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2013-07-25 - Agendas - Final
Fayetteville Fireman's Pension and Relief Fund Meeting Date 7-,95'/3 Adjourn Time 31, 3 $ P .m, Attendees: t ., k, ru .,. at A1 Subject: Subject: D / fiw�. , L iSf Motion By: Motion By: n Seconded: Seconded: OJ00 d Roy Cate ✓ Roy Cate ✓ Mayor Jordan Mayor Jordan Dennis Mullens e Dennis MullensSrnL Pete Reagan at tit* Pete Reagan CU p Sondra Smith ✓ Sondra Smith Ronnie Wood ✓ Ronnie Wood Subject: y-a�-�3 J� d'�/3 Subject: M rtiw C,401-s ,e) J au Motion By: Motion B 0001 Seconded: Seconded: Roy Cate ✓ Roy Cate ✓ Mayor Jordan ✓ Mayor Jordan ✓ Dennis Mullens Dennis Mullens Pete Reagan S f„/ Pete Reagan ;;i� r,d Sondra Smith ✓ Sondra Smith u! Ronnie Wood Ronnie Wood `� Lioneld Jordan Chairman Pete Reagan Position 2 Retired Sondra E.Smith Secretary Dennis Dennis Mullens Position 3 Retired Roy Cate Position 1 Retired Ron Wood Position 4 Retired S Firemen's Pension and Relief Fund Board of Trustees Meeting Agenda July 25, 2013 A meeting of the Fayetteville Firemen's Pension and Relief Fund Board of Trustees will be held at 3:00 PM on July 25, 2013 in Room 326 of the City Administration Building. Call to Order Roll Call Garrison Financial: • 2nd quarter reports • Monthly reports Joseph Schwab • Pension plan information Approval of the Minutes: • April 25, 2013 and May 30, 2013 meeting minutes Pension List Changes: • Gary John Dill—deceased July 3, 2013 Approval of the Pension List: • Approval of the August, September and October 2013 pension lists Unfinished Business: • GFOA Best Practices on the Governance of Public Employees Post-Retirement • Election results New Business: • PRB Evaluating Investments Memo • Board of Trustees List • 2nd Quarter revenue & expense report 06/30/13 • Turn back from State Informational: • 2013 meeting schedule OW GARRISON RECEIVED F I N A N C I A L JUL 0 5 2013 CITY OF FAY YETTpIlC July 5, 2013 y CITY CLERK'S OFFICE Ms. Sondra Smith City of Fayetteville 113 West Mountain Street Fayetteville, Arkansas 72701 Dear Ms. Smith, Enclosed is the quarterly report for the Firemen's Pension & Relief Fund for the quarter ended June 30, 2013. Although it may not feel like it given the recent volatility, the equity markets posted another positive quarter with the S&P 500 gaining +2.91% the last three months. Gains for the year now stand at+13.82%. 2013 has registered the best first half start for the equity markets since 1998 in spite of the economy weakening a bit throughout the first half of 2013. Healthcare, consumer discretionary and financial names led the way with all those sectors gaining around +20% so far this year. Materials, utilities and technology are the worst performing up only +2.95%, +6.30% and +6.66% respectively. The U.S. equity markets are one of the few bright spots for the year as most international markets are lagging by a wide margin. The MSCI Worldwide Index is up only +8.82% with the U.S. accounting for +5.45% of that gain. Excluding the US from the equation, the MSCI World Ex US Index is up only +3.37% year-to-date driven mostly by the +15.09% gain in the Nikkei (Japanese market). Most other developed markets are flat to negative as the Eurozone remains in recession. Emerging markets are having a particularly rough year with the MSCI Emerging Market Index down -9.40% year-to-date with -7.95% of the loss coming in the 2nd quarter. China is a big mover of this index and the Shanghai Composite has lost-9.65% year-to-date as the country struggles with structural reforms, a slowing economy and troubling credit markets. For the second quarter the Barclays Intermediate Government/Credit Index was down -1.70%, the majority of which occurred during the last eight trading days of June. The month of June alone was down -1.20%. YTD, the market is down -1.45%. On June 19, 2013, Federal Reserve Chairman Bernanke was kind enough to provide financial markets with some clarity on the eventual end of Quantitative Easing. Unfortunately, the markets did not like what he had to say. On June 18, the day before Bernanke's clarity the yield on the 10 Year Treasury(10YT)was 2.19°/x. Over the ensuing eight trading days the 10YT rose by 30 basis points (30/100 of 1%) to end the month of June at 2.49%. In the five trading days from June 19 to June 25, the yield rose by 42 basis points to 2.61%, representing the fastest increase in interest rates since 1962, with rates rising to levels not seen since August, 2011. Remember that as yields rise, bond prices fall. It appears as though the rotation out of low yielding fixed income may have commenced as June has seen the largest outflows in bond Garrison Financial 605 W. Dickson Street,Suite 201 •Fayetteville,Arkansas 72701 479-587-1045 • 888-442-7637. 479-587-1257 Facsimile•www.GarrisonFinancial.com mutual funds since 2008 (estimated at$40 billion) and the markets are starting to adjust to a long and inevitable return to a more normal monetary environment. For perspective, the average yield on the 10YT has been 2.75% over the last four years. For the second quarter of 2013 the yield on the 10YT went from 1.83%, dropping slowly into a May 2"' bottom of 1.63%, then rising rapidly to peak at 2.61% on June 25'", settling the quarter at 2.49%. The intra-day peak was in the 2.65% range. Bond yields are not rising because of a spike in inflation, but because of the Fed's comments to curtail asset purchases if the economy continues to improve. No matter how volatile this makes the markets, it is a good thing, not bad. We have taken a small baby step back toward normalcy. Even with reduced asset purchases, the Fed is still extremely accommodative and reiterated it was not tightening policy and the target rate should remain close to zero until 2015. The Fed's unwinding process will inevitably create volatility but will be healthy for the markets and economy in the long run. There are some bright notes on the economic front. Inflation remains at bay. The most recent producer and consumer prices remain well below historical norms with the most recent increases clocking in at only +1.7%. Gold, another inflation hedge has fallen dramatically and commodity prices are showing no signs of heating up. Housing has picked up dramatically and now is a positive contributor to growth. Labor markets continue to improve albeit at a very slow pace. Consumer confidence and durable goods orders both topped expectations in late June. Now is a great time to take a deep breath and a step back to reflect on why diversified portfolios are so important. Bonds are used to produce income and lessen volatility, stocks produce greater returns through growth and income but carry more risk (i.e. are more volatile), international investments provide diversification. Although different areas of the markets have posted vastly different returns recently, we continue to believe in the prudence of a well- diversified portfolio and believe it is the best path to achieving attractive long-term risk adjusted returns. Thanks again for your confidence in us. Sincerely, e.ttf Kerry Bradley, CFA, MBA Equity Portfolio Manager Garrison Financial 605 W.Dickson Street,Suite 201 •Fayetteville,Arkansas 72701 479-587-1045 • 888-442-7637. 479-587-1257 Facsimile•www.GarrisonFinancial.com RECEIVED JUL 0 5 2013 CYCLERKFI ITS OFICE 00*1, GADRISON F I N A N C I A L City of Fayetteville Firemen 's Pension & Relief Fund Charles Schwab #7851-1206 Quarter Ending June 30, 2013 Garrison Financial PORTFOLIO SUMMARY City of Fayetteville Firemen's Pension & Relief Fund Charles Schwab #7851-1206 June 30, 2013 ■Cash & Equivalents 450,491.63 ■Account Fixed Income 1,314,032.24 IN Account Equities 2,686,755.69 Garrison Financial PORTFOLIO APPRAISAL City of Fayetteville Firemen's Pension &Relief Fund Charles Schwab #7851-1206 June 30, 2013 Unit Total Market Pct. Unit Annual Quantity Security Cost Cost Price Value Assets Income Income Yield CASH AND EQUIVALENTS Schwab Advisor Cash Res- 450,491.63 450,491.63 10.1 0.010 45.05 0.0 Premier 450,491.63 450,491.63 10.1 45.05 0.0 TREASURY NOTE 400,000 USTreasuryNote 102.22 408,875.00 112.91 451,656.40 10.1 4.000 16,000.00 1.4 4.000%Due 08-15-18 Accrued Interest 5,966.85 0.1 _ 408,875.00 457,623.25 10.3 16,000.00 1.4 CORPORATE BONDS 50,000 IBMCorp. 100.01 50,004.00 131.39 65,694.35 1.5 7.000 3,500.00 3.8 7.000%Due 10-30-25 Accrued Interest 583.33 0.0 _ 50,004.00 66,277.68 1.5 3,500.00 3.8 COMMON STOCK 1,710 AT&T,Inc. 24.39 41,702.95 35.40 60,534.00 1.4 1.800 3,078.00 5.1 1,575 AbbVie,Inc. 24.41 38,451.37 41.34 65,110.50 1.5 1.600 2,520.00 3.9 1,575 Abbott Laboratories 22.40 35,277.06 34.88 54,936.00 1.2 0.560 882.00 1.6 2,000 American Electric 33.69 67,374.79 44.78 89,560.00 2.0 1.960 3,920.00 4.4 Power 2,300 BCE,Inc.Cl F 24.40 56,110.11 41.02 94,346.00 2.1 2.230 5,129.00 5.4 700 Chevron Corporation 73.07 51,150.83 118.34 82,838.00 1.9 3.600 2,520.00 3.0 3,000 Cisco Systems,Inc. 17.43 52,302.90 24.33 73,005.00 1.6 0.680 2,040.00 2.8 2,200 Coca-Cola Company 26.40 58,074.28 40.11 88,242.00 2.0 1.120 2,464.00 2.8 1,200 ConocoPhillips 44.94 53,930.85 60.50 72,600.00 1.6 2.640 3,168.00 4.4 833 Duke Energy Corp. 57.48 47,880.86 67.50 56,227.47 1.3 3.060 2,548.98 4.5 1,000 Emerson Electric 38.01 38,012.30 54.54 54,540.00 1.2 1.640 1,640.00 3.0 4,000 General Electric Co. 15.96 63,844.01 23.19 92,760.00 2.1 0.760 3,040.00 3.3 900 Genuine Parts Co. 36.65 32,986.53 78.07 70,263.00 1.6 2.150 1,935.00 2.8 2,000 GlaxoSmithKline Pic 38.47 76,936.20 49.97 99,940.00 2.2 2.350 4,700.00 4.7 ADR 450 IBM Corporation 122.43 55,091.76 191.11 85,999.50 1.9 3.400 1,530.00 1.8 3,725 Intel Corp. 17.61 65,581.48 24.23 90,256.75 2.0 0.900 3,352.50 3.7 1,115 Johnson&Johnson 60.77 67,758.33 85.86 95,733.90 2.2 2.440 2,720.60 2.8 850 Kimberly Clark Corp. 60.71 51,599.58 97.14 82,569.00 1.9 3.240 2,754.00 3.3 2,700 Microsoft Corp. 26.30 71,001.40 34.54 93,271.50 2.1 0.920 2,484.00 2.7 4,120 Pfizer,Inc. 16.52 68,077.88 28.01 115,401.20 2.6 0.960 3,955.20 3.4 1,000 Procter&Gamble Co. 50.46 50,458.56 76.99 76,990.00 1.7 2.410 2,410.00 3.1 1,400 Wal-Mart Stores,Inc. 50.36 70,497.97 74.49 104,286.00 2.3 1.880 2,632.00 2.5 1,214,102.00 1,799,409.82 40.4 61,423.28 3.4 MUTUAL FUNDS 1,296.008 Columbia Acorn Intl Cl 38.58 50,000.00 42.76 55,417.30 1.2 0.640 829.45 1.5 Z 3,984.064 Fed Intern Corp Bond 10.04 40,000.00 9.95 39,641.44 0.9 0.400 1,593.63 4.0 3,600.360 PIMCO Total Return 11.11 40,000.00 10.76 38,739.87 0.9 0.350 1,260.13 3.3 4,683.407 SteelPath MLP htcome 10.68 50,000.00 11.05 51,751.65 1.2 0.780 3,653.06 7.1 1,833.272 Vanguard Developed 27.27 50,000.00 29.02 53,201.55 1.2 1.010 1,851.60 3.5 Mkt 1,443.113 Vanguard Emerging 34.65 50,000.00 31.08 44,851.95 1.0 0.360 519.52 1.2 Mkt 2,615.123 Vanguard High Div Yid 19.12 50,000.00 22.36 58,474.15 1.3 0.630 1,647.53 2.8 1 Garrison Financial PORTFOLIO APPRAISAL City of Fayetteville Firemen's Pension &Relief Fund Charles Schwab #7851-1206 June 30, 2013 Unit Total Market Pet. Unit Annual Quantity Security Cost Cost Price Value Assets Income Income Yield 3,412.116 Vanguard Mid-Cap 29.31 100,000.00 33.65 114,817.70 2.6 0.210 716.54 0.6 Growth Index 3,410.952 Vanguard MidCap 29.32 100,000.00 35.61 121,464.00 2.7 0.600 2,046.57 1.7 Value Index 3,290.816 Vanguard Small-Cap 30.39 100,000.00 36.22 119,193.36 2.7 0.330 1,085.97 0.9 Growth Index 3,324.742 Vanguard Small-Cap 30.08 100,000.00 36.00 119,690.71 2.7 0.810 2,693.04 2.2 Value Index 730,000.00 817,243.69 18.4 17,897.03 2.2 UNIT TRUSTS 2,500 Sector Utility Select Shs 31.96 79,899.25 37.63 94,075.00 2.1 1.450 3,625.00 3.9 850 iShares DJ Select Div 47.39 40,285.75 64.01 54,408.50 1.2 2.250 1,912.50 3.5 5,000 iShares BOXX Inv 106.90 534,506.93 113.65 568,250.00 12.8 4.330 21,650.00 3.8 Grade Corp Bond 1,400 iShares Leh 7-10 yr 104.43 146,198.70 102.50 143,500.00 3.2 1.760 2,464.00 1.7 Treas 800,890.63 860,233.50 19.3 29,651.50 3.4 TOTAL PORTFOLIO 3,654,363.26 4,451,279.57 100.0 128,516.86 2.7 fou should carefully compare this statement to the statement you receive from your custodian and notify us immediately of any discrepancies. 