Letter to Shareholders

2010

To the Shareholders of Diversified Global Holdings Group Inc.:

The per-share book value of our Common stock increased from $0.02 as of 2009 to $2.32 as of 2010.

The highlight of 2010 was our acquisition of Kazanneftekhiminvest (KNHI), a purchase that has exceeded our expectations.  We believe the construction company will increase Diversified Global Holdings Group’s earning power during 2011. Since we intend to quickly monetize this asset and convert significant portions to cash, the economics of this transaction have turned out very favorably.

Last year, while we were emerging from the global economic crisis, I promised that we would emerge from the recession a better company. I am pleased to report that we have met and exceeded that goal. Our financial performance is accelerating; we have extended our competitive advantage; we are actively investing in growth opportunities; and we have fortified our leadership and culture.

The worldwide economy in 2011 is getting better, with new signs of economic strength emerging every day.  But, growth around the world is happening at multiple speeds.  Developing markets like Russia, China and Brazil are experiencing fast growth, while much of the developed world is dealing with sluggish growth, fiscal limitations and sovereign debt issues.  Globally, governments are becoming more active, as they grapple with problems ranging from inflation to unemployment to healthcare costs to deteriorating infrastructure.

While this emerging global economy moves through its growing pains, volatility will continue to be a way of life.  Commodity costs are increasing as the economy recovers. Geopolitical risk is also on the rise, as disruption in the Middle East and North Africa, in particular, could potentially shake the global markets.

The speed of communication will shorten the standard economic cycle and cycles will be more segmented.  Long-term growth will be interrupted by short-term volatility.  In this environment, companies must invest to grow, while staying productive through speed and flexibility.

We made good decisions during the crisis that are benefiting investors.  We invested in ourselves and have proven our business model to be strong and resilient.  Today, we have a competitively advantaged business that is rewarding investors with strong earnings growth.

Today, companies must also serve multiple roles. They must deliver positive returns for investors, provide products and services with competitive advantages and they must be a positive force for environmental and social goals and ethical accountability. I believe that our company will continue to achieve these goals.

DGHG’s value is more than the sum of its parts. We are an innovative international holdings company with infrastructure that possesses the scale, resources and expertise to solve tough global problems for customers and society. We are a competitive force for positive change.

We continue to under-promise and over-deliver.  We are well ahead of our five year plan and have the ability to be in all targeted market sectors by 2012, putting us a full two years ahead of our five year plan.

In 2010, DGHG also acquired a $50 million Sports and Spa Construction Project through our acquisition of KNHI.  This is the Company’s most profitable project to date, with total net earnings estimated to exceed $4 million. 

Performance 

Fiscal 2010 Financial Highlights

• Revenues increased from $1.3 million for the year ended December 31, 2009 to $45.8 million for the year ended December 31, 2010.
• Net income increased from a loss of $175,000 for the year ended December 31, 2009 to net earnings of $4.8 million for the year ended December 31, 2010.
• Book value increased to $2.32 million as of December 31, 2010 from $.02 as of December 31, 2009.

Management’s goal is to grow our shareholder value at a rate greater than that of our competitors. I prefer to look at book value when measuring our performance. To be sure, some of our businesses are worth far more than their carrying value on our books, due to strong growth potential and conservative accounting regulations, and therefore reflect an underappreciated intrinsic value.

We believe that our per-share earnings will continue to increase at a decent rate. While it gets tougher to realize strong percentage gains as our numbers continue to grow, I can assure you that we are prepared to meet these objectives by ensuring strong performance in our current operations and pursuing more acquisitions.

Our People

We possess a team of truly skilled managers who have an unusual commitment to their own operations and to Diversified Global Holdings Group.  Directors and their families own almost 90% of the company. Our directors, therefore, monitor DGHG’s actions and results with an “owner’s eye” and we are lucky to have them.

This same owner-orientation prevails among our subsidiaries.  Many of the companies we have acquired were family-owned and operated.  They came to us with an owner’s mindset, and we provide an environment that encourages them to retain it.  Having managers who love their businesses is a tremendous advantage.

We are also proud to welcome Robert Q. Lee to the DGHG team of advisors.  Mr. Lee was recently recognized by Florida Trend Magazine as “One of Florida’s Legal Elite”.

Plan to Succeed

This year, we will continue to invest for the long term, while cutting cost in less-essential areas, and we may sell some non-core assets in order to streamline the DGHG portfolio, giving us significant flexibility in the global economy.

