Investment Recap Second Quarter 2004

In the second quarter, stock market averages showed slight improvement (less than 2%), while interest rates rose and bonds declined in value. Our performance continued to track better than the averages. The questions about the election, Iraq, terrorism, and higher interest rates continued to confound and confuse investors.
We remain heartened by the earnings prospects of our stock holdings. Our approach is to analyze each company on a bottom-up basis to reassure ourselves of their prospects. In many respects, corporate fundamentals have never been better. While we do not anticipate as robust a market as last year, we believe that stock prices will trade higher over the balance of the year. We will continue to invest equity reserves and bond reserves in balanced accounts opportunistically.