005, the SPADE and S&P500 have both gained around 4.1%, so the next few weeks will tell whether the streak continues.

Q> Thank you for your time

A> Thank you for having me.

Disclaimers: The information presented in this interview is for informational purposes and should not represent a solicitation or an offer to purchase an investment product. SPADE and the SPADE Defense Index are registered trademarks of the ISBC. Powershares is a registered trademark of Powershares Capital Management.

For More Information:

Dawn L. Van Zant - President
800.665.0411 – dvanzant@investorideas.com 

Ann-Marie Fleming – Corporate Development
866.725.2554 – afleming@investorideas.com