Annual Shareholder Letter

September 30, 2017

Dear Shareholder:

Consistent with our longstanding investment philosophy and process, substantially all the Fund’s assets are invested in a focused portfolio of companies which we believe possess strong growth characteristics, fundamental strength, and compelling long-term price appreciation potential.

During the Reporting Period, the Fund’s Class A, C, and I shares generated cumulative total returns, without sales charges, of 25.66%, 24.68%, and 25.91%, respectively. These returns compare to the cumulative 21.94% total return of the Fund’s benchmark, the Russell 1000 Growth Index.

The majority of the Fund’s outperformance versus the benchmark was generated by our holdings in the Information Technology, Materials, and Consumer Discretionary sectors. Applied Materials (AMAT, 3.3% of the Fund), NVIDIA (NVDA, 2.7% of the Fund), Activision-Blizzard (ATVI, 4.4% of the Fund), and Electronic Arts (EA, 4.6% of the Fund) represented four of our top five performers, and all inhabit the Information Technology sector. Our single-best performer over the last year was Align Technologies (ALGN, 3.2% of the Fund), which produces clear tooth alignment devices and is a member of the Healthcare sector. Our stock selection was not as fortuitous in the Energy, Healthcare, and Industrial sectors. However, since our winners did quite well indeed and we were able to minimize the impact of our investment mistakes, the net effect was strong outperformance for the Fund compared to the Russell 1000 Growth Index.

Passive investing is all the rage these days, and inflows into index fund vehicles have surpassed those into actively-managed strategies for the last several years. We will spare you our full-throated argument in favor of active management, but suffice it to say that certain portfolio managers who rely on research, discipline, conviction and focus have historically demonstrated the ability to outperform passive indexes for long periods of time. Moreover, the more popular passive investing becomes, the more likely it is that certain securities will become inefficiently priced. Mis-priced securities are the mother’s milk of active management. Contrary to many in the business media, we expect more – not less – opportunities to be created for us by the enormous flood of capital into index funds.

Your Fund’s managers employ an unabashedly active approach to portfolio management. We focus intently on our goal of delivering long-term excess returns, after all expenses, when compared to the Russell 1000 Growth Index and the S&P 500 Index. Far from mirroring the indexes, we seek to build a diversified but focused portfolio of 30-40 individual common stocks which we believe have the potential to reward shareholders with outsize returns over the intermediate and long term.

Our commitment to owning such a focused group of stocks dictates that we also employ strong risk management techniques. There are a lot of definitions of “risk” in our industry, but for us it is best defined as the potential for permanent loss of capital. Short-term price volatility – the daily, weekly, and monthly fluctuations in securities prices – is interesting and sometimes exciting, but these zigs and zags are ultimately meaningless to long term investors. We are willing to accept moderate amounts of volatility in the prices of our investment positions, but we work very hard to avoid exposing our investors to investment propositions which threaten permanent destruction of capital.

We have no special insight into the path the broader equity market will carve out in the coming months. Thankfully, neither does anyone else. We all look through a glass darkly when it comes to the future. That said, there are several arguments in favor of continued gains. The global economy is perking along nicely, inflation and interest rates remain low, and corporate earnings are generally healthy. We are not yet sure what the final version of tax reform will look like, but both parties seem to show interest in lowering corporate taxes and reducing the number of individual tax brackets and deductions. Our educated guess is that a bipartisan tax package of some sort will come to fruition by early 2018. These positive factors may not yet be fully “priced in” by stocks, which could leave room for a further rally.

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