1st Quarter, 2002

March 29, 2002

Right after an interesting period last year, a dull quarter followed. Our system kept the portfolio in cash until the last days of February, when an apparent continuation of the rally developed for a few days. However, by mid March, the resumption of the down path left the account with barely enough gains to cover for the fees. During this period, management decided to automate the trading process, even if the commissions will increase from 7 to 12 (an increase of 71.43%). This decision has taken out the emotions from the process of executing trades.

Again, as noted in the allocation chart, the period ended with the account balance 100% in cash. The drop at the end of the performance chart reflect the impact of the management fees on the portfolio.

Also, during this quarter, our system was tested from the short side of the market and as a result of it, short selling will be incorporated to our strategy starting the next quarter.

In the short term, we expect our returns to be diminished by the decision to implement the use of stop orders despite the fact that our account equity has not grown enough. However, we believe that such a step will be ultimately beneficial to our portfolio by making the whole system less exposed to emotional breakdowns.