2 Garrison Financial PURCHASE AND SALE City of Fayetteville Firemen's Pension & Relief Fund Charles Schwab#7851-1206 From 01-01-13 To 06-30-13 Trade Settle Unit Date Date Quantity Security Price Amount SALES 05-15-13 05-20-13 1,650 Archer Daniels Midland 34.52 56,965.92 05-15-13 05-20-13 100 Chevron Corporation 122.69 12,268.85 05-15-13 05-20-13 45 Chevron Corporation 122.69 5,521.21 05-15-13 05-20-13 80 Chevron Corporation 122.69 9,815.48 01-02-13 01-02-13 351 Gen Elec Cap 6.625%06-28-32 25.00 8,775.00 01-02-13 01-02-13 5,000 Gen Electric Cap 6.1% 11-15-32 25.00 125,000.00 05-15-13 05-20-13 300 Kimberly Clark Corp. 104.61 31,384.15 06-13-13 06-18-13 1,675 Oracle Corporation 34.13 57,161.16 05-15-13 05-20-13 300 Procter&Gamble Co. 80.75 24,224.05 05-15-13 05-20-13 100 Procter&Gamble Co. 80.75 8,074.68 06-13-13 06-18-13 1,000 Sector Utility Select Shs 37.72 37,722.39 06-13-13 06-18-13 1,000 iShares DJ Select Div 64.83 64,831.92 441,744.81 Garrison Financial REALIZED GAINS AND LOSSES City of Fayetteville Firemen's Pension & Relief Fund Charles Schwab #7851-1206 From 01-01-13 Through 06-30-13 Gain Or Loss Open Close Cost Date Date Quantity Security Basis Proceeds Short Term Long Term 12-31-05 01-02-13 5,000 Gen Electric Cap 6.1% 124,888.90 125,000.00 111.10 I1-15-32 12-31-05 01-02-13 351 Gen Elec Cap 6.625% 8,783.51 8,775.00 -8.51 06-28-32 12-31-05 05-15-13 1,650 Archer Daniels Midland 52,809.08 56,965.92 4,156.84 12-31-05 05-15-13 100 Chevron Corporation 7,307.26 12,268.85 4,961.59 12-31-05 05-15-13 45 Chevron Corporation 3,288.27 5,521.21 2,232.94 12-31-05 05-15-13 80 Chevron Corporation 5,845.81 9,815.48 3,969.67 12-31-05 05-15-13 300 Kimberly Clark Corp. 18,211.62 31,384.15 13,172.53 12-31-05 05-15-13 300 Procter&Gamble Co. 15,137.57 24,224.05 9,086.48 12-31-05 05-15-13 100 Procter&Gamble Co. 5,045.86 8,074.68 3,028.82 12-31-05 06-13-13 1,000 iShares DJ Select Div 47,395.00 64,831.92 17,436.92 12-31-05 06-13-13 1,675 Oracle Corporation 26,297.33 57,161.16 30,863.83 12-31-05 06-13-13 1,000 Sector Utility Select Shs 31,959.70 37,722.39 5,762.69 TOTAL GAINS 0.00 94,783.42 TOTAL LOSSES 0.00 -8.51 346,969.90 441,744.81 0.00 94,774.91 TOTAL REALIZED GAIN/LOSS 94,774.91 NO CAPITAL GAINS DISTRIBUTIONS Garrison Financial PERFORMANCE SUMMARY GROSS OF FEES City of Fayetteville Firemen's Pension &Relief Fund Charles Schwab #7851-1206 June 30, 2013 PORTFOLIO COMPOSITION CHANGE IN PORTFOLIO Market Pct. Value Assets Yield Cash&Equivalents 450,491.63 10.1 0.0 Portfolio Value on 12-31-12 4,533,056.42 Account Fixed 1,314,032.24 29.5 2.7 Accrued Interest 6,583.33 Income Account Equities 2,686,755.69 60.4 3.1 Net Additions/Withdrawals -391,924.13 Account 0.00 0.0 - Realized Gains 38,981.29 Commodities Unrealized Gains 201,031.15 Income Received 63,584.65 Change in Accrued Interest -33.15 Portfolio Value on 06-30-13 4,444,729.38 Accrued Interest 6,550.18 Total 4,451,279.57 100.0 2.7 4,451,279.57 TIME WEIGHTED RETURN Annualized Quarter Year Last 12 Inception To Date To Date Months To Date Account -0.39 6.70 9.77 9.58 40%Fixed lncome/60% 1.06 7.52 12.11 11.04 Equity Blended Index Account Fixed Income -3.66 -3.42 -1.09 0.85 Barclays Capital Intermed -1.70 -1.45 0.28 0.95 Govt/Credit Account Equities 0.99 12.86 16.68 15.38 S&P 500 2.91 13.82 20.60 18.05 All "Account" returns refer to your portfolio. Benchmark indexes are also listed for reference. All returns are reported as percentages. This report is calculated using industry-standard accounting and performance calculation methodologies and is generated by our Axys portfolio accounting software. Calculations are a time-weighted total return series based on monthly valuations, including all cash and equivalents. All calculations are done based on trade date, employing the accrual method of accounting and include cash, interest, dividends and realized and unrealized gains and losses. Performance is adjusted to accurately reflect portfolio deposits and withdrawals. Results are presented after transaction costs but before management fees. Inception-to-date returns are annualized numbers, except for accounts under management less than one year. Unsupervised assets are excluded in performance calculation. At any given point in time an investment may be worth more or less than the original purchase price. 0 GARRISON F I N A N C I A L July 5,2013 City of Fayetteville Firemen's Pension & Relief Fund Charles Schwab #7851-1206 113 West Mountain Street Fayetteville,AR 72701-6069 STATEMENT OF MANAGEMENT FEES For The Period April 1 through June 30,2013 Portfolio Value as of 03-31-13 4,644,506 Portfolio Value as of 04-30-13 4,661,235 Portfolio Value as of 05-31-13 4,514,598 Portfolio Value as of 06-30-13 4,451,280 Average of 4 Months 4,567,905 4,567,905 @ 0.5000%per annum 5,710 Quarterly Management Fee 5,710 TOTAL DUE AND4-AYAlkE This statement is for informational purposes only. As you requested, the fee will be automatically deducted from your account. Please be advised that it is the responsibility of the client to verify the accuracy of each fee calculation. The custodian will not determine whether the fee is properly calculated. Page 1 of 3 Sondra Smith - Sondra, I spoke with Paul Becker and he suggested that I send you this information re: your Pension Fund From: Joseph Schwab<jschwab@thecollarfund.com> To: <ssmith@ci.fayetteville.ar.us> Date: 4/16/2013 2:40 PM Subject: Sondra, I spoke with Paul Becker and he suggested that I send you this information re: your Pension Fund Attachments: Fact Sheet-Collars as a Bond Alternative for Institutional Investors.pdf; COLLX Prospectus 9.1.12.pdf Sondra, Our collar strategy is available as a separately managed account ($25,000,000 minimum) or through our no- load mutual fund ($2,500 minimum). The Institutional Investor Fact Sheet is attached and you can click here for our 7 1/2 years composite returns. Why collars merit consideration for your manager lineup: • Collars as a bond alternative: Our monthly standard deviation is about the same as the AGG bond index. According to Morningstar: "This fund will not yield equity returns but should outperform bonds with similar risk."Nadia Papagiannis, Head of Alternative Fund Research, 11/20/2009 report. • Collars as 401(k)/403(bb option: Employees can invest in equities at reduced risk (see New York Times article: Less Risk,but Staying in Stocks.). • A new asset class: Collars have bondlike volatility but are uncorrelated to bonds, so if interest rates rise, collared stocks may fare better than bonds. Also, collars change the tuning of equity distributions (click here for Advisor Perspectives Whitepager 1/5/2010). • Superior hedgin strategy:trategy: A 20yr study comparing protective puts, covered calls,and collars concluded "Collars offer the best risk reduction and return-to-risk reward of all the tested strategies." (click here for Journal of Financial Planning,May 2010 article). • Collars vs. Market-Neutral Alternatives: Our high equity correlation helps generate positive returns when stocks rise, historically about 3 out of 4 years. Market-Neutral or Absolute Return strategies often do not benefit from the market's upward bias, a reason why Alternatives as a rule have disappointed investors (click here for "Unappealing Alternatives" - Financial Planning, November 2012 article). Please let me know if you prefer my contacting another person on your staff or your search consultant. Warmest Regards, Joe PS. Below are additional articles,white papers, and information: file:///C:/Clsers/ssmith/AppData/Local/Temp/XPgrpwise/516D62F4FAYETTEV ILLECIT... 5/16/2013 Page 2 of 3 • Wall Street Journal: Collar Fund Sacrifices Outsize Gains for Limited Pains • The Street.com: Mutual Fund Carries Built-In Protection • Morningstar Conference Interview:The Collar Fund on Asset Allocation and Absolute Return Strategies • Financial Advisor: Letters:Absolute Return Obsession. • OIC Advisor Quatterly:Advisor Profile: Thomas Schwab • OIC: Options for Rookies: COLLX: The Collar Fund. • Investment News: Collar Fund's Schwab uses Options to Manage Risk. • BusinessWeek: Putting a Collar on Investment Risk. • White Paper JFSP (2009): Exploring the use of Equity Collars in Asset Allocation. • White Paper JFSP (2008): Equity Collars as an Alternative to Asset Allocation. • CFP CE Course: Collars as a Bond Alternative. Investors should carefully consider the investment objectives, risks, charges and expenses of The Collar Fund. This and other important information about the Fund is contained in the prospectus, which can be obtained by calling 1-888-526-5527. The prospectus should be read carefully before investing. The Collar Fund is distributed by Nortbmn Lights Distributors,LLC member FINRA. Mutual Funds involve risk including possible loss ofprincapal. The Fund may invest in small, less well-known companies, which may be subject to more erratic market movements than large-cap stocks;foreign secunties, which are subject to currency fluctuations and political uncertain y;and derivative secunties, covered call and put option risk which may carry market, credit, and liguidiy nsks. These nsks may result in greater sbareprice volatility. The Fund may invest in ETPs Asa result, your cost of investing in the Fund will be higher than the cost of investing directly in ETF shares and may be higher than other mutual funds tbat invest directly in stocks and bonds. You will indirectly bear fees and expenses