January 28, 2000

Dear Investor:

The following are several items we picked up from various readings over the last several months.

1. “Last year was the third in a row in which value stocks did not keep up with growth stocks. But when value investing comes back, it should do so with a vengeance. After the two-tier market of the early 1970s, for example, it bounced back 60% in the first year and outperformed growth eleven fold in the next ten years. It has happened this way many times before. When the turn comes, investors who stick to their guns should be richly rewarded.” David Dreman, Forbes, January 24, 2000.

2. This is a fun fact. As of December 31, 1999, America Online is valued at more than GM, Ford and the entire steel industry combined.

3. According to an article during December 1999 in the Financial Times . . . “while equity investors have plenty to celebrate this Christmas, 1999 has been a grim year for the US fixed-income markets. The yield on the Treasury’s 30-year benchmark bond has risen from 5.25% in January to around 6.4% now – one of the worst performances ever. Corporate and agency bonds have done badly, too, in both absolute and relative terms. In many cases, their spreads to government issues have widened as investors have begun to focus on rising debt levels and default risks.”

4. According to Merrill Lynch, in their January 13, 2000, Fixed Income Digest . . . “by any measure, 1999 was a bad year for bonds, the 30 year Treasury Bond suffered a loss of 15.10% its worst performance on record.”

Our view going forward is to keep diversified portfolios in place. We feel that the bond markets may continue to have short to mid term difficulties, nevertheless we recommend that investors continue to accumulate high credit quality bonds, as catching the bottom of a market is impossible to do. Using proper vehicles, we feel we are in a current buying opportunity for selective quality fixed income vehicles. We continue to stay away from lower quality (“High Yield Bonds”) as default levels have increased to 5.5%. Patience should reward long-term conservative investors.

We continue to carry a 50% US equity position in our more aggressive portfolios. We are looking to reduce our equity holdings, as the markets appear to be severely over valued by historical standards.

We look forward to the day where our typical long-term portfolios have a 75% or greater position in equities. We will patiently wait for more appropriate valuation levels before we allocate to that type of position.

Lastly, we thank you for your continued support. Please contact us at any time if you want to discuss your portfolio or our views on investments.