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December 2002 performance review

January 15, 2003

The conservative portfolio was up 1.14% for the month of December, but the positive action was mostly from bond funds this month. The standout was the American Century International bond fund (BEGBX) up an astounding 6.52% for the month. Remember last month when we said the dollar was about to start working in the favor of international investments again? Basically 85% of that return was the result of the US dollar falling. For the record, with the dollar down near 20% in the last year, we're starting to think about easing up on our foreign bond position as much of the easy money has been made. The Harbor bond fund was also a winner in December, up almost 2%.

Falling from grace was the Vanguard Utilities Income fund, down just over 5%. The fund has converted to a dividend stock fund not unlike the Strong Dividend income fund, which is already in this portfolio. This switch on their part was just in time to miss a strong month for Utility stocks. The other explanation for this fund's disappointing month (a month when high dividend stocks were not particularly weak) was the manager's selling of a half billion dollars of utility stocks. You don't want to own a fund that has to make sales like that in a short time frame.

The aggressive growth portfolio was down less than .5%. This fund is proving to be surprisingly un-volatile for an aggressive growth portfolio, as its really done quite well in a bad year for stocks.

The Fidelity New Markets Income fund helped again up 2.6%, as emerging markets bonds add yet another strong month. We're starting to consider easing up on this area, as this fund is up in the deep double-digits over the last year.

Less impressive was the -6.47% showing of the Gabelli Global Telecom fund, coming off an amazing couple months that took the fund up around 30%.

For the record, the excellent Dreyfus Emerging Markets fund recently converted to load fund, a disappointing development, and one we're growing quite accustomed to in the fund industry of late, sadly. This move does not effect old investors in the fund who are grand fathered into a no load account, and can even add money no load. That said, new investors should NOT buy the fund as it now carries a sales load. We will have a replacement for new investors shortly.