By HELEN HUNTLEY, Times Staff Writer © St. Petersburg Times published March 30, 2003

Investors putting their money into foreign funds in the past year have been richly rewarded. Market watchers say the trend is far from over.

U.S. foreign policy isn't the only thing that has taken a beating in Europe. The dollar has been battered, too. Since its peak a year-and-a-half ago, the U.S. dollar has lost nearly a fourth of its value against the euro, the 4-year-old European currency.

The downhill slide was particularly severe this winter as international tensions grew. The dollar and the euro were an even exchange in early December, but by the time the dollar hit bottom March 10, it took $1.17 to buy a single euro. Even with a rebound as war against Iraq began, the dollar remains well below December levels.

But bad news for the dollar is good news for some U.S. investors, who are discovering ways to capitalize on the dollar's weakness and the higher interest rates available overseas.

Those bold enough to make the move last year have been richly rewarded. In the past year, international bond funds were up an average of 19 percent, second only to gold funds among the mutual fund sectors tracked by Morningstar.

While predicting currency movements is never a sure bet, many market watchers say this trend is a long way from being over.

"We believe we're about one year into a multiyear decline in the U.S. dollar," said Frank Trotter, president of Everbank, an online bank that specializes in foreign currency accounts. The unusual bank, which has its headquarters in St. Louis, offers accounts in euros, Norwegian krone, Mexican pesos and many other currencies.

Trotter said the bank's foreign-denominated deposits have doubled in the past year to $165-million. The six-month CD offerings recently available included the Japanese yen at 0.01 percent, the euro at 2 percent, the New Zealand dollar at 5 percent, the Mexican peso at 8 percent and the South African rand at 11.75 percent.

Although it is among the lower-yielding offerings, the euro is by far the most popular choice, Trotter said. That's because most investors who open accounts are only secondarily concerned about interest earnings. Their primary goal is to make money on changes in the exchange rate, by holding the favored currency until they think it's an opportune time to convert back into dollars. They pay an exchange fee of 0.75 percent in each direction. To them the euro looks strongest.

In effect, the euro has become a default choice for investors who do not want to hold Japanese yen or U.S. dollars.

"It's the lesser of three evils," said Ian Kelson, who manages the $1.2-billion T. Rowe Price International Bond Fund from London. "The case for the weak dollar and the strong euro is not at all to do with anything very good in (the economy of) Europe, which if anything has weaker growth than in the U.S."

Part of what's wrong with the dollar is the political and economic upheaval created by the threat of terrorism and war with Iraq. However, the reasons for the dollar's fall go much deeper and are not likely to be quickly resolved.

"Usually when there is some sort of conflict, the dollar is seen as a safe haven -- except when the conflict involves the U.S.," said Scott Brown, economist for Raymond James & Associates in St. Petersburg. "Venezuela, Iraq and North Korea are all U.S. problems. If we get a solution to the Iraq conflict, things clear up in Venezuela and we get some dialogue with North Koreans, we could get some short-term improvement in the dollar. But long-term trends will be in place for a while."

Some describe the dollar's decline as inevitable. Like a pendulum, the dollar could go only so far in one direction before it had to swing back the other way. As the dollar strengthened, U.S. goods became increasingly expensive overseas, exports fell and manufacturers suffered. The weakening dollar has begun to produce a pickup in foreign sales, although that is being tempered to some extent by weak economies around the world.

"This is a natural process," said Michael Hasenstab, portfolio manager of the Franklin Templeton Hard Currency Fund in San Mateo, Calif. "Revaluation of the U.S. dollar could be beneficial to the U.S. economy by helping export growth. These macro adjustments tend to move toward equilibrium. We don't know when we will reach that equilibrium, but the pressures that have driven the U.S. dollar to these levels are still in place."

At the root of the dollar's woes is the current account deficit, the government's way of tracking money flowing into and out of the country through trade and investment. So many more dollars are flowing out that the deficit has now reached 5 percent of U.S. economic output, high enough to make investors nervous. Europe, by contrast, has a surplus.

Three big trends have contributed to the problem:

-- The balance of trade is off because U.S. manufacturers cannot sell enough U.S. goods overseas to keep pace with the U.S. consumer's appetite for foreign goods.

-- For years the trade deficit was offset by foreign investors making equity investments in the United States, buying stocks and direct interests in U.S. companies and real estate. In effect, the extra dollars we sent overseas to buy foreign goods came back to us as equity investments. But after three years of stock market decline, accounting scandals and a weaker economy, the equity inflows have dwindled.

