Risk Factors

An investment in the Fund entails risks.  The Fund could lose money, or its performance could trail that of other investment alternatives.  The advisers cannot guarantee that the Fund will achieve its objective.  In addition, the Fund presents some risks not traditionally associated with most mutual funds.  It is important that investors closely review and understand these risks before making an investment in the Fund.  These and other risks are described below.

Risks of the Advisers’ Investment Strategy:

The principal risk of investing in the Fund is that the subadviser’s dynamic asset allocation strategy will not be successful.  At any time, the advisers will not know whether that particular signal will turn out to have indicated the start of a major or minor market move in either direction, or whether it will prove to be a false signal.  The Fund could be exposed to declining markets and/or could miss a market rise if the advisers’ model does not correctly adjust to market movements.  As a result, there is no assurance that the adviser’s dynamic asset allocation strategy will enable the Fund to be invested consistent with the major trends of the market or enable the Fund to achieve its investment objectives of capital appreciation.

Risks of Aggressive Investment Techniques:

The Fund uses investment techniques that may be considered aggressive.  Risks associated with the use of futures contracts, and options on securities, securities indices, and on futures contracts include potentially dramatic price changes (losses) in the value of the instruments and imperfect correlations between the price of the contract and the underlying security or index.  These instruments may increase the volatility of the Fund and may involve a small investment of cash relative to the magnitude of the risk assumed.

Risk of Holding Cash:

One of the Fund’s strategies is to hold cash positions when the market is not producing returns greater than the short-term cash investments in which the Fund may invest.  This usually occurs when broad markets are declining rapidly.  The purpose of this strategy is to protect principal in falling markets.  There is a risk that the sections of the market in which the Fund invests will begin to rise or fall rapidly and that the Fund will not be able to sell stocks quickly enough to avoid losses, or to reinvest its cash positions into areas of the advancing market quickly enough to capture the initial returns of changing market conditions.

High Portfolio Turnover:

The Fund’s dynamic asset allocation strategy gives the subadviser unlimited freedom with regard to the Fund’s asset allocation and may result in significant portfolio turnover to take advantage of anticipated changes in market conditions.  High portfolio turnover involves correspondingly greater expenses to the Fund, including brokerage commissions or dealer mark-ups and other transaction costs on the sale of securities and reinvestments in other securities.  Such sales also may result in adverse tax consequences to the Fund’s shareholders.  The trading costs and tax effects associated with portfolio turnover may adversely affect the Fund’s performance.

Risks of Investing in Equity Securities and Derivatives:

The Fund may invest in publicly issued equity securities, including common stocks, as well as instruments that attempt to track the price movement of stock indices.  Investments in common stocks and derivatives in general are subject to market risks that may cause their prices to fluctuate over time.  Fluctuations in the value of common stocks in which the Fund invests will cause the net asset value of the Fund to fluctuate.

Investments in small- and medium-capitalization securities may be speculative and volatile and involve greater risks than are customarily associated with larger capitalization securities.  Many smaller companies are more vulnerable than larger companies to adverse business or economic developments as they may have limited product lines, markets or financial resources.  New and improved products or methods of development may have a substantial impact on the earnings and revenues of such companies.  Any such positive or negative developments could have a corresponding positive or negative impact on the Fund.  In addition, investments in small-capitalization companies may result in comparatively greater price volatility and less liquidity than the securities of companies that have larger market capitalizations and/or that are traded on the major stock exchanges or than the market averages in general.

Credit Risk and Lower-Quality Debt Securities:

The Fund could lose money if the issuer of a debt security is unable to meet its financial obligations or goes bankrupt.  Credit risk usually applies to most debt securities, but generally is not a factor for U.S. government obligations.  The Fund may invest up to all of its assets in securities rated below investment grade or “junk bonds.”  Junk bonds may be sensitive to economic changes, political changes, or adverse developments specific to a company, such as large sustained sales by major investors or a higher profile default.  These securities generally involve greater risk of default or price changes than other types of fixed-income securities and the Fund’s performance may vary significantly as a result.  Therefore, an investment in the Fund is subject to a higher risk of loss of principal than an investment in a Fund that may not invest in lower-rated securities.

Interest Rate Risks:

Fixed-income securities have varying levels of sensitivity to changes in interest rates.  In general, the price of a debt security will fall when interest rates rise and will rise when interest rates fall.  Securities with longer maturities and mortgage securities can be more sensitive to interest rate changes.  In other words, the longer the maturity of a security, the greater the impact a change in interest rates could have on the security’s price.  In addition, short-term and long-term interest rates do not necessarily move in the same amount or the same direction.  Short-term securities tend to react to changes in short-term interest rates, and long-term securities tend to react to changes in long-term interest rates.