charged by ETPs in addition to the Fund's direct fees and expenses. ETF's are subject to specific risks, depending on the nature of the underlying strategy of the fund. These risks could include liquidity risk, sector risk, as well as risks associated with fixed income securities,real estate investments, and commodities, to name a few.When the Fund writes call options on its portfolio securities it limits its opportunity to profit and, consequently,the Fund could significantly underperform the market. When the Fund purchases a put option it may lose the entire premium paid for a put option and, consequently, the Fund could significantly underperform the market. In addition, the seller of the option may default and not purchase the security from the Fund at the exercise price,in which case the "protection" of the put option will not be realized. Tax Risk.The Fund expects to generate premiums from its sale of call options.These premiums typically will result in short-term capital gains for federal income tax purposes. In addition, stocks that are hedged with put options may not be eligible for long term capital gains.The Fund is not designed for investors seeking a tax efficient investment.The Fund's investment strategies are expected to involve frequent trading which leads to high portfolio turnover and could generate potentially large amounts of net realized capital gains in a given year. It is possible that the Fund may distribute sizable taxable capital gains to its shareholders,regardless of the Fund's net performance. Joseph M. Schwab Summit Portfolio Advisors, LLC PO Box 775187 Steamboat Springs,CO 80477 303-320-0167(Phone) 877-817-0979(Toll Free) www.TheCollarFund.com For Professional Use Only. If you do not wish to receive future emails,please reply"remove". file:///C:/Users/ssmith/AppData/Local/Temp/XPgrpwise/516D62F4FAYETTEV ILLECIT... 5/16/2013 Page 3 of 3 ©2013 Summit Portfolio Advisors, LLC.Summit Portfolio Advisors, LLC and Northern Lights Distributors, LLC are not affiliated. The information set forth was obtained from sources which we believe reliable but we do not guarantee its accuracy or completeness. Neither the information nor any opinion expressed constitutes a solicitation by us of the purchase or sale of any securities.Past performance is no guarantee of future performance.Mutual Funds involve risk including possible loss of principal Investors should carefully consider the investment objectives,risks, charges and expenses of The Collar FundTM. This and other important information about the Fund is contained in the prospectus, which can be obtained by calling 1-888-5-COLLAR(1-888-526-5527). The prospectus should be read carefully before investing. The Collar FundTM is distributed by Northern Lights Distributors,LLC member FINRA. file:///C:/Users/ssmith/AppData/Local/Temp/XPgrpwise/516D62F4FAYETTEV ILLECIT... 5/16/2013 Fact Sheet HE,4 ,�:.�I�� �zy� ;�4�,�� , Collars'as a Hon1�Alternailve#or Inshtufional Investors PORTFOLIOADVISORS,.LLC - "PIONEERS IN COId:AR INVESTING"9 Collars as Bond Alternatives Investment Strategy Collaring is a stock and option strategy that involves buying a stock and The key driver for our stack-selection process is to invest in stocks where the under- "collaring"that stock with the purchase of a put option and the sale of a covered lying call option premium is richer than the put option premium. For example, let's call option, While a stock is wrapped in a collar, any loss or gain is limited by assume a stock that pays no dividends sells at$100 per share.The stock also has the minimum and maximum price range of the collar, no matter how much the listed options where a one-year$90 strike put option trades at$7 per contract,and a stock actually falls or rises. one-year$110 strike call option trades at$8 per contract. Both the put and call are Collars can reduce portfolio volatility to bondlike levels. Our monthly standard $10 out of the money, but the call is trading for$1 more than the put,which indi- deviation is about 114th the S&P 500 and only slightly higher than Barclays cates that option investors collectively are bullish on the stack. This is appealing for two reasons: Aggregate Band Index (see table). Morningstar's Alternative Fund Research views collars as a bond alternative and featured our collar strategy on a bond 0 First,the fact that option investors are bullish might be an indicator that the alternative panel at the 2011 Morningstar Investment Conference. According to their May 16, 2012 analyst report, "The Collar fund will exhibit near-bondlike stock will show positive performance. returns." • Second, even if option investors are no savvier than other investors, if you collar the stock in the above example, you get an attractive reward-to-risk Benefits for Institutional Investors equation. If you buy the stock at$100,then buy the put for$7 and sell the call • A New Asset Class: Collars change the timing of equity distributions. For for$8,you have a net cost of$99.If that's the case,then the upside potential example,when a collared stock rises,the put option premium falls and the is$11 ($110 collar upper limit minus$99 cost) and downside risk is$9($99 short call option premium rises, at least temporarily delaying a portion of cost minus$90 lower limit). the stock gain until a later time period (see Advisor Perspectives White- paper-Jan 5.20101. Also, collars exhibit an unusual combination of low Summit Portfolio Advisors"LLC equity volatility but high equity correlation. As a bond alternative, collars Summit Portfolio Advisors, LLC ("SPA"), a 100% family owned and managed are uncorrelated to bonds.(see table) Registered Investment Advisor, commenced business in September 2005. SPA's • Superior Hedging Strategy:A 20 year study published in the May 2010 officers are Joseph M.Schwab, Chief Executive Officer, Elizabeth M. Uhl,President, Journal of Financial Planning compared various option hedging strategies and Thomas J.Schwab,Chief Investment Officer.SPA is investment manager for The including Long Put,Covered Call, and Collars(click here for studvl. The Collar Fund(COLLX),a no-load mutual fund. Click here for more information including study concluded "Collars offer the best risk reduction and return-to-risk articles and whitepapers. SMA fee:0.50%with a$25 million account minimum. reward of all the tested strategies." 'I, 5' br ,"ronyr • S9tglYa4 • Collars vs. Market-Neutral Strategies: Collars have high equity correla- tion whereas Market-Neutral strategies hedge out equity risk. Collars over 1.46% NIA NIA NIA I NIA 80% correlation helps generate positive returns when stocks rise, histori- xP 2.08% -1.27% 1.77% 0.42% 3.00% cally about 3 out of 4 years. Market-Neutral strategies do not benefit from 0.28% -1.30% -3.10% 1.05% -3.08% the market's upward bias, a reason why many Alternative strategies often 01. 1.65% -3.37% 3.13% 2.62% 3.85% disappoint (click here for"Unappealing Alternatives" -Financial Planning. _ -1.21% 3.92% 3.17% 0.91% 6.88% November 2012 article) -1.44% -1.20% -2.39% -1.71% -6.58% • Collars for Crisis Management: In turbulent markets, managing risk 1.05% 2.18% 1 2.10% 0.749/6 6.19% through asset allocation can be ineffective whereas collar risk is definitive 1.12% -0.34% 2.86% 3.86% 7.68% and absolute. In a broad market collapse,stocks shielded with collars will Q _ wA NIA NIA 1.61% NIA likely retain the bulk of their value. Listed options are backed by the Option m:ga 2.36% Clearing Corporation and carry the same credit rating as U.S. sovereign debt. See Whitepaper"Equity Collars as an Alternative to Asset Alloca- tion". -. 1.28% 2.69% 1.08% 4.69% Summit Portfolio Advisors,LLC 0.95% P.O.Box 775187,Steamboat Springs,CO 80477 Tel:877.817.0979(Toll Free)Fax:303.339.0609 82.31% Email:info(c]summitoortfolioadvisors.com 0.77% www.summitportfolioadvisors.com t- ©2012 Summit Portfolio Advisors,LLC Click Here for Monthly Returns 8r Disclosures *Collars use listed equity options which may be subject to special tax rules and other relevant factors that may effect your decision to invest You should consult with your investment,tax,and acoountng advisors before investng. Performance notes:*SPA's composite is a combination of SMA and mutual fund performance.SMA performance is calculated monthly and consists of SPA's regular accounts,size-weighted by beginning of the month asset values,and net of all fees and commissions. The composite perform- ance has been calculated in compliance with GIPS standards and there are no alterations of the composite returns as presented. This is not a sales solicilaton,but a profile of our investment management approach. Past performance is never a guarantee of future results.Investing in secudtes involves risk and investors may incur a loss. TM THE COLLAR FUND An Open-End, No-Load Mutual Fund Prospectus September 1, 2012 Ticker: COLLX CUSIP: 66537V401 1-888-5-COLLAR (1-888-526-5527) www.TheCollarFund.com i This Prospectus provides important information about the Fund that you should know before investing. Please read it carefully and keep it for future reference. These securities have not been approved or disapproved by the Securities and Exchange Commission nor has the Securities and Exchange Commission passed upon the accuracy or adequacy of this Prospectus. Any representation to the contrary is a criminal offense. TABLE OF CONTENTS FUND SUMMARY 1 Investment Objective 1 Fees and Expenses of the Fund 1 Principal Investment Strategies 1 Principal Investment Risks 2 Performance Information 3 Investment Adviser 4 Investment Adviser Portfolio Managers 4 Purchase and Sale of Fund Shares 4 Tax Information 4 Payments to Broker-Dealers and Other Financial Intermediaries 4 ADDITIONAL INFORMATION ABOUT PRINCIPAL INVESTMENT STRATEGIES AND RELATED RISKS 4 Investment Objective 4 Principal Investment Strategies 4 Principal Investment Risks 6 Temporary Investments 7 Portfolio Holdings Disclosure 7 MANAGEMENT 7 Investment Adviser 7 Investment Adviser Portfolio Managers 8 HOW SHARES ARE PRICED 9 HOW TO PURCHASE SHARES 10 Purchasing Shares 10 Minimum and Additional Investment Amounts 11 When Order is Processed 11 Retirement Plans 11 HOW TO REDEEM SHARES 12 Redeeming Shares 12 Redemptions in Kind 12 When Redemptions are Sent 12 When You Need Medallion Signature Guarantees 13 Retirement Plans 13 Low Balances 14 FREQUENT PURCHASES AND REDEMPTIONS OF FUND SHARES 14 TAX STATUS,DIVIDENDS AND DISTRIBUTIONS 14 DISTRIBUTION OF SHARES 15 Distributor 15 Additional Compensation to Financial Intermediaries 15 Householding 15 FINANCIAL HIGHLIGHTS 16 Privacy Notice 17 FUND SUMMARY Investment Objective: The Fund's investment objective is capital appreciation and income. Fees and Expenses of the Fund: This following