as of March 31, 2014
Fund Commentary
After a stellar conclusion to 2013, stocks slowed during the first quarter of 2014. Weaker-than-expected economic data, largely attributed to severe winter weather, contributed to the subdued performance. In addition, U.S. Federal Reserve (Fed) Chairwoman Janet Yellen surprised the financial markets when she said the Fed could begin raising short-term rates six months after the tapering of quantitative easing ends. Russia’s aggression in Ukraine also rattled the financial markets. Overall, stocks advanced modestly, and investors favored more defensive sectors and styles.

The Income Equity Fund posted a total return of 1.73% for the quarter, compared with 1.81% for the Fund’s benchmark, the S&P 500® Index. The Fund’s company selections in the industrials, financials and consumer discretionary sectors detracted from performance. Company selections within the information technology, utilities and materials sectors contributed favorably to performance. The Fund’s convertible securities, which are more defensive, generally outperformed the benchmark and contributed to the Fund’s relative performance.

The Fund continues to seek equity-like returns with more income and less volatility than the benchmark and low turnover. Convertible securities are important equity substitutes and help us achieve these objectives. Although the supply of convertibles increased during the first 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. These stocks generally outpaced non-dividend-paying stocks during the quarter.

Looking ahead, we will continue to focus on company selection with consistent emphasis on valuation. We remain hopeful that opportunities in the convertibles market will improve as valuations among some of the recently issued securities adjust to more reasonable levels that meet our investment style.
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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