SAGE SCOOP ON MUTUAL FUNDS July 21, 2000 ******************************************** You are receiving this e-mail because you have registered for Multex Investor, or because you have subscribed to Sage. To stop receiving this, reply to this e-mail with the word UNSUBSCRIBE in the Subject. ******************************************** <><><><><><><><><><><><><><><><><> In This Issue FundWatch Profile: New Perspective Fund Top Ten Global Funds Profile: TRP International Discovery Fund Community Speak: Diamonds In The Rough <><><><><><><><><><><><><><><><><> Dear Members: Summer is usually the time we feel the most adventurous. We are a little more relaxed, a little more apt to try new things. Speaking of which, we are excited to introduce Multex subscribers to Sage Scoop On Mutual Funds! We hope that the Scoop becomes an integral asset in your quest to stay informed and aware of your investment options. So, this summer expand your horizons and look into investing strategies and funds in places that you never thought of before. Just because you explore does not mean you have to leave your comfort level behind you. And as always, have fun doing it. Happy investing! Alan & Stephen Cohn, CFPs and Sage Online founders <><><><><><><><><><><><><><><><><> With thousands of funds to choose from, aren't you glad that you have FundWatch to help you keep current and abreast of what's happening in the world of mutual funds? FUNDWATCH ANOTHER 'HOT HANDS' APPROACH THAT IS LACKING There are fewer buy-and-hold mutual fund investors today. Fund investors are now trading mutual funds like many individuals trade in- dividual stocks.They use a momentum approach or following the "hot hands" manager. Forgetting the long-term track record, their approach is a "what have you done for me today" attitude. FUND FEES ARE CONFUSING AND THAT SUITS THE FUND INDUSTRY The fees charged investors by mutual fund companies are hard to get a handle on. You would think because mutual fund assets have jumped from $374 billion in 1984 to $7 trillion today, the economies of scale would mean that fund companies would have drastically lowered their fees. But that hasn't happened. The fact is the mutual fund industry doesn't want investors to get an exact handle on how much their invest- ments cost. VAN KAMPER MERGES CONVERTIBLE FUNDS; AETNA LAUNCHES NEW FUND Van Kampen Funds plans to eliminate the closed-end fund Van Kampen Convertible Securities Fund by merging it into the open- end Van Kampen Harbor Fund, which invests primarily in convertible bonds and preferred stocks, reports Standard & Poors....Aetna Funds launches its fourth mutual fund, Aetna Principal Protection Fund IV, with a guarantee of principal. It is being offered to investors from July 6 to September 6, with a guarantee period running from September 7 through September 6, 2005. DESPITE POOR RETURNS, INVESTORS SHOWER MUTUAL FUNDS WITH MONEY For the year through most of June, mutual funds returned an average of just over 2 percent. Yet investors continue to shower funds with new money. Based on figures for the first six months of 2000, the inflow of cash into mutual funds is about to set an all-time record, reports InvestmentNews.com. Morningstar research di- rector John Rekenthaler tells InvestmentNews that 2000 may well be a strong year for asset inflows into funds, but the greater question is how good a year will it be for fund performance. <><><><><><><><><><><><><><><><><> Trying to broaden your horizons? Wanting to include new and diverse perspectives among your own? I could be talking about life or,I could be talking about one of the Sage Fund Award contenders: http://208.55.34.187/survey/bestof2000/best2000.html. Perhaps it is time for investigation on both fronts. PROFILE: NEW PERSPECTIVE FUND by SageBasics Looking for a global fund in which the managers employ a buy-and-hold philosophy? The $35.1 billion five-star New Perspective Fund, a bank, broker, and financial intermediary sold fund from the American Funds Group, is one such fund.This large-cap, low risk and above average, growth- oriented fund is up 5.1 percent for the first six months of 2000 after gaining 40.1 percent in 1999. According to Morningstar, New Perspective's multiple managers "invests in cheap stocks around the world and trades infrequently. The fund has delivered above-average returns with minimum volatility." In 1999, there was only a 29 percent turnover of the fund's holdings, and