1st  Quarter 2006 Newsletter

Both the U.S. and international stock markets posted solid gains during the First Quarter of 2006, despite continued global economic and
political uncertainty.  The broad U.S. stock market, as measured by the widely-followed S&P 500 Index, has now risen 53%
1 over the three
year period since March 31, 2003, rewarding investors who “stayed the course” following the severe 2000 – 2002 market downturn.

While reported economic growth in the U.S. was down during the 4th quarter of 2005 (
GDP Growth of 1.7%2  vs. 4.1%3  in the 3rd quarter), this
was largely viewed as an anomaly due to the effects of the two major hurricanes in September.  A recent survey of leading economists
expects the economy to rebound with a strong growth rate of 4.6%
4 for the 1st Quarter of 2006.

Inflation during the First Quarter remained benign at 2.1%5, excluding food and energy, and 3.6%6  overall.  While gas and oil prices were
both up 9%
7 during the quarter, their impact on the overall economy was less severe than many had predicted due to the mild winter in the U.
S. and the lower than anticipated demand for fuel oil.

While all of the stock market indices delivered positive returns during the quarter (see chart on the following page), the strongest performing
asset classes were international stocks (MSCI-EAFE), U.S. small cap stocks (Russell 2500) and REIT’s.  Conversely, the overall bond
markets struggled during the quarter as the Fed continued to increase short-term interest rates, resulting in slightly negative performance for
the U.S. Bonds (the Lehman Aggregate Bond Index) and global bonds (the Lehman Global Bond Index).  Only the High Yield Bond Index
produced a positive return for the quarter.

International stocks have now outperformed U.S. stocks over the past three years
8, delivering a strong contribution to overall portfolio
performance for investors who have selected a globally diversified strategy.   Within the international markets, you’ll note that the
Emerging
Markets, led by countries such as China, India, Indonesia, and Russia, outperformed their developed market counterparts during the quarter,
which is a reflection of the strong growth occurring in these markets.






























As we look to the 2nd Quarter and the balance of the year, the U.S. economy is projected to expand at an above average rate of 3.5%
9 for
2006.  While there is always the potential that unexpected events could affect world financial markets and derail these expectations, both the
U.S. economy and stock market have shown great resiliency given the multitude of events, including the hurricanes, the on-going war in Iraq,
and the large increase in energy prices, we have experienced over the past 12-24 months.      


Best Regards,




Robert Valentine





Endnotes:
1  S&P 500 Index three year cumulative returns, March 31, 2003 thru March 31, 2006 provided by Wilshire Associates
2  Bureau of Economic Analysis of the U.S. Department of Commerce:  Gross Domestic Product 4th Quarter 2005 Final Release, March 30,
2006.
3  Bureau of Economic Analysis of the U.S. Department of Commerce:  Gross Domestic Product 3rd Quarter 2005 Final Release, December
21, 2005
4  Bloomberg Monthly U.S. GDP Forecast of the 60 top economists surveyed by Bloomberg from February 27 – March 7, 2006
5  Bureau of Labor Statistics Consumer Price Index Summary Release for the month of February 2006 released on March 16, 2006
6  Ibid
7  Bloomberg – Price Change from December 31, 2005 thru March 31, 2006 for West Texas Intermediate Crude Oil and U.S. Retail Gasoline
Prices (All Grades).
8  MSCI –EAFE returned 31.65% Annualized from March 31, 2003 to March 31, 2006 versus 19.67% Annualized for the Dow Jones Wilshire
5000 Index and 16.98% for the S&P 500 for the same time period.
9 Average of responses for each quarter of 2006 from Bloomberg Monthly U.S. GDP Forecast of the 60 top economists surveyed by
Bloomberg from February 27 – March 7, 2006.
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An index is a portfolio of specific securities, the performance of which is often used as a benchmark in judging the relative performance
of certain asset classes.  Indexes are unmanaged portfolios and investors cannot invest directly in an index.  Past performance is no
guarantee of future results.  The index returns are all “Total return” with dividends re-invested, which means the return includes not only
the change in price for the securities in the index, but any income generated by those securities.  Source:  Wilshire Associates
.