-- U.S. interest rates are so low that foreign investors are losing their appetite for U.S. bonds. At the same time, the federal budget has moved from a surplus to a deficit, creating a need to sell more bonds. Ultimately that imbalance could lead to higher interest rates, although at least for now, U.S. investors are making up the difference by putting their money in bonds instead of stocks.

"At precisely the time that people lost confidence in the U.S. economy and stock market and became less willing to make equity investments, yields on U.S. assets fell to very low levels," said Kelson at T. Rowe Price. "Low interest rates are absolutely right for the current U.S. economic climate, but they're not at all helpful in promoting a dollar recovery."

Interest rates also have been coming down in Europe; the European Central Bank has lowered rates partly because of concerns that the strong euro will hurt manufacturing exports. But the rate decline has not occurred as quickly as in the United States, which means European rates still have room to fall. If they do, that could give foreign bonds another boost.

Once the economy begins to improve, interest rates are expected to pick back up, both in the United States and abroad. If that happens, bond prices will fall since interest rates and bond prices move in opposite directions. The longer the term of the bond, the more its price is affected by interest-rate swings.

"I think U.S. bonds are the most vulnerable, but European bonds are potentially vulnerable too," Kelson said. "Our view is that this is not the moment to be very aggressive in terms of duration. It's much nearer the end game in terms of the interest rate cycle."

One way to skirt interest rate risk is to stick with very short-term investments, such as the Everbank CDs or the Franklin Templeton Hard Currency Fund, which keeps the average maturity of the securities it owns at 120 days or less.

"We're not looking to take interest rate risk," portfolio manager Hasenstab said. "Our financial advisers are showing this fund to clients as a hedge against the U.S. dollar" declining. He said the fund is making its biggest bets on the euro, the Swiss frank, Danish Krone and New Zealand, Australian and Canadian dollars.

Investing in foreign currencies and bonds remains a foreign concept for most U.S. investors.

"So far investors are not clamoring for it," said Greg Ghodsi, a stockbroker with Robert W. Baird & Co. in Tampa. "But in doing portfolio reviews, some ask what's going on with the dollar."

Investors who want to bet against the dollar have to be prepared for fluctuations in the value of their investments. The Everbank CDs carry FDIC insurance against bank insolvency, but there is no protection from losses if the dollar strengthens when you bet it would get weaker.

Some types of investments are more volatile than others. Broker Ghodsi said the safety-conscious investor should avoid individual foreign bonds, which have big price swings and may be difficult to sell.

"I don't think the typical investor would want to buy something at 100 (dollars per $100 of face value), see it go to 40 and then back up to 80," he said.

Ghodsi prefers mutual funds for foreign bond investments. He suggests investing through closed-end bond funds, which trade like shares of stock on the New York Stock Exchange and other exchanges. Because they do trade, it is possible to limit losses by setting up a standing order with a broker that will trigger the sale of the bond fund if the share price falls below a certain level.

Before buying any bond fund, investors should check to be sure its investing style matches their objectives. Some foreign funds hedge against currency fluctuations so you don't get big losses on the dollar's movements, but neither do you get big gains.

Foreign bonds and bond funds have not been particularly popular with U.S. investors for good reason: When the dollar was strong, they lost money. In addition, many investors prefer to keep their money closer to home.

For those willing to take the risk, putting some money in foreign income investments will diversify a portfolio since foreign bonds do not move up and down in synch with U.S. investments.

-- Helen Huntley can be reached at huntley@sptimes.com or (727) 893-8230.

Think the dollar is still on the downswing? Here are some ways to play your hunch. Just be prepared for losses if the dollar strengthens.

Bank accounts

• Everbank WorldCurrency CDs

CDs of up to 12 months available in a variety of foreign currencies. Minimum deposit $10,000. Currency conversions 0.75 percent each way. Go to www.everbank.com or call toll-free 1-888-882-3837. This St. Louis bank has no branches; all transactions handled online. Accounts have FDIC insurance to cover bank insolvency but not currency losses.

Open-end mutual funds

These funds may be purchased directly from the fund companies and through many brokerages.

