TURNAROUND FUNDS, FOR BETTER AND FOR WORSE

The equity funds on the left were ranked in the bottom quartile of their peer groups for 1997…

The equity funds on the left were ranked in the bottom quartile of their peer groups for 1997 but rebounded to be in the top quartile for 1998

year-to-date. Funds on the right were in the top quartile for 1997 but year-to-date returns for 1998 now place them in the bottom quartile.

small companies — fourth quartile to First

Year-to Three Total

Date 1997 Years assets

% Chg Rank Return Rank A.G.R. ($m)

Alger Small Cap B 9.14 84 9.16 412 6.65 536.9

ARK Small Cap Equity Inst 18.29 13 5.55 431 16.29 27.4

Firstar MicroCap Ret 10.90 62 13.63 356 N/A 18.2

Fortis Advt Capital Appreciation A 9.55 76 1.52 445 7.00 111.9

Ivy U.S. Emerging Growth A 9.07 87 4.26 437 13.92 63.5

Janus Venture 15.01 33 13.08 364 13.24 1,252.1

Morgan Stanley Inst Emerging Growth A 20.13 10 11.36 381 15.11 70.2

OVB Funds Emerging Growth A 11.63 49 0.51 449 7.47 22.0

Phoenix Small Cap A 13.02 39 9.51 407 N/A 185.0

Provident PIC Small Cap 7.54 111 -0.75 452 13.55 155.2

Provident PIC Small Company Growth 7.34 115 -1.36 454 N/A 40.6

Reserve Private Small Cap Growth 8.44 100 -0.54 451 7.70 5.9

Smith Barney Special Equities B 6.58 144 -6.38 465 4.41 191.6

TCW Galileo Small Cap Growth 13.56 37 13.41 358 20.90 141.2

TCW DW Small Cap Growth B 11.25 56 10.64 391 18.75 353.5

UAM Sirach Special Equity Inst 7.28 119 11.27 384 14.21 256.5

USAA Mutual Aggressive Growth 11.44 51 7.56 422 16.65 795.5

Mean/Count 3.45 593 21.54 471 16.24

Russell 2000 0.71 22.36 15.17

The lackluster showing of the small-cap category this year resulted in some interesting, even paradoxical, results. Consistent returns, rather than a substantial improvement, have been enough to move a fund from the fourth quartile to the first. Just look at TCW Galileo or Janus Venture. Firstar MicroCap’s return this year has been worse than the fund’s 1997 performance by nearly three percentage points and yet it moved up more than 290 places.

Aggressive Growth — fourth quartile to First

Year-to Three Total

Date 1997 Years assets

% Chg Rank Return Rank A.G.R. ($m)

Advisors’ Inner Circle Pin Oak 21.29 22 1.30 175 12.38 40.7

Janus Mercury Fund 34.30 5 11.88 144 22.87 2,354.5

Smith Barney Concert Peachtree Growth A 18.44 40 5.19 170 15.73 75.3

Mean/Count 11.03 220 19.53 190 16.47

Russell 2000 Growth 1.31 12.95 10.17

Only three aggressive growth funds made the transition from bottom of the heap to the top. Pin Oak was 15 places from dead last; now it is just 21 places down from the leader.

GrowtH — fourth quartile to First

Year-to Three Total

Date 1997 Years assets

% Chg Rank Return Rank A.G.R. ($m)

Fidelity Retirement Growth 26.11 71 18.54 710 20.07 4,743.4

IDEX Growth A 43.71 3 16.79 758 29.61 830.6

Jundt Growth Fund I 20.45 228 10.85 860 16.35 84.8

Loomis Sayles Core Growth Inv 20.80 211 15.68 785 N/A 22.1

Managers Capital Appreciation 35.75 18 12.74 837 23.18 84.7

Phoenix Equity Opportunity A 20.73 216 9.14 874 16.10 200.2

Reynolds Opportunity 30.50 36 14.58 809 20.96 28.6

WM Growth Fund A 33.47 27 9.78 868 22.22 112.9

Mean/Count 13.97 1063 24.86 897 21.71

S&P/BARRA Growth Index 23.07 36.53 32.25

Moving up seems to be more difficult than moving down, as a glance to the right reveals. 16 funds landed in the basement but only eight funds are ensconced in the penthouse. Fidelity’s Retirement Growth, at nearly $5 billion, was the largest fund to make the move, though others moved farther and improved returns more.

