# EDGAR Filing Document

**Accession Number:** 0000810695
**File Stem:** 0001580642-25-006853
**Filing Date:** 2025-10
**Character Count:** 935916
**Document Hash:** c896dab55722e38f3d221671e36329a6
**Contains OCR:** False
**Source Format:** 

## Filing Content

## Filing Summary
**0001580642-25-006853.hdr.sgml**: 20260626

**ACCESSION NUMBER**: 0001580642-25-006853

**CONFORMED SUBMISSION TYPE**: 485APOS

**PUBLIC DOCUMENT COUNT**: 7

**FILED AS OF DATE**: 20251030

**DATE AS OF CHANGE**: 20251231

**FILER**: 

**COMPANY DATA:**
- **COMPANY CONFORMED NAME:** Mutual Fund & Variable Insurance Trust
- **CENTRAL INDEX KEY:** 0000810695

**ORGANIZATION NAME:**
- **EIN:** 043023766
- **STATE OF INCORPORATION:** DE
- **FISCAL YEAR END:** 1231

**FILING VALUES:**
- **FORM TYPE:** 485APOS
- **SEC ACT:** 1940 Act
- **SEC FILE NUMBER:** 811-05010
- **FILM NUMBER:** 251436895

**BUSINESS ADDRESS:**
- **STREET 1:** C/O GEMINI FUND SERVICES, LLC
- **STREET 2:** 4221 NORTH 203RD STREET, SUITE 100
- **CITY:** ELKHORN
- **STATE:** NE
- **ZIP:** 68022-3474
- **BUSINESS PHONE:** 800-253-0412

**MAIL ADDRESS:**
- **STREET 1:** C/O GEMINI FUND SERVICES, LLC
- **STREET 2:** 4221 NORTH 203RD STREET, SUITE 100
- **CITY:** ELKHORN
- **STATE:** NE
- **ZIP:** 68022-3474

**FORMER COMPANY:**
- **FORMER CONFORMED NAME:** HUNTINGTON FUNDS
- **DATE OF NAME CHANGE:** 20040922

**FORMER COMPANY:**
- **FORMER CONFORMED NAME:** HUNTINGTON FUNDS /MA/
- **DATE OF NAME CHANGE:** 19990106

**FORMER COMPANY:**
- **FORMER CONFORMED NAME:** MONITOR FUNDS
- **DATE OF NAME CHANGE:** 19920703
**FILER**: 

**COMPANY DATA:**
- **COMPANY CONFORMED NAME:** Mutual Fund & Variable Insurance Trust
- **CENTRAL INDEX KEY:** 0000810695

**ORGANIZATION NAME:**
- **EIN:** 043023766
- **STATE OF INCORPORATION:** DE
- **FISCAL YEAR END:** 1231

**FILING VALUES:**
- **FORM TYPE:** 485APOS
- **SEC ACT:** 1933 Act
- **SEC FILE NUMBER:** 033-11905
- **FILM NUMBER:** 251436894

**BUSINESS ADDRESS:**
- **STREET 1:** C/O GEMINI FUND SERVICES, LLC
- **STREET 2:** 4221 NORTH 203RD STREET, SUITE 100
- **CITY:** ELKHORN
- **STATE:** NE
- **ZIP:** 68022-3474
- **BUSINESS PHONE:** 800-253-0412

**MAIL ADDRESS:**
- **STREET 1:** C/O GEMINI FUND SERVICES, LLC
- **STREET 2:** 4221 NORTH 203RD STREET, SUITE 100
- **CITY:** ELKHORN
- **STATE:** NE
- **ZIP:** 68022-3474

**FORMER COMPANY:**
- **FORMER CONFORMED NAME:** HUNTINGTON FUNDS
- **DATE OF NAME CHANGE:** 20040922

**FORMER COMPANY:**
- **FORMER CONFORMED NAME:** HUNTINGTON FUNDS /MA/
- **DATE OF NAME CHANGE:** 19990106

**FORMER COMPANY:**
- **FORMER CONFORMED NAME:** MONITOR FUNDS
- **DATE OF NAME CHANGE:** 19920703

## Series and Classes Contracts Data

### Rational Tactical Return Fund (Series ID: S000017165)

| Class ID   | Class Name                                         | Ticker Symbol   |
|:---|:---|:---|
| C000047568 | Rational Tactical Return Fund Class A Shares       | HRSAX           |
| C000047570 | Rational Tactical Return Fund Institutional Shares | HRSTX           |
| C000169250 | Rational Tactical Return Fund Class C Shares       | HRSFX           |

As filed October 30, 2025 Securities Act Registration No. 033-11905

Investment Company Act Registration No. 811-05010

**SECURITIES AND EXCHANGE COMMISSION** 

**Washington, DC 20549** 

**FORM N-1A**

**REGISTRATION STATEMENT** 

---

| | |
|:---|:---|
| ***UNDER***<br> ***THE SECURITIES ACT OF 1933*** |  |
| **Pre-Effective Amendment No.** |  |
| **Post-Effective Amendment No. 231** | x |

---

**REGISTRATION STATEMENT** 

---

| | |
|:---|:---|
| ***UNDER*** |  |
| **THE INVESTMENT COMPANY ACT OF 1940** |  |
| **Amendment No. 231** | x |

---

**Mutual Fund and Variable Insurance Trust**

**(Exact name of Registrant as Specified in Charter)** 

**36 North New York Avenue**

**Huntington, NY 11743**

**(Address of Principal Executive Offices)** 

**1-631-629-4237** 

**(Registrant's Telephone Number)** 

**The Corporation Trust Company**

**Corporate Trust Center**

**1209 Orange Street**

**Wilmington, DE 19801**

**(Name and address of Agent for service)** 

**(Notices should be sent to the Agent for Service)** 

***Copies to:***

**Michael P. O'Hare**

**Stradley Ronon Stevens & Young LLP**

**2005 Market Street, Suite 2600**

**Philadelphia, PA 19103-7018**

It is proposed that this filing will become effective:

immediately upon filing pursuant to paragraph (b)

on [ ] pursuant to paragraph (b)

60 days after filing pursuant to paragraph (a)(i)

X on December 31, 2025 pursuant to paragraph (a)(i)

75 days after filing pursuant to paragraph (a)(ii)

on<u> </u> pursuant to paragraph (a)(ii) of Rule 485

If appropriate, check the following box:

This post-effective amendment designates a new effective date for a previously filed post-effective amendment.

![](image_001.jpg)

 **PROSPECTUS**

 **[December 31], 2025**

 **Rational Premium Income Fund**

 ***(formerly, Rational Tactical Return Fund)***

 ****

Class A Shares: HRSAX Class C Shares: HRSFX Institutional Shares: HRSTX

This Prospectus provides important information about the Fund that you should know before investing. Please read it carefully and keep it for future reference.

The Securities and Exchange Commission and Commodity Futures Trading Commission have not approved or disapproved these securities or determined if this Prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

 **Table of Contents [TO BE UPDATED]**

---

| | |
|:---|:---|
| FUND SUMMARY – RATIONAL PREMIUM INCOME FUND | 2 |
| ADDITIONAL INFORMATION ABOUT THE FUND'S PRINCIPAL INVESTMENT STRATEGIES AND RELATED RISKS | 12 |
| HOW TO BUY SHARES | 44 |
| HOW TO REDEEM SHARES | 52 |
| ADDITIONAL PAYMENTS TO FINANCIAL INTERMEDIARIES | 58 |
| VALUING FUND ASSETS | 58 |
| DIVIDENDS, DISTRIBUTIONS AND TAXES | 59 |
| MANAGEMENT OF THE FUND | 61 |
| FINANCIAL HIGHLIGHTS | 64 |
| APPENDIX A | 65 |
| PRIVACY NOTICE | 70 |
| FOR MORE INFORMATION | 72 |

---

 **FUND SUMMARY – RATIONAL PREMIUM INCOME FUND** 

**Investment Objective:** The Fund's investment objective is to seek total return consisting of long-term capital appreciation and income**.**

**Fees and Expenses of the Fund:** This table describes the fees and expenses that you may pay if you buy, hold, and sell shares of the Fund. **You may pay other fees, such as brokerage commissions and other fees to financial intermediaries, which are not reflected in the table and Example below.** You may qualify for sales charge discounts on purchases of Class A shares if you and your family invest, or agree to invest in the future, at least $50,000 in the Fund. More information about these and other discounts is available from your financial professional and is included in the sections of the Fund's Prospectus entitled **How to Buy Shares** on page [ ] and **Appendix A - Intermediary-Specific Sales Charge Reductions and Waivers**, and in the sections of the Fund's Statement of Additional Information ("SAI") entitled **Waivers and Reductions of Up-Front Sales Charge on Class A Shares** on page [ ].

---

| | | | |
|:---|:---|:---|:---|
| **Shareholder Fees**<br> (fees paid directly from your investment) | **Institutional Shares** | **Class A Shares** | **Class C Shares** |
| Maximum Sales Charge (Load) Imposed on Purchases (as a percentage of offering price) |  | 4.75% |  |
| Maximum Deferred Sales Charge (Load) (as a percentage of the lesser of original purchase price or the net asset value of shares at the time of redemption) |  | None<sup>(1)</sup> | 1.00%<sup>(2)</sup> |
| Maximum Sales Charge (Load) Imposed on Reinvested<br> Dividends and other Distributions |  |  |  |
| Redemption Fee |  |  |  |
| Exchange Fee |  |  |  |
| **Annual Fund Operating Expenses**<br> (expenses that you pay each year as a percentage of the value of your investment) | **Institutional Shares** | **Class A Shares** | **Class C Shares** |
| Management Fees | 1.75% | 1.75% | 1.75% |
| Distribution (12b-1) Fees |  | 0.25% | 1.00% |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Other Expenses (including shareholder services fee of up to 0.25%)<br> *Interest/Dividend Expense*<br> *Remaining Other Expenses* | &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 0.39%<br> *0.01%*<br> *0.38%* | &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 0.42%<br> *0.01%*<br> *0.41%* | &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 0.33%<br> *0.01%*<br> *0.32%* |
| Acquired Fund Fees and Expenses<sup>(3)</sup> | 0.07% | 0.07% | 0.07% |
| Total Annual Fund Operating Expenses | 2.21% | 2.49% | 3.15% |
| Fee Waivers and/or Expense Reimbursements<sup>(4)</sup> | (0.14)% | (0.17)% | (0.08)% |
| Total Annual Fund Operating Expenses After Fee Waivers and/or Expense Reimbursements<sup>(4)</sup> | 2.07% | 2.32% | 3.07% |

---

<sup>(1)</sup> In the case of investments of $1 million or more (where you do not pay an initial sales charge and the selling broker receives a commission), a 1.00% contingent deferred sales charge ("CDSC") may be assessed on shares redeemed within two years of purchase.

<sup>(2)</sup> Maximum Deferred Sales Charge on Class C shares applies to shares sold within 12 months of purchase.