• Franklin Templeton Hard Currency Fund (ICPHX)

Fund invests in short-term money-market instruments and currency contracts. Minimum investment $1,000. Initial sales charge 2.25 percent. Up 17.2 percent in 2002 (not including sales charge). Go to www.franklintempleton.com or call toll-free 1-800-632-2301 (press *0).

• American Century International Bond Fund (BEGBX)

Fund invests in government and corporate debt. Minimum investment $2,500. No sales charge. Up 23.5 percent in 2002. Go to www.americancentury.com or call toll-free 1-800-345-2021.

• T. Rowe Price International Bond Fund (RPIBX)

Fund invests in government and corporate debt. Minimum investment $2,500. No sales charge. Up 21.8 percent in 2002. Go to www.troweprice.com or call toll-free 1-800-225-5132.

Closed-end mutual funds

These funds trade like stocks and may be purchased through a brokerage. They may sell for more or less than their net asset value.

• Templeton Global Income Fund (GIM)

Fund invests in debt securities, about two-thirds in Europe. Trades on New York Stock Exchange. Up 30.5 percent in 2002. Go to www.franklintempleton.com.

• PIMCO Strategic Global Government Fund (RCS)

Fund invests in mortgage-backed securities and debt securities. Trades on New York Stock Exchange. Up 22.9 percent in 2002. Go to www.rcsfund.com.

Mar. 29, 2003. 01:00 AM <a href=www.thestar.com>STEVEN THEOBALD BUSINESS REPORTER

While U.S. troops are laying siege to Baghdad, investors are prepared to sit it out as they finally understand the invasion of Iraq will be neither clean nor quick.

"No one knows how this is going to resolve itself and no one is going to take any bets," Brendan Caldwell, chief executive of Caldwell Securities Ltd., said yesterday. "Until we have some major breakthrough to the upside in the Iraq war, this market is not going to do anything terribly convincing."

Low trade volumes are amplifying swings in stock prices, Caldwell said.

"The market is drifting lower. It is not moving lower with any conviction."

The war-is-on euphoria sent markets soaring last week, taking New York's benchmark Dow Jones industrial average up 8.4 per cent, its best week in more than two decades.

Then came grisly images and reports showing the Iraqi military wasn't eager to surrender.

As optimism for a fast resolution evaporated, financial markets sank, sending benchmark American indexes to their biggest weekly declines since January.

The Dow was off 55.68 points yesterday to end the week down 4.4 per cent at 8,145.77. The broader S&P 500 dropped 3.6 per cent for the week, falling 5.02 points yesterday to close at 863.50. The tech-heavy Nasdaq composite index slipped 3.7 per cent on the week to 1,369.60, losing 14.65 yesterday.

Most of the week's losses came in the opening hours of trading Monday.

Toronto's benchmark S&P/TSX index fared somewhat better, gaining 26.04 yesterday to finish at 6,379.48, a 2.4 per cent drop for the week, its fourth losing week in five.

Canada's dollar benefited from a sell-off of U.S. dollars.

The loonie gained 1.01 of a cent (U.S.) over the week, closing yesterday at 67.93 cents.

Crude oil prices, which were up sharply earlier in the week, have stabilized. Traders aren't as concerned about Iraq now that the United States has secured control of key oil fields, ensuring a steady supply.

"I wouldn't say indifference, I'd say there is studied standbackishness," said Brian Prokop, and analyst with Peters & Co., a Calgary-based oil and gas investment dealer.

Crude oil on the New York Mercantile Exchange, up 12 per cent on the week, closed yesterday at $30.16, down 21 cents.

In London, Brent crude, up 8.9 on the week, closed yesterday at $27.32, down 47 cents.

At this point, crude oil traders are more interested in news out of Venezuela and Nigeria, Prokop said.

Venezuelan production is still 1 million barrels a day below pre-strike levels and civil unrest in Nigeria has taken a further 800,000 barrels a day off the market, he said.

"If you see Nigeria and Venezuela come back up I think you'll see a softening in oil prices."

War uncertainties, combined with job worries and higher energy prices, helped keep U.S. consumer spending on hold in February for the second straight month.

A report yesterday by the commerce department showed consumer spending was flat in January and February, holding at an annual rate of $7.49 trillion.

"Consumers are growing increasingly cautious in their spending and the income to support future spending is weakening," said Mark Zandi, chief economist at Economy.com. "Consumers are pulling back.''

While financial markets are hunkering down for a longer than expected conflict with Iraq, investors are growing increasingly certain the U.S. Federal Reserve will soon intervene to help boost confidence.

