Quarterly Investment Update – 4th Quarter 2005

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January 4, 2006

Dear Friends and Clients,

Enclosed is. your fourth quarter’s Investment Portfolio Report for the calendar year ending December 31, 2005. Please review this report very carefully and, as always, we welcome any questions or comments.

Since our last quarterly update, which we discussed in some detail at our investment seminar, the stock market’s upside momentum has been modest as oil prices eased and corporations continued to post healthy 3rd quarter earnings. Enclosed is an article from The Wall Street Journal (Weekend Edition) for Saturday, December 31,2005 reflecting the year end closing numbers on the major indexes. For 2005, the Standard and Poor’s 500-stock index ended the year with a 3% gain. This is the measure that we want to exceed in our individual portfolios year after year.

Even though the quarter began with an upside momentum, stock prices fell sharply during the month of December to bring the Dow Jones Industrial Index to close down for the year. This was done in a month which is normally one of the strongest months of the year for stocks.

We kept busy during the quarter by implementing several important defensive measures to all of our portfolios as a whole.

As conservative, long-term investors, we have been taking advantage of this fourth quarter rally by easing out of stocks and mutual funds that could present problems during 2006. In addition, we have reduced some of the weighted allocation of stocks and mutual funds that have appreciated substantially during the year. Furthermore, we increased our allocation of bonds and cash equivalents into our portfolios, which we hope will prove valuable to us in 2006 for some good buying opportunities. In addition, we have reviewed all of the taxable accounts for purpose of developing some year-end tax planning strategies to make the portfolios more tax efficient.

Looking ahead for 2006, the stock market must recognize that the economic background has changed. On the plus side, corporate profits have surged to record highs but we must recognize the main issues facing Bernanke and the Federal Reserve Board in terms of how much the credit tightening will hurt the economy and for how long. Or, to put it another way, will inflation get the most focus for the Federal Reserve Board during 2006? We’ll have to wait and see how these issues will affect the economy. Some analysts feel that the bull market that began in October 2002 is essentially over. As far as ,the bond market is concerned, we continue to feel that interest rates will go up. In fact the 3·month Treasury bill yield ticked up to 3.98% as of December 31, 2005. This is the highest level in almost five years and will most likely go up to 4% very soon and then to 4 1;4% shortly thereafter.

All in all, we don’t foresee a major market downturn for 2006 but the blue chip indexes could easily pull back at some point during the year. As far as our strategy for 2006 is concerned, we will continue to take defensive measures and continue to use any corrections 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. On behalf of the entire staff, we want to extend to you and your loved ones our warmest wishes for the New Year.