6-30-04

    The second quarter continued at the brisk pace where the first quarter left off - nearly a deal a day. As you probably read in the news, the housing market has been white hot. You have two forces pushing the market. First, you've got an improving economy which enables more people to afford housing. Secondly, you have the anticipation of higher interest rates.

   By the time you read this Uncle Al will have raised rates, my guess a quarter point. Mortgage rates have already factored this in as well as continual "measured pace" of rising interest rates to the tune of 1% increase over just the last six months. Even though mortgage rates are rising and will continue to rise, it won't harm the housing market. We are currently at a 45-year low. If Greenspan doubles rates from 1% to 2%, we are still below 30 year lows. A 3% Fed Funds rate is considered neutral.

   The economy is getting stronger by the month. Even if you listen to the political rhetoric, I don't think anyone can deny that we are doing a lot better than six months ago, and a world better than a year ago. Rising interest rates won't dampen the economy. They are a necessary evil to contain inflation.

   Two significant objectives were met this quarter. First, I raised another $550k of investor money, thanks again mostly to present investors' referrals. I've finally hit the $5 million mark, with the portfolio at $5.05 million. My plan is to grow continually over time. Secondly, is that DenSco has now paid $1 million dollars in interest back to investors. This is a significant milestone.

   There are presently 60 loans; with homes valued at $8.5 million. I funded 51 new loans and had 46 loans close. The pattern that has developed is that I have 1/3rd of the portfolio in escrow, 1/3rd the properties on the market, and 1/3rd being remodeled.

   The strong turnover in the portfolio, along with steady growth bodes well for continued summer quarter prosperity. The demand I'm seeing for new loans continues to out strip my ability to fund all of them.

   Please look through the list of properties. I've spent many an hour driving around taking pictures and doing inspections.

   I will continue to deliver a return on your investment. I appreciate your trust and your referrals.

   Denny J. Chittick