In seeking to achieve its investment objective, the Fund will invest, under normal circumstances, at least 80% of its assets, defined as net assets plus the amount of any borrowings for investment purposes, in long and/or short positions in fixed income securities (“80% investment policy”). For purposes of the 80% investment policy, the Fund defines fixed income securities as including (i) bills, (ii) notes, (iii) structured notes, (iv) bonds, (v) preferred stocks, (vi) any other debt or debt-related securities of any maturities, whether issued by U.S. or non-U.S. governments, agencies or instrumentalities thereof or corporate entities, and having fixed, variable, floating or inverse floating rates, (vii) fixed income derivatives including options, financial futures, options on futures and swaps, and (viii) underlying funds (defined below) that invest primarily in fixed income securities, or (ix) other evidences of indebtedness. The Fund may invest in debt securities of any maturity or credit quality, including those rated below investment grade (“high yield securities”). Below investment grade debt securities are those rated below Baa3 by Moody’s Investors Service or equivalently by another nationally recognized statistical rating organization (“NRSRO”). The Fund may invest in affiliated mutual funds, and affiliated mutual funds (including money market funds), exchange traded funds (“ETFs”) and inverse ETFs (collectively, “Underlying Funds”).

The Fund may invest up to 20% of its net assets in equity index futures or equities. Equity index futures are utilized by the Fund when the Fund’s Adviser believes that doing so is attractive from a risk/reward analysis perspective. The Fund may invest in equity index futures when doing so provides greater efficiency and lower cost than investing directly in equity securities and when such futures are attractively priced. The Fund may also purchase or write (sell) credit default swaps (“CDS”) or credit default swap indexes (“CDX”), which are credit derivatives used to hedge credit risk and/or take a position on a basket of credit entities. Unlike a credit default swap, which is an over the counter derivative, a CDX may be exchange traded, or sold over the counter. Each CDX is designed to track a basket of credit entities, which may be standard or customized. This means that it may be more liquid than a credit default swap, and it may be cheaper to hedge the Fund’s portfolio with a CDX than it would be to buy many single name credit default swaps to achieve a similar effect. The Fund may also purchase or write (sell) CDX swaptions, which are options to sell or buy credit protection on a specific reference by entering into a pre-defined swap agreement by some specified date in the future. The Fund may also purchase or sell total return swaps or invest in inverse ETFs to hedge its long positions. The Fund may also use derivative transactions to create investment leverage. For example, the Fund may use total return swaps or CDX to take indirect long or short positions on equity or fixed income indices, equity or fixed income securities, or currencies.

The Fund’s investment strategy is primarily driven by a modeling process which measures the relative strength or momentum of various asset classes against one another. Specifically, using this momentum-based strategy, the Fund will tactically shift its asset class exposure across high yield U.S. treasuries, and cash. Under normal conditions, the Fund expects to invest in fixed income securities and derivatives. When the high yield asset class is favored, the Fund will normally use a combination of fixed income securities and derivatives designed to create an investment return that tracks the return of the Fund’s primary benchmark index, currently the Bloomberg Barclays U.S. Corporate High Yield index. Specifically, the, will Fund may purchase securities, such as high yield ETFs or corporate bonds, and also enter into swaps or futures where the reference asset is a high yield index, high yield corporate bond ETFs or basket of high yield securities to seek to approximate the return of the Fund’s primary benchmark. When the treasury asset class is favored, the Fund will normally sell and/or hedge a portion of its high yield exposure using derivatives such as listed commodities, S&P 500 futures contracts, or CDX to hedge its high yield exposure, and increase the Fund’s exposure to treasuries through securities and derivatives. When the cash asset class is favored, the Fund will normally sell and/or hedge its high yield and/or treasury exposure and increase the Fund’s exposure to cash equivalents through securities and derivatives.

Due to the structure of the derivatives the Fund expects to use, the Fund will hold a portion of its assets in highly liquid securities as collateral for its derivatives transactions and still have excess cash to invest regardless of whether the favored asset class is high yield, treasuries or cash (or a combination of these asset classes). The Fund will normally invest this excess cash in a mix of investment grade corporate bonds, treasury bills and notes, municipal bonds and other instruments for diversification, risk management and to seek to obtain additional return. As a result, when the high yield asset class is favored, a portion of the Fund’s assets will be invested in non-high yield investments. Similarly, when the treasury asset class is favored, the Fund will hold a portion of its assets in non-treasury investments, and when the cash asset class is favored, the Fund will hold a portion of its assets in non-cash investments.