---

| | |
|:---|:---|
| <sup>(3)</sup>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 Fund's financial highlights because the financial statements include only the direct operating expenses incurred by the Fund, not the indirect costs of investing in other investment companies. |

---

---

| | |
|:---|:---|
| <sup>(4)</sup> The | Fund's investment adviser, Rational Advisors, Inc. (the "Advisor") has contractually agreed to waive all or a portion of its management fee and/or reimburse certain operating expenses of the Fund to the extent necessary in order to limit the Fund's total annual fund operating expenses (excluding (i) acquired fund fees and expenses; (ii) brokerage commissions and trading costs; (iii) interest (including borrowing costs and overdraft charges), (iv) taxes, (v) short sale dividends and interest expenses, and (vi) non-routine or extraordinary expenses, such as regulatory inquiry and litigation expenses) to not more than 1.99%, 2.24% and 2.99% of the average daily net assets of the Fund's Institutional, Class A, and Class C shares, respectively, through April 30, 2027. This arrangement may only be terminated prior to this date with the agreement of the Fund's Board of Trustees. Under certain conditions, the Advisor may recoup management fees that it waived or Fund expenses that it paid under this agreement for a period of three years from the date the fees were waived or expenses paid, if the recoupment can be achieved without causing the expense ratio of the share class (after the recoupment is taken into account) to exceed (i) the expense limit in effect at the time the fees were waived or expenses paid, or (ii) the expense limit in place at the time of the recoupment. |

---

**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 (or you hold, as applicable) all your shares at the end of those periods. The Example also assumes that your investment has a 5% return each year, the Fund's operating expenses remain the same, and the expense reduction/reimbursement remains in place for the contractual period only. 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** |
| Institutional Shares | $210 | $678 | $1172 | $2533 |
| Class A Shares | $699 | $1198 | $1723 | $3155 |
| Class C Shares – no redemption | $310 | $964 | $1643 | $3452 |
| Class C Shares – with redemption | $410 | $964 | $1643 | $3452 |

---

**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 rate 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 0% of the average value of its portfolio.

**Principal Investment Strategy** 

The Fund seeks to achieve its investment objective by implementing options strategies on the Standard & Poor's 500 Index ("S&P 500<sup>®</sup>"), futures contracts on the S&P 500<sup>®</sup>, or options and futures contracts on similar U.S. stock indexes, and/or their underlying constituents. Options strategies may include buying and selling options, buying and selling option spreads, and writing covered call options. The Fund also invests collateral in excess of that needed for investing in options strategies in primarily high quality, short-term income-producing securities and cash and cash equivalents, including treasury securities and money market funds.

The Fund may invest in one or more non-exchange-traded total return swap contracts and/or one or more structured notes to gain exposure to some or all of the options strategies. These instruments can provide exposure to a basket of options strategies, including option writing and various options spreads. The options strategies are generally designed to take advantage of certain inefficiencies in the market and typically have a positive carry expectation (i.e., a positive net income expectation from putting on the options positions). The options strategies may implement risk mitigation techniques, including intraday delta hedging, which is a risk management strategy intended to reduce market exposure from written options by establishing offsetting positions in the underlying asset or related instruments. These types of options strategies may also be implemented directly without the use of a total return swap and/or structured note.

The Fund may also implement covered call strategies in which the Fund sells call options on securities it holds to generate premium income and provide partial downside protection. The covered call writing may be implemented directly or included within the basket of options strategies implemented via total return

swap contracts and/or structured notes. To the extent the Fund utilizes covered calls, the Fund intends to write covered call options on stock indexes, such as the S&P 500<sup>®</sup>, or on individual large-capitalization stocks.

The Fund also invests in income-producing securities and cash and cash equivalents, some or all of which may serve as margin or collateral for the Fund's options exposures. The income-producing securities in which the Fund may invest include short-term U.S. corporate bonds (including convertible bonds) and real estate investment trusts ("REITs"). The Fund may invest in corporate bonds of any credit quality (including "junk" bonds), effective maturity or average modified duration; however, under normal circumstances, the Fund intends to hold a majority of its portfolio in investment grade corporate bonds (i.e., those rated BBB or higher by S&P Global Ratings, or the equivalent by another nationally recognized statistical ratings organization).

The Advisor generally intends to hold such bonds to maturity, but may sell any such security if the Advisor believes that the securities no longer offer compelling risk-adjusted return potential.

Distribution Policy – In order to allow shareholders of the Fund to realize a predictable, but not assured, level of cash flow, the Fund has adopted a policy (which may be modified at any time by its Board of Trustees) to pay monthly distributions on Fund shares at a specific target rate to be determined at the discretion of management. Shareholders receiving periodic payments from the Fund may be under the impression that they are receiving net profits. However, all or a portion of a distribution may consist of a return of capital. Return of capital is the portion of distribution that is a return of your original investment dollars in the Fund. Shareholders should not assume that the source of a distribution from the Fund is net profit. For more information about the Fund's distribution policy, please turn to "Additional Information About the Fund's Principal Investment Strategies and Related Risks – Principal Investment Strategies –Distribution Policy and Goals" section in the Fund's Prospectus.

**Principal Investment Risks**

As with any mutual fund, there is no guarantee that the Fund will achieve its objective. Investment markets are unpredictable and there will be certain market conditions where the Fund will not meet its investment objective and will lose money. The Fund's net asset value and returns will vary and you could lose money on your investment in the Fund and those losses could be significant. An investment in the Fund is not a bank deposit and is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency.

The following summarizes the principal risks of investing in the Fund. These risks could adversely affect the net asset value, total return and the value of the Fund and your investment.

**Cash or Cash Equivalents Risk.** At times, the Fund may have significant investments in cash or cash equivalents. When a substantial portion of a portfolio is held in cash or cash equivalents, there is the risk that the value of the cash account, including interest, will not keep pace with inflation, thus reducing purchasing power over time.

**Counterparty Risk.** The value of the Fund's investments may be adversely affected if an issuer's securities experience a credit downgrade; an issuer or guarantor of an investment held by the Fund fails to pay an obligation on a timely basis, otherwise defaults or is perceived by other investors to be less creditworthy; or a counterparty to a derivatives or other transaction with the Fund files for bankruptcy, becomes insolvent, or otherwise becomes unable or unwilling to honor its obligation to the Fund and therefore delays or impairs the Fund's ability to recover its deposits with such counterparty.

 **Changing Fixed Income Market Conditions Risk.** Interest rate increases could cause the value of any fund that invests in fixed income securities to decrease to the extent that it invests in fixed income securities. Federal Reserve policy changes may expose fixed-income and related markets to heightened volatility and may reduce liquidity for the Fund's investments, which could cause the value of the Fund's investments and share price to decline.

**Credit Risk**. Credit risk is the risk that an issuer of a security will fail to pay principal and interest in a timely manner, reducing the Fund's total return. In addition, the credit quality of fixed income securities held by the Fund may be lowered if an issuer's financial condition changes. The issuer of a fixed income security may also default on its obligations. Credit risk may be substantial for the Fund.

*Futures Risk.* Investments in futures contracts involve leverage, which means a small percentage of assets invested in futures can have a disproportionately large impact on the Fund. This risk could cause the Fund to lose more than the principal amount invested. In addition, futures contracts may become mispriced or improperly valued relative to the Sub-Advisor's expectations and may not produce the desired investment results. Additionally, changes in the value of futures contracts may not track or correlate perfectly with the underlying reference asset because of temporary, or even long-term, supply and demand imbalances and because futures do not pay dividends.

*Hedging Risk.* Hedging is a strategy in which the Fund uses options or futures to offset the risks associated with other Fund holdings. There can be no assurance that the Fund's hedging strategy will reduce risk or that hedging transactions will be either available or cost effective. The Fund is not required to use hedging and may choose not to do so.

 *Call Options Risk.* There are risks associated with the sale and purchase of call options. As the seller (writer) of a covered call option, the Fund assumes the risk of a decline in the market price of the underlying security below the purchase price of the underlying security less the premium received, and gives up the opportunity for gain on the underlying security above the exercise option price. The Fund continues to bear the risk that it will lose money if the value of the security falls below the strike price. Option premiums are treated as short-term capital gains and, when distributed to shareholders, are usually taxable as ordinary income, which may have a higher tax rate than long-term capital gains for shareholders holding Fund shares in a taxable account. As the buyer of a call option, the Fund assumes the risk that the market price of the underlying security will not increase above the strike price plus the premiums paid, so the Fund bears the risk that it will lose the premium paid for the option.

*Options Market Risk.* Markets for options and options on futures may not always operate on a fair and orderly basis. At times, prices for options and options on futures may not represent fair market value and prices may be subject to manipulation, which may be extreme under some circumstances. The dysfunction and manipulation of volatility and options markets may make it difficult for the Fund to effectively implement its investment strategy and achieve its objectives and could potentially lead to significant losses.

*Options Risk.* There are risks associated with the Fund's use of options. As the buyer of a call option, the Fund risks losing the entire premium invested in the option if the underlying reference instrument does not rise above the strike price, which means the option will expire worthless. As the buyer of a put option, the Fund risks losing the entire premium invested in the option if the underlying reference instrument does not fall below the strike price, which means the option will expire worthless. Conversely, as a seller (writer) of a call option or put option, the Fund will lose money if the value of the underlying reference instrument rises above (written call option) or falls below (written put option) the respective option's strike price. The Fund's losses are potentially large in a written put transaction and potentially unlimited in an unhedged written call transaction.

Additionally, purchased options may decline in value due to changes in price of the underlying reference instrument, passage of time and changes in volatility. Generally, options may not be an effective hedge because they may have imperfect correlation to the value of the Fund's portfolio securities. Further, the underlying reference instrument on which the option is based may have imperfect correlation to the value of the Fund's portfolio securities. Option premiums are treated as short-term capital gains and, when distributed to shareholders, are usually taxable as ordinary income, which may have a higher tax rate than long-term capital gains for shareholders holding Fund shares in a taxable account. Options are also subject to leverage and volatility risk, liquidity risk, tracking risk, and sub-strategy risk.

 *Swaps Risk.* Swaps are subject to tracking risk because they may not be perfect substitutes for the instruments they are intended to hedge or replace. Over the counter swaps are subject to counterparty default. Leverage inherent in derivatives will tend to magnify the Fund's losses. The costs of investing in swaps will be indirectly paid by the Fund.

 **Distribution Policy Risk. Shareholders receiving periodic payments from the Fund may be under the impression that they are receiving net profits. However, all or a portion of a distribution may consist of a return of capital (i.e., from your original investment). Shareholders should not assume that the source of a distribution from the Fund is net profit. Any capital returned to investors through** 

 **distributions will be distributed after payment of Fund fees and expenses. Shareholders should note that return of capital will reduce the tax basis of their shares and potentially increase the taxable gain, if any, upon disposition of their shares. For more information, please refer to the section of the Fund's prospectus entitled "Tax Consequences".**

 **Equity Securities Risk.** The price of equity securities in the Fund's portfolio will fluctuate based on actual or perceived changes in a company's financial condition and on market and economic conditions. Investor perceptions are based on various and unpredictable factors, including expectations regarding government, economic, monetary and fiscal policies; inflation and interest rates; economic expansion or contraction; and global or regional political, economic and banking crises.

 **Fixed Income Securities Risk**. The value of the Fund's investments in fixed income securities will fluctuate with changes in interest rates. Typically, a rise in interest rates causes a decline in the value of fixed income securities owned by the Fund. In general, the market price of fixed income securities with longer maturities will increase or decrease more in response to changes in interest rates than shorter-term securities. Other risk factors include credit risk (the debtor may default), extension risk (an issuer may exercise its right to repay principal on a fixed rate obligation held by the Fund later than expected), and prepayment risk (the debtor may pay its obligation early, reducing the amount of interest payments). These risks could affect the value of a particular investment by the Fund, possibly causing the Fund's share price and total return to be reduced and fluctuate more than other types of investments.

**Index Risk**. The options and futures in which the Fund invests will be subject to the risks associated with changes in the index to which they are linked.

