In our previous transmittal letter, we observed that "2006 brings us the
prospect of more balanced economic growth.”  Presently, there is clear
evidence that global economic expansion is more balanced than in 2005.  
Japan and Germany are exhibiting signs of sustainable economic growth,
and the U.S. housing market continues to cool in an orderly fashion.  Energy
prices remain volatile with oil and natural gas prices going in opposite
directions.  Oil prices are at the higher end of a $58 to $70 trading range
and remain sensitive to geo-political considerations, which are nearly
impossible to foretell.  In contrast, natural gas prices have declined to pre-
Katrina levels.    

Stock returns in January and for the first quarter were positive.  Stock
valuations seem reasonable given the earnings and inflation outlook.  We
expect a deceleration in corporate earnings growth from low teens to high
single digits this year.  Earnings growth across industry sectors should be
more balanced versus 2005, when energy, utilities and materials were the
only sectors outperforming the market.  In this environment of slowing
corporate profits, we will focus on identifying companies with rising returns
on invested capital and pricing power.   

The theme of balance also applies to the bond market, where monetary
policy neutrality suggests the Federal Reserve is in the final stages of
tightening.  As U.S. Treasury yields approach 5% across the maturity
spectrum, we are comfortable investing in short and intermediate maturities.  

Protectionism is an area of concern in this mid-term election year.  
Protectionist inroads would have adverse effects on financial markets and
economic growth. The marketplace should be the disciplinarian that drives
better balance in the global economy.  Although our general outlook remains
constructive, numerous uncertainties over the balance of the year suggest
careful attention to market volatility should be rewarded.  Consequently, we
will continue our emphasis on high quality investments and seek to re-
position assets on an opportunistic basis.