Penobscot Investment Management Company Inc.

Focus: Second Quarter 2010

                                                            Closing     First          1 Year          3 Years         5 Years
Stocks (Total return):                       Price        Quarter                      (Annualized) (Annualized)

Dow Jones Industrial Average               9774        - 9.4%       18.8%         -7.4%                1.6%

Standard & Poor 500 Index                    1031       -11.5%       14.3%          -9.8%              -0.8%

Bonds (Total Return):

Barclay's Capital Aggregate Bond Index                 3.5%        6.1%             7.6%                5.7%

(Sources: FT Interactive Data, Thomson Baseline, and WSJ; past performance is not indicative of future results.)

The second quarter was characterized by 10% or more declines in most equity market indices.

Increased volatility and higher prices for gold were the result of the uncertain economic outlook despite encouraging news about corporate earnings.

Discipline is essential during such periods of uncertainty. At Penobscot, we are as focused as ever on selecting portfolio companies noted for strong balance sheets, market leadership in their respective industries and reasonable valuations. We don’t stray from our discipline, and the result is consistent dividend growth and lower volatility. While short term market levels are unpredictable, the long term result of our investment discipline along with consistent dividend income growth is appreciation in the intrinsic value of our portfolio companies.

Discipline is essential at every level of the economy. Individuals must have self-discipline to live within their income and save for uncertain times. In the absence of self-discipline, external factors such as job loss or the lack of adequate savings can result in financial hardship such as home foreclosure that has been so common over the last several years.

Tax revenue and bond ratings provide the external discipline to take very seriously the importance of self-discipline to balance receipts and expenditures. At the federal level, external discipline is likely to become an increasingly important motivation for fiscal responsibility. Financial obligations of the US government have grown enormously during the decade as the result of the spending policies of the previous and current administrations. In two terms of Bush leadership, tax relief was the priority, but increasing federal deficits led to even higher levels of government spending as a percentage of gross domestic product. The Obama administration has initiated major tax increases that will become effective in the next several years, but government spending has not been restrained. Congressional budget analysts project that the federal debt will increase to 62% of gross domestic product by the end of this year.

There is very little evidence of self-discipline at the federal level. Tax and spending policies have been lax as a result of the enormous borrowing capacity that has been allowed by our global creditors. However even at the federal level, external discipline can be exercised swiftly and without much warning. Evidence of discipline is what gives taxpayers, voters and creditors confidence in the future. Until leadership in Washington demonstrates sincerity in its intentions to exercise discipline, investors are going to remain cautious in anticipation of the unknown severity of external discipline imposed by our foreign creditors and trading partners.

When our leadership in Washington eventually demonstrates desperately needed financial leadership discipline, we expect our investment strategy will be rewarded as the result of renewed investor confidence. Evidence of discipline committed to reducing the federal deficit and excessive indebtedness is essential to restoring investor confidence in capital markets. Otherwise, investors should expect market volatility and uncertainty in the months ahead. We believe that our leadership in Washington has the capability to exercise fiscal responsibility, but we will have to be cautious and patient in gaining confidence that they have the will to do so. Meanwhile, on behalf of our clients, we will continue to be disciplined in implementing our investment philosophy by choosing securities of market leading companies with global operations, strong finances and records of consistent earnings and dividend growth.

We look forward to speaking with you in the weeks ahead and hope you have an enjoyable summer.