**Interest Rate Risk.** Interest rate risk is the risk that bond prices overall, including the prices of securities held by the Fund, will decline over short or long periods of time due to rising interest rates. Bonds with longer maturities tend to be more sensitive to interest rates than bonds with shorter maturities. The maturity and effective duration of the Fund's investment portfolio may vary materially, from time to time, and there is no assurance that the Fund will achieve or maintain any particular target maturity or effective duration of its investment portfolio.

**Junk Bond Risk.** Lower-quality bonds, known as "high yield" or "junk" bonds, are considered to be speculative with respect to the issuer's ability to pay interest and principal when due and present greater risk than bonds of higher quality, including an increased risk of default. An economic downturn or period of rising interest rates could adversely affect the market for these bonds and reduce the Fund's ability to sell its bonds in its portfolio. The lack of a liquid market for these bonds could decrease the value of the Fund's portfolio and net asset value per share..

 **Large Capitalization Stock Risk.** Investments in larger, more established companies are subject to the risk that larger companies are sometimes unable to attain the high growth rates of successful, smaller companies, especially during extended periods of economic expansion. Large capitalization companies may be less able than smaller capitalization companies to adapt to changing market conditions. Larger, more established companies may be unable to respond quickly to new competitive challenges, such as changes in consumer tastes or innovative smaller competitors, potentially resulting in lower markets for their common stock. During different market cycles, the performance of large capitalization companies has trailed the overall performance of the broader securities markets.

**Leverage Risk.** The use of leverage by the Fund, such as through the use of derivatives, will cause the Fund to incur additional expenses and magnify the Fund's gains or losses. Relatively small market movements may result in large changes in the value of a leveraged derivatives position. Leveraging also may require that the Fund liquidate portfolio securities when it may not be advantageous to do so to satisfy its obligations. Leveraging may expose the Fund to losses in excess of the amounts invested or borrowed.

**Liquidity Risk**. Liquidity risk exists when particular investments of the Fund would be difficult to purchase or sell, possibly preventing the Fund from selling such illiquid securities at an advantageous time or price, or possibly requiring the Fund to dispose of other investments at unfavorable times or prices in order to satisfy its obligations. Liquid securities can become illiquid due to political, economic or issuer specific events; supply/demand imbalances; changes in a specific market's size or structure, including the number of participants; or overall market disruptions.

**Management Risk.** The investment strategies and models employed by the Advisor in selecting investments for the Fund may not result in an increase in the value of your investment or in overall performance equal to other similar investment vehicles having similar investment strategies. In addition, the Advisor's judgment about the attractiveness, value and potential appreciation of particular securities, options, and futures in which the Fund invests may prove to be incorrect and there is no guarantee that the Advisor's judgment will produce the desired results. The measures that the Advisor or portfolio manager use to monitor and manage the risks of the Fund may not accomplish the intended results and the Fund may experience losses significantly greater than expected.

 **Market Risk**. The value of securities in the Fund's portfolio will fluctuate and, as a result, the Fund's share price may decline suddenly or over a sustained period of time. Overall market risks may also affect the value of the Fund. Factors such as economic growth and market conditions, trading and tariff arrangements, interest rate levels, tariffs and trade wars, and political events affect the securities markets.

**Model and Data Risk.** Like all quantitative analysis, the investment models utilized by the Advisor carry the risk that the ranking system, valuation results and predictions might be based on one or more incorrect assumptions, insufficient historical data, inadequate design, or may not be suitable for the purpose intended. In addition, models may not perform as intended for many reasons, including errors, omissions, imperfections or malfunctions. Because the use of models is usually based on data supplied by third parties, the success of the Advisor's use of such models is dependent on the accuracy and reliability of the supplied data. Historical data inputs may be subject to revision or corrections, which may diminish data reliability and quality of predictive results. Changing and unforeseen market dynamics could also lead to a decrease in the short-term or long-term effectiveness of a model. Models may lose their predictive validity and incorrectly forecast future market behavior and asset prices, leading to potential losses. No assurance can be given that a model will be successful under all or any market conditions.

 **Real Estate/REIT Risk.** The Fund's investments in REITs are subject to the same risks as direct investments in real estate, including sensitivity to general economic downturns and the volatility of local real estate markets. REITs may have limited financial resources and their securities may trade infrequently and in limited volume, and thus they may be more volatile than other securities.

 **Structured Note Risk**. An Underlying Fund may seek investment exposure to sectors through structured notes that may be exchange traded or may trade in the over-the-counter market. These

notes are typically issued by banks or brokerage firms, and have interest and/or principal payments which are linked to changes in the price level of certain assets or to the price performance of certain indices. The value of a structured note will be influenced by time to maturity, level of supply and demand for this type of note, interest rate and market volatility, changes in the issuer's credit quality rating, and economic, legal, political, or events that affect the industry.

**Regulatory Risk**. Changes in the laws or regulations of the United States, including any changes to applicable tax laws and regulations, could impair the ability of the Fund to achieve its investment objective and could increase the operating expenses of the Fund. The Fund is deemed to be a "commodity pool" under the U.S. Commodity Exchange Act, and the Advisor is a "commodity pool operator" registered with and regulated by the Commodity Futures Trading Commission ("CFTC"). As a result, additional CFTC-mandated disclosure, reporting and recordkeeping obligations apply with respect to the Fund. Compliance with these regulatory requirements could increase the Fund's expenses.

**U.S. Agency Securities Risk**. The Fund may invest in U.S. government or agency obligations. Securities issued or guaranteed by federal agencies and U.S. government sponsored entities may or may not be backed by the full faith and credit of the U.S. government.

**Underlying Fund Risk.** Other investment companies, such as money market funds, in which the Fund invests are subject to investment advisory and other expenses, which will be indirectly paid by the Fund. As a result, the cost of investing in the Fund will be higher than the cost of investing directly in an Underlying Fund and may be higher than other funds that invest directly in stocks and bonds. Each Underlying Fund is subject to its own specific risks.

**Volatility Risk.** The Fund may have investments that appreciate or decrease significantly in value over short periods of time. This may cause the Fund's net asset value per share to experience significant increases or declines in value over short periods of time, however, all investments, long- or short-term, are subject to risk of loss.

For more information, please see the section of the Fund's Prospectus entitled "Additional Information Regarding the Fund's Principal Investment Strategies and Related Risks."

**Performance** **:** The bar chart and accompanying table shown below provide an indication of the risks of investing in the Fund by showing the total return of its Institutional shares for each full calendar year, and by showing how its average annual returns compare over time with those of a broad-based market index. How the Fund has performed in the past (before and after taxes) is not necessarily an indication of how it will perform in the future. Updated performance information is available at no cost by calling 1-800-253-0412.

Prior to December 31, 2025, the Fund was managed by a different sub-advisor with different investment strategies and policies. The performance data below for periods prior to December 31, 2025 reflects a different investment strategy. Consequently, the performance record may be less pertinent for investors considering whether to purchase shares of the Fund. The Fund's performance may have been different if the Fund's portfolio was managed under the current investment objective, strategies and policies.

 **Annual Total Returns**

![](image_002.jpg)

During the period shown in the bar chart, the highest return for a quarter was 12.07% (quarter ended September 30, 2017), and the lowest return for a quarter was (11.56)% (quarter ended September 30, 2015).

The Fund's Institutional shares year-to-date return as of September 30, 2025, was 2.69%.

**Average Annual Total Returns**

**(For periods ended December 31, 2024)**

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| | | | |
|:---|:---|:---|:---|
| | **1 Year** | **5 Years** | **10 Years** |
| **Institutional Shares** | | | |
| &nbsp;&nbsp;Return Before Taxes | 3.24% | 2.90% | 2.47% |
| &nbsp;&nbsp;Return After Taxes on Distributions | 1.51% | 1.88% | 0.87% |
| &nbsp;&nbsp;Return After Taxes on Distributions and Sale of Fund Shares | 1.99% | 1.96% | 1.22% |
| **Class A Shares** |  |  |  |
| &nbsp;&nbsp;Return Before Taxes | (1.87)% | 1.68% | 1.84% |
| **S&P 500 Total Return Index® (reflects no deduction for fees, expenses or taxes)** | 25.02% | 14.53% | 13.10% |
|  | **1 Year** | **5 Years** | **Since Class C Inception<br> (5/31/2016)** |
| **Class C Shares** |  |  |  |
| &nbsp;&nbsp;Return Before Taxes | 2.25% | 1.91% | 3.90% |
| **S&P 500 Total Return Index® (reflects no deduction for fees, expenses or taxes)** | 25.02% | 14.53% | 14.76% |

---

After-tax returns are calculated using the highest historical individual federal marginal income tax rate and do not reflect the impact of state and local taxes. Actual after-tax returns depend on a shareholder's tax situation and may differ from those shown. After-tax returns are not relevant for shareholders who hold

Fund shares in tax-advantaged accounts or to shares held by non-taxable entities. After-tax returns are only shown for Institutional shares. After-tax returns for other share classes will vary.

**Investment Advisor and Portfolio Managers**

**Advisor:** Rational Advisors, Inc. is the Fund's investment advisor.

 **Portfolio Managers:** David Miller, Chief Investment Officer and Senior Portfolio Manager of the Advisor, and Charles Ashley, Portfolio Manager of the Advisor, serve as the Fund's portfolio managers. Messrs. Miller and Ashley are jointly and primarily responsible for the day-to-day management of the Fund's portfolio. Messrs. Miller and Ashley have served the Fund as portfolio managers since December 31, 2025.]

**Purchase and Sale of Fund Shares**: The minimum initial purchase for the Fund's Class A, Class C, and Institutional shares is $1,000. For Class A and Class C shares, the minimum subsequent investment is $50; for Institutional shares, the minimum subsequent investment is $500. For Class A, Class C, and Institutional shares, the minimum initial and subsequent investment through the Automatic Investment Plan is $50.

You may purchase and redeem shares of the Fund on any day that the New York Stock Exchange is open. Redemption requests may be made in writing, by telephone or through a financial intermediary to the Fund or the Transfer Agent and will be paid by check or wire transfer.

**Tax Information**: The Fund's distributions generally are taxable to you as ordinary income, capital gains, or some combination of both, unless you are investing through a tax-advantaged arrangement, such as a 401(k) plan or individual retirement account, in which case your distributions may be taxed as ordinary income when withdrawn from the tax-advantaged account.

**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 THE FUND'S PRINCIPAL INVESTMENT STRATEGIES AND RELATED RISKS**

**INVESTMENT OBJECTIVES**

The investment objective the Fund is fundamental and may be changed only by a vote of a majority of the Fund's outstanding shares.

---

| | |
|:---|:---|
| **Fund** | **Investment Objective** |
| Rational Premium Income Fund | The Fund's investment objective is to seek total return consisting of long-term capital appreciation and income. |

---

**PRINCIPAL INVESTMENT STRATEGIES**

The Fund's main investment strategies are discussed in the Summary Section for Fund and are the strategies that the Advisor believes are most likely to be important in trying to achieve the Fund's investment objective. You should note, however, that the Fund may use other non-principal strategies and invest in other securities not described in this prospectus, which are disclosed in detail in the Fund's Statement of Additional Information ("SAI"). For a copy of the SAI please call toll free at 1-800-253-0412 or visit the Fund's website at <u>www.rationalmf.com</u>.

