as of June 30, 2014
Fund Commentary
The U.S. stock market, as represented by the S&P 500® Index, posted its sixth-consecutive quarterly gain despite a (-2.9%) contraction in first-quarter gross domestic product (GDP), the largest decline in output in five years. With many observers explaining away the economic weakness by frigid winter weather, stocks continued to advance to reach several new highs during the quarter, as investors focused on second-half growth and the Federal Reserve’s (Fed) ultra-low interest rates.

The Large Cap Value Fund posted a total return of 4.08% for the quarter, compared with 5.10% for the Fund’s benchmark, the Russell 1000® Value Index. Stock selection in the consumer discretionary, industrials and healthcare sectors detracted from Fund performance. Stock selection contributed to relative performance in the financials, energy and consumer staples sectors.

Looking ahead, we believe U.S. equities offer attractive risk-adjusted return opportunities —particularly value strategies, which tend to perform better in anticipation of rising earnings. Manufacturing competitiveness, a reduction in fiscal drag, consistency in domestic monetary policy and attractive real growth rates offer key structural improvements that could drive positive performance. With the market offering more normalized growth and return expectations, compared with the volatile climate of 2011-2012, and correlations falling to normal levels, we believe the current market environment is increasingly favorable for stock picking and active management. We believe the continued reduction of Fed stimulus could lead to increased volatility and greater dispersions between companies that are executing well and those that are not. In this environment, we believe our old-fashioned stock-picking strategy, which emphasizes bottom-up fundamental research, will help us anticipate emerging trends and risks and take advantage of out-of-index opportunities.
Investor Profile

If you are a value-oriented investor seeking long-term capital appreciation with the relatively lower risks of large, dividend-paying stocks, this Fund may be ideal for you. With its emphasis on relatively low-priced, high-yielding stocks, it can work in tandem with a growth-oriented fund to create a well-balanced, diversified stock portfolio.

  • Focus on valuation and dividend yield, which is designed to contribute positively to total return and provide a cushion against market volatility.
  • Select stocks based on valuation levels, financial strength and earnings growth potential, identifying a catalyst for potential appreciation, such as a new product line or corporate restructuring.
  • Maintain a strict sell discipline — systematically sell stocks that we believe have achieved their true value.
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Not FDIC insured | May lose value | No bank guarantee

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