Manager Commentary

Management Style
The Fund’s portfolio manager buys stocks that he believes present good growth potential at a reasonable price. The equity portion of the Fund is focused on holdings in sectors that the manager believes are likely to grow faster than the overall GDP growth rate. The portfolio manager favors companies that he believes are large, industry-leading U.S. and foreign firms with highly capable management, strong balance sheets, and consistent earnings growth. Stocks are purchased at prices that reflect what he believes are good value relative to their industry peers. Bond holdings are mostly short- to medium-term U.S. government agency bonds and high-grade corporate bonds.

To determine the stock/bond/cash allocation, the portfolio manager considers the current level and anticipated direction of domestic interest rates, the level of equity valuations, and the global economy’s effect on the U.S. economy and financial markets. The bond component produces income and moderates price swings in volatile markets. Cash is a buffering element and provides for opportunistic equity purchases.

Portfolio Commentary (as of March 31, 2008)
In the first quarter of 2008, we witnessed a significant increase in the fallout from the subprime mortgage crisis. Major write-offs became commonplace for many large financial institutions. As the number and size of losses increased, investor confidence quickly eroded and a credit squeeze ensued. With a major financial institution on the brink of insolvency, the Federal Reserve responded with both scheduled and emergency rate cuts, a bailout package and unprecedented liquidity infusions in an attempt to stabilize the market. The major U.S. stock indices all responded with negative year-to-date returns.

We expect the markets to continue to exhibit above-average volatility while the subprime debacle runs its course. A weak housing market and high energy prices will likely also weigh down the consumer and related market sectors. A weak dollar and high commodity costs will play an important role, as well, as we determine our investment strategy in the coming months.

Against this volatile backdrop, investment opportunities have developed which we believe could benefit our shareholders. As a result of the Fed’s rate reductions and recent pressure on equities, the general market appears attractively-valued. Earnings yield for the S&P 500 Index versus the 10-year Treasury bond yield looks promising, even when adjusting for a meaningful slowdown in corporate earnings for the year ahead. Therefore, we continue to overweight equities versus bonds in anticipation of a stronger second half of 2008 for equities.

The financial services sector has been one of the hardest hit. Hence, we believe some opportunities may exist there for our shareholders. The Fund has historically underweighted financials, but we believe there are some companies that have been unduly punished as result of the subprime turmoil. We are looking to add selectively to the financial service sector, and while we believe a correction in commodities is upon us, we still feel there will be healthy long-term secular demand as emerging markets continue to grow, albeit at a more moderate pace. Industrial and material sectors should also benefit as the global economy begins to reflate. We continue to focus on agriculture- and materials-based companies that demonstrate strong demand for their products and or services. Global infrastructure companies with exposure to the increasing demand for electricity have also been added to the portfolio.

We have remained focused on the long term and as such have made few changes in the Fund’s top holdings.

This commentary does not constitute an endorsement of any company’s attractiveness as an investment.

*Portfolio holdings as of 3/31/08.