**Rational Premium Income Fund**

The Fund seeks to achieve its investment objective by implementing options strategies on the S&P 500<sup>®</sup>, futures contracts on the S&P 500<sup>®</sup>, or options and futures contracts on similar U.S. stock indexes, and/or their underlying constituents. Options strategies may include buying and selling options, buying and selling option spreads, and writing covered call options. The Fund also invests collateral in excess of that needed for investing in options strategies in primarily high quality, short-term income-producing securities and cash and cash equivalents, including treasury securities and money market funds.

The Fund may invest in one or more non-exchange-traded total return swap contracts and/or one or more structured notes to gain exposure to some or all of the options strategies. These instruments can provide exposure to a basket of options strategies, including option writing and various options spreads. The options strategies are generally designed to take advantage of certain inefficiencies in the market and typically have a positive carry expectation (i.e., a positive net income expectation from putting on the options positions). The options strategies may implement risk mitigation techniques, including intraday delta hedging, which is a risk management strategy intended to reduce market exposure from written options by establishing offsetting positions in the underlying asset or related instruments. These types of options strategies may also be implemented directly without the use of a total return swap and/or structured note.

The Fund may also implement covered call strategies in which the Fund sells call options on securities it holds to generate premium income and provide partial downside protection. The covered call writing may be implemented directly or included within the basket of options strategies implemented via total return swap contracts and/or structured notes. To the extent the Fund utilizes covered calls, the Fund intends to write covered call options on stock indexes, such as the S&P 500<sup>®</sup>, or on individual large-capitalization stocks.

The Fund also invests in income-producing securities and cash and cash equivalents, some or all of which may serve as margin or collateral for the Fund's options exposures. The income-producing securities in

which the Fund may invest include short-term U.S. corporate bonds (including convertible bonds) and REITs. The Fund may invest in corporate bonds of any credit quality (including "junk" bonds), effective maturity or average modified duration; however, under normal circumstances, the Fund intends to hold a majority of its portfolio in investment grade corporate bonds (i.e., those rated BBB or higher by S&P Global Ratings, or the equivalent by another nationally recognized statistical ratings organization).

The Advisor generally intends to hold such bonds to maturity, but may sell any such security if the Advisor believes that the securities no longer offer compelling risk-adjusted return potential.

 *Distribution Policy and Goals* – In order to allow shareholders of the Fund to realize a predictable, but not assured, level of cash flow, the Fund has adopted a policy (which may be modified at any time by its Board of Trustees) to pay monthly distributions (including any return of capital) on Fund shares at a specific target rate to be determined at the discretion of management. All income will be distributed monthly, regardless of whether such income will be treated as return of capital. The Fund generally distributes to shareholders substantially all of its net income (for example, interest and dividends) monthly, as well as substantially all of its net capital gains (that is, long-term capital gains from the sale of portfolio securities and short-term capital gains from both the sale of portfolio securities and option premium earned) annually. In addition, pursuant to its distribution policy, the Fund may make distributions that are treated as a return of capital. Return of capital is the portion of a distribution that is the return of your original investment dollars in the Fund. A return of capital is not taxable to a shareholder unless it exceeds a shareholder's tax basis in the shares. Returns of capital reduce a shareholder's tax cost (or "tax basis"). Once a shareholder's tax basis is reduced to zero, any further return of capital would be taxable. Shareholders receiving periodic payments from the Fund may be under the impression that they are receiving net profits. However, all or a portion of a distribution may consist of a return of capital (i.e., from your original investment). Shareholders should not assume that the source of a distribution from the Fund is net profit. Shareholders should note that return of capital will reduce the tax basis of their shares and potentially increase the taxable gain, if any, upon disposition of their shares. As required under the 1940 Act, the Fund will provide a notice to shareholders at the time of distribution when such distribution does not consist solely of net income. Additionally, each distribution payment will be accompanied by a written statement which discloses the estimated source or sources of each distribution. The IRS requires you to report these amounts, excluding returns of capital, on your income tax return for the year declared. The Fund will provide disclosures, with each monthly distribution, that estimate the percentages of the current and year-to-date distributions that represent: (1) net investment income; (2) capital gains; and (3) return of capital. At the end of the year, the Fund may be required under applicable law to re-characterize distributions made previously during that year among: (1) ordinary income; (2) capital gains; and (3) return of capital for tax purposes. An additional distribution may be made in December, and other additional distributions may be made with respect to a particular fiscal year in order to comply with applicable law. Distributions declared in December, if paid to shareholders by the end of January, are treated for federal income tax purposes as if received in December.

**Temporary Defensive Positions**

From time to time, the Fund may take temporary defensive positions, which are inconsistent with the Fund's principal investment strategies, in attempting to respond to adverse market, economic, political, or other conditions. For example, the Fund may hold all or a portion of their respective assets in money market instruments, including cash, cash equivalents, U.S. government securities, other investment grade fixed income securities, certificates of deposit, bankers acceptances, commercial paper, money market funds and repurchase agreements. While the Fund is in a defensive position, the opportunity to achieve its investment objective will be limited. If the Fund invests in a money market fund, the shareholders of the Fund generally will be subject to duplicative management fees. Although the Fund would do this only in seeking to avoid losses, the Fund will be unable to pursue its investment objective during that time, and it could reduce the

benefit from any upswing in the market. The Fund also may also invest in money market instruments at any time to maintain liquidity or pending selection of investments in accordance with its policies.

**NON-PRINCIPAL INVESTMENT STRATEGIES**

In addition to the principal investment strategies discussed above, the Fund may invest in other investment companies, including affiliated funds.

**PRINCIPAL INVESTMENT RISKS**

All mutual funds carry a certain amount of risk. As with any mutual fund, there is no guarantee that the fund will achieve its objective. Investment markets are unpredictable and there will be certain market conditions where the Fund will not meet its investment objective and will lose money. The Fund's net asset value and returns will vary and you could lose money on your investment in the Fund and those losses could be significant. An investment in the Fund is not a complete investment program. An investment in the Fund is not a bank deposit and is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency.

The following chart summarizes the principal risks and non-principal risks of the Fund. These risks could adversely affect the net asset value, total return and the value of the Fund and your investment. The risk descriptions below provide a more detailed explanation of the principal and non-principal investment risks that correspond to the risks described in the Fund's Fund Summary section of the Prospectus.

***Key:***

Principal Risk: ●

Non-Principal Risk: ○

Not Applicable: —

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| | |
|:---|:---|
| | **Rational Premium Income Fund** |
| ADR Risk | ○ |
| Advisor's Potential Conflict Risk | ○ |
| Affiliated Investment Company Risk | ○ |
| Allocation Risk | ○ |
| Asset-Backed Securities Risk | ○ |
| Actively Managed Fund Risk | ○ |
| Bank Loans Risk | ○ |
| Basic Materials Industry Risk | ○ |
| Business Development Companies ("BDC") Risk | ○ |
| Call Risk | ○ |
| Call Options Risk | ● |
| Capacity Risk | ○ |
| Cash or Cash Equivalents Risk | ● |
| CDOs and CLOs Risk | ○ |
| Changing Fixed Income Market Conditions Risk | ● |
| Class/Sector/ Region/ Focus Risk | ○ |
| Collateralized Bond Obligation Risk | ○ |
| Commodities-Related Investment Risk | ○ |
| Commodity Risk | ○ |
| Commodity Tax Risk |  |
| Concentration Risk | ○ |
| Conflict of Interest – Advisors <br> Risk  | ○ |
| Conflict of Interest – Portfolio Manager Risk | ○ |
| Consumer Discretionary Sector Risk | ○ |

---

---

| | |
|:---|:---|
| Consumer Staples Sector Risk | ○ |
| Convertible Securities Risk | ○ |
| Correlation Risk | ○ |
| Counterparty Risk | ● |
| Credit Default Swap Risk | ○ |
| Credit Risk | ● |
| Credit Spread Options Risk | ○ |
| Currency Risk | ○ |
| Cybersecurity Risk | ○ |
| Derivatives Risk | ● |
| Digital Assets Futures Contracts Risk | ○ |
| Distribution Policy Risk | ● |
| Dividend Yield Risk | ○ |
| Duration Risk | ○ |
| Emerging Market Risk | ○ |
| Energy and Infrastructure Industry Risk | ○ |
| Energy Sector Risk | ○ |
| Equity Security Risk | ● |
| ETF Risk | ○ |
| ETNs Risk | ○ |
| Extension Risk | ○ |
| Financials Sector Risk | ○ |
| Fixed Income Risk | ● |
| Floating Rate Loans Risk | ○ |
| Foreign Exchanges Risk | ○ |
| Foreign Investment Risk | ○ |
| Foreign Currency Forward Contrack Risk | ○ |
| Forwards Risk | ○ |
| Futures Risk | ● |
| Geographic Concentration Risk | ○ |
| Growth Stock Risk | ○ |
| Healthcare Sector Risk | ○ |
| Hedging Risk | ● |
| Income Risk | ○ |
| Index Risk | ● |
| Industrials Sector Risk | ○ |
| Inflation-Indexed Bond Risk | ○ |
| Inflation Protected Securities Risk | ○ |
| Information Technology Sector Risk | ○ |
| Interest Rate Risk | ● |
| Inverse ETF and ETN Risk | ○ |
| IPO Risk | ○ |
| Investment Style Risk | ○ |
| Issuer-Specific Risk | ○ |
| Junk Bond Risk | ● |
| Large Capitalization Stock Risk | ● |
| Leverage Risk | ● |
| Leveraged ETF Risk | ○ |
| Limited History of Operations Risk |  |
| Liquidity Risk | ● |
| Litigation Risk | ○ |
| Loan Risk | ○ |
| Lower Quality Debt Risk | ○ |

---

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| | |
|:---|:---|
| Machinery and Electrical Equipment Industry Risk | ○ |
| Managed Volatility Risk | ○ |
| Management Risk | ● |
| Market Capitalization Risk | ○ |
| Market Risk | ● |
| Market Volatility-Linked ETFs Risk | ○ |
| Medium (Mid) Capitalization Stock Risk | ○ |
| Micro Capitalization Risk | ○ |
| MLP and MLP-Related Securities Risk | ○ |
| MLP Tax Risk | ○ |
| Model and Data Risk | ● |
| Mortgage-Backed Securities Risk | ○ |
| Municipal Bond Risk | ○ |
| Non-Diversification Risk |  |
| Options Market Risk | ● |
| Options Risk | ● |
| OTC Trading Risk | ○ |
| Preferred Stock Risk | ○ |
| Prepayment Risk | ○ |
| Real Estate Risk | ● |
| REIT Risk | ● |
| Regulatory Risk | ● |
| Repurchase and Reverse Repurchase Agreement Risk | ○ |
| Restricted Securities Risk | ○ |
| Sector/Asset Class Risk | ○ |
| Sector Risk | ○ |
| Security Risk | ○ |
| Segregation Risk | ○ |
| Short Position Risk | ○ |
| Small Capitalization Stock Risk | ○ |
| Sovereign Debt Risk | ○ |
| Structured Note Risk | ● |
| Swaps Risk | ● |
| Tax Risk |  |
| Total Return Swap Risk | ○ |
| Target Volatility Strategy Risk | ○ |
| Turnover Risk | ○ |
| Underlying Fund Risk | ● |
| U.S. Agency Securities Risk | ● |
| Utilities Sector Risk | ○ |
| Value Investing Risk | ○ |
| Volatility Risk | ● |
| Wholly Owned Subsidiary Risk |  |
| Written Call Option Risk | ○ |

---

**Actively Managed Fund Risk.** An Underlying Fund may be actively managed and not seek to replicate the performance of its benchmark. As a result, the Underlying Fund's performance will vary intentionally and perhaps significantly from that of its benchmark.

