The U.S. Equity Market bounced back in the third quarter after the second quarter decline to close at levels near the peak of May 2006, either slightly above or below the peak depending on which index you focus on. The year to date returns for the following indices are:

                                                    2006 YTD Market Index Performance
                                                    Dow Jones Industrial Average              8.97%
                                                    S&P 500 Index                                   8.53%
                                                    NASDAQ Composite Index                2.41%
                                                    Lehman Aggregate Bond                      3.06%

Please keep in mind that the above numbers reflect performance since the beginning of the year. Your quarterly reports reflect a later beginning date, typically 2/28, 3/31 or 4/30. For comparison purposes the following are the relevant numbers. Also keep in mind that beyond proper time frame, any meaningful comparisons to indices need to take into consideration the makeup of the portfolio with regard to types of securities (ie: equities, domestic/foreign, and fixed income positions).

                                                                     Since 2/28    Since 3/31   Since 4/30
                         Dow Jones Industrial Average     6.23%         5.13%         2.74%
                         S&P 500 Index                           4.31%         3.16%         1.93%
                         NASDAQ Composite Index      -1.01%        -3.48%       -2.76%
                         Lehman Aggregate Bond             2.62%          3.51%        3.67%

The catalyst behind the rebound was a combination of continued solid earnings growth, an improved outlook for interest rates and a pullback in oil and other commodity prices. The drop in commodity prices helped reduce inflationary concerns, which in turn reduce the likelihood of a hike in interest rates by the Federal Reserve. Lower interest rates are very positive for stocks. The Federal Reserve Board opted to hold its key lending rate at 5.25% on September 20th marking the second consecutive pause.

The economic growth of the U.S. is expected to continue to slow down. One of the concerns relate to the housing market softening and the potential impact on the economy, which is fairly normal considering where we are in the economic cycle. Some positive offsets are a strong job market and rising household income continuing to contribute to consumer spending, as well as helping to alleviate some of the affordability concerns. In addition, we can take into consideration the fact that corporations are still flush with cash and should fill in the spending gap of the consumer as the economy continues to grow, even at an expected slower pace.

There are contrasting views among major economists about the future direction of the economy and interest rates. We remain optimistic about the stock market given that the economy is settling into a more sustainable and less inflationary growth pattern and we are in the midst of attractive stock valuations.

After the minor correction experienced in May, investors were quick to realize that the economic and earning fundamentals did not warrant a significant market revaluation and the dip was therefore short lived. Investor's collective risk assessments are continuously subject to change and will inflict the market with short term volatility. This volatility is often unrelated to actual fundamentals. It is an amalgam of many investors continuous assessments and re-assessments of so many things. That is the nature of the stock market, and this understanding is critical for long term success. The best course of action remains to "stay the course". Thank you for the opportunity to serve you.