June 21, 1999

At La Jolla Economics, we apply in an ongoing process, the Selector Methodology to our value and growth proxies -- the BARRA value and growth indices -- to estimate the likelihood of the value stocks in the S&P 1500 outperforming the growth stocks in the S&P 1500, and vice versa. Looking forward to the next quarter, our methodology estimates the probability of value outperforming growth at 57.2%. During the fourth quarter, the probability of value stocks outperforming increases further and then falls off during the first quarter of 2000, when there is a virtual tie between growth and value stocks. The probabilities for the rest of 1999 are consistent with our view that Y2K would lead to a temporary increase in real economic activity early in the year with a slow down in the latter part of the year to approximately 3%. We believed the real interest ratewould more or less track the pace of real economic activity with minor timing differences. We expect the economic slow down to precede the decline in real rates. Such an environment of slowing economic growth and high interest rates clearly favors value stocks. The investment implication of the probability estimates is fairly clear: increase portfolio exposure to the sector whose probability has increased.

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