Portfolio Management

Portfolio Commentary (as of December 31, 2007)
The first two months of the fourth quarter 2007 saw widespread concerns about sub-prime lending and liquidity. This anxiety created considerable fear for investors, who sent the S&P 500 Index down more than 8.7% before rising 4.8% from the low, to close with an overall loss of 4.6% for the fourth quarter. There are perhaps many reasons for the market turbulence and losses, but we believe the situation was caused by a confluence of events around a rather crowded one-way positioning in the markets. The quarter started with a series of credit crunches which lead to a flight-to-quality, triggering a short burst of volatility. This was followed by the Federal Reserves’s (Fed) unprecedented move to lower the federal funds rate as well as the discount rate, raising concerns of an economic slowdown and recession. The prior equity leadership areas of small-cap and value styles were hit particularly hard by these events. Small-caps, as measured by the Russell 2000 Index, underperformed large-cap stocks as measured by the Russell 1000 Index, by 135 basis points. But the biggest performance impact was felt between styles, following the prior quarter trend, as growth continued to outperform value by more than 500 basis points for the quarter.

Against this backdrop, Women’s Equity Fund’s focus continues to be on stable-blue chip companies with consistent growth prospects. We feel that the Fund is well-diversified with exposure to all economic sectors except utilities, with an overweighting in health care and consumer staples, and an underweighting in financials and technology. Furthermore, the Fund is tilted towards a moderate exposure to foreign companies. We believe there are clear signs that economic growth has slowed, and that questions about consumer spending, credit concerns, and housing retrenchment have not fully played out.

In this environment, while it appears counterintuitive, we believe growth will likely outperform value. As the Fed lowers interest rates with the goal of propelling economic growth for the next economic cycle, ‘growth’ becomes more valuable. Investors’ willingness to pay for earnings growth drives multiple expansions.

During the fourth quarter 2007, the Women’s Equity Fund outperformed the benchmark Russell 3000 Index by more than 350 basis points. Good stock selection in consumer discretionary, materials and financial sectors helped performance. Staples, Inc. (SPLS) (1.8%*), Sigma-Aldrich Corp. (SIAL) (1.5%*) and State Street Corp. (STT) (1.8%*) fared particularly well for the Fund. Consumer discretionary sector performance was helped by the Fund’s lack of media and home improvement stocks.

SPLS, a leading office supply company, surprised investors with an improvement in gross margins and cash flow. SIAL, an industry leader that manufactures chemical and other organic products for biotech and pharmaceutical companies, benefited from the growth in biotech research, leading to strong revenue growth.  Finally, STT outperformed the financial sector due to its negligible exposure to the subprime situation and related problems.

On the other hand, performance was detracted by financial stocks Bank of America (BAC) (1.6%*) and Citigroup, Inc. (C) (0.9%*). As the subprime crisis unfolded and these stocks came under pressure, we initiated a position in Citibank and added to our Bank of America holdings at levels we believed were attractive. As the credit issues broadened, however — deeper than initially expected — these stocks continued to suffer, contributing negatively to the Fund’s performance. We expect that these issues will pass and that these companies will be much stronger going forward. Performance was also hurt by Target (TGT) (1.3%*), which had lower-than-expected earnings growth due to weaker- than-expected same-store sales. We believe TGT will benefit as consumers trade down in a slowing economy and continue to hold the stock.

As the equity markets struggle to gauge the impact of slowing economic growth, a potential recession, the weak dollar, and consumer financial health, the uncertainty and volatility of individual stocks will remain at higher levels in the near term. That said, stable, large-cap growth companies with solid balance sheets, strong earnings growth, and international exposure are presenting good portfolio opportunities. We feel that the Fund is positioned for this uncertainty with a bias towards growth and sustainable cash flows.

This commentary does not constitute an endorsement of any company’s attractiveness as an investment.

*Portfolio holdings are as of 12/31/07.