Markets are again starting to price in an interest rate cut by the Fed following its May 6 policy meeting, said Steve Saldanha, senior capital markets strategist at TD Securities.

But markets are assigning a 50-50 chance the Bank of Canada will continue hiking its key interest rates when it sets policy on April 15, he added.

Canada's central bank has made it abundantly clear it will be raising rates further to get inflation back under control, Saldanha said.

"Geopolitical concerns alone won't stay the bank's hand."

On the Toronto Stock Exchange yesterday, the advance was fuelled by a nearly 7 per cent jump in the gold sector as the price of bullion surged $2.80 (U.S.) to $331.50 an ounce in New York. Barrick Gold rose $1.31 (Canadian) to $22.71.

The TSX financial sector was down slightly a day after the House of Commons finance committee report on bank mergers did little to clarify the issue. Bank of Montreal was off 46 cents to $40.50.

Other active Toronto stocks included Bombardier, down 21 cents to $2.71. The company announced yesterday it is cutting 350 non-union jobs from nine transport division sites in North America.

Air Canada lost 14 cents to $2.50, Hudson's Bay was up 35 cents to $8.24 and Ivanhoe Mines rose 19 cents to $3.30.

Shares in Gauntlet Energy were down $1.43 to $1.55 after the company said it will probably have to slash its northern oil and gas reserve estimates.

Inco was up $1.25 to $27.60 after it said it is spending nearly $1 billion to redeem convertible preferred shares and debentures.

With files from the star's wire services

Press Release Source: Bank of America Corporation Friday March 28, 2:48 pm ET

Note to editor: The "U.S. Economic Projections" report that follows is written each week by Lynn Reaser, Ph.D., chief economist and senior market strategist for Banc of America Capital Management. The report is a publication of Banc of America Capital Management, which is the primary investment management group of Bank of America. Banc of America Capital Management develops investment management products and services for distribution to individual and institutional clients, and advised more than $267 billion in assets as of December 31, 2002.

NEW YORK/ST. LOUIS and CHARLOTTE, N.C., March 28 /PRNewswire/ -- Banc of America Capital Management today released the latest "U.S. Economic Projections" report:

For Week of March 31, 2003

Awaiting Signs of Spring

CURRENT MARKET FOCUS

As new blades of grass appear, the world hopes that spring will soon bring resolution to the Iraqi conflict. Although the U.S.-led war against Iraq has been under way for just 10 days, investors' emotions have swung from euphoria to despair to uncertainty.

Recent reports have reflected a winter-like grip on the U.S. economy. Sales of both new and existing homes fell in February, while factory orders for durable goods forfeited more than half of their January gain. Consumer confidence measures also fell in March to their lowest levels in about a decade.

Yet, more current data collected after the conflict began reveal the resilience of the U.S. economy. Reports from auto dealers, realtors and retailers indicate that consumer spending has far from collapsed.

The airlines are clearly suffering, with traffic dropping sharply due to the uncertain environment. Domestic bookings for the next 60 days are now down 20% from levels of a year ago, while international bookings are off 40%. Concerns about SARS (severe acute respiratory syndrome) are especially depressing travel to Asia.

THE WEEK AHEAD

Prepare for more signs of gray in economic reports scheduled for release next week. However, improved weather conditions following February's severe storms likely helped to offset the generally soft fundamentals accompanying the launch of the attack against Iraq.

Expect the Institute for Supply Management's indices of manufacturing and non-manufacturing activity for March to have eased somewhat from February's levels. Meanwhile, sales of autos and light trucks likely edged up only slightly last month given rising gasoline prices and prior rich sales incentives. Employment figures for March may show a tiny gain following the prior month's steep loss of more than 300,000 jobs. However, expect the jobless rate to drift higher, to 5.9% from 5.8% in February.

The availability and price of oil will remain major factors in the global economic outlook. Fortunately, the Iraqi oil fields have been spared significant damage. Thus, while oil prices have backed up to around $30 per barrel, they remain well below the high of around $38 per barrel reached just two weeks ago.

The cutoff of Iraqi supplies amounts to about 2 million barrels of oil per day, while civil unrest in Nigeria has reduced that nation's daily production by another 800,000 barrels. Most of Venezuela's recent reduction has been restored. Overall, about 4% of world consumption has been disrupted, an amount currently being offset by higher OPEC production, primarily by Saudi Arabia.

