INTERWOVEN, INC. & FREEMARKETS, INC.

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Dear Reader,

By now, we thought the war would have started and nearly be over. So did the rest of us so-called market prognosticators. However, it just dawned on us: The looming war and its outcome are not the underlining reasons as to why the markets are in the pits. Instead it is a sense that our national leadership is in disarray. Yeah, go ahead and blame the French, but the past month or so has not been the Bush administration’s finest hour. The markets want strong leadership.

So, what’s next? Well, in lieu of playing the tape recorder, again, go back and read our comments in the February 20 Newsletter. And we would like to add the following:

$4.5 TRILLION

Look at it hard. That is the estimate of how much cash is now sitting on the sidelines. If the war goes as expected, much of it will literally pour into the markets. Also, the dollar should strengthen, causing foreign money to join in. If you have any doubts about this, just look at last week’s “relief rally”, and most of that was just short-covering.

No, we did not close any positions over the last few weeks, and, yes, our Portfolio is still marking time. But, could this be a good time for bargain hunters?

Here are the headlines since the last issue about companies in the Current Portfolio. Dates in parentheses are when we first recommended them.

Mountain Province Diamonds (MPVI) (10/20/97). Says encouragingly thick kimberlite intersections were encountered near the Kelvin Kimberlite Body. We have kept MPVI in the Portfolio for all these years because of its tie-in with DeBeers.

Detwiler, Mitchell (DMCO) (8/5/99). Files annual report, and while numbers are not pretty, company seems to be hanging in there.

Draxis Health (DRAX) (3/20/00). Gets FDA okay as bone care manufacturing site.

N2H2 (NTWO) (8/20/00). Company channel program wins VARBusiness 5-Star rating. Also, pending case before U.S. Supreme Court over smut filters could impact NTWO. Don’t forget, on “Endangered List”.

DOR BioPhara (DOR) (9/20/00). Announces publication of Intranasal version of DOR’s oral vaccine against botulinum toxin. This, too, is still on the “Endangered List”, but, as we have said previously, the stock could get a nice boost from a war with Iraq.

RateXchange (RTX) (1/20/01). Taps senior institutional salesman from CSFB to head equity capital markets.

Access Pharmaceuticals (AKC) (11/5/01). Details Zindaclin license pacts.

Saba Software (SABA) (11/20/01). Several product announcements plus earnings release date.

Orthovita (VITA) (12/20/01). Granted its third U.S. patent for VITOSS. Completes patient enrollment for RHAKOSS pivotal clinical study in Europe. Gets FDA clearance for a new series of IMBIBE bone marrow aspiration syringes.

Airspan Networks (AIRN) (1/20/02). To develop WipLL reseller program.

VASCO Security (VDSI) (2/5/02). Launches low cost and easy to implement Digipass authentication server.

Mechanical Technology (MKTY) (3/5/02). Year-end results not real great, but balance sheet still looks good. Gets a nice plug in the New York Times.

Magic Software (MGIC) (3/20/02). Launches iBOLT integration suite for affordable enterprise application integration. Appoints new board members.

DigitalThink (DTHK) (4/5/02). Eskenazi group raises stake in company to 19.6%.

Nanogen (NGEN) 5/20/02). Expands molecular diagnostic product menu.

Optibase (OBAS) (5/20/02). Announces adoption of TV streaming solution by Spain’s Antena 3.

Immersion (IMMR) (6/5/02). Signs development and licensing agreements. Also, several blips on new products.

Hemispherx (HEB) (7/5/02). To present new interim clinical data on Phase IIB study in HIV/AIDS. Acquires rights for only FDA-approved natural alpha interferon drug company.

SpeechWorks (SPWX) (9/5/02). Partners with OTG to offer integrated and deployed speaker verification solution.

Harvard Bioscience (HBIO) (10/20/02). Subsidiary acquires GeneMachines. Year-end numbers seem real good, as does balance sheet.

Viewpoint (VWPT) (11/20/02). Despite even more upbeat news about partners and products, stock price continues to worsen. This is due mainly to a breach notice from bondholders who claim company made mis-representations. Regrettably, we place it on the “Endangered List”.

Interactive Intelligence (ININ) (12/5/02). Company wins several awards for products.

Vasogen (VSV) (12/5/02). Year-end results show balance sheet still looking somewhat healthy, but Reuters reports that losses mount as clinical trial costs rise.

Looksmart (LOOK) (1/5/03). Coverage initiated by First Albany. Renews multi-year pact with Road Runner

Allscripts (MDRX) (1/20/03). TouchWorks mEMR featured in Intel Centrino mobile technology launch. Hambrecht starts coverage on stock at “buy”.

Applied Molecular (AMEV) (2/5/03). Year-end results show revenue improvement with higher losses; balance sheet still appears okay.

Avaya (AV) (2/20/03). A slew of releases about products and distribution pacts. UBS Warburg initiates coverage.

E*TRADE (ET) (2/20/03). E*Trade Japan and Softbank Inv. set merger details. Elects new President/CEO. Deutsche Bank drops finance coverage.

