Our Mutual Funds

Manager Commentary

Portfolio Manager

Sujatha R. Avutu, CFA is Portfolio Manager of the Pax World Value Fund and Women's Equity Fund. Prior to joining the Adviser, she spent over eight years at Evergreen Investments, where she was Managing Director and lead Portfolio Manager for Evergreen Equity Income Fund. She has over fifteen years of investment management experience. Ms. Avutu received her Bachelor of Science degree from the University of Dayton with a concentration in Finance, and a Masters of Business Administration with concentrations in Finance and Management Information Systems from Miami University. She is a Chartered Financial Analyst and is a member of Boston Security Analyst Society and Boston Bank Analyst Society.

Management Style
The Fund’s portfolio manager selects equity securities on a company-by-company basis primarily through the use of fundamental analysis. Undervalued companies tend to have lower stock prices relative to their earnings potential and other financial measures. The portfolio manager seeks to identify companies for possible investment by analyzing their growth prospects based on their market and competitive position, financial condition and economic, political and regulatory environment. The following characteristics may also be considered in analyzing the attractiveness of such companies:

valuation factors such as price-to-earnings ratio¹, price-to-book ratio² and/or price-to-cash flow ratio³,
a healthy balanced sheet
overall financial strength, and
catalysts for changes that improve future earnings prospects.

Portfolio Commentary (as of March 31, 2008)
Following the trend set in late 2007, the market environment of the first quarter of 2008 continued to be extremely volatile, with intraday swing ranges of several hundred points. In January we saw a powerful rally in many interest rate-sensitive sectors, followed by the February fall-off that continued into March. The problems stemmed from the housing crisis and related subprime credit issues. But the biggest question was, and remains: How deep and widespread is this crisis? Related issues such as the impending recession, inflation fears, the weak dollar and liquidity all gripped the markets. Going forward, the principal factor on the positive side will be the Federal Reserves’ willingness to do whatever it takes to alleviate the mortgage and related credit and liquidity crisis. We believe that by late in the second half of 2008 the credit markets may stabilize, followed by an easing of the liquidity crisis. Until then, as equity markets continue to struggle to gauge the economic uncertainty, volatility of individual stocks will likely remain at higher levels.

Against this backdrop, our strategy continues to be based mainly on investment opportunities that we believe benefit from recurring revenues and undervalued companies. Additionally, the portfolio has a defensive tilt, in response to extremely high volatility levels which reflect the market transition, which will likely remain in the intermediate term, given the structural issues. We continue to see attractive opportunities in foreign stocks and increased our international exposure accordingly. Also, during the quarter we opportunistically closed the underweight position in the financial sector. We believe that while the road to improvement might be bumpy in the intermediate term, sector performance will be anticipatory and improve ahead of the turn.

During the quarter, the Value Fund had two takeouts/acquisitions in its top 10 holdings. In January, Bright Horizons Family Solutions (1.7%*) announced an agreement to be acquired by a private equity firm. In early March, United Technologies (0.0%*) made an offer to acquire Diebold (1.3%*). Interestingly, the premiums offered for these two companies were between 47% and 66%, respectively, which we believe highlights the effectiveness of our process of identifying undervalued stocks.

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

*Portfolio holdings as of 3/31/08.
¹Price-to-earning ratio (“P/E ratio”) is the price of a share of a company’s stock divided by the income or profit earned by each share. The P/E ratio is used to estimate how much an investor is willing to pay for $1 in earnings. A higher P/E ratio generally indicates that investors are expecting higher future earnings than from a company with a lower P/E ratio. Because different industries and sectors have different growth prospects, it is generally most useful to compare P/E ratios among companies in the same industry, sector and market.
²Price-to-book ratio (“P/B ratio”) is the current market price for a share of a company’s stock divided by per share value on the company’s most recent quarter-end balance sheet. A higher P/B ratio may indicate that investors are willing to pay a premium over the value of a company’s hard assets; a low P/B ratio may indicate that a stock is undervalued by the market. It is generally most useful to compare P/B ratios among companies in the same industry, sector and market.
³Price-to-cash flow ratio compares a company’s current market value to its operating cash flow. A lower price-to-cash flow relative to its industry and sector may indicate that a company’s stock is undervalued by the market; a higher price-to-cash flow relative to its industry and sector may indicate overvaluation.