considered only as one part of an investment portfolio.
The Fund is more appropriate for long-term investors who can bear the risk of short-term NAV fluctuations, which at times, may be significant and rapid.
The following is a summary description of
certain risks of investing in the Fund.
Common Stock Risk:
Common stocks are subject to greater fluctuations in market value than certain other asset classes as a result of such factors as a company’s business performance, investor perceptions, stock market trends and
general economic conditions.
Counterparty Risk:
The Fund may enter into various types of derivative contracts. These derivative contracts may be privately negotiated in the over-the-counter market. These contracts also involve exposure to credit risk,
since contract performance depends in part on the financial condition of the counterparty. If a privately negotiated over-the-counter contract calls for payments by the Fund, the Fund must be prepared to make such payments when due. In addition, if
a counterparty’s creditworthiness declines, the Fund may not receive payments owed under the contract, or such payments may be delayed under such circumstances and the value of agreements with such counterparty can be expected to decline,
potentially resulting in losses by the Fund.
Derivatives Risk:
In general, a derivative contract typically involves leverage,
i.e.
, it provides exposure to potential gain or loss from
a change in the level of the market price of the underlying security, currency or commodity (or a basket or index) in a notional amount that exceeds the amount of cash or assets required to establish or maintain the derivative contract. Adverse
changes in the value or level of the underlying asset or index can result in a loss to the Fund substantially greater than the amount invested in the derivative itself. The use of derivative instruments also exposes the Fund to additional risks and
transaction costs. These instruments come in many varieties and have a wide range of potential risks and rewards, and may include futures contracts. A risk of the Fund’s use of derivatives is that the fluctuations in their values may not
correlate perfectly with the overall securities markets.
Futures Contract Risk:
The successful use of futures contracts draws upon the
Adviser’s
skill and experience with respect to such
instruments and are subject to special risk considerations. The primary risks associated with the use of futures contracts, which may adversely affect the Fund’s
NAV
and
total return
, are (a) the imperfect correlation between the change in market value of the instruments held by the
Fund and the price of the futures contract; (b) possible lack of a liquid secondary market for a futures contract and the resulting inability to close a futures contract when desired; (c) losses caused by unanticipated market movements, which are
potentially unlimited; (d) the
Adviser’s
inability to predict correctly the direction of securities prices, interest rates, currency exchange
rates and other economic factors; (e) the possibility that the counterparty will default in the performance of its obligations; and (f) if the Fund has insufficient cash, it may have to sell securities from its portfolio to meet daily variation
margin requirements, and the Fund may have to sell securities at a time when it may be disadvantageous to do so.
Hedging Transactions Risk:
The
Adviser
from time to time employs various hedging techniques. The success of the Fund’s hedging strategy
will be subject to the
Adviser’s
ability to correctly assess the degree of correlation between the performance of the instruments used in the
hedging strategy and the performance of the investments in the portfolio being hedged. Since the characteristics of many securities change as markets change or time passes, the success of the Fund’s hedging strategy will also be subject to the
Adviser’s
ability to continually recalculate, readjust, and execute hedges in an efficient and timely manner. For a variety of reasons, the
Adviser
may not seek to establish a perfect correlation between such hedging instruments and the portfolio holdings being hedged. Such imperfect
correlation may prevent the Fund from achieving the intended hedge or expose the Fund to risk of loss. In addition, it is not possible to hedge fully or perfectly against any risk, and hedging entails its own costs.
High Portfolio Turnover Risk:
To the extent that the Fund makes invesments on a shorter-term basis, the Fund may as a result trade more frequently and incur higher levels of brokerage fees and commissions, and may cause higher levels of current tax
liability to shareholders in the Fund.
Investment in Other Investment Companies
Risk:
As with other investments, investments in other investment companies, including exchange-traded funds ("ETFs"), are subject to market and selection risk. In addition, if the Fund acquires shares of investment
companies, shareholders bear both their proportionate share of expenses in the Fund (including management and advisory fees) and, indirectly, the expenses of the investment companies. The Fund may invest in money market
mutual funds
. An investment in a money market
mutual fund
is
not insured or guaranteed by a Federal Deposit Insurance Corporation or any other government agency. Although such funds seek to preserve the value of the Fund’s investment at $1.00 per share, it is possible to lose money by investing in a
money market
mutual fund
.
Leverage Risk:
As part of the Fund’s principal investment strategy, the Fund will make investments in futures contracts and other derivative instruments. The futures contracts and certain other derivatives provide the economic
effect of financial leverage by creating additional investment exposure, as well as the potential for greater loss. If the Fund uses leverage through purchasing derivative instruments, the Fund has the risk of capital losses that exceed the net
assets of the Fund. The net asset value of the Fund employing leverage will be more volatile and sensitive to market movements. Leverage may involve the creation of a liability that requires the Fund to pay interest.
Manager
Risk:
If the Fund’s portfolio managers make poor investment decisions, it will negatively affect the Fund’s investment performance.
Market Risk:
Market risk is the risk that the markets on which the Fund’s investments trade will increase or decrease in value. Prices may fluctuate widely over short or extended periods in response to company, market or
economic news. Markets also tend to move in cycles, with periods of rising and falling prices. If there is a general decline in the securities and other markets, your investment in the Fund may lose value, regardless of the individual results of the
securities and other instruments in which the Fund invests.
Mid Cap Securities Risk:
The prices of securities of mid cap companies generally are more volatile than those of large capitalization companies and are more likely to be adversely affected than large cap companies by changes in earnings results
and investor expectations or poor economic or market conditions, including those experienced during a recession.