table describes the fees and expenses that you may pay if you buy and hold shares of the Fund. -0 Maximum Sales Charge(Load)Imposed on Purchases None (as a percentage of offering price) Maximum Deferred Sales Charge(Load) None (as a percentage ofredemption proceeds) Maximum Sales Charge(Load)Imposed on Reinvested Dividends and Other None Distributions Redemption Fee None (as a percenM ofamount redeemed) �g Management Fees 0.95% Distributionand/or Service(126-1)Fees 0.00% Other Expenses 0.00% Acquired Fund Fees and Expenses 0.02% Total Annual Fund Operating Expenses 0.97% (1) Acquired Fund Fees and Expenses are the indirect costs of investing in other investment companies.The operating expenses in this fee table will not correlate to the expense ratio in the Ford's financial highlights because the financial statements include only the direct operating expenses incurred by the Fund. (2) This fee table and the example below does not refiect the fact that the fund has contractually agreed to reduce its management fee until January 1, 2013 to 0.49%on the Fund's average daily net assets in excess of$50 million. This agreement may be terminated only by the Fund's Board of Trustees,on 60 days written notice to the adviser. Example: This example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds. The Example assumes that you invest$10,000 in the Fund for the time periods indicated and then redeem all of your shares at the end of those periods. The Example also assumes that your investment has a 5%return each year, you reinvest all dividends and capital gains distributions and that the Fund's operating expenses remain the same. Although your actual costs may be higher or lower,based on these assumptions,your costs would be: 1 Year 3 Years 5 Years 10 Years $99 $309 $536 $1,190 Portfolio Turnover: The Fund pays transaction costs, such as commissions, when it buys and sells securities (or "turns over" its portfolio). A higher portfolio turnover may indicate higher transaction costs and may result in higher taxes when Fund shares are held in a taxable account. These costs, which are not reflected in annual fund operating expenses or in the Example, affect the Fund's performance. During the most recent fiscal year,the Fund's portfolio turnover rate was 151.64%of the average value of its portfolio. Principal Investment Strategies: The Fund seeks to achieve its investment objective by investing primarily in a portfolio of U.S. and foreign equity securities, traded in U.S. markets, and by writing covered call options and buying put options on a substantial portion of the Fund's portfolio securities. Equity securities in which the Fund invests include common and preferred stock of all capitalization levels. The Fund executes its equity strategy by investing (1) directly in U.S. equity securities, (2) through exchange traded funds ("ETFs") that invest primarily in equity securities and(3) through American Depositary Receipts ("ADRs"), which are receipts evidencing ownership of foreign equity securities. The Fund's option strategy is commonly referred to as "hedging" or "collaring." It typically consists of selling covered call options and buying put options to hedge individual stocks in the Fund's portfolio. * Covered Call Options. When the Fund sells a covered call option,the purchaser of the option has the right to buy that security at a predetermined price(exercise price)during the life of the option. If the purchaser exercises the option,the Fund must sell 1 the stock to the purchaser at the exercise price. The option is "covered" because the Fund owns the stock at the time it sells the option. As the seller of the option,the Fund receives a premium from the purchaser of the call option,which may provide additional returns to the Fund. • Put Options. When the Fund purchases a put option, the Fund acquires the right to sell an underlying security at a predetermined price (exercise price) during the life of the option. If the Fund exercises the put option, the counterparty to the put option must purchase the stock from the Fund at the exercise price. While the Fund will typically purchase put options with respect to equity securities held by the Fund, it may also purchase "index put options" or put options with respect to a broad based securities index. The Fund may purchase index put options in an effort to protect the Fund from a significant market decline (or decline in a specific market index)over a short period of time. If the market price for a security held by the Fund exceeds the exercise price of the call option written for that underlying security,the Fund will generally be required to sell the security at the exercise price associated with the call option to the holder of the option. In like manner, if the market price for a security held by the Fund falls below the exercise price of the put option held by the Fund with respect to that underlying security, the Fund may exercise the put option and sell the security at the put option exercise price. In this manner, the exercise price of the call option sets a cap on the appreciation the Fund may realize with respect to any portfolio security and the put option sets a floor on the amount of depreciation the Fund may realize. The Fund has no maximum or minimum level that will be hedged, but anticipates being hedged most of the time. When selecting the appropriate option for a stock in the portfolio, the advisor bases its decision on the current dividend for the stock, the historical volatility of the stock and the current option premiums. The advisor will engage in active trading of the Fund's portfolio securities as a result of its option strategy. Principal Investment Risks:As with all mutual funds,there is the risk that you could lose money through your investment in the Fund Many factors affect the Fund's net asset value and performance. • Covered Call Option Risk. When the Fund sells covered call options,it receives cash but limits its opportunity to profit from an increase in the market value of the security beyond the exercise price(plus the premium received). In a rapidly rising market,the Fund could significantly underperform the market. • ETF Risk You will indirectly bear fees and expenses charged by ETFs in addition to the Fund's direct fees and expenses. As a result,your cost of investing in the Fund will be higher than the cost of investing directly in ETF shares and may be higher than other mutual funds that invest directly in stocks and bonds. Additional ETF risks include: • ETF Strategies. Each ETF is subject to specific risks,depending on the nature of the ETF. These risks could include liquidity risk, sector risk, foreign and emerging market risk, as well as risks associated with fixed income securities,real estate investments,and commodities. • Net Asset Value and Market Price. The market value of the ETF shares may differ from their net asset value. This difference in price may be due to the fact that the supply and demand in the market for ETF shares at any point in time is not always identical to the supply and demand in the market for the underlying basket of securities.Accordingly,there may be times when an ETF share trades at a premium or discount to its net asset value. • Tracking Risk. ETFs in which the Fund may invest will not be able to replicate exactly the performance of the indices they track because the total return generated by the securities will be reduced by transaction costs incurred in adjusting the actual balance of the securities. In addition,the ETFs in which the Fund invests will incur expenses not incurred by their applicable indices. Certain securities comprising the indices tracked by the ETFs may, from time to time,temporarily be unavailable,which may further impede the ETFs'ability to track their applicable indices. • Foreign Risk. Changes in foreign economies and political climates are more likely to affect the Fund than a mutual fund that invests exclusively in U.S. companies. There may be less government supervision of foreign markets, resulting in non-uniform accounting practices and less publicly available information. The value of foreign investments may be affected by changes in exchange control regulations,application of foreign tax laws(including withholding tax),changes in governmental administration or economic or monetary policy(in this country or abroad) or changed circumstances in dealings between nations. 2 • Issuer-Specific Risk. The value of a specific security can be more volatile than the market as a whole and can perform worse than the market as a whole. • Management Risk. The ability of the Fund to meet its investment objective is directly related to the adviser's investment model. The adviser's assessment of the attractiveness and potential appreciation of particular investments or markets in which the Fund invests may prove to be incorrect and there is no guarantee that the adviser's investment strategy will produce the desired results. • Market Risk. The price of equity securities may rise or fall because of economic or political changes. Stock prices in general may decline over short or even extended periods of time, and tend to be more volatile than other investment choices. Market prices of equity securities in broad market segments may be adversely affected by a prominent issuer having experienced losses or by the lack of earnings or such an issuer's failure to meet the market's expectations with respect to new products or services, or even by factors wholly unrelated to the value or condition of the issuer, such as changes in interest rates. • Portfolio Turnover Risk. Transactional and brokerage costs associated with turnover reduce the Fund's return, unless the securities traded can be bought and sold without corresponding commission costs. The Fund's investment strategies involve frequent trading that leads to high portfolio turnover and could generate potentially large amounts of net realized capital gains in a given year. It is possible that the Fund may distribute sizable taxable capital gains to its shareholders, regardless of the Fund's net performance. • Put Option Risk. When the Fund purchases a put option on an underlying portfolio security it may loose the entire premium paid if the underlying security does not decrease in value. • Smaller Capitalization Securities Risk. Smaller capitalization companies may be more vulnerable than larger, more established organizations to adverse business or economic developments. In particular,smaller capitalization companies may have limited product lines, markets, and financial resources and may be dependent upon a relatively small management group. The value of securities of smaller issuers can be more