as of June 30, 2014
Fund Commentary
Stocks rallied during the second quarter, as solid earnings reports and improving economic data helped boost investor confidence. Investors generally overlooked a sharp decline (-2.9%) in first-quarter domestic economic activity, still-declining U.S. interest rates and mounting geopolitical issues (Russia/Ukraine, Middle East) to drive stocks higher. The S&P 500® Index posted its sixth-consecutive quarterly gain and reached eight new closing highs during the quarter.

The Income Equity Fund posted a total return of 4.28% for the quarter, compared with 5.23% for the Fund’s benchmark, the S&P 500® Index. The Fund’s company selections in the healthcare, materials and industrials sectors detracted from performance. Company selections within the financials, consumer discretionary and energy sectors contributed favorably to performance. The Fund’s convertible securities, which are more defensive, generally lagged the rallying benchmark and contributed to the Fund’s relative underperformance.

The Fund continues to seek equity-like returns with more income and less volatility than the benchmark. Convertible securities are important equity substitutes and help us achieve these objectives. Although the supply of convertibles increased during the quarter, the availability of the value-oriented convertibles we prefer remained low. Therefore, we continued to invest more heavily in large-cap common stocks, particularly companies with attractive dividend payments.

Looking ahead, we will continue to focus on company selection with consistent emphasis on valuation. In particular, we will seek to identify high-quality, dividend-paying companies.
Investor Profile

If you are a moderate-risk investor looking for a relatively high level of current income, but don't want to forego the capital appreciation potential of the stock market, you may like this Fund.

Philosophy
  • Select securities with the potential to generate high current yields, such as dividend-paying common stocks, preferred stocks and convertible securities, as well as selected fixed income securities.
  • Maintain a conservative, broadly diversified portfolio of companies with strong prospects for growth and appreciation potential.
  • Analyze the upside/downside ratio of individual securities in relation to the underlying stocks in an effort to identify those issues that are priced to have more exposure to the upside.
 
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Not FDIC insured | May lose value | No bank guarantee

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