In 2005 the S&P 500 stock index returned 4.9% including dividends, closing at 1248. While earnings grew 14% the stock market was restrained by surging energy prices and relentlessly rising Federal Reserve overnight interest rates, which ended the year at 4.25%. The benchmark 10-year U.S. Treausry note closed the year with a yield of 4.40%, which compares with a year-end 2004 yield of 4.22%.

Our forecast for the S&P 500 for year-end 2006 is 1375. We see downside risk to 1175. We think the first half will contain the most risk with the second half regaining strength and momentum.

The key risks to our forecast include a continued cooling of the housing market. Another risk is Federal Reserve policy, which may prove to be too tight as evidenced by the recent inversion of the yield curve. Energy prices, while somewhat weaker in the fourth quarter, remain elevated and volatile.

The primary rationale for our bullish stance is the strong financial and operational condition of American business. For example, the return on equity of the S&P 500 relative to the cost of debt is at a 50-year high. This should lead to a high level of merger and acquisition activity, underpinning our bullish forecast.

For 2006, our investment strategy will continue to focus on value investing. By doing this we provide a cushion to offset the risks we note above. While not excluding investments in non-dividend paying stocks, we prefer dividends when available. Where fixed-income investments are appropriate, we tend to put the most emphasis on high-grade debt.

Because Patrick Mauro Investment Advisor, Inc. manages less than twenty-five million dollars; it is regulated by the state of Illinois. These state regulations require that you be offered a disclosure document (ADV-Part II). This form is on file with the Secretary of State’s office (Securities Department) and is available to you by merely writing a request to this firm.

Thank you for the trust you have placed in us. We value your business greatly and are available to discuss your concerns at any time.

Patrick Mauro, Daniel Mauro, Henry Criz