Strategy Update Q2 2006

6/30/06

As of this writing, the second quarter is shaping up to be one of the most difficult quarters for the Russell 2000 since the third quarter of 2002. The Russell declined about 5% over the last three months and the S&P 500 lost about 2%.

Such market corrections occur regularly and are part of investing in the stock market. Our strategies will generally participate in sharp downturns, but if they turn into protracted bear markets, our portfolios adjust and redeploy assets in areas with the best performance potential.

Dynamic Value

The Dynamic Value Portfolio weathered the volatile quarter in line with benchmark returns.

Performance

To view detailed performance information, please click here (Requires free registration to access).

Sectors

The Technology sector performed worst with a 13% decline followed by the Health Care sector. The Dynamic Value strategy has very minimal exposures to these sectors. Our main exposures were in the Industrial, Consumer Cyclical, and Financial sectors. This quarter all of these sectors were average performers with declines around 6%. The best performing sectors included Consumer Staples and transportation related stocks, which eked out returns around 2% for the quarter. Dynamic Value had little exposure in these sectors. As a result our performance tracked the Russell 2000 rather closely this quarter.

Current Holdings

Diversified Income

This portfolio is intended to provide tax advantaged dividend income with low volatility. The strategy outperformed the S&P 500 this quarter, returned about 1% compared with a decline of 1.7% for the benchmark. This is due to the emphasis on dividend paying larger companies and the small allocations to every industry sector.

Performance

To view detailed performance information, please click here (Requires free registration to access).

Current Holdings