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April 2003 performance review

May 15, 2003

The Conservative portfolio made its biggest one month move to date, up 3.3%. Bonds and stocks were both strong this month and didn’t cancel each other out like they have in other months. Every fund in the portfolio was up this month. As we mentioned in this months newsletter, this type of convergence can raise risk.

The biggest moves were in the Vanguard Dividend Growth fund, up 7.7%. Stocks were strong across the board in April, small cap, large cap, value, growth, international, the works. The FMI Sasco Contrarian Value fund, this portfolios weakest performer since we started it, was up 4.8%.

The American Century International Bond fund had a relatively mild 1.82% return for the month. For the record, the large allocation we made to international bonds a year ago is up over 25%. Bonds. Who’d of thought it? 

Besides our money market allocation, the next weakest fund was the Harbor Bond fund. Our theory on the fund's relatively weak performance is that Bill Gross, the fund's manager, is nervous about the possibility that rates are going back up soon. Almost every type of bond was up more than the 1.01% his fund was up for the month. He was either in short term bonds or floating rate bonds for this to happen. While his caution didn't pay off this month, we think it may in the future.

Junk bonds keep on trucking, with the Vanguard High Yield fund jumping 3.44% for the month. The fund is now up 6.42% in the last 3 months and up 13.61% since October.

The Aggressive growth portfolio was up 8.75% in April, the strongest showing for the portfolio and our best portfolio for the month. Perennial looser Japan gave us the weakest returns: the T. Rowe Price Japan eked out a 1.93% gain in a month most stock markets were up more. We’re hanging in there. 

Bonds and stocks were both strong this month and didn’t cancel each other out like they have in other months. Every fund in the portfolio was up this month. As we mentioned in this months newsletter this type of convergence can raise risk.

Emerging market bonds have performed spectacularly. The Fidelity New Markets Income fund was up 6.8% for the month and is up over 20% since we put it in the portfolio. We keep expecting these markets to slip and give something back but they don’t.

Junk bonds stayed strong, and the Northeast investors fund started performing a bit better, up 3% for the month. We have not been happy with this funds performance last year.

The Artisan International Small Cap fund was up 13.8% for the month, a strong showing outpacing most US stock funds and indexes. The fund benefited from a still weakening dollar, a return to small cap stocks, and good stock selection. This new fund has done very well compared to the vast majority of stock funds, up 3.79% since March 2002, a time frame most stock funds including most international stock funds fell during. This fund is proof you don’t have to wait for a new fund to build a track record if you are comfortable with the manager and the strategy.

Telecom stocks were strong, sending the Gabelli Global Telecom fund up 11% for the month. The fund is almost back where it was a year ago. Microcap stocks have been among the strongest areas in the US market, the Bridgeway Ultra Small Tax Advantage fund was up 9.77% for the month and up 4.28% since March 2002, a much better showing than most stock funds. Emerging markets were strong, sending the SSgA Emerging markets fund up 9%. 

The Aggressive Growth portfolio is down just –2.1% since inception just over a year ago.