We are pleased that the Fund has ended the second calendar year in a row with positive performance relative to its benchmark, the Russell Midcap Index.  In 2009 and 2010, the Fund returned 46.91% and 25.59%, respectively, versus its benchmark which returned 40.48% and 25.48%, respectively.  At the end of March, the Fund will have existed for three years.  We appreciate your interest and/or investment at this early stage of its life, and look forward to continuing this relationship into the future.

Positive relative performance during the quarter was largely driven by good sector selection.  This was primarily achieved by overweighting Energy and underweighting Utilities relative to the benchmark.  The yield of the U.S. Government 10 Year Treasury Bond rose from 2.5% to 3.3% over this period.  Many own Utility stocks for their dividend yields, and as bond interest rates rise, these yields have become relatively less attractive to investors.  We anticipate this trend to continue.  Commodity prices also rose during this time, suggesting that revenue should increase for Energy companies.  Consequently, this sector climbed slightly more than 24% over the last three months.

Individual stock selection did not contribute positively to relative performance though the Fund does compare well on this metric in its composition of Technology stocks.  Maxim Integrated Products Inc., Flextronics International Ltd. and JDS Uniphase are all Technology companies among the top ten contributors to Fund performance for the quarter.  The best performer was Abercrombie & Fitch Co., a stock that appreciated in early December when the company reported a year-over-year increase in same-store sales of 22% for November.  The worst performer was Lions Gate Entertainment Corp.  Lions Gate declined, because Carl Icahn had abandoned his attempt to take over the company through a tender offer.  This is one of the few stocks we own in the portfolio not for the underlying company earnings, but because we believe that the assets of the firm (film library) hold a much higher long-term value than the current stock price would suggest.  As media company valuations recover with the stock market and financing for potential M&A deals continues to thaw, Lions Gate’s assets should become more attractive to larger conglomerates or private equity capital.

One trend that we noticed late in the year was the increasingly strong performance exhibited by financial stocks – the banks specifically.  Associated Banc-Corp rose 38% and Marshall & Ilsley Corp. jumped almost 28%, driven by a takeover deal by the Bank of Montreal.  As we enter 2011, is it possible for this trend to continue?  We think so.  It can be easy to dismiss the banks as being laden with bad debts from the housing crisis.  It is true that as these losses flow through their income statements, their earnings and capital reserves are challenged.  However, a finite number of bad loans were written.  We believe that in aggregate the losses have peaked or are close to doing so.  If this is true, a major drag to bank earnings should start to disappear.  Investors look to the future, and if they start to see the proverbial light at the end of the tunnel, they will be less likely to dismiss this sector.

Regardless of the market environment in 2011, we will continue working hard to achieve competitive returns for you.