The Income Equity Fund posted a total return of -7.46% for the quarter, compared with -5.80% for the Fund's benchmark, the Merrill Lynch All U.S. Convertibles Index. The Fund's underperformance primarily was due to security selection. On a relative basis, the best-performing sectors included utilities, telecommunication services and energy, while consumer discretionary, health care and information technology were among the weakest sectors.

The Fund continues to seek equity-like returns with more income and less volatility than the market as a whole and regardless of market cycles. Convertible securities, which have been an important equity substitute, have been instrumental in the Fund's pursuit of its objective. Nevertheless, during the past several years, changes within the convertible new-issue market combined with a recent material reduction in the overall availability of suitable convertible issues have caused the Fund to invest more heavily in dividend-paying common stocks. Therefore, as of July 31, 2010, the Fund's benchmark will be the S&P 500® Index. This switch reflects the gradual change in the Fund's mix of assets and is not due to any changes in the Fund's investment objective or investment process.

If you are a moderate-risk investor looking for a relatively high level of current income, but don't want to forego the capital appreciation potential of the stock market, you may like this Fund.

• Select securities with the potential to generate high current yields, such as dividend-paying common stocks, preferred stocks and convertible securities, as well as selected fixed income securities.
• Maintain a conservative, broadly diversified portfolio of companies with strong prospects for growth and appreciation potential.
• Analyze the upside/downside ratio of individual securities in relation to the underlying stocks in an effort to identify those issues that are priced to have more exposure to the upside.