The Technology Fund posted a total return of -7.00% for the quarter, compared with -8.38% for the Fund's benchmark, the NYSE ARCA Tech 100 Index. Stock selection in the information technology sector drove the Fund's outperformance.

We expect demand for information technology to improve along with the global economy and corporate profits, but the recent financial turmoil in Europe could have a negative impact on enterprise and consumer demand. History demonstrates technology demand is deferrable in times of macro uncertainty and technology stocks react a few months before fundamentals deteriorate. Nevertheless, we believe multiple product cycles related to "cloud computing" will generate demand. The accelerating use of virtualization technologies to lower costs and improve flexibility is creating new investments in servers, storage and networking equipment. The gradual shift to architectures supporting cloud computing could drive a multi-year reinvestment cycle. Consumer technology spending is also holding up relatively well, driven by lower prices, mobility and the shift toward a more digital lifestyle.

We continue to recommend an overweight in technology, due to positive earnings revisions, attractive valuations and accelerating mergers-and-acquisitions activity. Potential risks include the European financial crisis, rising component costs, continued pressure on application service providers (ASPs) in hardware and software, high offshore cash balances and proposed tax-rate changes and the recent strength in the dollar, which may become a headwind to revenue growth expectations.

If you're a growth-oriented investor intrigued by the appreciation potential of technology-driven companies, you may want to explore the opportunities this Sector Fund offers. It is designed for investors with a long-term time horizon, who are willing to withstand inevitable short-term market swings and who understand the risks and potential rewards of sector investing.

• Buy stocks that develop, produce or distribute products and services related to technology.
• Base stock picks on financial condition, market share, earnings growth rates, product leadership or market niches, as compared to competitors, market valuation and price trends.
• In addition to traditional technology companies, the Fund may also invest in biotechnology, health care and health care equipment, aerospace and defense and financial administration.