EARNINGS LETTER

3rd Quarter, 2000

During the quarter ending September 30, 2000, most of your stocks rose in anticipation of continued strong earnings gains, while the S&P declined 1%. DST Systems gained the most, rising by 54%.

The third quarter earnings gain recorded by your companies exceeded twice the S&P reported operating earnings increase. None reported a gain of less than the 12% recorded by the S&P. Our strong economy and lackluster stock market have heightened investor anxiety and lessened tolerance for missed forecasts. We believe companies with the financial and managerial resources to execute well-defined business plans offer the best protection against loss. As the economy slows and SEC regulations conspire to make analysts’ numbers cloudier, unpleasant surprises will become more common.

Harte-Hanks

With the exception of Harte-Hanks, all of your companies have reported third quarter earnings that met or surpassed their forecasts. Harte-Hanks earnings per share fell one penny below forecast. The stock declined nearly 20% when management explained that a sudden slowdown in sales of direct marketing services to traditional retailers, Sears, JC Penney and K-Mart, would not end quickly. These retail customers are not the driving factor fueling Harte-Hanks growth. Its best and fastest growing business remains facilitating technology companies’ sales.

Concord

Concord’s results surged 35% as its debit, credit and ATM transactions processed from supermarket and gas station customers continue to grow faster than its industry peers. The company’s MAC Network, combined with its pending acquisition of Star Systems, creates a nationwide pin-based debit card transaction network vastly larger than its next nearest competitor. Pin-number activated debit transactions are growing more than 25% throughout the U.S.

DST

DST’s earnings per share rose 35% as mutual fund accounts processed grew 19% to 65 million. During the fourth quarter, DST will add 5.7 million additional accounts to its system from new mutual fund families, including 1.7 million accounts from Dreyfus. DST’s European joint venture with State Street is scheduled to become profitable next year. DST stock split 2 for 1 on October 19.

Stilwell Financial

Stilwell Financial reported a near doubling of assets under management to $315 billion, principally from its Janus mutual fund group. Earnings more than doubled. Janus continues to lead the industry in terms of garnering more assets from its customers as a result of its well-honed marketing and distribution model.

First Data

First Data’s 21% earnings per share gain was driven by a 20% increase in Western Union money transfer volume and double-digit gains in credit card processing. Earlier this month FDC added 45 million JC Penny retail cards onto its Omaha card processing system as part of its agreement with GE. Card accounts on file now exceed 300 million.

AIG

Realized losses on insurance portfolio investments reduced AIG’s 14% third quarter operating earnings gain to 9%. Higher property and casualty insurance rates produced an 8% rise in net premiums written while AIG’s life insurance premiums rose 18%. AIG’s financial service and asset management income, which together comprise nearly 20% of operating earnings, grew 24% during the quarter.

Client portfolio holdings may change, and stocks of companies noted may or may not be held by one or more client portfolios from time to time. Investors should not consider references to individual securities as an endorsement or recommendation to purchase or sell such securities. Transactions in such securities may be made which seemingly contradict the references to them for a variety of reasons, including but not limited to, liquidity to meet redemptions or overall client portfolio rebalancing. Investing in the stock market involves gains and losses and may not be suitable for all investors. Investment return and principal value of an investment will fluctuate.

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2000 – 4th Quarter EARNINGS LETTER 2000 – 2nd Quarter EARNINGS LETTER