small companies– First quartile to fourth

Year-to Three Total

Date 1997 Years assets

% Chg Rank Return Rank A.G.R. ($m)

BlackRock Small Cap Value Inv A -2.09 487 35.04 50 18.97 42.3

Bridgeway Ultra Small Company -6.87 581 37.99 29 23.51 446.2

CG Capital Markets Small Cap Value -2.22 494 36.01 40 20.82 944.3

Delaware Small Cap Value A -3.37 523 33.03 72 19.82 301.6

Evergreen Micro Cap Y -3.86 534 47.59 8 15.73 51.1

Evergreen Small Cap Equity Y -3.46 526 33.62 62 21.26 105.3

Galaxy Small Cap Value Retail A -1.07 448 31.23 92 21.57 98.1

Glenmede Small Cap Equity -3.41 524 29.92 108 18.14 407.5

Heartland Group Value Plus -4.02 539 30.60 100 19.65 293.5

Heritage Series Small Cap Stock A -2.41 496 29.26 117 22.03 237.3

Lazard Bantam Value Institutional -4.12 545 33.94 58 N/A 72.4

Lindner/Ryback Small Cap -1.41 467 31.69 89 21.12 54.1

Lord Abbett Research Small Cap A -5.59 568 36.69 32 N/A 278.2

MassMutual Inst Small Cap S -1.32 461 36.36 38 20.80 730.8

Neuberger Genesis Fund -5.80 569 34.89 52 21.14 1,511.0

Oakmark Small Cap -3.71 528 40.51 25 N/A 1,287.1

Pimco Small Cap Value Inst -3.17 514 35.02 51 20.55 47.3

Target Small Cap Value -2.51 497 29.98 107 17.52 164.3

UAM FMA Small Company Inst -2.09 488 40.39 26 22.29 4.8

Wilshire Target Small Company Vl Inv -1.40 465 31.20 93 17.25 22.8

Mean/Count 3.45 593 21.54 471 16.24

Russell 2000 0.71 369 22.36 228 15.17

It’s a straight run of minus signs in the year-to-date returns of this group of small-cap funds. Evergreen Micro Cap’s 51 percentage point fall from 1997’s return and No. 8 ranking was the most spectacular, though others went lower.

AGgressive Growth — First quartile to fourth

Year-to Three Total

Date 1997 Years assets

% Chg Rank Return Rank A.G.R. ($m)

American Heritage Fund -6.12 209 75.00 1 11.22 13.5

Hartford Capital Appreciation A 3.31 192 55.11 3 N/A 353.2

Piper Small Company Growth A 5.06 173 26.96 48 17.46 35.5

Principal Preservation Select Value 3.40 191 27.60 45 21.20 11.1

Touchstone Emerging Growth A 2.82 195 32.20 24 15.72 8.8

Mean/Count 11.03 220 19.53 190 16.47

Russell 2000 Growth 1.31 201 12.95 137 10.17

Lo, how the mighty American Heritage Fund has fallen. From 1997’s No. 1 aggressive growth fund to 11 places off the bottom of the category this year so far. Hartford Capital Appreciation kept it company as it slid from the top of the heap but can still claim a positive return.

Growth — First quartile to fourth

Year-to Three Total

Date 1997 Years assets

% Chg Rank Return Rank A.G.R. ($m)

CornerCap Growth Fund -1.87 1026 32.63 121 19.73 17.2

Croft-Leominster Value 4.06 927 32.51 126 21.68 6.5

Delaware Growth Stock A 2.92 949 34.74 65 20.84 41.0

Fahnestock Hudson Cap A -3.21 1040 42.88 11 26.91 32.8

Harris Insight Equity A 5.32 894 35.29 53 25.10 25.6

Hilliard-Lyons Growth A 3.30 941 40.41 18 24.71 82.3

Mississippi Opportunity A -0.44 1005 34.93 59 12.57 4.4

Mosaic Equity Investors Fund 5.63 880 34.77 63 24.28 28.3