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Funds With Recommended Tech Holdings

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Aug. 14, 2003 — The battered information technology sector should rebound and flourish by 2004-2005 as equipment bought in 1999 for Y2K compliance begins to be replaced, according to analysts at Standard & Poor’s. In keeping with this theme, Standard & Poor’s recommends the following eight technology companies as particularly attractive investments that will help stock buyers participate in tech’s resurgence.

*Affiliated Computer Services (ACS). The company’s growing outsourcing market has allowed ACS to be profitable while many of its competitors have struggled.

*Analog Devices (ADI). The semiconductor categories which this company specializes in will experience faster growth than the industry as a whole.

*Flextronics International (FLEX). The company should attract a disproportionate amount of future outsourcing contracts.

*InterActive Corp. (IACI). The company has recast itself as a formidable and profitable player in consumer e-commerce.

*International Business Machines (IBM). The company is well positioned to capitalize on an eventual rebound in tech spending.

*Novellus Systems (NVLS). Sales are expected to grow 20% in 2003, and 28% in 2004.

*Texas Instruments (TXN). The company’s ongoing cost cuts should help sustain profitability until the acceleration in chip demand broadens.

*Vishay Intertechnology (VSH). Revenues are expected to grow 22% in 2003, 14% in 2004.

FundAdvisor screened for mutual funds that held these stocks — at a minimum of 2% of net assets — as of April 30, 2003. A total of eight portfolios were found, each holding two of the recommended stocks. IBM, the familiar blue chip, appeared in each portfolio. There were no funds that held more than two of these stocks at a minimum of 2% of net assets. Seven of the eight funds uncovered are tech funds.

Although technology has rebounded smartly this year, tech-oriented funds have incurred deep losses during the bear market, and are at best small players in an overall portfolio because of their concentration and high volatility. Despite their strong recent gains, funds in the sector should be approached with caution for investors looking to ease back into tech. Indeed, many have a long way to go make up for the losses they incurred during the bear market.

Though not a tech fund, IBM and Affiliated Computer Services show up in Bramwell Growth fund, a large-cap growth offering with about a 16% tech weighting. For the three years ended July 31, the average large-cap growth fund fell 17.3% annualized, while the average tech fund lost 30.6%. Year to date as of the end of July, large-cap growth funds have risen 15.7%, and tech funds have gained a sizeable 28.9%.


AAL Technology Stock Fund/A (AATSX)IBM, 4.7; TXN, 2.2+29.6-32.9

Bramwell Growth Fund (BRGRX)ACS, 2.9; IBM, 2.7+10.2-11.2

Hartford Global Technology Fund/A (HGTAX) IBM, 6.8; ADI, 3.5+32.6-25.8

ING Technology Fund/A (ATNAX) TXN, 3.0; IBM, 2.8+24.1-31.4

Janus Global Technology Fund (JAGTX) TXN, 2.6; IBM, 2.2+24.4-34.0

Monetta Trust:Select Technology Fund (MSCEX) IBM, 5.1; TXN, 3.3+32.8-21.3

One Group Technology Fund/A (OGTAX) IBM, 8.8; TXN, 2.3+23.0-27.4

Security:Technology Fund/A (SETAX) IBM, 7.4; ADI, 3.8+31.5-26.8

Source: Standard & Poor’s. Total returns include reinvested dividends. Data as of 7/31/03.