volatile than that of larger issuers. • Tax Risk. The Fund expects to generate premiums from its sale of call options. These premiums typically will result in short-term capital gains for federal income tax purposes. In addition,stocks that are hedged with put options may not be eligible for long term capital gains. The Fund is not designed for investors seeking a tax efficient investment. Performance: The bar chart and performance table below show the variability of the Fund's returns, which is some indication of the risks of investing in the Fund. The bar chart shows performance of the Fund for each a full calendar year since the Fund's inception.The performance table compares the performance of the Fund over time to the performance of a broad-based market index and two supplemental indexes. You should be aware that the Fund's past performance (before and after taxes) may not be an indication of how the Fund will perform in the future. Updated performance information is available at no cost by calling 1-888-526- 5527. Performance Bar Chart For Calendar Years Ended December 31, 5% 3A2% 0% -5% -3.08% 2010 2011 Best Quarter: I 3rd Quarter 2010 1 3.04% Worst Quarter: I 2nd Quarter 2010 (3.41)% 3 The year-to-date return as of the most recent calendar quarter, which ended June 30,2012,was 0.79%% Performance Table Average Annual Total Returns (For periods ended December 31,2011 One Life of Year Fundy) Returns Before Taxes (3.08)% 1.71% Returns After Taxes on Distributions (4.07)% 1.29% Returns after Taxes on Distributions and Sale of Fund Shares (1.85)% 1.25% Index—S&P 500 TR reflects no deduction for fees,expenses or taxes) 2.11% 15.28% (1) The inception date of the Fund is June 29,2009. After-tax returns were calculated using the historical highest individual federal marginal income tax rates and do not reflect the impact of state and local taxes. Actual after-tax returns depend on an investor's tax situation and may differ from those shown, and after-tax returns shown are not relevant to investors who hold shares of the Fund through tax-deferred arrangements, such as 401(k) plans or individual retirement accounts. The S&P 500® Index is an unmanaged market capitalization-weighted index of 500 of the largest capitalized U.S. domiciled companies. Index returns assume reinvestment of dividends. Unlike the Fund's returns, however, they do not reflect any fees or expenses. An investor cannot invest directly in an index. Investment Adviser: Summit Portfolio Advisors,LLC,is the Fund's investment adviser. Investment Adviser Portfolio Managers: Joseph Schwab, Elizabeth Uhl and Thomas Schwab, each a portfolio manager of the adviser,have served the Fund in this capacity since it commenced operations in 2009. Purchase and Sale of Fund Shares: You may purchase and redeem shares of the Fund on any day that the New York Stock Exchange is open for trading by written request or by telephone. The minimum initial investment in the Fund is $2,500. The minimum subsequent investment in the Fund is$100. Tax Information: Dividends and capital gain distributions you receive from the Fund, whether you reinvest your distributions in additional Fund shares or receive them in cash, are taxable to you at either ordinary income or capital gains tax rates unless you are investing through a tax-deferred plan such as an IRA or 401(k)plan. Payments to Broker-Dealers and Other Financial Intermediaries: If you purchase the Fund through a broker-dealer or other financial intermediary(such as a bank),the Fund and its related companies may pay the intermediary for the sale of Fund shares and related services. These payments may create a conflict of interest by influencing the broker-dealer or other intermediary and your salesperson to recommend the Fund over another investment. Ask your salesperson or visit your financial intermediary's website for more information. ADDITIONAL INFORMATION ABOUT PRINCIPAL INVESTMENT STRATEGIES AND RISKS Investment Objective: The Fund's investment objective is capital appreciation and income. The Fund's investment objective is a non-fundamental policy and may be changed upon 60 days written notice to shareholders. Principal Investment Strategies: The Fund seeks to achieve its investment objective by investing primarily in a portfolio of U.S.and foreign equity securities,traded in U.S. markets, and by writing covered call options and buying put options on a substantial portion of the Fund's portfolio securities. Equity securities in which the Fund invests include, common and preferred stock of all capitalization levels. The Fund executes its equity strategy by investing(1)directly in U.S. equity securities, (2)through exchange traded funds("ETFs")that invest primarily in equity securities and (3)through American Depositary Receipts ("ADRs"),which are receipts evidencing ownership of foreign equity securities. The Fund's option strategy is commonly referred to as"hedging" or"collaring." It typically consists of selling covered call options and buying put options to hedge individual stocks in the Fund's portfolio. 4 • Covered Call Options. When the Fund sells a covered call option,the purchaser of the option has the right to buy that security at a predetermined price(exercise price)during the life of the option. If the purchaser exercises the option,the Fund must sell the stock to the purchaser at the exercise price. The option is"covered"because the Fund owns the stock at the time it sells the option. As the seller of the option,the Fund receives a premium from the purchaser of the call option, which may provide additional income to the Fund. The selling of covered call options may tend to reduce volatility of the Fund because the premiums received from selling the options will reduce any losses on the underlying securities,but only by the amount of the premiums. However, selling the options will also limit the Fund's gain,if any,on the underlying securities. • Put Options. When the Fund purchases a put option, the Fund acquires the right to sell an underlying security at a predetermined price (exercise price) during the life of the option. If the Fund exercises the put option, the counterparty to the put option must purchase the stock from the Fund at the exercise price. The premium received by the Fund for selling call options is designed to offset the premium paid by the Fund for purchasing put options. While the Fund will typically purchase put options with respect to equity securities held by the Fund, it may also purchase "index put options" or put options with respect to a broad based securities index. The Fund may purchase index put options in an effort to protect the Fund from a significant market decline (or decline in a specific market index)over a short period of time. If the market price for a security held by the Fund exceeds the exercise price of the call option written for that underlying security,the Fund will generally be required to sell the security at the exercise price associated with the call option to the holder of the option. In like manner,if the market price for a security held by the Fund falls below the exercise price of the put option held by the Fund with respect to that underlying security, the Fund may exercise the put option and sell the security at the put option exercise price. In this manner, the exercise price of the call option sets a cap on the appreciation the Fund may realize with respect to any portfolio security and the put option sets a floor on the amount of depreciation the Fund may realize. The Fund has no maximum or minimum level that will be hedged, but anticipates being hedged most of the time. When selecting the appropriate option for a stock in the portfolio, the advisor bases its decision on the current dividend for the stock, the historical volatility of the stock and the current option premiums. The advisor will engage in active trading of the Fund's portfolio securities as a result of its option strategy. • Depositary Receipts. The Fund may invest in sponsored and unsponsored American Depositary Receipts, which are receipts issued by an American bank or trust company evidencing ownership of underlying securities issued by a foreign issuer. ADRs, in registered form, are designed for use in U.S. securities markets. Unsponsored ADR's may be created without the participation of the foreign issuer. Holders of these ADR's generally bear all the costs of the ADR facility, whereas foreign issuers typically bear certain costs in a sponsored ADR. The bank or trust company depositary of an unsponsored ADR may be under no obligation to distribute shareholder communications received from the foreign issuer or to pass through voting rights. • Exchanee Traded Funds. The Fund may invest in securities commonly referred to as "exchange traded funds" or ETFs, whose shares are listed and traded on U.S. stock exchanges. An ETF is typically an investment company that seeks to track the performance of an index by holding in its portfolio either the contents of the index or a representative sample of the securities in the index. Some ETFs attempt to track the returns of the relevant index by investing in accordance with the market capitalization of each security in the index,while others invest equal amounts in each security without regard to market capitalization. ETFs combine the advantages of stocks with those of index funds. ETFs are designed to closely follow the index they track. ETF fund managers may replicate the index in its entirety by owning every security or instrument in the index according to its set weighting,or in some cases they may"optimize" (replicate the index as closely as possible without having to own each security). ETFs can be classified under one of the following structures: open-end index fund, unit investment trust (UIT) and grantor trusts. Unlike closed-end funds, ETFs have the capability to continuously offer shares through a unique creation and redemption process, which means that the number of outstanding shares may be increased or decreased on a daily basis as necessary to reflect demand.ETFs have the capability to avoid trading at large premiums and discounts to their Net Asset Values.Open-end index funds and UITs are registered under the Investment Company Act of 1940. ETFs incur fees and expenses such as operating expenses, licensing fees, registration fees, trustee fees, and marketing expenses. Therefore, ETF shareholders (such as the Fund)will pay their proportionate share of these expenses. ETFs that attempt to track a particular index will not be able to replicate exactly the performance of the index they track because the total return generated by the securities will be reduced by transaction costs incurred in adjusting