The Fund continued to focus on stocks with long-term secular growth drivers. Given the volatility in the stock market and our concern about the upside at this point in the stock market cycle, we have “barbelled” this approach over the past several quarters by adding to positions in companies with more modest growth prospects but very attractive relative valuations. We feel this approach provides the best combination of long-term growth opportunities and near-term protection in a volatile market.

Given the renewed concerns over the growth of the global economy, the Fund’s investments in economically sensitive industries drove much of the quarter’s downside. Holdings in the Fund’s energy and materials sectors were negatively impacted by fear of reduced demand if the global economy weakens. Long term, we continue to view these sectors as secular growth opportunities driven by increased global demand, primarily from emerging markets. Large positions in several Chinese companies in the Internet software & services industry sold off during the quarter, as a result of talk of the Chinese government’s concerns over the corporate structure of Chinese stocks trading on U.S. exchanges. We view the potential for significant impact to our current holdings as unlikely. We continue to believe these stocks will benefit from the secular growth of the online media market in China.

The utilities and consumer discretionary sectors were the largest positive contributors to the relative performance of the Fund. ITC Holdings Corp. (1.5% of the Fund) provided strong relative performance in the utilities sector. The company continues to be well-positioned as one of the few pure plays on growth in electric transmission infrastructure. The consumer discretionary sector benefited in particular from positions in several retailers, including Sally Beauty Holdings, Inc., (2.1%), Dollar Tree, Inc., (1.1%) and PetSmart, Inc. (1.5%). These stocks all delivered good quarterly results including strong same-store sales growth. Our retail positions are tilted towards companies that are growing market share and selling goods that are attractive even in a difficult retail environment.

The Fund continued to focus on stocks with long-term secular growth drivers. Given the volatility in the stock market and our concern about the upside potential at this point in the rally, we have “barbelled” this approach over the past several quarters by adding to positions in companies with more modest growth prospects but very attractive relative valuations. We feel this approach provides the best combination of long-term growth opportunities and near-term protection in a volatile market.

Stock selection in the Fund’s information technology sector was the leading detractor from relative performance during the quarter. Large positions in several Chinese companies in the Internet software & services industry had relatively weak performance during the quarter after significant rallies earlier this year. These companies included SINA Corp. (3.3% of the Fund) and Sohu.com, Inc. (1.0%). We continue to believe these stocks will benefit from the secular growth of the online media market in China. The energy sector also detracted from the Fund’s relative performance during the quarter. A position in Peabody Energy Corp. (2.0%) was the primary contributor to the relative weakness of the sector. The weak performance of the sector was consistent with the overall pull-back in energy stocks during the quarter due to concerns about global economic growth. We continue to view the energy sector as a secular growth opportunity driven by increased energy demand, primarily from emerging markets. We have tilted our energy holdings toward emerging market exposure, with particular exposure to coal in the Asian markets.

The largest offset to these negative factors was positive stock selection in the Fund’s consumer discretionary and industrials sectors. In the consumer discretionary sector, the Fund benefited from the solid performance of several retailers, including Sally Beauty Holdings, Inc. (2.2%), Dollar Tree, Inc. (1.1%) and PetSmart, Inc. (1.1%). These stocks all delivered good quarterly results, including strong same-store sales growth. Our retail positions are tilted towards companies that are growing market share and selling goods that are attractive even in a difficult retail environment.

The Fund continued to focus on stocks with long-term secular growth drivers. Given the volatility in the stock market, we have “barbelled” this approach over the past two quarters by adding to positions in companies with more modest growth prospects but very attractive relative valuations. We feel this approach provides the best combination of long-term growth opportunities and near-term protection in case of a market downturn.

Although information technology was one of the weaker sectors of both the Fund and its Russell 1000® Growth benchmark during the quarter, strong stock selection among information technology holdings helped to boost the relative performance of the Fund. The sector’s top contributors to the Fund’s relative performance included three Chinese Internet software & services holdings: SINA Corp. (1.0% of the Fund), Baidu, Inc. ADR (1.4%) and Sohu.com, Inc. (1.4%). These stocks all continued to benefit from the secular growth of the online advertising market in China.

Stock selection in the industrials and health care sectors also contributed to the Fund’s strong relative performance. In the health care sector, Intuitive Surgical, Inc. (0.7%) added to relative performance as the company continued to see strong demand for its minimally invasive surgical systems and products.

Although the energy sector was the largest positive contributor to the Fund’s absolute return, it was the largest detractor from relative performance. The lack of positions in EOG Resources, Inc. and Halliburton Co. was a key reason for the weak relative return of the sector. These stocks benefited from increased energy prices, which lifted returns across most of the sector. On a positive note, however, overweight positions in Chevron Corp. (1.8%) and Peabody Energy Corp. (1.8%) offset much of the underperformance of the sector. The strong performance of Peabody Energy was due to the fact that both coal pricing and demand for coal continued to be strong, especially in Asia.

Other stocks that detracted from relative performance included Ford Motor Co. (1.9%) in the consumer discretionary sector and Monster Worldwide, Inc. in the information technology sector. Monster Worldwide was sold due to our concerns about increasing competition in the online job listing business. Ford was down due to a weaker than expected earnings report. We continue to hold the stock as we expect the company to deliver strong growth as the automotive market rebounds and Ford gains market share.