July 15, 2007

Dear Fellow Shareholder:

The Balanced Fund had a satisfactory quarter ended June 30, 2007, with a total return of 2.8% versus 3.7% for our primary benchmark, the Blended Index^†. Both the Fund and the Blended Index^† posted modestly higher returns for the calendar year-to-date. More importantly, the Fund’s longer term results remain solid, as shown below.

The following table shows the results of the Balanced Fund over various time periods through June 30, 2007, along with the Blended Index^†, the S&P 500 (stocks) and the Lehman Brothers Intermediate U.S. Government/Credit Index (bonds).

These performance numbers reflect the deduction of the Fund’s annual operating expenses which as stated in its most recent Prospectus are 1.14% of the Fund’s net assets. This information represents past performance and past performance does not guarantee future results. The investment return and the principal value of an investment in the Fund will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than the original cost. Current performance may be higher or lower than the performance data quoted above. Click here for performance data current to the most recent month-end.

* Fund inception date: October 1, 2003. All performance numbers assume reinvestment of dividends.

† The Blended Index reflects an unmanaged portfolio of 60% of the S&P 500, which is an unmanaged index of common stock prices, and 40% of the Lehman Brothers Intermediate U.S. Government/Credit Index, which is an unmanaged index consisting of government securities and publicly issued corporate debt with maturities from one to ten years.

# Index performance is hypothetical and is for illustrative purposes only.

Portfolio activity was light following a relatively active first quarter. We did not purchase any new stocks in the second quarter, and the Fund’s asset allocation was virtually unchanged at 54% stocks and 46% bonds and short-term securities. The Fund’s returns year-to-date have been reasonable but not stellar. The stock market generally has been strong, while several of our core holdings have been temporarily out of favor, a situation that is neither unusual nor alarming.

Corporate takeover activity has dominated business headlines in recent months. Private equity firms have enormous pools of capital to invest. Lenders have been willing to provide abundant, cheap and virtually no-strings-attached debt financing. These conditions have helped fuel strong bids for cash-flowing businesses, and the resulting wave of public-to-private transactions has been massive. Alltel, First Data, Harrah’s and HCA are examples of companies we have owned that agreed to go private in the past two years. In some cases we sold early, an occupational hazard for the value investor.

The core of our investment process is to understand what a rational buyer would be willing to pay for 100% of a given company. Our value estimates broadly assume that companies are financed by prudent lenders who are reasonably risk averse. In contrast, real-world corporate lending has been very aggressive in recent years. Leverage ratios have soared, and structural protections have essentially vanished. At the same time pricing for the riskiest layers of debt, as measured by yield premiums over risk-free alternatives, approached historic lows during the quarter. In short, lenders have been taking more risk and getting paid less for it.

In this environment our internal stock valuations at times look conservative compared to leveraged deal prices. This doesn’t mean that private equity buyers are irrational, nor does it mean that their lenders won’t get paid back. It simply means that we are looking for more of a cushion in case things don’t go according to Hoyle. We also continue to have little direct interest in corporate bonds, especially high-yield issues. While spreads have widened in the past few weeks, this softness to date looks more like a good start than a necessary correction. As a result, corporate debt accounts for less than 3% of the Fund’s assets.

The credit quality of our bond portfolio remains excellent with over 90% invested in U.S. Treasury obligations, AAA-rated agency securities or U.S. government agency-guaranteed mortgage-backed securities ("MBS"). During the quarter we increased our investments in high-quality, agency-guaranteed MBS at attractive incremental yields over U.S. Treasuries. We continued to focus these MBS investments on defensively structured securities with limited extension risk and expected lives in the 2-5 year range. The goal is to modestly enhance portfolio returns while minimizing the risk of negative surprises.

After quarter end we added to our holdings of Treasury Inflation-Protected Securities ("TIPS"). TIPS are U.S. government obligations whose returns are tied to inflation as measured by the Consumer Price Index ("CPI"). These bonds give investors the ability to protect against inflation while providing a certain "real" return. This real return on TIPS has increased substantially in the past two months, while the break-even inflation rate has remained relatively low (in the lower 2% range). If inflation exceeds this break-even rate over the life of the bonds, TIPS will deliver higher total returns than comparable traditional Treasuries. At today’s prices TIPS are an attractive inflation hedge for the portfolio that also may provide reasonable-to-good investment returns.

The Fund appears well positioned to achieve our three investment objectives over time: long-term capital appreciation, capital preservation and regular current income. The Fund’s equity investments are tilted to companies with leading market positions, strong balance sheets and excellent management teams at generally attractive valuations. We continue to think this collection of stocks has good upside potential with superior protection against permanent downside. Our bond investments are concentrated in high quality, shorter-term securities. With risk-free yields around 5% across the maturity spectrum, our fixed income investments now provide decent current income and moderate total return potential with limited credit and interest rate risk. Finally, more than 15% of the portfolio remains in very low-risk, short-term securities generating income as we wait for better opportunities in either stocks or bonds. We appreciate the continued trust you have placed in the Fund.

Regards,

Bradley P. Hinton
Portfolio Manager