PepsiCo Inc.

HARTE-HANKS INC. $19.47, New York symbol HHS, has moved down in the past month, partly due to the cancellation of a takeover of a competitor by a private equity fund. Investors saw this as a sign of problems in the consumer data collection industry, in addition to the growing unwillingness of lenders to finance takeovers. Harte-Hanks’ earnings have also suffered recently. Slumping housing markets in California and Florida have hurt demand for real estate advertising at its shoppers newspaper business. Fears that the housing downturn will cut consumer spending have also hurt demand for its direct marketing services. But the company’s strong position in these niche markets, as well as its sound balance sheet, should help it rebound quickly. Harte-Hanks is still a buy for long-term gains....

IVY CANADIAN FUND $30 (CWA Rating: Conservative) invests in high-quality, largecapitalization stocks. The $3.7 billion fund’s top holdings include Shoppers Drug Mart, Imperial Oil, Manulife Financial, Canadian National Railway, Reckitt Benckiser plc, McDonald’s Corp., Thomson Corporation, Diageo plc and PepsiCo. Ivy Canadian’s breakdown by industry is: Consumer staples, 22.3%; Financials, 13.9%; Consumer discretionary, 13.7%; Industrials, 12.4%; and Energy, 8.3%....

IVY FOREIGN EQUITY FUND $28.24 (CWA Rating: Conservative) outperformed the Morgan Stanley benchmark international index over the last 10 years. The fund gained 6.2%, and that was better than the Morgan Stanley benchmark’s gain of 4.6%. Ivy Foreign Equity Fund made 4.4% over the last year. The fund invests in companies based outside of Canada, but cuts risk by avoiding direct investment in emerging markets. Ivy Foreign Equity is one of our top foreign fund recommendations. Still, we think non-U.S. international funds should make up at most 10% of the holdings of a conservative investor. The fund’s top 10 holdings are Reckitt Benckiser plc (UK household & healthcare products), Mc- Donald’s Corp., L’Oreal SA (French cosmetics), Shopper’s Drug Mart, Nestle SA, Henry Schein Inc., (U.S. healthcare), PepsiCo (U.S. food & beverage), William Demant (hearing health products), and Diageo plc (UK alcoholic drinks)....

IVY GROWTH AND INCOME FUND $23.41 (CWA Rating: Conservative) (Mackenzie Financial Corp., 150 Bloor St. West, Toronto, Ont. M5S 3B5. 1-800-387-0780; Web site: www.mackenziefinancial.com. Load fund — available from brokers) is a balanced fund, holding a mixture of stocks, bonds and cash. The fund has returned 6.3% annually for the 10 years. It made 4.1% over the last year. The fund’s MER is 2.14%. The fund’s top stock holdings are Shoppers Drug Mart, PepsiCo, Canadian National Railway, Manulife Financial, Imperial Oil, Thomson Corp., McDonald’s Corp., Becton Dickinson (U.S. medical technology), Diageo plc (UK alcoholic beverages) and Reckitt Benckiser plc (UK household & healthcare products). This $3.0 billion fund holds 24% of its assets in bonds. Interest rates on bonds are now under 5% annually in Canada. That’s the total return that a bond can provide, from today until it matures. However, bonds leave investors at the mercy of inflation, which shrinks the purchasing power of all fixed-return investments. In fact, an upsurge in inflation could wipe out all returns on bonds, and some of their principal besides....

At one time, mutual funds within a particular ‘fund family’ often shared some key investment characteristic, such as a conservative or aggressive investment approach, or a stress on value as opposed to growth. However, due to trends in the mutual-funds industry such as corporate mergers and takeovers, and more aggressive marketing, a fund’s membership in a fund family now has little bearing on its investment approach or appeal as an investment. Below, for instance, we analyse five funds from the Ivy Group. (Note that Ivy is now part of Mackenzie Financial, which in turn is part of IGM Financial. The contact information listed for Ivy Growth and Income also applies to the other four.)...

ALCOA INC. $38 (New York symbol AA; Conservative Growth Portfolio, Resources sector; Shares outstanding: 884.0 million; Market cap: $33.6 billion; WSSF Rating: Above average) aims to complete construction of its new aluminum smelter in Iceland by the end of 2007. Traditional hydroelectric projects will power the new plant. But Alcoa is studying ways of tapping into Iceland’s abundant geothermal energy to heat water and power turbines. The company hopes to develop a new type of geothermal well that can produce 10 times the power of current wells. That would cut the new plant’s operating costs, and perhaps make it easier for Alcoa to build more plants in Iceland. Alcoa is a buy....

SONY CORP. ADRs $51 (New York symbol SNE; Conservative Growth Portfolio, Manufacturing & Industry sector; ADRs outstanding: 1.0 billion; Market cap: $51.0 billion; WSSF Rating: Above average) has outfitted its new PlayStation 3 video game player with its Blu-ray high-definition DVD technology. Sony feels this will help Blu-ray become the dominant format for high-definition DVDs. The plan seems to be working. Blu-ray now has about 70% of the market. Video rental chain Blockbuster now plans to carry only Blu-ray titles, which should spur more demand for Blu-ray players. Sony is a buy....

FIDELITY FOCUS CONSUMER INDUSTRIES FUND $18.65 (CWA Rating: Aggressive) (Fidelity Investments Canada, 483 Bay St., Suite 200, Toronto, Ont. M5G 2N7. 1-800-263-4077; Web site: www.fidelity.ca. Load fund — available from brokers) invests mainly in U.S. consumer goods and services companies. Consumer spending is a key part of the U.S. economy, accounting for approximately two-thirds of activity. Fidelity Focus Consumer Industries Fund’s top holdings include Procter & Gamble, Nestle SA, Coca-Cola, Altria Group, Toyota Motor, Esprit Holdings, PepsiCo, Groupe Danone, Reckitt Benckiser and Time Warner. The $10.6 million fund is broken down by industry as follows: 12.6% in Food products, 10.1% in Beverages, 10.1% in Specialty retail, 9.6% in Media and 8.6% in Household products....

Here are three Fidelity funds that hold much of their portfolios in one specific sector. We generally advise against investing in funds that concentrate in one economic sector. For example, a fund concentrating in financial services is particularly vulnerable to any setbacks in the sector or interest-rate rises. However, all of these Fidelity funds stick with high-quality stocks. If you do invest in these funds, be sure to adjust the rest of your portfolio so these funds won’t overly concentrate your holdings in any one sector. FIDELITY FOCUS CONSUMER INDUSTRIES FUND $18.65 (CWA Rating: Aggressive) (Fidelity Investments Canada, 483 Bay St., Suite 200, Toronto, Ont. M5G 2N7. 1-800-263-4077; Web site: www.fidelity.ca. Load fund — available from brokers) invests mainly in U.S. consumer goods and services companies. Consumer spending is a key part of the U.S. economy, accounting for approximately two-thirds of activity....

TRIMARK U.S. COMPANIES FUND $5.88 (CWA Rating: Conservative) invests in U.S. companies that the managers see as inexpensive in relation to earnings, cash flow and other valuation measures. The top holdings of this $107.7 million fund are Merrill Lynch, Wells Fargo & Co., Target Corporation, Ametek Inc., KLA-Tencor, Paxair, Affilitated Managers Group, Omnicom Group, PepsiCo and General Electric. The fund’s one-year gain in Canadian dollars is 7.5%, compared to the S&P 500’s gain of 13.8% in Canadian funds. Its MER is 2.59%. Trimark U.S. Companies Fund is still a buy.