Intergrated Silicon (ISSI) (3/5/03). Introduces several new products.

Eden Bioscience (EDEN) (3/5/03). Receives conditional registration for use of Messenger on California citrus.

Our picks for this issue are another chewed-up small tech, and don’t flip out, an Internet company that seems to have survived the carnage.

INTERWOVEN, INC. (NASDAQ: IWOV) – $1.90. Twelve-month hi-low has been $8.32 – $1.34. Based in Sunnyvale, CA, with about 600 employees, this software company has 106.7 million shares outstanding, $211 million in total current assets, $298.6 million in total assets, little debt, and $95 million in total liabilities. Institutional ownership is around 60%. Two analysts give the stock a “moderate buy” and ten have it as “hold”. http://www.interwoven.com

While we wait for the war, let’s look at another beaten-down small tech that has been upgrading its products and still has a half-decent balance sheet, such as Interwoven, Inc.

Founded in 1995, Interwoven bills itself as the world’s leading provider of enterprise content management (ECM). Its Interwoven 5 platform supports complete content lifecycle from content processing management to making content business ready and deploying it to web browsers, PDAs, print, wireless devices, and enterprise applications. This ECM platform is used to manage all assets – documents, XML/HTML, rich media, application code and operational data – from all contributors across the enterprise. Basically, IWOV weaves Web content.

Interwoven’s flagship TeamSite software is a Web content management application for developing and maintaining large Web sites and corporate portals. It allows many users within a company to simultaneously contribute content, manage different versions of a site, and set content approval standards. IWOV’s OpenDeploy software is used to transfer Web content from development environments to multiple Web servers. The company’s third major product, MetaTagger lets customers and employees find information fast. In addition, Interwoven also offers installation, project management, workflow strategy, and related services.

Interwoven’s ECM platform has been used at more than 1100 global enterprises, including British Airways, Cisco Systems, GE, GM, and Philips to power their eBusiness initiatives. Currently, IWOV has 7 of the Fortune 10 as customers.

Recently, Experian re-engineered their business processes with IWOV’s software; and Interwoven was named to KM World’s top 100 knowledge management companies. Also, late last month, the company rolled out a stand-alone version of OpenDeploy.

For FY2002, ending 12/31/02, revenue was $126.8 million with $148.6 million in losses versus 2001 revenue of $204.6 million with $129.1 million in losses. Yup, there’s no getting around it, 2002 was a tough year for most software companies.

What we like here is that IWOV continues product upgrades, still has a relatively decent balance sheet, and continues to add new major companies as customers while maintaining re-orders from many present ones. At some point, the tech doldrums will pass.

Our 20-month target for the stock is $3.50 to $4.00.

For more information, call IWOV at 408-530-7009; investor.relations@interwoven.com

FREEMARKETS, INC. (NASDAQ: FMKT) – $4.50. Twelve-month hi-low has been $29.09 – $3.50. Located In Pittsburgh, PA, with about 1000 employees, this Internet software and services company has 42.1 million shares outstanding, $135 million in cash/investments, $193.6 million in total assets, $1.33 million in long-term debt, and $36.2 million in total liabilities. Institutional ownership is around 64%. One analyst rates the stock a “strong buy” and seven have it as a “hold”. http://www.freemarkets.com

With all the dire predictions about the economy tanking, soon, you have to think that corporate purchasing agents are really bearing down and shopping for the best prices right about now. A company like FreeMarkets, Inc. could do well in this sort of climate.

Founded in 1995, picture FreeMarkets as something like an eBay. No, you won’t find ancient Barbie dolls or Mickey Mantle cards, instead, FMKT operates real-time business-to-business online auctions and marketplaces for companies buying industrial parts, raw materials, and services in more than 200 product categories. The company offers GSM (global supply management) programs which are sourcing software and services for goods purchased. This lets customers automate requests for proposals, qualify suppliers, manage negotiations, and track contracts. FreeMarkets also offers software that allows users to create their own online markets.

With operations centers also in Brussels and Singapore, FreeMarkets has a pretty good customer base that includes VTech, BP, Emerson, CP Power Hong Kong, Palm, United Technologies, Manitowoc, International Truck and Engine, HP, and Reliance Industries, to name a few.

Of note is a nifty piece of marketing that FreeMarkets began three years ago called the WorldSource Conference, which, this year, the company will be hosting in Palm Beach. Attending will be executives and supply management types from many of the Global 2000 companies.

For FY2002, ending 12/31/02, revenue was $181.69 million with $17.5 million in net losses versus 2001 revenue of $166.59 million and $295.2 million in losses. Looks like an improvement to us.

FMKT has a pretty good-looking balance sheet and products/services that we suspect should only gain in popularity.

Our 20-month target for the stock is $8.00 to $10.

For more information, call FMKT at 412-297-8950; investorrelations@freemarkets.com

The April 5, 2003 issue should be posted on 4/1 or 4/2.

Good Luck,
George

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