**Advisor's Potential Conflict Risk.** Because the Advisor or an affiliate is primarily responsible for managing both the Fund and the Underlying Funds, the Advisor is subject to conflicts of interest with respect to how it allocates the Fund's assets among the Underlying Funds. The Advisor may have an

incentive to allocate the Fund's assets to those Affiliated Funds for which the net advisory fees payable to the Advisor are higher than the fees payable by other Affiliated Funds.

**American Depositary Receipts ("ADRs") Risk.** ADRs, which are typically issued by a bank, are certificates that evidence ownership of shares of a foreign company and are alternatives to purchasing foreign securities directly in their national markets and currencies. ADRs are subject to the same risks as direct investment in foreign companies and involve risks that are not found in investments in U.S. companies. In addition to the risks of investing in foreign securities discussed below, there is no guarantee that an ADR issuer will continue to offer a particular ADR. As a result, the Fund may have difficulty selling the ADR, or selling them quickly and efficiently at the prices at which they have been valued. In a sponsored ADR arrangement, the foreign company assumes the obligation to pay some or all of the depositary's transaction fees. Under an unsponsored ADR arrangement, the foreign company assumes no obligations and the depositary's transaction fees are paid directly by the ADR holders. Because unsponsored ADR arrangements are organized independently and without the cooperation of the foreign company, available information concerning the foreign company may not be as current as for sponsored ADRs and voting rights with respect to the deposited securities are not passed through. ADRs may not track the price of the underlying foreign securities on which they are based, and their value may change materially at times when U.S. markets are not open for trading. Certain ADRs are not listed on an exchange and therefore may be considered to be illiquid. Because ADRs are denominated in US dollars, they are also subject to currency risk, as movements in the exchange rate of the local currency of the foreign issuer versus the US dollar are automatically reflected in the price of the ADR in US dollars. Therefore, even if the price of the foreign security does not change on its local market, if the exchange rate of the local currency relative to the US dollar declines, the ADR price would decline by a similar measure.

**Affiliated Investment Company Risk**. The Fund invest in affiliated underlying funds (the "Affiliated Funds"), unaffiliated underlying funds, or a combination of both. The Advisor, therefore, is subject to conflicts of interest in allocating the Fund's assets among the underlying funds. The Advisor will receive more revenue to the extent it selects an Affiliated Fund rather than an unaffiliated fund for inclusion in the Fund's portfolio. In addition, the Advisor may have an incentive to allocate the Fund's assets to those Affiliated Funds for which the net advisory fees payable to the Advisor are higher than the fees payable by other Affiliated Funds.

**Allocation Risk.** Allocation risk refers to the risk that if the Fund's strategy for allocating assets among different asset classes does not work as intended, the Fund may not achieve its objective or may underperform other funds with the same or similar investment strategy.

**Asset-Backed Securities Risk**. Asset-backed securities may be subject to prepayment risk. If interest rates fall, the underlying debt may be repaid ahead of schedule, reducing the value of the Fund's investments. As a result, the Fund may reinvest these early payments at lower interest rates, thereby reducing the Fund's income. If interest rates rise, there may be fewer prepayments, which would cause the average bond maturity to rise, increasing the potential for the Fund to lose money and causing the price of the asset-backed securities, and the Fund's net asset value per share, to fall. Asset-backed securities are also subject to extension risk. The prices of asset-backed securities may decrease more than prices of other fixed-income securities when interest rates rise. The value of asset-backed securities may be significantly affected by changes in interest rates, the market's perception of issuers, and the creditworthiness of the parties involved. The ability of the Fund to successfully utilize these instruments may depend on the ability of the Advisor to forecast interest rates and other economic factors correctly. The Advisor's assessment, or a rating agency's assessment, of borrower credit quality, default rates and loss rates may prove to be overly optimistic. These securities may have a structure that makes their reaction to interest rate changes and other factors difficult to predict, making their value highly volatile. The more senior security classes are generally entitled to receive payment before the subordinate classes if the cash flow generated by the underlying

assets is not sufficient to pay all investors. Asset-backed securities may be secured by pools of loans, such as student loans, automobile loans, equipment leases, and credit card receivables. The credit risk on such securities is affected by borrowers or lessees defaulting on their payments. The values of assets underlying asset-backed securities may decline and, therefore, may not be adequate to cover underlying investors. Possible legislation in the area of credit cards and other loans that may collateralize the securities in which the Fund may invest could negatively impact the value of the Fund's investments. To the extent the Fund focuses its investments in particular types of asset-backed securities, the Fund may be more susceptible to risk factors affecting such types of securities.

**Bank Loans Risk.** The market for bank loans may not be highly liquid and the Fund may have difficulty selling them. These investments expose the Fund to the credit risk of both the financial institution and the underlying borrower. Bank loans settle on a delayed basis, potentially leading to the sale proceeds of such loans not being available to meet redemptions for a substantial period of time after the sale of the bank loans. Certain bank loans may not be considered "securities" under the federal securities laws and purchasers, such as the Fund, therefore may not be entitled to rely on the protections of such laws, including anti-fraud provisions.

**Basic Materials Industry Risk.** To the extent that the Fund's investments are exposed to issuers conducting business in basic materials, the Fund is subject to the risk that the securities of such issuers will underperform the market as a whole due to legislative or regulatory changes, adverse market conditions and/or increased competition affecting that economic sector. World events, political, environmental and economic conditions, energy conservation, environmental policies, commodity price volatility, changes in exchange rates, imposition of import controls, trade policy, increased competition, depletion of resources and labor relations may adversely affect such issuers. The prices of the securities of basic materials companies also may fluctuate widely in response to such events.

**Call Risk.** Issuers of securities may redeem the securities prior to maturity at a price below their current market value.

**Business Development Companies ("BDC") Risk.** BDCs may carry risks similar to those of a private equity or venture capital fund. BDC company securities are not redeemable at the option of the shareholder and they may trade in the market at a discount to their net asset value. A BDC is a form of investment company that is required to invest at least 70% of its total assets in securities (typically debt) of private companies, thinly traded U.S. public companies, or short-term high-quality debt securities. The BDCs held by the Fund may leverage their portfolios through borrowings or the issuance of preferred stock. While leverage often serves to increase the yield of a BDC, this leverage also subjects a BDC to increased risks, including the likelihood of increased volatility and the possibility that a BDC's common share income will fall if the dividend rate of the preferred shares or the interest rate on any borrowings rises. A significant portion of a BDC's investments are recorded at fair value as determined by its board of directors, which may create uncertainty as to the value of the BDC's investments. Non-traded BDCs are illiquid, and it may not be possible to redeem shares without paying a substantial penalty or at all. Publicly traded BDCs usually trade at a discount to their net asset value because they invest in unlisted securities and have limited access to capital markets. BDCs are subject to high failure rates among the companies in which they invest, and federal securities laws impose restraints upon the organization and operations of BDCs that can limit or negatively impact the performance of a BDC. However, the Fund does not believe it would be liable for the actions of any entity in which it invests and that only its investment is at risk. Also, BDCs may engage in certain principal and joint transactions that a mutual fund or closed-end fund may not without an exemptive order from the SEC.

**Capacity Risk.** The markets and securities in which the Fund invests may, at times, be limited. Under such conditions, the execution of the Fund's strategy may be affected, and the Fund may not achieve its

investment objective. In addition, the Fund may not be able to purchase or sell securities at favorable market prices.

**Cash or Cash Equivalents Risk.** At times, the Fund may have significant investments in cash or cash equivalents. When a substantial portion of a portfolio is held in cash or cash equivalents, there is the risk that the value of the cash account, including interest, will not keep pace with inflation, thus reducing purchasing power over time. Additionally, in rising markets, holding cash or cash equivalents may adversely affect the Fund's performance and the Fund may not achieve its investment objective.

**CDOs and CLOs Risk***.* Collateralized debt obligations ("CDOs") and collateralized loan obligations ("CLOs") are securities backed by an underlying portfolio of debt and loan obligations, respectively. CDOs and CLOs issue classes or "tranches" that vary in risk and yield and may experience substantial losses due to actual defaults, decrease of market value due to collateral defaults and removal of subordinate tranches, market anticipation of defaults, and investor aversion to CDO and CLO securities as a class. The risks of investing in CDOs and CLOs depend largely on the tranche held by the Fund and the types of underlying debts and loans in such tranche of the CDO or CLO, respectively. The risks of CDOs and CLOs will be greater if the Fund invests in CDOs and CLOs that hold debt or loans of uncreditworthy borrowers or if the Fund holds subordinate tranches of the CDO or CLO that absorb losses from the defaults before senior tranches. CDOs and CLOs are also subject to additional risks, including, but not limited to, interest rate risk and credit risk.

**Changing Fixed Income Market Conditions Risk.** The historically low interest rate environment observed over the past couple years was created in part by actions taken by the Board of Governors of the Federal Reserve System (the "Federal Reserve") to keep the federal funds rate at a low level, including expanding the scope of its repurchase agreement operations and purchasing large quantities of securities issued or guaranteed by the U.S. government, its agencies or instrumentalities on the open market. In recent years, the Federal Reserve has "tapered" its quantitative easing programs and, in 2022, began implementing increases to the federal funds rate. The future direction of interest rates is uncertain at this time. Further rate increases are expected. As interest rates rise, there is risk that rates across the financial system also may rise. Changes in government intervention may have adverse effects on the Fund's investments, volatility, and illiquidity in debt markets. Interest rate increases could cause the value of the Fund to decrease to the extent that it invests in fixed income securities. Federal Reserve policy changes may expose fixed-income and related markets to heightened volatility and may reduce liquidity for certain Fund investments, which could cause the value of the Fund's investments and share price to decline. If the Fund invests in derivatives tied to fixed-income markets, the Fund may be more substantially exposed to these risks than the fund that does not invest in derivatives. To the extent the Fund experiences high redemptions because of these policy changes, the Fund may experience increased portfolio turnover, which will increase the costs the Fund incurs and may lower its performance. Furthermore, if rising interest rates cause the Fund to lose enough value, the Fund could also face increased shareholder redemptions, which could force the Fund to liquidate investments at disadvantageous times or prices, thereby adversely affecting the Fund. In addition, decreases in fixed income dealer market-making capacity may persist in the future, potentially leading to decreased liquidity and increased volatility in the fixed income markets.

**Class/Sector/Region Focus Risk.** If the Fund invests more than 25% of its net assets in a particular asset class, or securities of issuers within a particular market sector or geographic region, it is subject to increased risk. Performance will generally depend on the performance of the class, sector, or region, which may differ in direction and degree from that of the overall U.S. stock or bond markets. In addition, financial, economic, business, and political developments affecting the class, sector or region may have a greater effect on the Fund.

 **Collateralized Bond Obligation Risk.** The pool of securities underlying collateralized bond obligations is typically separated in groupings called tranches representing different degrees of credit quality. The higher quality tranches have greater degrees of protection and pay lower interest rates. The lower quality tranches carry greater risk and pay higher interest rates.

**Commodities-Related Investment Risk.** Neither the Advisor nor the Fund anticipate being subject to registration or regulation by the CFTC as a commodity pool, commodity pool operator ("CPO") (except with respect to Rational Premium Income Fund) or a commodity trading adviser ("CTA") under the Commodity Exchange Act ("CEA") as a result of the Fund's commodities-related investments. However, should the Advisor or the Fund be deemed to fall under these categories, then the Advisor would be subject to registration and regulation in its capacity as the Fund's CPO or CTA, and the Fund would be subject to regulation as a commodity pool under the CEA. The Fund may incur additional expenses as a result of the registration and regulation obligations and certain investments may be limited or restricted.

