Dear Clients,

I’m even more delighted than usual to report to you at midyear on the events of the last six months. But first, as always, a brief recitation of our principles.

Part One: General Principles

• You and I are long-term, goal-focused, planning-driven owners of broadly diversified portfolios of enduringly successful companies. As such, we act continuously on our plan, as opposed to reacting episodically to current events and conditions.

• We’re convinced that the economy cannot be consistently forecast, nor the market consistently timed. We infer from this that our best chance to capture something close to the full long-term return of equities is to ride out their frequent, sometimes significant, but historically always temporary declines.

• These will continue to be the bedrock convictions that inform our investment policy, as we pursue your most cherished financial goals together.

Part Two: Current Observations

• After declining sharply for most of 2022, the S&P 500 ended the year at 3,840.

• As the year turned, it seemed as if the economy might well be in a no-win situation. Either the Federal Reserve would tighten credit conditions enough to stamp out inflation, thereby plunging us into recession. Or it would relent, avoiding recession but permitting inflation to burn on. In either case, we were assured that corporate earnings must be about to decline significantly, boding ill for “the stock market.”

• To this apparently intractable situation, the first half of 2023 added three new and potentially critical uncertainties: the specter of U.S. sovereign default, a wave of bank failures that seemed to threaten the banking system itself, and a renewed outbreak of fear surrounding the dollar’s status as the world’s reserve currency.

• Yet after enduring that relentless onslaught of crises real and imagined,** the S&P 500 closed out the first half of 2023 (June 30) at 4,381, up 14% from 2022 year-end**. I’m almost tempted to say, “You read that right,” and leave you to draw your own conclusions. Instead, I’ll just repeat Peter Lynch’s timeless maxim: “The real key to making money in stocks is not to get scared out of them.”

• In that sense, these six months represent for me—and I devoutly hope for you—a successful investing career in microcosm. You and I did all that can be asked of us: amid well-nigh universal pessimism, we didn’t get scared out.

• Rather, we stayed focused on our goals and on our long-term plan, with confidence that the managements of the companies we own were husbanding our capital with diligence, while they sought out new and potentially greater opportunities amid the adversity.

I believe I was put here for just that reason: to help you not get scared out of them. Thank you for being my clients. It is a privilege to serve you.

Michael Paulding Thomas

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^{Securities offered through Innovation Partners, LLC. Member FINRA/SIPC}