the actual balance of the securities.In addition,the ETFs in which a Fund invests will incur expenses not incurred by their applicable indices. Certain securities comprising the indices tracked by the ETFs may,from time to time,temporarily be unavailable, which may further impede the ETFs' and underlying funds'abilities to track their applicable indices. The strategy of investing in ETFs could affect the timing,amount and character of distributions to you and therefore may increase the amount of taxes you pay. In addition, certain prohibitions on the 5 acquisition of mutual fund shares by a Fund may prevent that Fund from allocating its investments in the manner the adviser considers optimal. A Fund that intends to purchase ETFs will purchase ETFs that are either no-load or waive the sales load for purchases made by that Fund. Principal Investment Risks: • Covered Call Option Risk. When the Fund sells covered call options,it receives cash but limits its opportunity to profit from an increase in the market value of the security beyond the exercise price(plus the premium received). In a rapidly rising market,the Fund could significantly underperform the market. The gain on the underlying stock will be equal to the difference between the exercise price and the original purchase price of the underlying security,plus the premium received. The gain may be less than if the Fund had not sold an option on the underlying security. If a call expires unexercised,the Fund realizes a gain in the amount of the premium received,although there may have been a decline(unrealized loss)in the market value of the underlying securities during the option period which may exceed such gain. If the underlying securities should decline by more than the option premium the Fund received,there will be a loss on the overall position. • ETF Risks. The Fund may invest in ETFs. As a result,your cost of investing in the Fund will be higher than the cost of investing directly in ETF shares and may be higher than other mutual funds that invest directly in stocks and bonds. You will indirectly bear fees and expenses charged by ETFs in addition to the Fund's direct fees and expenses.Additional risks of investing in ETFs are described below: • ETF Strategies. Each Underlying Fund is subject to specific risks,depending on the nature of the Underlying Fund. These risks could include liquidity risk, sector risk,foreign and emerging market risk,as well as risks associated with fixed income securities,real estate investments,and commodities,to name a few. • Net Asset Value and Market Price Risk The market value of the ETF shares may differ from their net asset value.This difference in price may be due to the fact that the supply and demand in the market for ETF shares at any point in time is not always identical to the supply and demand in the market for the underlying basket of securities. Accordingly,there may be times when an ETF share trades at a premium or discount to its net asset value. • Tracking Risk. Investment in the Fund should be made with the understanding that the ETFs in which the Fund may invest will not be able to replicate exactly the performance of the indices they track because the total return generated by the securities will be reduced by transaction costs incurred in adjusting the actual balance of the securities. In addition,the ETFs in which the Fund invests will incur expenses not incurred by their applicable indices. Certain securities comprising the indices tracked by the ETFs may, from time to time,temporarily be unavailable,which may further impede the ETFs'ability to track their applicable indices. • Foreign Risk. The Fund could be subject to greater risks because the Fund's performance may depend on issues other than the performance of a particular company or U.S. market sector. Changes in foreign economies and political climates are more likely to affect the Fund than a mutual fund that invests exclusively in U.S. companies. There may also be less government supervision of foreign markets,resulting in non-uniform accounting practices and less publicly available information. The value of foreign investments may be affected by changes in exchange control regulations, application of foreign tax laws (including withholding tax), changes in governmental administration or economic or monetary policy (in this country or abroad) or changed circumstances in dealings between nations. Investments in foreign issues could be affected by other factors not present in the United States,including expropriation,armed conflict, confiscatory taxation,and potential difficulties in enforcing contractual obligations. • Issuer-Specific Risk. The value of a specific security can be more volatile than the market as a whole and can perform differently from the value of the market as a whole. The value of securities of smaller issuers can be more volatile than that of larger issuers.The value of certain types of securities can be more volatile due to increased sensitivity to adverse issuer,political,regulatory,market,or economic developments. • Management Risk. The ability of the Fund to meet its investment objective is directly related to the advisers investment model. The adviser's assessment of the attractiveness and potential appreciation of particular investments or markets in which the Fund invests may prove to be incorrect and there is no guarantee that the adviser's investment strategy will produce the desired results. 6 • Market Risk. The net asset value of the Fund will fluctuate based on changes in the value of the securities in which the Fund invests. The price of equity securities may rise or fall because of economic or political changes. Stock prices in general may decline over short or even extended periods of time, and tend to be more volatile than other investment choices. Market prices of equity securities in broad market segments may be adversely affected by a prominent issuer having experienced losses or by the lack of earnings or such an issuer's failure to meet the market's expectations with respect to new products or services, or even by factors wholly unrelated to the value or condition of the issuer, such as changes in interest rates. • Portfolio Turnover Risk. Portfolio turnover refers to the rate at which the securities held by the Fund are replaced. The higher the rate, the higher the transactional and brokerage costs associated with the turnover which may reduce the Fund's return,unless the securities traded can be bought and sold without corresponding commission costs.Mutual funds are required to distribute their net realized capital gains annually under federal tax laws.The Fund's investment strategies are expected to involve frequent trading which leads to high portfolio turnover and could generate potentially large amounts of net realized capital gains in a given year. It is possible that the Fund may distribute sizable taxable capital gains to its shareholders,regardless of the Fund's net performance. • Put Option Risk. When the Fund purchases a put option with respect to an underlying portfolio security, in exchange for the payment of a premium,the Fund limits its exposure to reductions in the market price of that security beyond the put option exercise price. The Fund may,however,loose the entire premium paid for a put option if the underlying security does not decrease in value. The use of put options also involves the risk that the counterparty to the option will not fulfill its contractual obligations. • Smaller Capitalization Securities Risk. Direct investments in individual smaller capitalization companies may be more vulnerable than larger, more established organizations to adverse business or economic developments. In particular, smaller capitalization companies may have limited product lines,markets, and financial resources and may be dependent upon a relatively small management group. • Tax Risk, The Fund expects to generate premiums from its sale of call options. These premiums typically will result in short-term capital gains for federal income tax purposes. In addition,stocks that are hedged with put options may not be eligible for long term capital gains. The Fund is not designed for investors seeking a tax efficient investment. Temporary Investments: To respond to adverse market, economic, political or other conditions, the Fund may invest 100% of its total assets, without limitation, in high-quality short-term debt securities and money market instruments. These short-term debt securities and money market instruments include shares of other mutual funds, commercial paper, certificates of deposit, bankers' acceptances, U.S. Government securities and repurchase agreements. While the Fund is in a defensive position, the opportunity to achieve its investment objective will be limited. Furthermore,to the extent that a Fund invests in money market mutual funds for its cash position, there will be some duplication of expenses because the Fund would bear its pro- rata portion of such money market funds'advisory fees and operational fees. The Fund may also invest a substantial portion of its assets in such instruments at any time to maintain liquidity or pending selection of investments in accordance with its policies. Portfolio Holdings Disclosure: A description of the Fund's policies and regarding the release of portfolio holdings information is available in the Fund's Statement of Additional Information. MANAGEMENT Investment Adviser: Summit Portfolio Advisors, LLC, ("Adviser" or"Summit") located at P.O. Box 775187, Steamboat Springs, CO 80477, serves as investment adviser to the Fund. Summit was established in 2005 and serves as an investment adviser primarily for individual investors. Assets under management for Summit exceeded $50.4 million on August 15, 2011. Pursuant to the Investment Advisory Agreement between the Fund and the Adviser, the Adviser is responsible for selecting the Fund's investments according to the Fund's investment objective,policies and restrictions. The Adviser also provides certain management and administrative services to the Fund. The Adviser pays all expenses of the Fund,except for the fee payments under the Investment Advisory Agreement, brokerage expenses,taxes,interest,dividend expense on securities sold short,fees and expenses of other investment companies in which the Fund invests, and extraordinary or non-recurring expenses such as litigation. The Fund pays the Adviser, on a monthly basis, an annual advisory fee of 0.95%of the Fund's average daily net assets up to$100 million and 0.55%on the Fund's average daily net assets in excess of$100 million. The Adviser has agreed to waive its advisory fees until January 1,2013 so that such