Granite Investment Advisors

We remain positive on equities. Valuations on large capitalization stocks remain attractive. Though smaller cap companies outperformed large cap stocks in 2010, we believe the valuation gap will close in 2011 in large part because many of the large cap names have significant sales exposure to emerging economies around the world. In fixed income, we continue to favor corporate securities with maturities shorter than five to six years, cushion bonds, step-up bonds, and selected non-investment grade bonds. We expect rates to continue to rise over the next eighteen months.