THE STOCK MARKET

After the prior week's spectacular display of optimism, some pullback in stock prices would have been expected this week even without renewed concerns over Iraq. All of the major market indices -- the Dow Jones Industrial Average, the S&P 500 Index and Nasdaq -- were on track to record weekly losses as of noon Friday.

Even as a new chill regarding the war's duration has swept over the market, the Dow Jones Industrial Average has retained a considerable gain over its recent low of Mar. 11. As of noon Friday, the Dow Industrials were still up about 600 points from their recent low.

Investors did retreat to some safer havens this past week. The defensive sectors of energy, health care and utilities outperformed the overall S&P Index for the week.

Meanwhile, the dollar lost some of its recent gain, with the euro approaching $1.08 on Friday. Still, the euro remains below its recent high of more than $1.10 reached on Mar. 10.

The coming week will feature the first batch of earnings releases for the first quarter. Brace for generally drab or even bleak reports. Companies scheduled to release earnings next week include Best Buy, Bed Bath & Beyond, and Circuit City (retail); Alcoa (basic materials); and El Paso (energy). At the same time, heightened uncertainty will likely lead more firms to reduce expectations for the period ahead.

THE BOND MARKET

Temperatures warmed in the bond market this week as expectations mounted that the Iraqi conflict would be longer and more difficult than believed just a week ago. However, mirroring the movement of other war-sensitive commodities and assets -- such as oil, gold, stocks and the dollar -- Treasury bonds have not completely retraced their steps since the war began. As of noon Friday, the 10-year U.S. Treasury note was yielding 3.89%. While down considerably from the peak of 4.11% reached just a week ago, bond yields remain well above the 3.59% level of Mar. 10.

Regarding monetary policy, Federal Reserve officials have maintained that a successful conclusion of the Iraqi conflict would unlock the economy's potential by reducing oil price premiums and the uncertainty holding back business capital spending and other activity. Early reaction in the financial markets would tend to support those assumptions.

While no one can be certain of the precise outcome, the war effort seems more likely to require weeks rather than months. If that is the case and the economy holds up reasonably well in the interim, as we currently expect, the Fed will likely remain on the sidelines. However, if consumer and business spending start to weaken appreciably and the war timeline stretches to three to six months, look for the Federal Reserve to cut interest rates.

With respect to fiscal policy, which has important implications for both stocks and bonds, the Senate sliced in half the President's proposed tax cut of $726 billion over five years. This reduction to $350 billion follows the House of Representatives' approval of the total $726 billion package. The two amounts will now be reconciled in House-Senate conference committees. While a compromise budget resolution is likely to provide for a sizable tax cut, growing concerns about the costs to rebuild Iraq are likely to reduce its size from the President's proposed plan. A sizable scaling back of dividend tax relief also appears likely given current political opposition.

On balance, look for prices of all financial assets to continue to trade on every report emanating from Baghdad and other critical points in Iraq during the next several days. This will be a time for investors to remain patient and confident in their long-term investment strategies.

Indicators to watch

Indicator     Institute for Supply Management Manufacturing Index - March
Release Date  Tuesday, April 1, 10:00 a.m. EST
February      50.5
Forecast      49.5 (49.0 to 50.0 range)
Comments      Factory activity likely slipped in March as war concerns and
              rising energy costs crimped business activity.  Improving
              weather may have provided some support.

Indicator     Construction Spending - February
Release Date  Tuesday, April 1, 10:00 a.m. EST
January       1.7%
Forecast      -0.9% (-1.2% to -0.7% range)
Comments      Prepare for a substantial reversal in construction spending
              equal to about half of the sharp gain seen in February.
              Severe weather in the East and Midwest probably held back
              homebuilding, nonresidential construction and public works
              projects during the month.

Indicator     Auto and Truck Sales - March
Release Date  Tuesday, April 1
February      15.3 million
Forecast      15.4 million (15.4 million to 15.5 million range)
Comments      Early industry reports suggest that sales of autos and
              light trucks held close to February's levels.  The recent
              jump in gasoline prices may be delaying purchase decisions.
              December's sales surge in response to generous incentives
              also pulled some of this year's potential sales into 2002.

