COLUMBUS, Ohio (January 2, 2003) Dear Friends and Investors, Happy New Year to all and best wishes for a successful start to 2003! While the markets gave back a significant portion of their 4th quarter gains in December, Prospero produced positive returns in its two hedged products (Beaumont and Curan) and outperformed the S&P by 4.8% and the NASDAQ by 8.6% for the month in its full-market-exposure fund (Antenor). Prospero Capital's substantial outperformance in December contributed to a strong year for the funds, with Curan generating a positive 6.5% for our investors in 2002, while the S&P dropped (22.1)% and the NASDAQ declined by (31.3)%. Our core-equity (Antenor) strategy is now 15.7% PER ANNUM ahead of the S&P 500 during the last three years; in other words, a $1 million investment in Prospero three years ago not only generated a positive return for our investors (with full market exposure), but also produced an incremental $550,000 in excess return versus the S&P! Furthermore, Beaumont Fund, which launched as a separate long/short fund in July (replacing our previous format of blending our Antenor and Curan separate account strategies) has also outperformed the S&P during its short history (July, 2002 through December, 2002). Despite the overall strength of the fourth quarter market rally, the S&P and NASDAQ remain (37.6)% and (66.8)% below their 1999 closing levels, respectively. In contrast, Prospero's core equity strategy (Antenor) has produced gains for its investors during the last three years, consistent with our target of delivering positive returns in both rising and falling markets. While the markets remain challenging, Prospero's proven strategy of value-based investment selection by sector has kept our investors comfortably ahead of the markets and many of our competitors since our inception in 1992. 2002 was a year of tremendous progress for Prospero Capital and our Antenor/Beaumont/Curan Funds, as we: Became one of the first registered hedge funds to have completed a full, on-site audit by the SEC More than tripled our Assets Under Management Fulfilled our goal of outperforming the S&P 500 in Antenor and Beaumont, while generating positive absolute returns in Curan Successfully launched a registered fund version of each of our equity strategies (long, long/short, and market-neutral) Assembled an independent Board of Directors for the Funds Secured a relationship with one of the largest law firms in the world (Paul, Weiss in New York) Completed an independent, AIMR-certified audit of our long-term track record since 1997 (please contact us for a copy of the auditor report!) Doubled the size of our equity research team Hired a full-time MBA level investor relations executive Agreed to host a field-study project with 2 Harvard Business School students Reinvested 100% of management fees back into the company in the pursuit of strong returns for our investors (I did not take any salary or bonus for the 3rd consecutive year) Retained 100% of the investors with whom we began the year Created a proprietary stock screening program to accelerate and enhance our equity research efforts Produced and maintained a comprehensive website describing our investment philosophy, performance, and top 10 holdings Transitioned from the State of Ohio to the SEC as our governing regulatory body Moved to a larger office to accommodate our growth surge In summary, it was an exceptional year of change and growth for Prospero Capital, and as we embark into 2003, we believe the funds are well-positioned to continue producing above-average returns at below-average levels of risk. If you would like more information about Prospero's investment strategies or to inquire about becoming an investor, please call us toll-free at 866.377.7677. In the interim, we will be working hard on your behalf to produce consistent gains during 2003 and beyond! Best wishes for a healthy and strong beginning to the New Year from the entire team at Prospero Capital! Kind Regards, Ben Bornstein President