Good Morning. Today is Tuesday October 3^rd and this is Tim Peoples reporting to you on the results of the 3^rd quarter of 2000.

My last audio report was in April and at that time I said that it was the most exciting quarter I can remember. That is if you find roller coasters exciting. So far the whole year, including this last quarter has matched it without any problem.

July started out with the markets improving until about mid month. We then saw a retreat back to a little below where we started. Mutual funds we are holding that did well in July were the Oakmark fund, which you will remember I have been keeping an eye on after it’s poor performance last year, and the Baron Asset fund. Most other growth funds like Janus and Select were down slightly and the International, Technology and Health care funds did poorly.

In August about everything went up. Technology and Health care funds were the best performers. Growth funds like Janus and Select made some nice profits too. Even the Oakmark fund continued to perform well. The only area that did just fair was the International funds.

In September things started to change again. High oil prices started to be a worry as some analysts finally decided that they could effect company earnings in a lot of different industries. This started what I call the "Earnings jitters". As happens at the end of every quarter, companies that are not going to meet their expected earnings start to make announcements. As I have mentioned in previous reports, this is a way to soften the blow when they actually publish the numbers. The pre announcements this quarter were from some pretty big names and it made for a rocky couple of weeks. One of the first pre-announcements from a big name was from Morgan Stanley. They were then followed by Intel, which really set a bad tone in the Technology sector. Then came Kodak and Priceline among others. All in all it made for one of the worst September’s I can remember. For our Mutual Fund holdings, the Berger was up nicely. It has several stocks that totally bucked the trend. In fact one of its largest holdings is Schwab which did pretty well at the end of the month. The Merger fund did well, as usual, the Value funds did fair, and Growth, International and Tech were all down.

Our returns for the quarter were very good compared to the markets. Our Conservative accounts were up 1 ½ to 2 ½ % for the quarter; our Moderate accounts returned 4 to 5% and our more Aggressive accounts had gains of 3 to 4%. Over the last year our Conservative accounts are up 11 to 12%, our Moderate accounts are up 15 to 18% and our more Aggressive accounts are up 17 to 20% .

In comparison the DOW Jones average was up 2% for the quarter and only 3% for the last year.. The S&P 500 was down a little over 1% for the quarter and up 12% for the year and the Russell 2000 was flat for the quarter and up 22% for a year. Overall, considering our less aggressive stance, our fund picks are performing very well in a very volatile market.

For the quarter, our best returns came from the Health fund, Value funds like Oakmark, and surprisingly the Technology fund. Also as I have mentioned before, the Merger fund has continued to run like a steady engine, giving us another 5% gain for the quarter.

We are still holding a couple of the American Century Benham bond funds as a hedge in several accounts. They have improved steadily over the past 4 or 5 months as interest rates have leveled off and are all in a profitable status now. With the Federal reserve holding rates level, I will continue to hold them as long as they appreciate in value.

As far as some other holdings, a couple of quarters ago we started moving back into the overseas funds with the Artisan International. So far this has not paid off as the international funds across the board have done poorly. As far as these funds go, I think the management at Artisan is one of the best, and they have the track record to back it up, but I am keeping an eye on the sector in hopes of a 4^th quarter turnaround.

New investments made for the quarter were in the Technology funds. As this area has been beaten down, I am finding a couple of new Tech funds that look good. One of these is the Wireless Fund. I think one of the biggest growth areas in the next few years will be in wireless technology. I read on article that explained that by 2003, more people would be connecting to the Internet by wireless devices than by fixed base computers. This fund gives us an excellent way to participate in this growing area. Times like this past month are great opportunities to invest at what could be bargain prices

As far as the next quarter goes, I am still expecting more of the same although with less volatility. Earnings pre-announcements are behind us. The ones left to be announced should be mostly positive. The economy seems to be slowing in some areas, which should keep the Fed from any further rate hikes. Prices on a lot of stocks, particularly in the Technology area are at lows for the year and in some cases, lows for several years. On top of that, we have a major election this quarter and tonight we get our first debate. I hope we can all stay awake for it. In summary, I am expecting a quieter quarter, which could even have a nice rally, but will hopefully have less downside potential.

At any rate, I will continue to watch our holdings and add to them as it seems prudent.

If you have any questions about your account or any of the investments we have discussed, please give me a call. 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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