December 31, 2001

The past year has presented many challenges to our country, our clients and ourselves but at the end of the year we find people more united and more committed than has been experienced in decades.

Since the September 21st market low, stocks have rallied more than 20% before recently giving back some of their gains. That means we are technically in a new bull market. We are still far from the all time high in early 2000 of a 11,722 Dow (now at 9,892) and a NASDAQ that surpassed the 5,000 mark (now at 1,987).

We all still feel the pain of those losses and the more heavily weighted you were in technology, the more losses you experienced. We still believe in having some money in the technology sector, especially biotechnology and healthcare, but in a proper ratio.

As I talked with all of you over the past year, it was clear to me that you understood that there would be a time of loss and you were steadfast in investing for the long term. I commend you all for believing that asset allocation (not securities selection) is responsible for returns, which happens to be the foundation of Modern Portfolio Theory.

We have never tried to predict the future, but history has proven that adversity often creates opportunity, particularly for the careful, patient investor.

Wall Street has become less friendly to small investors as fees at brokerage firms go through the roof. Small investors are finding that investment minimums, fees and services at mutual fund companies and brokerage firms are higher than paying a financial advisor, and so we have experienced tremendous growth this year.

In order to accommodate everyone fairly, we are beefing up our menu of programs and services.

Michael Pavlik CFP and I are developing a web-based program for clients who do not have our minimum requirement to invest. There will be an area on our website for clients to log in and check out model portfolios that will be built around ETFs (exchange traded funds) for diversification and low cost. They will also have access to our ongoing library of topics and the latest developments in tax law changes and financial planning. There will be a flat annual fee for access. It will be useful for clients building a net worth and do-it-your selfers. Check out Mike’s bio on our web site. He is a welcomed addition to the firm this year.

My financial planning hourly rate will go to $250 an hour beginning in January 1, 2002 on new contracts. This is still a competitive rate considering that I have been in the business for over 20 years now and one of the few fee-only financial planners in the Bay Area. This rate also includes a one-year retainer for consultations at no cost. I know of no other financial advisor that offers this. That is how committed I am to seeing that you understand and implement your financial plan.

Our new minimum for assets to manage is $250,000 per family. This minimum is for new clients only. That can be a combination of IRAs, brokerage accounts, etc. I charge 1% of assets under management with break points for single accounts over a million (.60% of the next million and .20% thereafter). You will receive quarterly statements with our quarterly newsletter and we can manage portfolios for tax efficiency. You will also have access to the new program on our web site. For those of you that are under the $250,000 minimum now, we will continue to manage your funds for you as per our original agreement.

For current financial planning clients with assets under $250,000, your annual reviews will be every other year. I will contact you to discuss when your next review will be.

Tax organizers will go out mid January with a fee schedule. As usual I charge per form. Existing clients will have a pre-scheduled appointment for them and new clients will be asked to call the office for a appointment.

Please keep in mind that all of our services- financial planning, investment management, and tax preparation are distinct services and you are under no obligation to use all of them. We are accepting new clients and we welcome referrals.

I appreciate any suggestions or comments on how we can improve. Unfortunately, we did get hit with a virus this year so we have terminated our McAfee service and will use firewalls for protection in the future. Email now surpasses the telephone, as our primary means of communication so make sure that we have updated email addresses.

The year-end brings no greater pleasure than the opportunity to express to you how thankful I am for your business. May your Holiday and New Year be filled with health, happiness, and prosperity!

- Fern Alix LaRocca CFP® EA