Again, the best we can say is that we did better than average. The composite return of clients for the period December 31, 2000 to June 30, 2002 (eighteen months) was (5.35) % compared to (13.66) % for the S&P 500. The composite return for stocks alone, not including other instruments in portfolios such as bonds, was (9.08).

We would like to feel satisfaction for having outperformed the market, but we do not. The last two years have been hard on investors, both financially and temperamentally. The pain of this period seems to have reached a peak during the two weeks following close of the quarter, because clients called us more frequently than at any time since we started business in 1997. The calls, of course, reflected stress over the declines in personal net worth.

Sadly, three clients took precipitous action this week. First, without prior notification, we received orders to transfer a trust account to a full service brokerage firm. Upon receiving the order, we first checked performance results. Since inception in October of 2000, the client earned (11.91) %, annualized, compared to (18.74) for the S&P. This result is perversely satisfactory, but offers no gratification. Unless the couple explains, we never will know what motivated them, nor will we be able to advise. The second and third clients ordered us to sell all securities and to place funds in money market accounts. Both said that they wish to maintain a long-term relationship with us, but that they can no longer tolerate declines in the market. (The market has dropped to about 7700 at this writing.)

For clients who maintain their positions in the market, and are patient and tolerant, we offer the observation that precipitous actions, such as the three instances mentioned above, usually come toward the end of a bear market. Let us hope that this one will end soon.

The results above are for fully-invested, diversified portfolios, and do not include data from our accounts invested exclusively in bonds. Clients oriented to bonds are individuals seeking income with a high degree of stability. If data from their portfolios were mixed with data from fully diversified portfolios, composite returns would be higher and more stable.

At the end of the quarter, assets under management were $30,538,000.

To our many loyal clients, with whom we share the pain of this market, we offer thanks and encouragement. Someone said, "the only persons who have been consistently wrong about America are the pessimists."

jwg 07-23-2002