fees,on an annual basis, do not exceed 0.49%of the Fund's average daily net assets that exceed$50 million. During the fiscal year ended April 30, 2011,the aggregate fee paid to the Adviser was 0.94%of the Fund's average daily net assets. During the fiscal year ended April 30, 2012, the 7 aggregate fee paid to the Adviser was 0.94% of the Fund's average daily net assets. A discussion regarding the basis for the Board's renewal of the Investment Advisory Agreement is available in the Fund's annual shareholder report dated April 30,2012. The Advisor(not the Fund)may pay certain financial institutions(which may include banks,brokers,securities dealers and other industry professionals) a fee for providing distribution related services and/or for performing certain administrative servicing functions for Fund shareholders to the extent these institutions are allowed to do so by applicable statute,rule or regulation. Investment Adviser Portfolio Managers: Mr.Joseph Schwab began his career in the investment business in 2003. From 2003 to 2004,Mr.Schwab was a financial consultant for RBC Dain Rauscher Corp. In 2005, Mr. Schwab founded the Adviser and has served as a portfolio manager and its Chief Executive Officer since. Mr. Schwab received his Bachelor of Science from the College of Business,University of Colorado at Boulder. Ms. Elizabeth Uhl served as President a portfolio manager of the Adviser since its founding in 2005 and has been in the investment management business for ten years. From 1999 to 2000, she was a financial planner for American Express Financial Advisors. From 2000 to 2005, she was a Regional Consultant with Envestnet Asset Management. Ms. Uhl received her Bachelor of Science from the College of Business,University of Colorado at Boulder. Mr.Thomas Schwab has served as Chief Investment Officer and a portfolio manager of the Adviser since its founding in 2005 and has been in the investment management business for 40 years. From 1968 to 1972,Mr. Schwab served as an Examiner with the New York Stock Exchange. From 1972 to 1976,Mr. Schwab was a Financial Analyst with Goldman Sachs. From 1976 to 2005,Mr.Schwab was a Financial Consultant and a Senior Vice President for Smith Barney. Mr. Schwab received his Bachelor of Business Administration in Accounting from the University of Notre Dame. Mr. Schwab received his Masters of Business Administration in Finance from New York University. The Fund's Statement of Additional Information provides additional information about the portfolio manager's compensation structure, other accounts managed by the portfolio manager,and the portfolio manager's ownership of Fund shares. Prior Performance of the Portfolio Managers Joseph Schwab,Elizabeth Uhl and Thomas Schwab(collectively,the"Investment Team")werejointly responsible for managing separate accounts for clients of the Adviser through December 31, 2010, at which time the separate accounts were closed. The performance information presented below includes all accounts managed by the Adviser with objectives,policies and strategies that are substantially similar to the Fund(the"Accounts"). The Investment Team has full discretionary authority over the selection of investments for the Accounts,and intends to continue to use substantially the same goals and style of investment management in managing the Fund. The Fund will have substantially the same investment objective,policies and strategies as the Accounts. The information for Accounts is provided to show the past performance of those accounts as measured against the specified benchmark and index. The investment management fees associated with the Accounts range from 0.55%to 0.80%. The Fund's estimated expenses are higher than those of the Accounts, and therefore the Fund's performance would have been lower than the performance of the Accounts. The performance figures set forth below exclude certain accounts of the Adviser that are subject to a socially responsible investment limitation. The performance of the Accounts does not represent the historical performance of the Fund, and should not be considered indicative of future performance of the Accounts or the Fund. Future results will differ from past results because of differences in future behavior of the various investment markets, in brokerage commissions,account expenses,the size of positions taken in relation to account size and diversification of securities, and the timing of purchases and sales, among other things. In addition, the Accounts are not subject to certain investment limitations and other restrictions imposed by the 1940 Act and the Internal Revenue Code which,if applicable,might have adversely affected the performance of the Accounts during the periods shown. Performance of the Fund for future periods will definitely vary, and some months and some quarters will result in negative performance; indeed, some future years may have negative performance. The Adviser provided the information shown below and calculated the performance information. The Accounts'returns shown include realized and unrealized gains plus income, including accrued income. These returns are net of separately managed account investment advisory fees and transactions costs. Results include the reinvestment of dividends and capital gains. Returns from cash and cash equivalents in the Accounts are included in the performance calculations,and the cash and cash equivalents are included in the total assets on which the performance is calculated. The Accounts were valued on a monthly basis. 8 Summit Portfolio Advisors,LLC Accounts Average Annual Total Returns (for Q4 2005-Q4 2010) Average Total Return For Quarter Ended Q4 1 01 Q2 Q3 13.86% 1.18% Q2 Q3 Q4 Q1 Q2 Q3 2005 2006 2006 2006 2007 2007 2007 2008 2008 2008 Accounts 1.61% 1.11% -0.34% 2.86% 2.18% 2.10% 0.74% -1.44%(including actual ex ensesS&P 500 2.08% 4.21% -7.44% .67 6.28% 2.03% -3.33% -9.46% Index Avera a Total Return For Quarter Ended as of 12/31/10 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 2008 2009 2009 2009 2009 2010 2010 2010 2010 Accounts -1.71% -1.21% 3.92% 3.21% 2.63% 1.51% -3.10% 4.39% 2.49F/-6- (including .49% (including actual expenses) S&P 500 -21.94% -11.01% 15.93% 15.61% 6.04% 5.39% -11.43% 11.29% 10.76% Index Average Annual Total Return(as of 12131110) 1 Year 3 Year 5 Year Since Inception Accounts 5.24% 2.25% 4.12% 4.24% (including actual expenses) S&P 500 Index 16.06% -2.86% 2.29% 2.58% HOW SHARES ARE PRICED The net asset value ("NAV") of each class of shares is determined at 4:00 p.m. (Eastern Time) on each day the New York Stock Exchange("NYSE")is open for business. NAV is computed by determining,on a per class basis,the aggregate market value of all assets of the Fund, less its liabilities, divided by the total number of shares outstanding ((assets-liabilities)/number of shares = NAV). The NYSE is closed on weekends and New Year's Day, Martin Luther King, Jr. Day, President's Day, Good Friday, Memorial Day, Independence Day,Labor Day,Thanksgiving Day and Christmas Day.The NAV takes into account,on a per class basis,the expenses and fees of the Fund,including management, administration, and distribution fees, which are accrued daily. The determination of NAV for a share class for a particular day is applicable to all applications for the purchase of shares,as well as all requests for the redemption of shares,received by the Fund(or an authorized broker or agent,or its authorized designee)before the close of trading on the NYSE on that day. Generally, the Fund's securities are valued each day at the last quoted sales price on each security's primary exchange. Securities traded or dealt in upon one or more securities exchanges (whether domestic or foreign) for which market quotations are readily available and not subject to restrictions against resale shall be valued at the last quoted sales price on the primary exchange or,in the absence of a sale on the primary exchange, at the last bid on the primary exchange. Securities primarily traded in the National Association of Securities Dealers' Automated Quotation System ("NASDAQ")National Market System for which market quotations are readily available shall be valued using the NASDAQ Official Closing Price. If market quotations are not readily available, 9 securities will be valued at their fair market value as determined in good faith by the advisor in accordance with procedures approved by the Board and evaluated by the Board as to the reliability of the fair value method used. In these cases,the Fund's NAV will reflect certain portfolio securities'fair value rather than their market price. Fair value pricing involves subjective judgments and it is possible that the fair value determined for a security is materially different than the value that could be realized upon the sale of that security. The fair value prices can differ from market prices when they become available or when a price becomes available. The Fund may use independent pricing services to assist in calculating the value of the Fund's securities. In addition,market prices for foreign securities are not determined at the same time of day as the NAV for the Fund.Because the Fund may invest in underlying ETFs which hold portfolio securities primarily listed on foreign exchanges,and these exchanges may trade on weekends or other days when the underlying ETFs do not price their shares,the value of some of the Fund's portfolio securities may change on days when you may not be able to buy or sell Fund shares. In computing the NAV,the Fund values foreign securities held by the Fund at the latest closing price on the exchange in which they are traded immediately prior to closing of the NYSE. Prices of foreign securities quoted in foreign currencies are translated into U.S. dollars at current rates. If events materially affecting the value of a security in the Fund's portfolio,particularly foreign securities,occur after the close of trading on a foreign market but before the Fund prices its shares,the security will be valued at fair value. For example, if trading in a portfolio security is halted and does not resume before the Fund calculates its NAV,the advisor may need to price the security using the Fund's fair value pricing guidelines. Without a fair value price, short-term traders could take advantage of the arbitrage opportunity and dilute the NAV of long-term investors. Fair valuation of the Fund's portfolio securities can serve to reduce arbitrage opportunities available to short-term traders,but there is no assurance that fair value pricing policies will prevent dilution of the Fund's NAV by short-term traders. The determination of fair value involves subjective judgments. As a result,using fair value to price a security may result in a price materially different from the prices used by other mutual funds to determine net asset value, or from the price that may be realized upon the actual sale of the security. With respect to any portion of the Fund's assets that are invested in one or more open-end management investment companies registered under the 1940 Act,each Fund's net asset value is calculated based upon the net asset values of those open-end management investment companies, and the prospectuses for these companies explain the circumstances under which those companies will use fair value pricing and the effects of using fair value pricing. HOW TO PURCHASE SHARES Purchasing Shares: You may purchase shares of the Fund by sending a completed application form to the following address by either regular or overnight mail: via Regular Mail: Collar Fund c/o Gemini Fund Services,LLC P.O.Box 541150 Omaha,Nebraska 68154-1150 or Overnight Mail.