the year before that, only 30 percent. The fund can invest all of its assets outside the United States and there have been periods when New Perspective had more than 75 percent of assets invested outside the U.S. borders. The fund diversifies in blue chip companies both at home and abroad. According to the fund com- pany, New Perspective emphasizes multinational or global companies and also focuses on "opportunities generated by changes in global trade patterns and economic and political relationships." About one quarter of the fund is invested in the services sector and another quarter of the fund is invested in tech stocks. The fund is 11.6 percent invested in financial services companies. Vodafone Airtouch was the top holding in this fund in the period ending March 31. Other top holdings include Micro Technology, LM Ericsson, Astrazeneca, Pfizer, Time Warner, Taiwan Semi- conductor, Viacom, AT&T and Samsung Electronics. The fund's average annual returns have also been consistent. For the 12 month period ending June 30, the fund's return was 29.5 percent. The three-and five-year average annual returns in the period ending June 30 was 23.2 and 22.2 percent respectively. The 10-year annualized return ending June 30 was 16.75 percent. Managers of New Perspective in the period ending March 31had the fund about one-third invested in U.S. stocks and about 28 percent invested in European markets. A little over 11percent of the fund is invested in Japan and about 7.3 percent in the Pacific Rim. The initial investment into the fund, advised by Capital Research & Management, is $250 for both a regular account and IRA's. Additional invest- ments in a regular account can be as low as $50 and $25 for IRAs. If you choose to use an auto- matic investment plan, the minimum investment is $50. Like most of the American Funds, this fund is sold with either a front-end load of 5.75 percent or a declining rear-end load. But the total expense ratio for the "A" class shares is a modest 0.77 percent. <><><><><><><><><><><><><><><><><> Exposure to markets outside of the United States is a positive thing, not something of which you should be afraid. So take the plunge and examine our Top Ten Global Funds. TOP TEN GLOBAL FUNDS 10) UMB Scout WorldWide [UMBWX] 9) Montgomery Global Opportunities R [MNGOX] 8) New Perspective [ANWPX] 7) AIM Global Consumer Products & Services Fund A [GPSAX] 6) Forum Austin Global Equity [AGEQX] 5) Putnam Global Equity A [PDETX] 4) Oppenheimer Global A [OPPAX] 3) Citizens Global Equity Standard [WAGEX] 2) Pilgrim Worldwide Growth A [NAWGX] 1) Warburg Pincus Global Post-Venture Capital Fund [WVCCX] <><><><><><><><><><><><><><><><><> T. Rowe Price has a solid reputation but does that mean every fund in the family is a high flyer? Not necessarily, but it probably means that you should look and see. PROFILE: T. ROWE PRICE INTERNATIONAL DISCOVERY FUND by Louis A. Hames T. Rowe Price International Discovery's objective is the long-term growth of investors' capital by investing in the small and medium sized companies outside of the United States. As of its latest reporting the fund held 41 percent of its assets in Europe, 16 percent in Japan, and 15 percent in the Pacific Rim. The fund has been heavily invested in the technology and the services sector. There is also a 10 percent weighting in industrial cyclicals. The fund recently had less than 10 percent of its assets in domestic U.S. companies and another nine percent in cash. As of May 31, the fund's annualized return was 12.56 percent comparing favorably with the foreign index return of 9.56 percent. Sadly, this fund is currently closed to new investors.The fund's expense ratio of 1.42 percent compares favorably with the expense ratio of most foreign funds with the average ratio being closer to 2 percent. The fund charges no front-end or deferred charges and there is no 12b-1 fee associated with this fund. The T. Rowe Price International Discovery fund has shown an extremely volatile past. Over the past 10 years, the fund lost investors' money during five of those years. In 1999, investors who remained invested in this fund were rewarded with a total return of 155 percent, far outdistancing its relative the index (The MSCI EAFE ND), by 128.07 percent. As with many funds that have recently experi- enced exceptional return years, the fund is currently ahead by 0.78 percent. Those who waited until last year to jump on the