Portfolio Manager's Commentary
November 2008

As you are well aware, market conditions have deteriorated over the past few months as the crisis in our financial system accelerated. Furthermore, the media's coverage has been dominated by negative news to the point that even the most optimistic person is inclined to question the future.

With all the dark clouds, we have identified some rays of hope. Listed below are additional positive actions taken by the FED, Treasury, and FDIC since our previous letter on 10/8/2008.

1. As a result of actions taken, the three month LIBOR dropped to 2.71% on November 4th, 2008 after peaking at 4.81% on October 10th, 2008. Also on November 4th, the one month LIBOR fell to 2.18%, its lowest level since November 2004. This is very important because it shows more liquidity is available and the system continues to work.

2. The FED announced on Wednesday, October 29th that they would cut the benchmark federal funds rate a half point to 1%, its lowest level since 2004.

3. The FED agreed to provide a $30 billion credit swap facility to each of the central banks of Brazil, Mexico, South Korea, and Singapore to add liquidity and unfreeze money markets in these emerging economies with high demand for dollars.

4. As oil and gasoline prices have fallen drastically from their peak over the last few months, it has resulted in an estimated $300 billion stimulus to the U.S. economy and an estimated $300 billion stimulus to the rest of the world.

5. The actions taken by the governments and central banks across the world have resulted in a tidal wave of stimulus that will help spur reflation and growth.

6. On October 21st the FED announced a program called the Money Market Investor Funding Facility in which it will provide $540 billion in financing to purchase from mutual funds certificates of deposit, bank notes, and commercial paper in order to provide liquidity and facilitate money market fund transactions.

7. On October 14th, the Treasury announced the Capital Purchase Program, one part of the $700 billion bank rescue plan, through which it will take a $250 billion equity interest in U.S. banks in order to shore up their balance sheets.

8. As part of the rescue package, the FED received authorization to pay interest to banks on excess reserves.

9. On October 14th the FDIC announced the Temporary Liquidity Guarantee Program that will guarantee senior unsecured debt of banks and thrifts and provide unlimited FDIC insurance on non-interest bearing deposit transaction accounts between banks.

10. The G7 nations are supporting important financial institutions and preventing their failure after assessing the adverse implications of Lehman's bankruptcy on the whole financial system.