Weekly Portfolio Update
Income Equity Portfolio

APRIL 20 , 2001

The Market This Week
The last five trading days saw the Federal Reserve rate cut. The enthusiasm for technology stocks on Wednesday and Thursday was to be expected although we were somewhat surprised at the extraordinary strength of many newer names in the sector. The predominant economic backdrop remains weak despite a few rays of strength such as the favorable swing in the trade deficit, which should add well over one percentage point to first quarter GDP. Employment continues to decline and consumer confidence rolled back over, with capital spending the weakest sector of the economy. Earnings estimates continue to be cut, but this is all characteristic of market bottoms.

In other economic news, the consumer price index was released before the rate cut. March CPI was up a modest 0.1% with the core rate up 0.2%, both in line with expectations. Inflation is obviously less of an issue these days. March industrial production was stronger than expected, up 0.4%, whereas the consensus was for a drop of -0.1%. Housing starts fell -1.3% in March, although that may be related to poor weather. Significantly, the February trade deficit fell almost 19%, mostly due to lower imports rather than more exports. One implication of this is that overseas economies highly dependent on export to the U.S. are in store for a slowdown, as they increasingly become affected by our economic downturn.

The news this week was dominated by a surprise rate cut from the Federal Reserve on Wednesday. The Fed made a 50 basis point cut between regularly scheduled meetings bringing the Federal funds rate down to 4.5%. This means that year to date the Fed has cut rates 200 basis points in one of the fastest declines in well over a decade. Most observers are looking for a further 50 basis point cut in May. The market, we believe, correctly views this as a very positive sign for the economy later this year.

Portfolio Activity
No trades this week.

The opinions expressed are those of Berkeley Capital Management and based upon sources deemed reliable. BCM shall not be held liable for inaccurate information obtained from these sources from which BCM could normally, reasonably depend on as accurate.Past performance does not guarantee future results.

FOR BROKER-DEALER USE ONLY. NOT FOR USE WITH CLIENTS A complete list and description of all the firm's composites and individual securities' transactions and returns for the past twelve months are available upon request.