Indicator     New Factory Orders - February
Release Date  Wednesday, April 2, 10:00 a.m. EST
January       1.5%
Forecast      -0.7% (-1.0% to -0.5% range)
Comments      Look for a small 0.2% drop in orders for nondurable goods to
              add to the 1.2% decline in durable goods already reported.
              The overall decline in orders would suggest that companies
              continue to see lackluster demand and have little incentive
              to rebuild inventories.

Indicator     Initial Claims for Unemployment Insurance - week ended
              3/29/03
Release Date  Thursday, April 3, 8:30 a.m. EST
Prior Week    402,000
Forecast      408,000 (406,000 to 410,000 range)
Comments      Last week's 25,000 drop in jobless claims provided a welcome
              respite in a recent trend of generally weak economic
              numbers.  Do not be surprised to see claims rise again in
              the latest report, although a number below 420,000 would
              represent significant improvement from levels reported for
              the first half of March.

Indicator     Institute for Supply Management Non-Manufacturing Index -
              March
Release Date  Thursday, April 3, 10:00 a.m. EST
February      53.9
Forecast      52.5 (52.0 to 53.0 range)
Comments      Look for this barometer of activity in the non-manufacturing
              sector to remain above the 50.0 break-even mark.  However,
              do not be surprised to see some deterioration from
              February's level, reflecting a significant weakening among
              the airlines and reduced orders and spending by firms in
              other non-manufacturing areas.

Indicator     Unemployment Rate - March
Release Date  Friday, April 4, 8:30 a.m. EST
January       5.8%
Forecast      5.9% (5.9% to 6.0% range)
Comments      Look for the jobless rate to edge higher as companies' focus
              on cost control and uncertainty about the future continues
              to hold back hiring.  The economy will need to grow faster
              than its potential of slightly more than 3.0% in real terms
              before progress can be achieved in reducing the unemployment
              rate.

Indicator     Nonfarm Employment - March
Release Date  Friday, April 4, 8:30 a.m. EST
January       -308,000
Forecast      10,000 (-10,000 to 20,000 range)
Comments      Following the sizable swings of the past two months,
              payrolls should flatten out with a small overall increase
              for March.  Anticipate further losses in factory jobs, but
              increases in construction, retailing and the services
              sectors thanks in large part to better weather.

Indicator     Hourly Earnings - March
Release Date  Friday, April 4, 8:30 a.m. EST
January       0.7%
Forecast      0.3% (0.2% to 0.3% range)
Comments      Anticipate a moderate rise in hourly earnings equal to the
              average gain of the past six months.  Relative to a year
              ago, this would represent a gain of 3.3%, which would mean
              that wage earners are still keeping slightly ahead of
              inflation (recently at 3.0%).


Economic Forecasts

               2002Q3  2002Q4  2003Q1f 2003Q2f 2003Q3f 2003Q4f  2002 2003f
Real GDP (% chg.
 annual rate)    4.0    1.4      2.1     1.7     4.0    4.2     2.4   2.4
CPI (% chg.
 annual rate)    2.2    2.0      3.6     1.1     1.6    2.4     1.6   2.3
Personal Consumption
 Price Index (%
 chg. annual
 rate)           1.7    1.8      2.4     0.9     1.6    2.0     1.4   1.8
S&P 500 Operating
 Earnings ($ per
 share)        12.28  12.23    12.40   13.25   13.60  13.75   48.00 53.00
Federal Funds
 Rate (%, end
 of period)     1.75   1.25     1.25    1.25    1.50   2.00    1.25  2.00
10-Year Treasury
 Note Yield (%,
 end of period) 3.93   3.83     3.92    4.25    4.75   5.10    3.83  5.10
Euro ($/euro,
 end of period) 0.99   1.05     1.07    1.04    1.03   1.02    1.05  1.02
Yen (yen/$, end
 of period)      122    119      120     124     125    124     119   124

The information and data provided in this analysis are derived from sources that we deem to be reliable and accurate. Any opinions expressed are strictly the opinion of Banc of America Capital Management and are subject to change without notice.

