Quarterly Investment Update – 3rd Quarter 2006

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October 2, 2006

Dear Friends and Clients,

Before we discuss investments, let’s briefly discuss our upcoming Fourth Annual Investment Seminar at Amelia Island and its main purpose. In addition to having a wonderful time and eating some good food, it serves as a good opportunity for us to discuss our investments that we made during the past year as well as to discuss the investment climate for next year. It should also serve as a wonderful opportunity for you to evaluate your own personal financial plan before the end of the year as you do your year end tax planning. This is the primary reason that all of our CPA/financial planners (A.B., Terry and I) will be available at the seminar. Our seminar has also had a great affect in providing us good feedback on what we’re trying to accomplish as a firm on a more personal level and we encourage all of you to make every effort to attend. Even though formal invitations will be forthcoming, please mark your calendar for Thursday, November 9, 2006 at PLAE’ Restaurant at Amelia Island Plantation, Florida.

As far as the investment climate is concerned, the third quarter has passed with stocks doing remarkably well since the June lows. Normally, in a midterm election year, the third quarter is a bummer for stocks. But stocks defied the norm by ending the quarter on a positive note with the strongest quarterly percentage gain on the S & P 500 since 2004. In fact, the Dow Jones industrial average reached a milestone last Thursday by briefly trading above its record high close of 11,722.98 set on January 14,2000. We may have a few bumps on the way, but the economic conditions continue to look very positive for stocks. Also, the third quarter really turned things around for bonds. As recently as the end of June, Wall Street’s best and brightest were complaining over interest rates. Soaring energy and metal prices were conjuring up the specter of accelerating inflation and the inevitable response -a damaging credit squeeze by the Federal Reserve. Suddenly, those fears are vanishing into thin air and it’s hardly surprising that bond yields have nosedived. The yield on the benchmark lO-year Treasury Index has skidded from a peak of 5.24% on June 28 to as low as 4.53% recently. We’re delighted, of course, with these results because the share prices of our long-tem1 bonds and zero-coupon bonds have increased dramatically. However, as value-oriented investors, it’s important for us to maintain our price discipline. Many stocks and mutual funds have risen sharply in recent weeks, making them less attractive than they were in June and July. In fact, we wouldn’t be at all surprised if stocks and bonds “corrected” some of their recent gains over the next few weeks. At the seminar we’ll discuss, in more detail, what we should expect from both stocks and bonds for remainder of 2006 as well as 2007.

During the quarter ended September 30, 2006, we continued with our strategy of reviewing all of our portfolios with regards to asset allocation and continued to reduce our over-weighted industry sectors of stocks and mutual funds that have substantially appreciated in value in order to raise cash. Since the prices of long-term bonds and zero coupon bonds have increased, we have stopped purchasing any new bonds or bond funds for now. However, for taxable accounts, we have been purchasing other high yielding investments such as limited partnerships, preferred stocks, REITS as well as high yielding dividend paying stocks of domestic corporations from selected equity industry groups. For non-taxable accounts, such as all retirement accounts, we have continued to purchase growth and value equity investments in selected industry groups.

All in all, we continue to have a positive outlook for stocks but we will continue to take defensive measures and use any correction as an opportunity to buy more of our favorite stocks and mutual funds.

Again, thank you very much for the trust and confidence you have placed in our firm and it is always appreciated. Please contact me with any questions or comments.