The energy sector was the most negative of the Index's sectors during the third quarter, posting a -43% return. Although nearly all of the Fund's energy holdings had negative returns as well, the Fund's energy holdings declined by less than those of its benchmark and therefore had a significant positive impact on the Fund's relative performance.

The financials, consumer discretionary and industrials sectors had the most negative impact on the Fund's performance relative to its benchmark. In the financials sector, Assurant, Inc. (1.2% of the Fund), a multi-line insurance company, was down due to its financial exposure to hurricanes Gustav and Ike. We anticipate, however, that the company should benefit from its creditor-placed homeowners' insurance business. The Fund's relative performance was also hurt by the absence of some of the companies represented in the financial sector of the benchmark that rebounded during the quarter because of investor expectations of better times ahead. As an example, regional banks in the S&P MidCap 400® Index were generally very strong despite weak fundamentals, based on investor optimism that the worst was behind them. In the consumer discretionary sector, Discovery Holding Co. (0.9%), GameStop Corp. (1.1%) and Morningstar, Inc. (0.4%) were among the holdings that continued to have strong fundamentals but were out of favor with investors, at least temporarily. As was the case in the financials sector, the lack of a position in some companies that are represented in the Fund's benchmark and had strong stock price performance for the quarter, including homebuilders, hurt relative returns. In the industrials sector, McDermott International, Inc. (0.9%) suffered from its exposure to the energy sector, and General Cable Corporation (1.8%) was hurt by concerns about global economic weakness.