**Commodity Risk.** The Fund's exposure to the commodities futures markets may subject the Fund to greater volatility than investments in traditional securities. The value of commodity-linked derivative instruments and/or commodity-linked notes may be affected by changes in overall market movements, commodity index volatility, changes in interest rates, or sectors affecting a particular industry or commodity, such as drought, floods, weather, livestock disease, embargoes, tariffs, and international economic, political and regulatory developments.

**Commodity Tax Risk**. The tax treatment of commodity-linked derivative instruments may be adversely affected by changes in legislation, regulations or other legally binding authority. If, as a result of any such adverse action, the income of the Fund from certain commodity-linked derivatives was treated as non-qualifying income, the Fund might fail to qualify as a regulated investment company and be subject to federal income tax at the Fund level. Should the Internal Revenue Service issue further guidance, or Congress enact legislation, that adversely affects the tax treatment of the Fund's use of commodity-linked derivatives or the Subsidiary (which guidance might be applied to the Fund retroactively), it could, among other consequences, limit the Fund's ability to pursue its investment strategy. The Subsidiary is classified as a controlled foreign corporation for US tax purposes. Typically, any gains/losses from trading in Section 1256 futures contracts, such as exchange-traded commodity futures contracts, are taxed 60% as long term capital gains/losses and 40% short term capital gains/losses. However, because the Subsidiary is a controlled foreign corporation, any income received from its investments will be passed through to the Fund as ordinary income and reflected on shareholder's tax Forms 1099 as such.

**Concentration Risk.** The Fund that concentrates its investments in a sector, industry or group of industries is more vulnerable to adverse market, economic, regulatory, political, or other developments affecting such sector, industry or group of industries than the Fund that invests its assets more broadly.

**Conflict of Interest - Advisors Risk.** The Advisor and other individuals associated with the Advisor may have compensation and/or other arrangements that may be in conflict to the interests of the Fund.

**Conflict of Interest - Portfolio Manager Risk.** Actual or apparent conflicts of interest may arise when a portfolio manager has day-to-day management responsibilities with respect to more than one fund or other accounts. More specifically, portfolio managers who manage multiple funds are presented with the following potential conflicts:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;· The management of multiple accounts may result in a portfolio manager devoting
unequal time and attention to the management of each account. The management of multiple funds and accounts also may give rise to potential
conflicts of interest if the fund and accounts have

different objectives, benchmarks, time horizons, and fees, as the portfolio manager must allocate his time and investment ideas across multiple funds and accounts.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;· With respect to securities transactions for the Fund, the Advisor determine
which broker to use to execute each order, consistent with the duty to seek best execution of the transaction. The portfolio manager may
execute transactions for another fund or account that may adversely impact the value of securities held by the Fund. Securities selected
for funds or accounts other than the Fund may outperform the securities selected for the Fund.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;· The appearance of a conflict of interest may arise where the Advisor
or has an incentive, such as a performance-based management fee. The management of personal accounts may give rise to potential conflicts
of interest; there is no assurance that the Advisor's or Fund's respective codes of ethics will adequately address such conflicts.
One of the portfolio manager's numerous responsibilities is to assist in the sale of Fund shares. Because the portfolio manager's
compensation is indirectly linked to the sale of Fund shares, they may have an incentive to devote time to marketing efforts designed
to increase sales of Fund shares.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;· The Advisor has adopted a code of ethics that, among other things, permits
personal trading by employees under conditions where it has been determined that such trades would not adversely impact client accounts.
Nevertheless, the management of personal accounts may give rise to potential conflicts of interest, and there is no assurance that these
codes of ethics will adequately address such conflicts.

**Consumer Discretionary Sector Risk.** The success of consumer product manufacturers and retailers is tied closely to the performance of domestic and international economies, interest rates, exchange rates, competition, consumer confidence, changes in demographics and consumer preferences. Companies in the consumer discretionary sector depend heavily on disposable household income and consumer spending and may be strongly affected by social trends and marketing campaigns. These companies may be subject to severe competition, which may have an adverse impact on their profitability.

**Consumer Staples Sector Risk.** The consumer staples sector may be affected by the regulation of various product components and production methods, marketing campaigns and other factors affecting consumer demand. Tobacco companies, in particular, may be adversely affected by new laws, regulations and litigation. The consumer staples sector may also be adversely affected by changes or trends in commodity prices, which may be influenced by unpredictable factors.

**Convertible Securities Risk**. Convertible bonds are hybrid securities that have characteristics of both bonds and common stocks and are subject to fixed income security risks and conversion value-related equity risk. Convertible bonds are similar to other fixed-income securities because they usually pay a fixed interest rate and are obligated to repay principal on a given date in the future. The market value of fixed-income securities tends to decline as interest rates increase. Convertible bonds are particularly sensitive to changes in interest rates when their conversion to equity feature is small relative to the interest and principal value of the bond. Convertible issuers may not be able to make principal and interest payments on the bond as they become due. Convertible bonds may also be subject to prepayment or redemption risk. If a convertible bond is called for redemption, the Fund will be required to surrender the security for redemption, and convert it into the issuing company's common stock or cash at a time that may be unfavorable to the Fund. Convertible securities have characteristics similar to common stocks, especially when their conversion value is greater than the interest and principal value of the bond. If a convertible security's investment value is greater than its conversion value, its price will likely increase when interest rates fall and decrease when interest rates rise. If the conversion value exceeds the investment value, the price of the convertible security will tend to fluctuate directly with the price of the underlying equity security. 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. 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. When a convertible bond's value is more closely tied to its conversion to stock feature, it is sensitive to the underlying stock's price.

**Correlation Risk.** There is no guarantee that the Funds historical relationship and correlation to equity direction or volatility will continue. As a result, there is no guarantee that the Fund will achieve lower volatility than the S&P 500<sup>®</sup> Index and/or better performance than the S&P 500<sup>®</sup> Index. Correlation and covariance are factors that impact the Fund's calculation of risk. There is also no guarantee that these factors will accurately predict future risk. Just as past performance is not necessarily indicative of future performance, past correlation is not necessarily indicative of future correlation.

**Counterparty Risk.** The Fund may engage in transactions in securities and financial instruments that involve counterparties. Counterparty risk is the risk that a counterparty (the other party to a transaction or an agreement or the party with whom the Fund executes transactions) to a transaction with the Fund may be unable or unwilling to make timely principal, interest or settlement payments, or otherwise honor its obligations, and therefore delays or impairs the Fund's ability to recover its deposits with, or any payments from, such counterparty.

**Credit Default Swap Risk.** Credit default swaps ("CDS") are typically two-party financial contracts that transfer credit exposure between the two parties. Under a typical CDS, one party (the "seller") receives pre-determined periodic payments from the other party (the "buyer"). The seller agrees to make compensating specific payments to the buyer if a negative credit event occurs, such as the bankruptcy or default by the issuer of the underlying debt instrument. The use of CDS involves investment techniques and risks different from those associated with ordinary portfolio security transactions, such as potentially heightened counterparty, concentration and exposure risks.

**Credit Risk**. Credit risk is the risk that an issuer of a security will fail to pay principal and interest in a timely manner, reducing the Fund's total return. In addition, the credit quality of fixed income securities held by the Fund may be lowered if an issuer's financial condition changes. The issuer of a fixed income security may also default on its obligations. The Fund's exposure to credit risk may be increased through its investments in high-yield securities, commonly known as "junk bonds." Credit risk may be substantial for the Fund.

 **Currency Risk.** Currency trading involves significant risks, including market risk, interest rate risk, country risk, counterparty credit risk and short sale risk. Market risk results from the price movement of foreign currency values in response to shifting market supply and demand. Since exchange rate changes can readily move in one direction, a currency position carried overnight or over a number of days may involve greater risk than one carried a few minutes or hours. Interest rate risk arises whenever a country changes its stated interest rate target associated with its currency. Country risk arises because virtually every country has interfered with international transactions in its currency. Interference has taken the form of regulation of the local exchange market, restrictions on foreign investment by residents or limits on inflows of investment funds from abroad. Restrictions on the exchange market or on international transactions are intended to affect the level or movement of the exchange rate. This risk could include the country issuing a new currency, effectively making the "old" currency worthless. The Fund may also take short positions, through derivatives, if the Advisor believes the value of a currency is likely to depreciate in value. A "short" position is, in effect, similar to a sale in which the Fund sells a currency it does not own but has borrowed in anticipation that the market price of the currency will decline. The Fund must replace a short currency

position by purchasing it at the market price at the time of replacement, which may be more or less than the price at which the Fund took a short position in the currency.

**Cybersecurity Risk**. The computer systems, networks and devices used by the Fund and their service providers to carry out routine business operations employ a variety of protections designed to prevent damage or interruption from computer viruses, network failures, computer and telecommunication failures, infiltration by unauthorized persons and security breaches. Despite the various protections utilized by the Fund and their service providers, systems, networks, or devices potentially can be breached. The Fund and their shareholders could be negatively impacted as a result of a cybersecurity breach.

Cybersecurity breaches can include unauthorized access to systems, networks, or devices; infection from computer viruses or other malicious software code; and attacks that shut down, disable, slow, or otherwise disrupt operations, business processes, or website access or functionality. Cybersecurity breaches may cause disruptions and impact the Fund's business operations, potentially resulting in financial losses; interference with the Fund's ability to calculate its NAV; impediments to trading; the inability of the Fund, the Advisor and other service providers to transact business; violations of applicable privacy and other laws; regulatory fines, penalties, reputational damage, reimbursement or other compensation costs, or additional compliance costs; as well as the inadvertent release of confidential information.

Similar adverse consequences could result from cybersecurity breaches affecting issuers of securities in which the Fund invests; counterparties with which the Fund engages in transactions; governmental and other regulatory authorities; exchange and other financial market operators, banks, brokers, dealers, insurance companies, and other financial institutions (including financial intermediaries and service providers for the Fund's shareholders); and other parties. In addition, substantial costs may be incurred by these entities in order to prevent any cybersecurity breaches in the future.

**Derivatives Risk**. The Fund may use derivatives to enhance returns or hedge against market declines. The Fund's use of derivative instruments involves risks different from, or possibly greater than, the risks associated with investing directly in securities and other traditional investments. These risks include (i) the risk that the counterparty to a derivative transaction may not fulfill its contractual obligations; (ii) risk of mispricing or improper valuation; and (iii) the risk that changes in the value of the derivative may not correlate perfectly with the underlying reference asset. Derivatives may also be less tax efficient and subject to changing government regulation that could impact the Fund's ability to use certain derivatives or their cost. In addition, changes in government regulation of derivative instruments could affect the character, timing, and amount of the Fund's taxable income or gains and may limit or prevent the Fund from using certain types of derivative instruments as a part of its investment strategy, which could make the investment strategy more costly to implement or require the Fund to change its investment strategy. When a derivative is used for hedging, the change in value of the derivative may also not correlate specifically with the risk of the underlying asset being hedged. Derivative prices are highly volatile and may fluctuate substantially during a short period of time. Such prices are influenced by numerous factors that affect the markets, including, but not limited to: changing supply and demand relationships; government programs and policies; national and international political and economic events and changes in interest rates, inflation and deflation. Trading derivative instruments involves risks different from, or possibly greater than, the risks associated with investing directly in securities, including:

*Call Options Risk.* There are risks associated with the sale and purchase of call options. As the seller (writer) of a covered call option, the Fund assumes the risk of a decline in the market price of the underlying security below the purchase price of the underlying security less the premium received, and gives up the opportunity for gain on the underlying security above the exercise option price. The Fund continues to bear the risk that it will lose money if the value of the security falls below the strike price. Option premiums are treated as short-term capital gains and, when

distributed to shareholders, are usually taxable as ordinary income, which may have a higher tax rate than long-term capital gains for shareholders holding Fund shares in a taxable account. As the buyer of a call option, the Fund assumes the risk that the market price of the underlying security will not increase above the strike price plus the premiums paid, so the Fund bears the risk that it will lose the premium paid for the option.

