July 17, 2002 — Their style may emphasize large-cap holdings, but for the giants of the fund industry, their performance is being buoyed by investments outside their style box.

For the most part, the heavyweights are sticking to their large-cap mandates, but mid- and small-cap holdings have been cushioning losses among the ten-largest camp, as determined by Standard & Poor’s through returns-based style analysis. This analysis reveals how much overall performance is attributable to each of the main investment style categories.

With the smaller-cap segments of the stock market holding up better in recent years, a tilt toward small-caps is probably not surprising. The negative trends affecting the market this year — terrorist fears, corporate ethics, uncertain economic prospects, and high valuations — have generally hit large-cap stocks harder than small-cap stocks.

So far this year, strong performance among the giant funds means smaller losses, since none of the heavyweights has altogether avoided the market’s sharp declines.

One beneficiary of better mid-cap results apparently is Fidelity Contrafund (FCNTX), where nearly 30% of the fund’s return during the first half is attributable to its mid-cap growth holdings. For comparison, about 5% of the fund’s performance was attributable to large-cap growth holdings, down from 40% three years earlier. Foreign interests, a negligible factor in performance three years ago, accounted for about 30% of the return through June.

Contrafund has the distinction of leading the ten-largest pack so far this year, while generally maintaining an overall large-cap growth orientation over the three years through May.

The next-best performing heavyweights after Contrafund this year — Washington Mutual Investors Fund (AWSHX) and Vanguard Windsor II (VWNFX) — are large-cap value offerings, but their returns have also benefited from smaller-cap holdings.

The bulk of Washington Mutual’s performance is still attributable to large-cap value stocks — 60%, versus about 65% three years earlier — but the impact of mid-cap value stocks has roughly doubled over this period to 20% from about 10%.

Vanguard Windsor II has also benefited from mid-cap value’s rise in the past three years, with about one-third of the returns so far this year attributable to that category, up from about 10%. At the same time, the fund’s results due to large-cap value holdings have fallen to about 50% from about 80%.

Even the poorest-performing giant fund, Janus Fund (JANSX), has benefited from its smaller-cap growth holdings. About 25% of the return so far this year is atributable to the sector, up from about 10% three years ago. And over the past three years, the contribution of large-cap value holdings to Janus Fund results has risen to about 20%, from zero three years ago.

Ten Largest FundsInvestment StyleMid-year 2002 Returns (%)June 2002 Returns (%)

Fidelity Magellan (FMAGX) Large-Cap Growth-15.1%-7.7%

Vanguard 500 Index/Inv (VFINX) Large-Cap Blend-13.2%-7.1%

Investment Company of America Fund/A (AIVSX) Large-Cap Value-7.2%-6.7%

Washington Mutual Investors Fund/A (AWSHX) Large-Cap Value-4.0%-5.2%

Growth Fund of America/A (AGTHX) Large-Cap Growth-15.6%-8.5%

Fidelity Contrafund (FCNTX) Large-Cap Growth-0.9%-4.1%

Fidelity Growth & Income (FGRIX) Large-Cap Blend-9.7%-5.5%

American Century Ultra/Inv (TWCUX) Large-Cap Growth-12.4%-7.3%

Vanguard Windsor II/Inv (VWNFX) Large-Cap Value-5.0%-6.4%

Janus Fund (JANSX) Large-Cap Growth-16.6%-9.5%

Large-Cap Growth Average-17.8%-8.2%

Large-Cap Value-9.3%-7.2%

Large-Cap Blend-13.6%-7.5%

Domestic Equity Fund Average*-12.1%-7.3%

S&P 500Large-Cap Blend-13.3%-7.3%

*Excluding sector and balanced funds.

Source: Standard & Poor’s. Total returns are in U.S. dollars and include reinvested dividends.