April 9, 2010

Dear:

The stock market enjoyed a solid advance in the first quarter of 2010. After a good start, a late January technical correction ensued, lasting a brief three weeks, which took a little steam out of an overheated market that was getting a little ahead of itself. The market was the only thing overheated. In the North and East, a brutal winter was pummeling those parts of the country with repeated snowstorms. I mention this only because it affects the mood of so many people who in turn affect the market and our economy. A long, gray, cold, miserable winter inhibits spending and curtails optimism which is important to our recovery. But Spring has arrived, right on schedule, and you can see this reflected in the mood of consumers and investors. Retail sales have picked up at higher levels than expected. Our fear-induced recession appears to have made its bottom last August, six months after the market lows last March. Confidence has slowly been returning and our economy is gaining strength.

Ryan and I have been busy this quarter on a special research project to identify those companies that have had rising earnings and dividends over the past ten years without a commensurate rise in their stock price. After culling through several thousand candidates, we came up with a list of 34 companies that have the characteristics of potentially being, what we think, the stocks best positioned to outperform the market going forward. What is especially exciting about this endeavor is seeing how this screen has worked before. Quality, blue-chip companies, that fundamentally grow, but go unrecognized, are actually undervalued in the market. They pay better than average dividends, and then, when they are discovered, appreciate at rates greater than the averages. Of course, there is no guarantee they will be discovered or they will continue to grow, but the dividends and potential appreciation, we find enticing. A number of these issues are already in your portfolio. We are in the process of preparing this report for publication.

Already the second quarter is off to a good start, although I expect periodic technical corrections as we continue to regain confidence in our market and our inherently dynamic economy. Looks like a lot of work for us ahead, but I think we’re up to it.

This is the time of the year when annual reports and proxies are sent out. Some of you have elected not to receive them and we vote your proxies on your behalf. The SEC requires us to remind you that if you would like to know how any of these proxies are voted, or, if you would like to read our proxy voting procedures, please call us and we will be happy to supply that information. Of course, as always, please call or come by any time you have any questions or concerns.

Very truly yours,

Richard J. Fruth

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