2011 was a year in which:

Three
heads of state stepped down amid political turmoil: Egypt’s Hosni Mubarak in
February; Greece’s George Papandreou and Italy’s Silvio Berlusconi in November.

Two
leaders were assassinated: Al-Qaida’s Osama Bin Laden was killed by U.S. troops
in May and Libya’s Muammar Gaddafi was killed by Libyan rebels in October.

Japan’s
earthquake in March was the most powerful to ever hit Japan, with a magnitude
of 8.9. The earthquake triggered tsunami waves that reached heights of 133
feet. It is ranked as the fifth most powerful in the world.

The
debt ceiling was raised in August by $2.1 trillion from $14.3 trillion to $16.4
trillion. The ceiling was originally put in place in 1917 at $11.5 billion.
Through the 1940’s and 1950’s it was raised several times and lowered a couple
of times. Since 1962 it has been raised 74 times (ten of those times since
2001).

The
most merger activity out of all the economic sectors was in the Energy sector.
The largest deal was in August with BHP Billiton’s (largest mining company in
the world) $15 billion purchase of Petrohawk Energy (U.S. shale gas company).

Steven
Jobs died in October. He co-founded Apple Computer and transformed computers,
smartphones, music, and movies.

U.S.
debt was downgraded in August by Standard and Poor’s (S&P) from AAA to AA+.
The other main rating agencies, Fitch and Moody’s, maintain a AAA rating on
U.S. debt. S&P gives 18 countries a AAA rating: Australia, Austria, Canada,
Denmark, Finland, France, Germany, Guernsey, Hong Kong, Isle of Man,
Liechtenstein, Luxembourg, Netherlands, Norway, Singapore, Sweden, Switzerland,
and United Kingdom.

The Occupy Wall Street protest
movement began in September in Zuccotti Park, NY. They are protesting economic
and social inequality and their slogan is “We are the 99 percent”.

At year end aboutTop
of Form

24
percent of homes with mortgages are still underwater (12 million out of 50
million homes).

The
largest IPO in the U.S. was in March when HCA holdings raised $3.8 billion to
go public. HCA is a Tennessee company that operates hospitals and surgical
centers in the U.S. and England. It has publicly traded in the past.

The
largest IPO in the world was in May when Glencore International raised $10.3
billion to go public. It is a commodities conglomerate headquartered in
Switzerland.

Hello 2012…

Despite our country debt woes and the coming disruptive
political season, we think the dollar will continue to strengthen against the
Euro. Compared to Europe, the U.S. has a proactive central bank, stable
financial and political systems, and a highly productive work force.

Nonetheless, proceed with caution is our mantra going into 2012
as we maintain a mix of high quality US stocks, emerging market stocks,
short-term treasury and high credit US corporate bonds. We have been pulling
back on our exposure to Europe in favor of emerging markets and will continue
until conditions improve. Though we expect the U.S. economy to be hampered by
Europe’s problems, we do not anticipate a domestic recession.

Our conviction on US stocks remains strong. We see opportunities in most economic
sectors, specifically in Healthcare, Energy, and Technology. We look for Healthcare companies that
have adjusted to patent run-off and have lean operations with smart
partnerships for R&D and/or marketing, Energy companies that have sourced
lucrative new reserve opportunities and investments in legitimate alternative
technologies, and Technology companies that have a global manufacturing
footprint and continually introduce new products and innovative technologies.

Although
the S&P 500 was almost flat for the year, 2011 earningswere
impressive. The S&P 500 is on
pace (4^TH quarter has yet to come in) for EPS growth of 16 percent IN
2011. With a multiple of 13 times current earnings, the S&P 500 is
certainly cheap relative to history.

Happy New Year everyone.

We
wish you a prosperous 2012.