SEASONALITY $^{ }$Title Insurance:  Title insurance premiums are closely related to the level of real estate activity  and the average price of real estate sales. The availability of funds to finance purchases directly  affects real estate sales. Other factors include consumer confidence, economic conditions, supply  and demand, mortgage interest rates and family income levels. Generally, the first quarter has the  least real estate activity, while the remaining quarters are more active. Fluctuations in mortgage  interest rates can cause shifts in real estate activity outside of the normal seasonal pattern,  especially as these changes relate to refinance activity.  $^{ }$Exchange Services:  Seasonal factors affecting the level of real estate activity and the volume of  title insurance premiums written will also affect the demand for exchange services.  Investments are an integral part of the Company' s business. In formulating its investment  strategy, the Company has emphasized after-tax income. Investments in marketable securities  have increased from funds retained in the Company. The investments are primarily in debt  securities, and to a lesser extent, equity securities. The effective maturity of the majority of the  fixed income investments is within 15 years.  As new funds become available, they are invested in accordance with the Company' s investment  policy and corporate goals. Securities purchased may include a combination of taxable fixed  income securities, tax-exempt securities and equities. The Company strives to maintain a high  quality investment portfolio.  Investment income increased 16.2%, 18.6% and 12.7% in 2000, 1999 and 1998, respectively.  These increases were primarily attributable to increases in the average investment portfolio  balances.  A summary by segment of the Company' s operating expenses is as follows:  On a consolidated basis, profit margins were 7.44%, 9.33% and 11.26% in 2000, 1999 and 1998,  respectively. The decrease of 14% in net premiums written coupled with a smaller decrease of  only 7% in operating expenses contributed to the decline in profit margin for 2000. Expenses  increased due to investments in technology and costs associated with entering and supporting  new market areas.  © Investors Title Company  13 $^{ }$INVESTMENT INCOME $^{ }$EXPENSES 2000 Title Insurance $ 36,925,644 Exchange Services 225,330 All Other 818,331 $ 37,969,305 1999 97.3% $ 40,368 076 5% 176 627 2.1% 356 462 100.0% $ 40,905,165 1995 96.7% $ 40,314,905 4% 137 444 3% 326 405 100.0% $ 40,760,754 98.9% 3% 3% 100.0%