May You Live in Interesting Times – Old Chinese Proverb

Barring big changes tomorrow, the indexes for the first quarter will be down approximately, Dow 8%, S&P 500 10%, and the NASDAQ 15%. Since we may no longer provide our average performance data without running afoul of SEC rules, you should compare your own statements to the above to see how much better you have fared. Call us if you need help.

The dismal performance of the financial markets is the result of a credit crisis of confidence precipitated by incredibly loose lending standards of recent years which led to debt acquisition by many who cannot make repayments. Tom and I believe this situation will take some time to remedy and are continuing our conservative positions of call options, cash, gold and leveraged bear fund holdings. The increased volatility is providing us with call writing opportunities that we find lucrative.

We have apparently survived our fourth SEC examination in our 25 years in business. The Commission continues to press us for additional recordkeeping and has faulted us for rounding (to the nearest $25) in our quarterly billings without so disclosing in our Form ADV II. We will amend our filing to indicate such rounding in the future and invite any of you to review your past billings (or have us do so) to determine if you might be due a refund. We will also be disclosing in our filing that we do not vote proxies on behalf of our clients.

We have been faulted for other rules violations which are largely procedural in nature. The net effect is that we will be required to either spend substantial additional time to comply with their recommendations or hire other professionals to assist in our doing so. In either case, our costs and efforts will increase and we find it necessary to increase our billings rate by 5 basis points (five one hundredths of one percent) per year. This increase will amount to no more than 10% for any one client and is our first increase since January 1, 2001. The new rate will begin on July 1, 2008.

We regret increasing our costs to you. We have tried, without success, to convince the SEC that our results-oriented, low-cost, high client retention, complaint-free, history should speak for itself. They are unimpressed and relentless in their quest for records, policies and procedures that we feel only takes time away from our efforts to provide you with protection of your investments and a fair return thereon. We welcome your inquiries on any of this and are willing to expand on any areas of interest.

We are pleased with how our defensive measures have held the fort against the anticipated financial maelstrom. The other good news included the special dividend received at the Guyett household, namely the arrival of Jack Michael Guyett, born March 24, 2008.

Very truly yours,

Michael F. Cantlon