June 30, 2000

We apply, in an ongoing process, our Selector Methodology to value and growth proxies - the BARRA value and growth indices -- to estimate the likelihood of value stocks in the S&P 1500 outperforming growth stocks in the S&P 1500, and vice versa. Looking forward to the third quarter, our methodology estimates the probability of value outperforming growth to continue increasing to a peak at 54.3%. The investment implication of our probability estimates is fairly clear: Increase portfolio exposure to value stocks for the quarter. Notice that during the fourth quarter the growth stocks are expected to resume their leadership. This outcome is consistent with our view that the economy will slow down during the second and third quarter. As evidence of the slowdown mounts, we expect the Fed to ease their relentless attack on valuation and will also ease up on the banking system thereby producing an environment favorable to growth stocks during the fourth quarter.

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