This paper reports preliminary findings from the action research evaluation of the Scottish shadow fund-holding project. Fifty doctors looking after 84,000 patients in six groups negotiated and managed a paper fund for six months, and then a real fund for six months. First analyses of quantitative data suggest that the numbers of prescriptions written, investigations done and referrals made remained stable over the period of study. The length of time spent at consultations varied apparently independently of holding a fund. Patient satisfaction with actions taken by doctors and their feelings of benefit from consultations were high throughout the study, but a consistent and significant shift from very satisfied to satisfied categories was noted in all practices for most variables surveyed during the course of 1990-91. Analyses to explain this are continuing. Qualitative study identified benefits in terms of a greater understanding of the costs of activities, and new working patterns between hospital, general practice and administrative staff have led to progressive work in contracting for quality of patient care. At the same time, the lack of sophistication of fund setting needs to be addressed; equity issues will become relevant as fund-holding reaches a larger proportion of practices. The pressures on those taking leading roles in administration are high, and this is confirmed by parallel quantitative work. Further information is becoming available on both prescribing and the care of selected 'marker' conditions, and these will be the subject of further reports.