December 23, 1997

Dear Client or Colleague:

This is an E-mail that I sent this morning, which I thought might be of interest to you:

I was rummaging through an old textbook called Security Analysis by David Dodd and Ben Graham. This book is known as The Bible for financial analysts who use a value approach. It was first written in 1934 and updated through 1988. The following is a quote which I find quite relevant in this “eternal bull market.”

“Equally destructive of satisfactory investment are the fads and herd instincts of major market participants in the marketplace. For security analysis to contribute positively to the investment process, the discipline must provide a basis for resisting the pressure to be either a passive follower of prevailing sentiment or a mindless contrarian committed to simply thinking in opposite terms from the consensus.”

A worthwhile value manager and investor looks for a long-term approach in companies and/or industries that are projected to be valuable in the future. The investments that are made are often currently out of favor and they often do perform contrary to the recent historic bull market. Examples of this are two of our core picks, AT&T and the Cable Industry. Both of these investments had been poor performers over the last few years. We added both of these investments during 1997 and patiently waited.

Both of these investments have been among the year’s best performers. In light of this approach, we have been investing in several currently out-of-favor companies and industries. A few of them are: precious metals, natural resources and specific investments in China. We have also been over emphasizing high quality, fixed income vehicles. We have avoided most of the “nifty fifty.” We have ignored them for no reason other than our interpretation of high valuations.

We look forward to continued success in 1998 by continuing to use a defensive style within this current global environment. Please contact me with any thoughts or questions on the subject. If you would like a copy of our current model portfolio or previous letters such as this, please call and ask for them.

We wish you Happy Holidays & Great Health and Happiness in 1998!!!

Very truly yours,