[ Quarterly Client Update - September 2003 ] It has become a fruitful year. Even complete market pessimists would find it hard to disagree with the assumption that overall, markets have shown tremendous strength for the year.  This quarter, the sectors have all posted positive numbers across the board.  Investors are finally being well compensated to take risks once again!  Small cap growth stocks posted the best returns in the entire universe of stocks (over 5,000). We have been heavily weighting our equity concentration in your portfolios in this area for several months.  In the Sunday New York Times, the manager of one of our chosen small cap funds, Oberweis Emerging Growth, was mentioned as one of the top four in the country for the quarter. The good news is that most people still don’t realize that the market is in recovery.  This has given us an unprecedented opportunity to reposition portfolios under the radar of the general market. There continued to be sell-offs in the bond markets from mid June to early July.  This caused some short-term price fluctuations, but by the end of September, bond prices had rallied again.  Many of these funds moved to growth equities as consumer sentiment improved. GDP figures were revised upward, and world markets, including Japan, increased. It was shaping up to be an extremely strong quarter until the last week, where a bit of the overall returns were shaved away. Typically, markets are sluggish in the third quarter; however, this quarter you were rewarded.  We have detailed this equity performance separately on your enclosed portfolio reports. We are seeing a steady upward trend that most experts feel will continue into mid - 2004.  Remember, we still have record low interest rates, stimulus tax cuts that have not taken full effect and continued low inflation.  Also, with depleted inventories, corporations must begin to rebuild.  A falling U.S. dollar should be positive with exports increasing as our goods become cheaper. The creation of more jobs in this country is the end result. Recent Updates In Your Portfolio After a solid recovery in the 2nd quarter, we saw some negative employment figures in July. However, recently released numbers show the U.S. unemployment rate down to 6.1% from 6.4%. In addition, capital expenditures increased for this period as confirmed by the National Association of Purchasing Managers, and the GDP came in at +3.3% for the quarter. It was our belief that the net effect of these factors was neutral. In other words, we maintained our current investment style allocation for the 3rd quarter. During this period, we took time to examine our individual holdings at the fund level and made some changes in your value stock holdings. Our goal has always been to select the best investment managers in their respective styles. Typical value funds have deep value stocks (low valuations + low earnings growth) and relative value stocks (undervalued stocks in growth sectors). It’s no surprise that the current climate favors relative value stocks. Our research focused on finding value funds that had a larger ‘relative value’ component. In particular, we shifted a portion of Goldman Sachs Mid Cap Value to Hotchkis & Wiley Mid Cap Value. Goldman performed extremely well during the past few years with its deep value stock strategy. With our conviction in a prolonged recovery period, we felt transitioning some of our value funds would maximize the upside. For the same reason, we also moved a portion of Pimco Small Cap Value to American Advantage Small Cap Value. We had researched the American fund, consisting of two investment managers, for some time. By purchasing the AA Small Cap Value fund, we gained access to these two managers at half the expense ratio of going directly to the fund companies. We have always been sensitive to fees, and this is clearly a case where comparisons paid.  We sold a portion of Ivy Small Cap Growth (formerly Waddell & Reed Small Cap Growth) and added to our William Blair Small Cap Growth position. It was decided to take some 2nd quarter gains off the table, and move to a higher earnings growth fund.  For our variable annuity clients, we completed another successful re-allocation in mid-August. Being overweighed in small cap growth stocks continued to provide positive returns. The next scheduled re-allocation will be in mid-January 2004.  In our continued effort to examine all portions of your portfolios, we have formulated a new bond strategy. While July saw a significant drop in bond values, our defensive actions protected your portfolio.  We are cognizant of the shift in interest rate expectations from just a year ago. In the next few weeks, some repositioning will occur. For the past few quarters, we gradually introduced convertible bonds in your holdings. Pioneer High Yield has provided returns correlated with the equity markets while offering price support through a high coupon yield. It should be less sensitive to interest rate changes. In recent weeks, Faith Read Xenos and Albert Chu spent considerable time conducting due diligence meetings with current fund managers in Denver and Chicago. These included face-to-face meetings with Liberty Acorn Twenty, Westcore MidCo Growth, and William Blair Small Cap Growth. This process allows us to reconfirm our original investment hypotheses, and to insure that our expectations are met. In our commitment to provide the best research possible, we meet with our fund managers regularly. News At Singer Xenos Our next Client Gala will be on November 18th; please save the date.  We’ve chosen a surprise fun-filled location and hope to see you there.  Our speaker, Mr. Gregory Valliere, is an economist known for his insightful and entertaining outlooks (and his frequent CNN and CNBC interviews). This will be our best affair yet!  As always, we deeply appreciate the confidence and trust you have placed in us.  We look forward to discussing these portfolio and economic issues with each of you personally at your next meeting.