A flurry of positive economic news lifted investor spirits in November, fueling strong equity market returns for the month and setting the stage for an end-of-year rally similar to that achieved in the closing months of 2004. The increasingly positive mood was a welcome change from the heightened pessimism in the wake of the Gulf hurricanes and resulting surge in energy prices.

Perhaps the best news was that third quarter economic growth was stronger than anticipated, despite the economic headwind caused by the hurricanes and the spike in gasoline prices in particular. The revised estimate for third quarter growth was 4.3% annualized, up from a 3.3% annualized rate for the second quarter. Throughout the summer, expectations were for an uptick in GDP growth, but those hopes were dampened by the devastation of the Gulf region. The ability of the economy to surge forward in the face of such significant regional disruption again demonstrates its strength and resiliency.

Nonetheless, the increased optimism of Main Street America may have been a function of relief over tumbling gasoline prices rather than by positive macroeconomic results. With the onset of winter, a more pessimistic sentiment could re-emerge with the realization that higher gasoline costs have been replaced with elevated natural gas prices. An unusually cold or long winter could crimp consumer spending in the affected regions and put a drag on growth.

During November, the S&P 500 Index gained 3.7%, pushing the blue chip benchmark return for 2005 to 4.8%. The Russell MidCap and 2000 Index returns outdistanced that of the S&P with strong gains of 4.4 and 4.9% respectively for the month. Year to date, the Russell Mid Cap continues to lead the domestic market with its 11.5% return, well ahead of the Russell 2000’s 5.0% return over the same period. The rally carried over into the international markets, although to a lesser degree. The 2.5% monthly return for the EAFE Index was sufficient to improve its year-to-date performance to 8.5%.

The fixed income markets continue to lag equities year-to-date and, barring a significant and unexpected sell off in stocks, will under perform them for the third consecutive year. The Lehman Aggregate Bond Index returned 0.4% for the month. For 2005, its return of 1.5% puts it slightly ahead of the short-term taxable bond benchmark (Lehman Aggregate Bond Index 1-3 Year Government) return of 1.3%. The continued flattening of the yield curve in the face of rising short-term rates has allowed intermediate to long-term bonds to hold up better than many anticipated. Domestic high quality bonds have managed to stay marginally in positive territory, although these mediocre rates of return have not kept pace with inflation, resulting in slightly negative real returns. The Citi World Government Bond Index Hedged has managed a year-to-date return of 4.2%, easily outpacing the domestic benchmarks and providing a return slightly better than inflation as measured by the Consumer Price Index.

As we move into the final weeks of the year, we continue to closely evaluate the capital markets and economic developments. While we expect to continue to be in a generally low return environment in 2006, the potential cessation of Fed rate hikes, current reasonable equity valuations, and the prospects for continued economic expansion of the U.S. economy should provide reasonable underpinnings for positive results next year.

In closing, we wish you and your family the happiest of holidays and a prosperous new year.