1st Quarter 2003 Newsletter

For the quarter, the S&P 500 declined 3.27%, while the Dow Jones Industrial Average fell 3.60%.  International markets followed domestic
markets downward, with the MSCI EAFE Index losing 8.2% amid war tensions, mixed economic news, and accounting concerns.  Bonds
continued to fare well, with the Lehman Brothers Aggregate Index advancing 1.39%
1 .
                                              Q1 2003 Index Returns

Source: Wilshire Associates.
Past performance is no guarantee of future results

U.S. stock markets opened the year optimistically, gaining 6% in early January due to positive equity fund flows2  and the announcement of
the President’s $700 billion stimulus package.  However, earnings disappointments and profit uncertainty dampened investors’ spirits, with
AOL-Time Warner’s $45 billion loss and board departures in late January providing the exclamation point to a weak earnings season.  When
the dust settled, fourth quarter 2002 S&P 500 profits had declined sequentially
3 from the third quarter and hopes for a 2003 recovery were
again being pushed to the back half of the year.

Concerns about the economy and fears of a potential conflict with Iraq increased the market’s volatility toward the middle of the quarter.   By
the week of March 11, the market had erased its gains and was down approximately 9% for the quarter
4.  Mid-March brought some relief, as
the initiation of conflict ended pre-war uncertainty, resulting in 8 consecutive positive sessions.  However, the rally stalled by quarter’s end,
succumbing to negative news on both the economic and war fronts.  This news included Congress’ decision to slash the President’s 2003
budget plan in half, casting doubt over the economic impact from tax relief and other fiscal stimuli, aimed at reviving the economy before the
2004 election.

Clearly, this year has demonstrated that war clouds more than the battlefield.  It casts a shadow of uncertainty over consumer and investor
behavior—at a time when many are questioning the continued strength of consumer spending and investor confidence.

To address this issue directly, two of the investment firms with which we work, AssetMark and Atlanta Capital, studied prior world conflicts and
their effects on stock returns. Surprisingly, they found that the performance of markets during and after periods of world conflict was
remarkably positive, casting hope for those considering throwing in the towel.

Specifically, they studied five prior world conflicts: Pearl Harbor, North Korea’s invasion of South Korea, the Cuban Missile Crisis, the Tet
Offensive, and Iraq’s invasion of Kuwait. We would highlight two results:

1. The S&P 500 fell 3% in the first month of conflict, on average.
2. The S&P 500 actually rose an average of 12% in the year following the initiation of conflict, more than reversing its earlier losses.

We believe the results underscore the importance of maintaining focus on your long-term financial goals, in spite of the volatility and
headlines that dominate the television screen

Today’s volatility also reminds us of the virtues of maintaining a well-diversified portfolio.  Indeed, the U.S. market’s P/E and dividend yield
suggest lower returns than we’ve been accustomed to over time. As such, we believe it may a good time to focus on a broader investable
universe.  While it remains the chief point of reference for most investors, the U.S. stock market only accounts for about half of the world’s
market cap6  and hence excludes many attractive areas for investment.

Many of the Portfolio Strategists with which we work have recently pointed out attractive areas of the market outside of traditional U.S. stocks,
international stocks and REITs7 .  International stock markets in the aggregate offer more attractive valuations than the U.S. market,
with economic prospects that are less correlated to our domestic economy.  
REITs have provided a strong, defensive dividend yield during
the downturn, and could provide some portfolio protection during a potential inflationary scenario, as the replacement cost of their underlying
assets appreciates.

The fact is, nobody knows with certainty which markets or sectors will lead a recovery in the world’s capital markets. However, we do believe
that an approach that considers the broadest investable universe may be appropriate at this time. We believe strongly that our investment
management solutions offer the breadth and depth to access the asset classes that will provide strong returns in the future.

1  Source: Wilshire Associates.
2  Source: Banc of America Securities, AMG Data Services.
3  Source: First Call.
4 Source: CSI.
5 Source:  Atlanta Capital Management, Inc.  For a copy of the full report, please give us a call.  Past performance is no guarantee of future
returns.        6  Source: MSCI All World Index.
7  Including UBS Asset Management and Litman/ Gregory.
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