Banc of America Capital Management provides access to extensive investment expertise, which is available within its own organization, as well as through strategic affiliations. Banc of America Capital Management offers the following:

• investment advisory services for many institutional client types, including, but not limited to: corporations, municipalities, foundations and universities.
• a broad range of investment options and services, including establishing asset allocation models for institutional portfolios; managing investments in stocks, bonds, and cash; and serving as the investment sub-adviser to many of the Nations Funds, a mutual fund family with more than $267 billion in assets as of December 31, 2002.
• experienced analysts and strategists who provide expert insight into the economy, businesses, and financial markets. This professionalism and expertise is put to work on behalf of clients in the most effective ways possible.
• Lynn Reaser, Ph.D.
• Chief Economist & Senior Market Strategist
• Banc of America Capital Management
• March 28, 2003

Source: Bank of America Corporation

Press Release Source: Coca-Cola FEMSA, S.A. de C.V. Friday March 28, 7:56 am ET

MEXICO CITY & MIAMI--(BUSINESS WIRE)--March 28, 2003--Coca-Cola FEMSA, S.A. de C.V. ("Coca-Cola FEMSA") (NYSE:KOF - News) and Panamerican Beverages Inc. ("Panamco") announced today that the Comision Federal de Competencia, the Mexican Antitrust Commission, has approved without any restrictive conditions the acquisition by Coca-Cola FEMSA of Panamco. Additionally, the Brazilian Ministry of Justice issued a favorable legal opinion in support of the acquisition to the Brazilian Antitrust Commission, which will make its final decision on the acquisition within the next 60 days. Coca-Cola FEMSA and Panamco, however, may consummate the transaction before the Brazilian Antitrust Comission renders a final decision. As previously announced, on February 4, 2003 the Company received notice that the waiting period under the U.S. Hart-Scott-Rodino Antitrust Improvements Act with respect to the proposed acquisition by Coca-Cola FEMSA of Panamco had been terminated early. As a result of the receipt of these approvals, all conditions precedent to the completion of the acquisition relating to the receipt of antitrust approvals of governmental agencies have been satisfied.

ADVERTISEMENT The closing of the proposed acquisition remains subject to the satisfaction or waiver of other conditions. These conditions are described in the preliminary proxy statements filed by Panamco with the U.S. Securities and Exchange Commission (the "SEC") on January 30, 2003 and March 18, 2003.

About Coca-Cola FEMSA

Coca-Cola FEMSA produces Coca-Cola, Sprite, Fanta, Lift and other trademark beverages of The Coca-Cola Company in the Valley of Mexico, the Southeast Territories in Mexico and the Buenos Aires Territory in Argentina. The Company has eight bottling facilities in Mexico and one in Buenos Aires and serves more than 283,650 retailers in Mexico and 76,400 retailers in the greater Buenos Aires area. Coca-Cola FEMSA currently accounts for approximately 3.4% of Coca-Cola global sales, 25.0% of all Coca-Cola sales in Mexico and approximately 36.5% of all Coca-Cola sales in Argentina. The Coca-Cola Company owns a 30% equity interest in Coca-Cola FEMSA.

About Panamco

Panamco is the largest soft drink bottler in Latin America and one of the three largest bottlers of Coca-Cola products in the world. The Company produces and distributes substantially all Coca-Cola soft drink products in its franchise territories in Mexico, Guatemala, Nicaragua, Costa Rica, Panama, Colombia, Venezuela and Brazil, along with bottled water, beer and other beverages in some of these territories. Panamco is an anchor bottler of The Coca-Cola Company.

FORWARD-LOOKING STATEMENTS

This press release contains certain "forward-looking statements" within the meaning of Section 21E of the Securities and Exchange Act of 1934, as amended. These forward-looking statements relate to Coca-Cola FEMSA, Panamco, their respective businesses, the proposed combined company and the transaction are based on Coca-Cola FEMSA's and Panamco's managements current expectations. Readers are cautioned not to put undue reliance on such forward-looking statements, which are not a guarantee of performance and are subject to a number of uncertainties and other factors, many of which are outside Coca-Cola FEMSA's and Panamco's control.

ADDITIONAL INFORMATION AND WHERE TO FIND IT

Panamco filed with the SEC a preliminary proxy statement on January 30, 2003 and an amended preliminary proxy statement on March 18, 2003, regarding the proposed business combination transaction referred to in the foregoing information. In addition, Panamco will prepare and file with the SEC a definitive proxy statement and other documents regarding the proposed transaction. Investors and security holders are urged to read the definitive proxy statement, when it becomes available, because it will contain important information. The definitive proxy statement will be sent to shareholders of Panamco seeking their approval of the proposed transaction. Investors and security holders may obtain a free copy of the definitive proxy statement (when it is available) and other documents filed with the SEC by Panamco on the SEC's website at www.sec.gov. The definitive proxy statement (when it is available) and these other documents may also be obtained for free from Panamco by directing a request to Laura I. Maydon (lmaydon@panamcollc.com). Free copies of documents filed with the SEC by Coca-Cola FEMSA may be obtained at the SEC's website at www.sec.gov or by directing a request to Alfredo Fernandez (afernandeze@kof.com.mx).