Risk Management

It is equally important to consider risks that are linked to short or long term success. There is a direct link between risk management and shareholder value.  Diversified Global Holdings has implemented risk management into its business culture supporting innovation and expansion.  These controls guarantee our sustainability and long term success.  Risk management is integrated into all aspects that impact our business, from industry trends, competition, laws and regulations, through customer service, technology, finance, human capital, business plan and operations management.

The culture of Risk Management is the willingness of our employees to provide a safe working environment, planning carefully all aspects of our programs, abiding by the laws of the areas where we do business and our community.  In other words, it is the basic respect for our Company, Shareholders, Employees, Clients, Property, Laws, and Community. We will evaluate potential benefits alongside potential risks as a routine part of our administrative and business planning processes.

Corporate Transparency

Diversified Global Holdings Group will continue to be fully reporting and embrace corporate transparency to assure shareholders that they are getting value for their money.

Looking to the Future

Last year I said, “I see Diversified Global Holdings continuing to grow, for the next several years.” I am confident this growth will lead to an even stronger balance sheet and an asset base many times larger than we have today.

I see our company continuing as an industry leader, utilizing innovation and technology, and leveraging our work force and asset base.  It is a very exciting time and the upside for our shareholders is equally exciting. Management continues to execute on its strategy and prove its determination and capabilities every day.

Globalization will increasingly change our world. Only a few large firms will be able to grow quickly without embracing new markets across the globe.  Our latest studies plan moves into new markets as a top driver of profits over the next several years.

We face the future with a stronger portfolio and product pipeline than ever before and because of this, I believe DGHG is positioned for success.

As a result, DGHG is planning to apply for listing of common stock on a senior national securities exchange, which will increase liquidity in the stock, giving the company access to a wider range of institutional investors and a tighter bid-ask spread that will reduce risk for investors. The company believes this exchange listing will also give DGHG greater access to capital that can be used to grow its business.

In Summary

I look forward to seeing our shareholders next year, when we hold our annual shareholder meeting at our Orlando Headquarters following the filing our Annual Report on Form 10-K for 2011. I hope to have updates on our progress and the numerous initiatives and opportunities that we are pursuing.  I want to thank all of you for continuing to support us with your investment in the company. I know you appreciate what we are trying to do by creating long-term value in a deliberate and logical fashion, while remaining cognizant of the risks and challenges that we face.

I want to thank all of our managers and leaders for staying focused and dedicated through difficult times and pursuing excellence in their jobs and in delivering outstanding customer experiences. I also want to thank our customers for their tremendous feedback, which helps us improve every day and to serve you better in the future.

Best Regards,

Richard Lloyd
Chief Executive Officer

Cautionary Statement Regarding Forward-Looking Statements: Certain statements contained in this letter contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Statements that use words such as the company “believes,” “expects,” “intends,” “plans,” “experiments,” “explores,” “aims” “is likely to” and similar expressions or future or conditional verbs such as “will,” “may,” and “could” are generally forward-looking in nature and not historical facts and are intended to identify forward-looking statements. Forward-looking statements are subject to risks and uncertainties that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by these forward-looking statements. Such statements are based upon the current beliefs and expectations of our management and are subject to significant risks and uncertainties. The following factors, among others, could cause actual results to differ from those set forth in the forward-looking statements: our ability to offer products and services that our customers want, including our subsidiaries brands, products and services; our ability to successfully implement initiatives to improve management and other capabilities; competitive conditions in the industries we operate; worldwide economic conditions and business uncertainty, the availability of consumer and commercial credit, changes in consumer confidence, tastes, preferences and spending, and changes in vendor relationships; the impact of seasonal buying patterns, including seasonal fluctuations due to weather conditions, which are difficult to forecast with certainty; our dependence on sources outside the United States; our extensive reliance on computer systems to process transactions, summarize results and manage our business; our reliance on third parties to provide us with services in connection with the administration of certain aspects of our business; impairment charges for goodwill and intangible assets or fixed-asset impairment for long-lived assets; our ability to attract, motivate and retain key executives and other associates; and the outcome of pending and/or future legal proceedings, including product liability claims, including proceedings with respect to which the parties have reached a preliminary settlement. We intend the forward-looking statements to speak only as of the time made and do not undertake to update or revise them as more information becomes available.