bandwagon maybe sorely disappointed. The previous high return year for this fund in the last decade was 49.85 percent in calendar year 1993. While adhering to the principles of diversification, investors must be aware of and prepared to accept the increased risk associated with international investing. In addition to the normal market risk, there is also the political risk in many foreign countries; changes in the political climate can have a tremendous affect on your returns. Fund manager Ian MacDonald in a recent interview discussing Japan had this to say: "From a broad viewpoint, the signals continue to be mixed. The economy, for example, remains on an improving trend, with both first-and second-quarter GDP expected to show a recovery from the weak second half of 1999. However, consumer-spending patterns are cautious at best, and dwindling government coffers are making it difficult to prime the economic pump with more government spending. The political scene is also uncertain now in the wake of former Prime Minister Keizo Obuchi's death." MacDonald went on to say that he believes that true restricting lies at the corporate level and not influenced by the government. This could be true and there maybe a move in Japan as well as other Asian countries to make progress in spite of the political forces at works in these areas. Looking at traditional risk measures offer little help in this area. The T. Rowe Price fund has a beta of 0.53. Casual glances at the returns point out the uselessness of this measure. Morningstar Principia does, however, calculate certain "Equity Portfolio Statistics" for us and these give us some clue as to the average price being paid for the holdings in the fund's portfolio. The average P/E ratio of the fund's holdings recently was 45.1 percent; this is 18 percent higher than its relative index and 21 percent higher than its category. While it may have become a lost art to consider such things while going through the fund selection process, this is one area where attention to this detail is vital. The price/cash flow and the price/book ratio each are 30 percent above the relative index and category. Investors seeking international exposure and with a desire to invest with this family because of the initial low cost to would be well advised to in- vestigate a few of the other international funds offered by the company. This fund, being closed, is not currently an option for the new investor. <><><><><><><><><><><><><><><><><> Our Message Boards stay busy! You know, everyone seems to havea fund that they love but no one else seems to know about. These are a few of your Diamonds in the Rough. COMMUNITY SPEAKS: DIAMONDS IN THE ROUGH Just because this fund (ICM/Isabelle Small Cap Value Fund [IZZYX] - no-load) doesn't have a three year track record, everyone seems to be over-looking it. Portfolio manager Warren Isabelle managed the Pioneer Capital Growth Fund (load) to a great record and now he is doing it with his new fund. -- BullMkt101, 6/21/00 Ryan Jacob, of Jacob Internet Fund [JAMFX], has felt the pain of the market but dear God, is it a buying opportunity. Ryan knows his Internet. You can buy me a steak dinner later; you'll thank me. -- TILFY, 6/11/00 Check out the American Funds. If you are in the long haul, you can't beat their discipline over time. The load is worth paying for consistently good returns in all types of markets. In my opinion Janus and Vanguard will suffer for a while as we go forward. -- GatrBait2000, 6/10/00 <><><><><><><><><><><><><><><><><> BEFORE YOU GO... Our newsletters are exciting and, of course, free. Subscribe now! We hope you enjoyed this week's issue of the Sage Scoop. We encourage feedback. Thanks for spending time with us! -- Jill Bempong (SageSigma), newsletter editor To advertise in this e-mail, ASK FOR SAGE ONLINE at [EMAIL PROTECTED] get to Multex Corporate & Institutional: www.Multex.com. To get to Multex Investor Network: www.MultexInvestor.com. If you do not wish to receive further issues of The Telecomm Analyst, please click on the REPLY button on your email software, and reply to THIS e-mail message with the word UNSUBSCRIBE in the subject line. If you would like to remove yourself from the mailing list for ALL MultexInvestor e-mails, please respond to THIS message with the word No EMAIL in the subject line of your message. Copyright 2000, Sage Online, Inc. 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