Good Morning. Today is Friday, January 7^th and this is Tim Peoples reporting to you on the results of the 4^th quarter of 1999.

It has been a really busy quarter with the move of our office. I think it was actually tougher than moving a home since there are so many companies and people to notify and so many details to keep running. But the move went smoothly and the new office renovations are mostly finished. If you have not been by, please do so; it’s less than 10 min from our old office. We’re on the corner of Meigs and 7^th, right behind the Court House and our parking and entrance are at the back of the building. I included a map last quarter, if you need another copy just let me know.

Well we made it into the new millennium and for the most part the y2k bug did not bite. I am sure most of you are really tired of hearing about y2k, but it did pose a real threat and I think we have been fortunate that all the preparation and dollars that have been spent actually paid off.

During this last quarter there were several records that were broken. The NASDAQ composite hit the 3000 milestone at the beginning of November and then hit the 4000 level less than 2 months later. That’s kind of unbelievable since from the time the index was started in 1971, it took it 24 years to hit the 1000 level in 1995. During the quarter, the Dow Jones average of 30 stocks went back above 11,000 and the S&P 500 went above 1400, both new records. Technology and Internet stocks were the clear winners for the year. A common theme, that was very much like last quarter, was that the big gains were made in a small percentage of stocks that got a lot of press coverage. A large percentage of stocks did good to just tread water and many well known companies like Xerox, Goodyear, Mattel, and Penny’s actually went down in value.

My expectations for the quarter, were for volatility to continue to increase with a possible decline in the markets of 10 to 15 % toward the end of the year. Well we had the volatility but no decline. My reasoning for expecting a decline was threefold. First would be profit taking after the strong run up we have had in technology stocks. Second would be y2k fears, and Third and most important were the rising interest rates in the bond market and by the Federal Reserve. Each time that Fed Chairman Greenspan & Co. have raised interest rates this past year the markets have reacted poorly, but they reacted even more poorly when there was the expectation of rising interest rates. It’s like the rumor is worse that the fact. All during the last quarter there was the expectation of rising rates. This expectation of a market decline kept us in a more conservative position with more in the money market and bond funds. A great position if we got a decline but not so great when the market just continues to chug right along.

Our returns for the quarter were fairly diverse. Our Conservative accounts returned 2 to 4% for the quarter; our Moderate accounts returned 6 to 8% and our more Aggressive accounts had gains of 11 to 13%. For the year our Conservative accounts were up 7 to 8%, our Moderate accounts were up 12 to 13% and our more Aggressive ones were up over 20%. Not bad considering our conservative stance. As I mentioned before, the primary winner this year was in Technology companies, with most everything else lagging. Our Moderate and more Aggressive accounts are invested in this area to different degrees, but our Conservative accounts are not. This really was the reason for the larger than normal spread between the different types of accounts.

As far as the New Year goes, I am expecting more of the same. The volatility will continue and we may still get a market decline to some degree. So far this week the technology and Internet stocks that did so great last year are giving some of the gains back, and some of the areas that lagged last year are starting to improve. Along that vein I am starting to buy some funds that invest in these value companies that underperformed last year.

We will make these moves slowly, especially until we have a clearer idea of the direction of interest rates.

If you have any questions about your account or the subjects I have just covered, please give me a call. Also, if you need detailed reports on fund purchases and sales for tax purposes, just let me know. If you would like to review your account in detail, let’s get together. I also welcome any comments or ideas that you may have that could make our service better.

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