- Collar ail:Collar Fund c/o Gemini Fund Services,LLC 17605 Wright Street, Suite 2 Omaha,Nebraska 68130-2095 The USA PATRIOT Act requires financial institutions, including the Fund,to adopt certain policies and programs to prevent money- laundering activities, including procedures to verify the identity of customers opening new accounts. As requested on the application, you should supply your full name,date of birth, social security number,and permanent street address. Mailing addresses containing a P.O. Box will not be accepted. This information will assist the Fund in verifying your identity. Until such verification is made,the Fund may temporarily limit additional share purchases. In addition,the Fund may limit additional share purchases or close an account if it is unable to verify a shareholder's identity. As required by law,the Fund may employ various procedures, such as comparing the information to fraud databases or requesting additional information or documentation from you, to ensure that the information supplied by you is correct. Automatic Investment Plan: You may participate in the Fund's Automatic Investment Plan, an investment plan that automatically takes money from your bank account and invests it in the Fund through the use of electronic funds transfers or automatic bank drafts. You may elect to make subsequent investments by transfers of a minimum of$100 on specified days of each 10 month into your established Fund account. Please contact the Fund at 1-888-526-5527 for more information about the Fund's Automatic Investment Plan. Purchase through Brokers: You may invest in the Fund through brokers or agents who have entered into selling agreements with the Fund's distributor. These brokers and agents are authorized to designate other intermediaries to receive purchase and redemption orders on behalf of the Fund. The Fund will be deemed to have received a purchase or redemption order when an authorized broker or its designee receives the order. The broker or agent may set its own initial and subsequent investment minimums. You may be charged a fee if you use a broker or agent to buy or redeem shares of the Fund. Finally, various servicing agents use procedures and impose restrictions that may be in addition to, or different from those applicable to investors purchasing shares directly from the Fund. You should carefully read the program materials provided to you by your servicing agent. Purchase by Wire: If you wish to wire money to make an investment in the Fund,please call the Fund at 1-888-526-5527 for wiring instructions and to notify the Fund that a wire transfer is coming. Any commercial bank can transfer same-day funds via wire. The Fund will normally accept wired funds for investment on the day received if they are received by the Fund's designated bank before the close of regular trading on the NYSE.Your bank may charge you a fee for wiring same-day funds. Minimum and Additional Investment Amounts: The minimum initial investment to open an account is $2,500 for regular accounts and for retirement plans (e.g., tax-deferred retirement programs, IRAs, etc.). The minimum initial investment may be waived for clients of the Adviser. The minimum subsequent investment is $100. There is no minimum investment requirement when you are buying shares by reinvesting dividends and distributions from the Fund. The Fund, however, reserves the right, in its sole discretion, to reject any application to purchase shares. Applications will not be accepted unless they are accompanied by a check drawn on a U.S. bank, savings and loan, or credit union in U.S. funds for the full amount of the shares to be purchased. After you open an account, you may purchase additional shares by sending a check together with written instructions stating the name(s)on the account and the account number,to the above address. Make all checks payable to the"The Collar Fund."The Fund will not accept payment in cash,including cashier's checks or money orders. Also,to prevent check fraud, the Fund will not accept third party checks, U.S. Treasury checks, credit card checks, or starter checks for the purchase of shares. Note: Gemini Fund Services, LLC ("GFS"), the Fund's transfer agent, will charge a$25 fee against a shareholder's account, in addition to any loss sustained by the Fund,for any check returned to the transfer agent for insufficient funds. For shareholder account funds and/or transfers into the Fund, the Fund may accept securities in lieu of cash at the discretion of the adviser. There may be black-out periods such as near the end of a fiscal quarter or other holding or reporting periods where the adviser may refuse to accept securities into the Fund from new or existing Shareholders. Any tax issues resulting from the exchange of securities into the Fund in lieu of cash are the responsibility of the shareholder. When Order is Processed: All shares will be purchased at the NAV per share next determined after the Fund receives your application or request in good order. All requests received in good order by the Fund before 4:00 p.m.(Eastern time)will be executed on that same day. Requests received after 4:00 p.m.will be processed on the next business day. Good`Order zUen xnakurg a pun;hpe requestj`make sure yourrequest': rs m good 9rder Goodorder means your pwchase request meludes • theryame ofthe Fpnd tai+ • the- ailar amount of shares,-,t gbeurchasedx • a completed purchase apphaatiop of mvestmerit stub and = `�- •1' check;payable,to"41te-C"ollazFund � , Retirement Plans: You may purchase shares of the Fund for your individual retirement plans. Please call the Fund at 1-888-526- 5527 for the most current listing and appropriate disclosure documentation on how to open a retirement account. 11 HOW TO REDEEM SHARES Redeeming Shares: You will be entitled to redeem all or any portion of the shares credited to your accounts by submitting a written request for redemption to: via Regular Mail: Collar Fund c/o Gemini Fund Services,LLC P.O.Box 541150 Omaha,Nebraska 68154-1150 or Overnight Mail: Collar Fund c/o Gemini Fund Services,LLC 17605 Wright Street, Suite 2 Omaha,Nebraska 68130-2095 Redeeming by Telephone: The telephone redemption privilege is automatically available to all new accounts, except retirement accounts. If you do not want the telephone redemption privilege, you must indicate this in the appropriate area on your account application or you must write to the Fund and instruct it to remove this privilege from your account. The proceeds will be sent by mail to the address designated on your account or wired directly to your existing account in any commercial bank or brokerage firm in the United States as designated on your application. To redeem by telephone, call 1 888-526- 5527. The redemption proceeds normally will be sent by mail or by wire within three business days after receipt of your telephone instructions. IRA accounts are not redeemable by telephone. The Fund reserves the right to suspend the telephone redemption privileges with respect to your account if the name(s) or the address on the account has been changed within the previous 30 days. Neither the Fund,GFS,nor their respective affiliates will be liable for complying with telephone instructions they reasonably believe to be genuine or for any loss, damage, cost or expenses in acting on such telephone instructions and you will be required to bear the risk of any such loss. The Fund,GFS,or both,will employ reasonable procedures to determine that telephone instructions are genuine. If the Fund and/or GFS do not employ these procedures,they may be liable to you for losses due to unauthorized or fraudulent instructions. These procedures may include, among others,requiring forms of personal identification prior to acting upon telephone instructions, providing written confirmation of the transactions and/or tape recording telephone instructions. Redeeming through Broker: If shares of the Fund are held by a broker-dealer, financial institution, or other servicing agent, you must contact that servicing agent to redeem shares of the Fund. The servicing agent may charge a fee for this service. Redemptions by Wire: If you request your redemption by wire transfer,you will be required to pay a$15.00 wire transfer fee to GFS to cover costs associated with the transfer but GFS does not charge a fee when transferring redemption proceeds by electronic funds transfer. In addition,your bank may impose a charge for receiving wires. Systematic Withdrawal Plan: If your individual account,IRA, or other qualified plan account has a current account value of at least $10,000, you may adopt a Automatic Withdrawal Plan to provide for monthly, quarterly or other periodic checks for any designated amount of$100 or more. If you wish to open an Automatic Withdrawal Plan, please indicate on your application or contact the Fund at 1-888-526-5527. Redemptions in Kind: The Fund reserves the right to honor requests for redemption or repurchase orders by making payment in whole or in part in readily marketable securities ("redemption in kind") if the amount of such a request is large enough to affect operations(for example,if the request is greater than$250,000 or 1%of the Fund's assets). The securities will be chosen by the Fund and valued at the Fund's NAV. A shareholder may incur transaction expenses in converting these securities to cash. When Redemptions are Sent: Once the Fund receives your redemption request in"good order" (as described below), it will issue a check based on the next determined NAV following your redemption request. If you purchase shares using a check and soon after request a redemption,redemption proceeds will be withheld by the Fund until after the check has cleared(usually within 10 days). 12