CERTAIN INFORMATION CONCERNING PARTICIPANTS

A detailed list of names, affiliations and interests of participants in the solicitation of proxies of Panamco to approve the proposed business combination is included in the preliminary proxy statement.

CONTACTS

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Coca-Cola FEMSA Investor Relations Guillermo Gonzalez Camarena No. 600, Col. Centro de Ciudad Santa Fe 01210, Mexico D.F., Mexico Alfredo Fernandez / (52) 55 5081 51 20 / afernandeze@kof.com.mx Julieta Naranjo / (52) 55 5081 51 48 / jnaranjo@kof.com.mx

Panamco Investor Relations 701 Waterford Way, Suite 800, Miami, FL 33126 Laura Maydon / 305 929 0867 / lmaydon@panamcollc.com

Contact:

 Coca-Cola FEMSA
 Investor Relations:
 Alfredo Fernandez, (52) 55 5081 51 20
 afernandeze@kof.com.mx
 or
 Julieta Naranjo, (52) 55 5081 51 48
 jnaranjo@kof.com.mx
 or
 Panamco
 Investor Relations:
 Laura Maydon, 305/929-0867
 lmaydon@panamcollc.com

The Associated Press By Amy Baldwin

NEW YORK — Inertia settled over Wall Street yesterday, leaving stocks little changed as the market waited for news indicating allied forces were making progress in Iraq. The major indexes closed slightly lower.

Stocks are expected to remain vulnerable amid uncertainty about the war. Wall Street's chief concern is that the fighting could last months, posing an additional risk to the economy as uneasy businesses and consumers curtail spending.

"Every delay in ending the war is just going to be negative for the market," said Stephen Carl, principal and head of equity trading at The Williams Capital Group.

The Dow Jones industrial average closed down 28.43 at 8,201.45. The Dow retreated 50.35 on Wednesday and shed 307.29 on Monday, the market's worst day in six months.

Dow components Microsoft and Boeing went in opposite directions, as Microsoft edged 21 cents lower to close at $25.04 per share and Boeing added 12 cents to $26.52.

The market's broader gauges also posted modest losses. The Nasdaq composite index fell 3.20 to 1,384.25. The Standard & Poor's 500 index declined 1.43 to 868.52.

In the past 2-1/2 weeks, investors have gone from feeling euphoric and optimistic the war would be over soon, to deeply fearful that fighting would drag on. Yesterday, they seemed almost detached in the absence of significant war developments.

The market again saw some profit-taking yesterday, as more investors sought to preserve the gains they made when stocks surged higher in the optimistic days leading up to the war and the first few days of fighting. The Dow has given back about 386 points, or nearly 40 percent, of the 997 points it gained over the course of eight sessions.

Once again, the economy gave investors reason to be pessimistic. The Commerce Department reported yesterday that the economy as measured by gross domestic product grew at a lackluster 1.4 percent annual rate in the fourth quarter of 2002, meeting analysts' expectations. Many analysts predict the economy could fare worse in the current quarter as the sluggish job market and war uncertainties make consumers and businesses even more cautious.

Gold/oil

In U.S. trading, gold continued to slip, giving up $1.70 to $328.40 per ounce.

Oil prices gained $1.99 to $30.47 a barrel, the first time they've been above $30 a barrel since war broke out in Iraq.

Prices have climbed nearly 13 percent since last Friday, when they hit a three-month low as concerns about worldwide supplies replaced early hopes for a quick end to the Iraq war.

Traders, who expect the volatility to continue at least until the end of fighting in Iraq, have plenty to worry about:

• Commercial inventories of crude are extremely low in the United States at a time when refiners are cranking out gasoline for the summer driving season.

• Iraqi exports have ceased and supplies from Nigeria and Venezuela are down because of labor strife, taking more than 3 million barrels a day out of the market.

• Finally, analysts said the extra petroleum being pumped by Saudi Arabia and other OPEC members to offset that shortfall hasn't entirely reached U.S. shores and might not be enough to calm markets when it does.