*Credit Default Swap Risk.* Credit default swaps ("CDS") are typically two-party financial contracts that transfer credit exposure between the two parties. Under a typical CDS, one party (the "seller") receives pre-determined periodic payments from the other party (the "buyer"). The seller agrees to make compensating specific payments to the buyer if a negative credit event occurs, such as the bankruptcy or default by the issuer of the underlying debt instrument. The use of CDS involves investment techniques and risks different from those associated with ordinary portfolio security transactions, such as potentially heightened counterparty, concentration, and exposure risks.

*Credit Spread Options Risk.* The Fund's credit spread options positions expose the Fund to leverage risk because a small investment may produce large changes in Fund value. Additionally, the Fund's credit spread options positions expose the Fund to losses limited by the spread's price differential, which is the difference between the strike prices less the net credits from writing a call (put) option while buying a call (put) option at a higher (lower) strike price.

*Counterparty Risk.* The Fund may engage in transactions in securities and financial instruments that involve counterparties. Counterparty risk is the risk that a counterparty (the other party to a transaction or an agreement or the party with whom the Fund executes transactions) to a transaction with the Fund may be unable or unwilling to make timely principal, interest or settlement payments, or otherwise honor its obligations and therefore delays or impairs the Fund's ability to recover its deposits with, or any payments from, such counterparty.

*Foreign Currency Forward Contract Risk.* Foreign currency forward contracts are a type of derivative contract whereby the Fund may agree to buy or sell a country's or region's currency at a specific price on a specific date, usually 30, 60, or 90 days in the future. These contracts are subject to the risk of political and economic factors applicable to the countries issuing the underlying currencies and may fall in value due to foreign market downswings or foreign currency value fluctuations. Forward foreign currency contracts are individually negotiated and privately traded, so they are dependent upon the creditworthiness of the counterparty and subject to counterparty risk. The Fund's investment or hedging strategies may not achieve their objective.

*Forwards Risk.* Forward contracts are individually negotiated and privately traded so they are dependent upon the creditworthiness of the counterparty and subject to counterparty default risk and liquidity risk. If a counterparty defaults and fails to deliver or settle a forward trade, replacing the transaction may be costly. Liquidity risk exists because no organized secondary market exists to trade or dispose of forward obligations**.** 

*Futures Risk.* The Fund's use of futures involves risks different from, or possibly greater than, the risks associated with investing directly in securities and other traditional investments and exposes the Fund to the risks associated with derivative instruments described above. These risks include (i) leverage risk (ii) risk of mispricing or improper valuation; and (iii) the risk that changes in the value of the futures contract may not correlate perfectly with the underlying index. Investments in futures involve leverage, which means a small percentage of assets invested in futures can have a disproportionately large impact on the fund. This risk could cause the fund to lose more than the principal amount invested. In addition, futures contracts may become mispriced or improperly valued relative to the Advisor's expectation and may not produce the desired investment results.

Additionally, changes in the value of futures contracts may not track or correlate perfectly with the underlying reference asset because of temporary, or even long-term, supply and demand imbalances. Most U.S. commodity futures exchanges impose daily limits regulating the maximum amount above or below the previous day's settlement price which a futures contract price may fluctuate during a single day. During a single trading day, no trades may be executed at prices beyond the daily limit. Once the price of a particular futures contract has increased or decreased to the limit point, it may be difficult, costly or impossible to liquidate a position. It is also possible that an exchange or the CFTC, which regulates commodity futures exchanges, may suspend trading in a particular contract, order immediate settlement of a contract or order that trading be for liquidation of open positions only.

*Hedging Risk.* Hedging is a strategy in which the Fund uses a security or derivative to reduce the risks associated with other Fund holdings. There can be no assurance that the Fund's hedging strategy will reduce risk or that hedging transactions will be either available or cost effective. The Fund is not required to use hedging and may choose not to do so.

*Leverage and Volatility Risk.* Derivative contracts ordinarily have leverage inherent in their terms. The low margin deposits normally required in trading derivatives permit a high degree of leverage. Accordingly, a relatively small price movement may result in an immediate and substantial loss to the Fund. The use of leverage may also cause the Fund to liquidate portfolio positions when it would not be advantageous to do so in order to satisfy its obligations or to meet collateral segregation requirements. The use of leveraged derivatives can magnify the Fund's potential for gain or loss and, therefore, amplify the effects of market volatility on the Fund's share price.

*Liquidity Risk.* It is possible that particular derivative investments might be difficult to purchase or sell, possibly preventing the Fund from executing positions at an advantageous time or price, or possibly requiring it to dispose of other investments at unfavorable times or prices in order to satisfy its obligations.

*Options Market Risk.* Markets for options and options on futures may not always operate on a fair and orderly basis. At times, prices for options and options on futures may not represent fair market value and prices may be subject to manipulation, which may be extreme under some circumstances. The dysfunction and manipulation of volatility and options markets may make it difficult for the Fund to effectively implement its investment strategy and achieve its objectives, and could potentially lead to significant losses.

*Options Risk.* There are risks associated with the sale and purchase of call and put options. Generally, options may not be an effective hedge because they may have imperfect correlation to the value of the Fund's portfolio securities. Additionally, the underlying reference instrument on which the option is based may have imperfect correlation to the value of the Fund's portfolio securities. As the buyer of a call option, the Fund risks losing the entire premium invested in the option if the underlying reference instrument does not rise above the strike price, which means the option will expire worthless. As the buyer of a put option, the Fund risks losing the entire premium invested in the option if the underlying reference instrument does not fall below the strike price, which means the option will expire worthless. Additionally, purchased options may decline in value due to changes in price of the underlying reference instrument, passage of time and changes in volatility. As a seller (writer) of a put option, the Fund will lose money if the value of the underlying reference instrument falls below the strike price. As a seller (writer) of a call option, the Fund will lose money if the value of the underlying reference instrument rises above the strike price. The Fund's losses are potentially large in a written put transaction and potentially unlimited in a written call transaction. Option premiums are treated as short-term capital gains and, when distributed to

shareholders, are usually taxable as ordinary income, which may have a higher tax rate than long-term capital gains for shareholders holding Fund shares in a taxable account. Because option premiums paid or received by the Fund are small in relation to the market value of the investments underlying the options, buying and selling put and call options can be more speculative than investing directly in securities.

*Swaps Risk.* The Fund may use swaps to enhance returns and manage risk. The Fund's use of swaps involves risks different from, or possibly greater than, the risks associated with investing directly in securities and other traditional investments and exposes the Fund to the risks associated with derivative instruments described above. In a standard "swap" transaction, two parties agree to exchange the returns, differentials in rates of return or some other amount earned or realized on the "notional amount" of predetermined investments or instruments, which may be adjusted for an interest factor. Swaps can involve greater risks than direct investment in securities because swaps may be leveraged and subject to counterparty risk (e.g., the risk of a counterparty's defaulting on the obligation or bankruptcy), credit risk and pricing risk (i.e., swaps may be difficult to value). Swaps are also subject to non-correlation risk because they may not be perfect substitutes for the instruments they are intended to hedge or replace. Swaps may also be considered illiquid. It may not be possible for the Fund to liquidate a swap position at an advantageous time or price, which may result in significant losses.

*Total Return Swap Risk.* A total return swap is a contract in which one party agrees to make periodic payments to another party based on the change in market value of the assets underlying the contract, which may include a specified security, basket of securities, or securities indices during the specified period, in return for periodic payments based on a fixed or variable interest rate or the total return from other underlying assets. Total return swap agreements may be used to obtain exposure to a security or market without owning or taking physical custody of such security or investing directly in such market. Total return swap agreements may effectively add leverage to the Fund's portfolio because, in addition to its total net assets, the Fund would be subject to investment exposure on the notional amount of the swap. The primary risks associated with total returns swaps are credit risk (if the counterparty fails to meet its obligations) and liquidity risk (if there is no liquid market for the agreement or unfavorable changes occur to the underlying asset).

*Written Call Option Risk.* Selling covered call or stock index options will limit the Fund's gain, if any, on its underlying securities. Losses on stock index options may only be partially offset by gains in the Fund's portfolio if the portfolio does not track the call-related stock index. The Fund continues to bear the risk of a decline in the value of its underlying stocks. Option premiums are treated as short-term capital gains and, when distributed to shareholders, are usually taxable as ordinary income, which may have a higher tax rate than long-term capital gains for shareholders holding Fund shares in a taxable account.

**Digital Assets Futures Contracts Risk.** A fund may be indirectly exposed to risks of investing in digital assets through its investments in digital asset futures contracts, such as Bitcoin and/or Ether. In addition to the risks of futures contracts generally, the markets for digital asset futures contracts have additional unique risks. The markets for digital asset futures contracts may be less developed, less liquid and more volatile than more established futures markets. Digital assets such as Bitcoin and Ether are technological innovations with a limited history and, while the markets for the Bitcoin and Ether futures contracts have grown substantially since they commenced trading, there can be no assurance that this volume and growth will continue.

Digital asset futures contracts may be subject to larger collateral requirements and have exposure limits imposed by brokers and exchanges. These limits may impact a fund's ability to achieve its desired exposure.

As with other futures markets, during periods of high volatility or illiquidity, it may be difficult to execute a trade at a specific price when there is a relatively small volume of buy and sell orders in a market. A materially adverse development in one or more of the factors that influences the liquidity of the market for digital assets futures may cause the market to become illiquid, for short or long periods. In such markets, the Fund's Subsidiary may not be able to buy and sell digital asset futures contracts quickly (or at all) or at the desired price. Such market illiquidity may cause losses for a fund.

The price of digital asset futures contracts is based on the expected price of the respective digital asset on certain digital asset exchanges on the expiration date of the digital asset futures contracts. Digital asset futures prices reflect the price of the respective digital asset on certain digital asset exchanges only, and not cash markets. The liquidity of markets for digital asset futures depends on, among other things: the supply and demand for the digital asset; the adoption of the digital asset for commercial uses; the anticipated increase of investments in and investment products related to the digital asset by retail and institutional investors; speculative interest in the digital asset, futures on the digital asset and investment products related to the digital asset; regulatory or other restrictions on investors' ability to invest in digital asset futures; and the potential ability to hedge against the price of digital asset with the related digital asset futures (and vice versa).

**Distribution Policy Risk.** The Fund's distribution policy is not designed to generate, and is not expected to result in, distributions that equal a fixed percentage of the Fund's current net asset value per share. Shareholders receiving periodic payments from the Fund may be under the impression that they are receiving net profits. However, all or a portion of a distribution may consist of a return of capital. Return of capital is the portion of distribution that is a return of your original investment dollars in the Fund. Shareholders should not assume that the source of a distribution from the Fund is net profit. Shareholders should note that return of capital will reduce the tax basis of their shares and potentially increase the taxable gain, if any, upon disposition of their shares. The Fund will provide disclosures, with each quarterly distribution, that estimate the percentages of the current and year-to-date distributions that represent (1) net investment income, (2) capital gains and (3) return of capital. At the end of the year, the Fund may be required under applicable law to re-characterize distributions made previously during that year among (1) ordinary income, (2) capital gains and (3) return of capital for tax purposes.

