9-30-02

   Third quarter of 2002 was a tough one. The stock market hit four and six-year lows on the major indexes, the anniversary of Sept 11th, along with some poor economic numbers. We had fewer loans close in July and August than we have in the past. September picked up right away and was busy all month. Interest rates are at 40-year lows; this will keep a strong demand for housing.

   This was the first quarter that DenSco didn't have any additional investors. I spoke with several people that are interested, however I believe that with what I mentioned above, it turned analysis of investments in to paralysis. The demand for loans has been very strong and keeping fully invested is quite simple. It also allows me to pick and choose which loans I'll invest monies.

   The portfolio now stands with 23 loans, totaling $2.3 million. The average number of days from funding a loan to close of escrow has been extended to 115 days. Some of that is because of the longer-term construction loans closing this quarter. We have had some challenges with two loans. One loan had a resident fighting eviction for three months, but in the end the judge affirmed our first and rightful position on the deed of trust and she moved out. The other loan after being current for a long time is now fighting foreclosure. However our position was confirmed by the court as correct, and it's just a matter of time until we close that loan, with all of our interest paid.

   With activity picking up like it has in the last few weeks, I can see our portfolio turnover rising to our expected rate. I've updated the pictures of the properties. We have a wide diversity in properties across the valley, price and borrowers. I hope to attract more investors and continue to grow and diversify the portfolio.

   Denny J. Chittick