**Dividend Yield Risk.** While the Fund may hold securities of companies that have historically paid a dividend, those companies may reduce or discontinue their dividends, thus reducing the yield of the Fund. Lower priced securities in the Fund may be more susceptible to these risks. Past dividend payments are not a guarantee of future dividend payments. Also, the market return of high dividend yield securities, in certain market conditions, may be worse than the market return of other investment strategies or the overall stock market.

**Duration Risk.** Longer-term securities may be more sensitive to interest rate changes. In a low interest rate environment where there is potential for increases in those rates, a heightened risk is posed by rising interest rates to longer-term fixed income securities. Effective duration estimates price changes for relatively small changes in rates. If rates rise significantly, effective duration may tend to understate the drop in a security's price. If rates drop significantly, effective duration may tend to overstate the rise in a security's price. Duration should not be confused with maturity. The maturity of a fixed income security is a measure of the amount of time left until the security "matures" or repays its face value. In contrast, duration measures the price sensitivity of a fixed income security to changes in interest rates rather than the amount of time remaining to maturity. Longer duration tends to result in greater volatility and a greater sensitivity to interest rate changes. For example, a five-year duration means that the fixed income security will decrease in value by 5% if interest rates rise 1% and increase in value by 5% if interest rates fall 1%.

 **Emerging Market Risk.** The Fund may invest in countries with newly organized or less developed securities markets. There are typically greater risks involved in investing in emerging markets securities. Generally, economic structures in these countries are less diverse and mature than those in developed countries and their political systems tend to be less stable. Emerging markets countries may have a higher degree of corruption and fraud than developed market countries, as well as counterparties and financial institutions with less financial sophistication, creditworthiness and/or resources. Emerging market economies may be based on only a few industries, therefore security issuers, including governments, may be more susceptible to economic weakness and more likely to default. Emerging market countries may also have higher rates of inflation and more rapid and extreme fluctuations in inflation rates and greater sensitivity to interest rate changes. Emerging market countries may have relatively unstable governments, weaker economies, and less-developed legal systems with fewer security holder rights. Therefore, laws regarding foreign investment in emerging market securities, securities regulation, title to securities, and shareholder rights may change quickly and unpredictably. Emerging markets countries also may have less developed legal systems allowing for enforcement of private property rights and/or redress for injuries to private property, such as bankruptcy. The ability to bring and enforce actions in emerging market countries, or to obtain information needed to pursue or enforce such actions, may be limited, and shareholder claims may be difficult or impossible to pursue. In addition, the taxation systems at the federal, regional, and local levels in emerging market countries may be less transparent and inconsistently enforced, and subject to sudden change. Further, companies in emerging market countries generally may be subject to less stringent regulatory, disclosure, financial reporting, accounting, auditing and recordkeeping standards than companies in more developed countries and, as a result, the nature and quality of such information may vary. Information about such companies may be less available and reliable and, therefore, the ability to conduct adequate due diligence in emerging markets may be limited, which can impede the Fund's ability to evaluate such companies. In addition, certain emerging market countries have material limitations on Public Company Accounting Oversight Board ("PCAOB") inspection, investigation and enforcement capabilities, which hinder the ability to engage in independent oversight or inspection of accounting firms located in or operating in certain emerging markets; therefore, there is no guarantee that the quality of financial reporting or the audits conducted by audit firms of emerging market issuers meet PCAOB standards. The potentially smaller size of emerging markets countries' securities markets and lower trading volumes can make investments relatively illiquid and potentially more volatile than investments in developed countries, and such securities may be subject to abrupt and severe price declines. Due to this relative lack of liquidity, the Fund may have to accept a lower price or may not be able to sell a portfolio security at all. An inability to sell a portfolio position can adversely affect the Fund's value or prevent the Fund from being able to meet cash obligations or take advantage of other investment opportunities. Other risks of investing in emerging markets securities may include additional transaction costs, delays in settlement procedures, unexpected market closures, and lack of timely information.

**Energy and Infrastructure Industry Risk.** Companies in the energy and infrastructure industry are subject to many risks that can negatively impact the revenues and viability of companies in this industry. These risks include, but are not limited to, commodity price volatility risk, supply and demand risk, reserve and depletion risk, operations risk, regulatory risk, environmental risk, terrorism risk and the risk of natural disasters.

**Energy Sector Risk**. Risks of energy related securities include the risks that a decrease in the production of natural gas, natural gas liquids, crude oil, coal or other energy commodities, or a decrease in the volume of such commodities available for transportation, mining, processing, storage or distribution, may adversely impact the financial performance of energy related securities. To maintain or grow their revenues, these companies need to maintain or expand their reserves through exploration of new sources of supply, through the development of existing sources, through acquisitions, or through long-term contracts to acquire reserves. The financial performance of energy related securities may be adversely affected if an MLP, or the companies to whom it provides the service, are unable to cost-effectively acquire additional reserves

sufficient to replace the natural decline. Various governmental authorities have the power to enforce compliance with regulations and the permits issued under them, and violators are subject to administrative, civil and criminal penalties, including civil fines, injunctions or both. Stricter laws, regulations or enforcement policies could be enacted in the future which would likely increase compliance costs and may adversely affect the financial performance of energy related securities. Volatility of commodity prices, which may lead to a reduction in production or supply, may also negatively impact the performance of energy related securities. Energy related securities are also subject to risks that are specific to the industry they serve. Energy related entities that provide crude oil, refined product, natural gas liquids and natural gas services are subject to supply and demand fluctuations in the markets they serve which will be impacted by a wide range of factors, including fluctuating commodity prices, weather, increased conservation or use of alternative fuel sources, increased governmental or environmental regulation, depletion, rising interest rates, declines in domestic or foreign production, accidents or catastrophic events, and economic conditions, among others.

**Equity Security Risk**. Equity securities are susceptible to general stock market fluctuations and to volatile increases and decreases in value. Equity securities may experience sudden, unpredictable drops in value or long periods of decline in value. This may occur because of factors affecting securities markets generally, the equity securities of a particular sector, or a particular company. Investor perceptions are based on various and unpredictable factors, including expectations regarding government, economic, monetary, trade and fiscal policies; inflation and interest rates; economic expansion or contraction and global or regional political, economic and banking crises.

**ETNs Risk.** Similar to ETFs, owning an ETN generally reflects the risks of owning the assets that comprise the underlying market benchmark or strategy that the ETN is designed to reflect. ETNs also are subject to issuer and fixed income risk. In addition, ETNs are subject to counterparty risk, which is the risk that the broker-dealer or bank that issues the notes will not fulfill its contractual obligation to complete the transaction with the Fund and thereby delays or impairs the Fund's ability to recover its deposits with such counterparty. ETNs constitute general unsecured contractual obligations of the banks or broker-dealers that issue them, and the Fund is relying on the creditworthiness of such banks or broker-dealers.

**Extension Risk.** Extension risk is the risk that if interest rates rise, repayments of principal on certain debt securities, including, but not limited to, floating rate loans and mortgage-related securities, may occur at a slower rate than expected, and the expected maturity of those securities could lengthen as a result. Securities that are subject to extension risk generally have a greater potential for loss when prevailing interest rates rise, which could cause their values to fall sharply.

**Financials Sector Risk***.* Performance of companies in the financial sector may be adversely impacted by many factors, including, among others, government regulations, economic conditions, credit rating downgrades, changes in interest rates, and decreased liquidity in credit markets. The impact of more stringent capital requirements, recent or future regulation of any individual financial company, or recent or future regulation of the financial sector as a whole cannot be predicted.

**Fixed Income Risk**. The value of the Fund's fixed income securities will fluctuate with changes in interest rates. Typically, a rise in interest rates causes a decline in the value of fixed income securities owned by the Fund. In general, the market price of fixed income securities with longer maturities will increase or decrease more in response to changes in interest rates than shorter-term securities. Other risk factors include credit risk (the risk that the debtor may default) and prepayment risk (the risk that the debtor may pay its obligation early, reducing the amount of interest payments). These risks could affect the value of a particular investment by the Fund, possibly causing the Fund's share price and total return to be reduced and fluctuate more than other types of investments.

 **Floating Rate Loans Risk.** The Fund may invest in floating rate loans that are senior in the capital structure of the borrower or issuer, and that are secured with specific collateral. Loans that are senior and secured generally involve less risk than unsecured or subordinated debt and equity instruments of the same borrower because the payment of principal and interest on senior loans is an obligation of the borrower that, in most instances, takes precedence over the payment of dividends or the return of capital to the borrower's shareholders, and payments to bond holders; and because of the collateral supporting the repayment of the debt instrument. However, the value of the collateral may not equal the Fund's investment when the debt instrument is acquired or may decline below the principal amount of the debt instrument subsequent to the Fund's investment. Also, to the extent that collateral consists of stocks of the borrower, or its subsidiaries or affiliates, the Fund bears the risk that the stocks may decline in value, be relatively illiquid, or may lose all or substantially all of their value, causing the Fund's investment to be under-collateralized. Therefore, the liquidation of the collateral underlying a floating rate loan in which the Fund has invested may not satisfy the borrower's obligation to the Fund in the event of non-payment of scheduled interest or principal, and the collateral may not be able to be readily liquidated.

In the event of the bankruptcy of a borrower or issuer, the Fund could experience delays and limitations on its ability to realize the benefits of the collateral securing the Fund's investment. Among the risks involved in a bankruptcy are assertions that the pledge of collateral to secure a loan constitutes a fraudulent conveyance or preferential transfer that would have the effect of nullifying or subordinating the Fund's rights to the collateral.

Floating rate loans are also subject to interest rate risk arising from changes in short-term market interest rates. If short-term market interest rates fall, the yield on the Fund's shares will also fall. Conversely, when short-term market interest rates rise, because of the lag between changes in such short-term rates and the resetting of the floating rates on the floating rate debt in the Fund's portfolio, the impact of rising rates will be delayed to the extent of such lag. The impact of market interest rate changes on the Fund's yield will also be affected by whether, and the extent to which, the floating rate debt in the Fund's portfolio is subject to floors on the base rate on which interest is calculated for such loans (a "base rate floor"). So long as the base rate for a loan remains under the base rate floor, changes in short-term interest rates will not affect the yield on such loans. In addition, to the extent that the interest rate spreads on floating rate debt in the Fund's portfolio experience a general decline, the yield on the Fund's shares will fall and the value of the Fund's assets may decrease, which will cause the Fund's net asset value to decrease.

The floating rate debt in which the Fund invests may be generally rated lower than investment-grade credit quality, i.e., rated lower than "Baa3" by Moody's Investors Service, Inc. ("Moody's") or "BBB-" by S&P Global Ratings ("S&P"), or have been made to borrowers who have issued debt securities that are rated lower than investment-grade in quality or, if unrated, would be rated lower than investment-grade credit quality. Investment decisions for the Fund will be based largely on the credit analysis performed by the Advisor and not entirely on rating agency evaluation. This analysis may be difficult to perform. Information about a loan and its borrower generally is not in the public domain. Many borrowers have not issued securities to the public and are not subject to reporting requirements under federal securities laws. Generally, however, borrowers are required to provide financial information to lenders and information may be available from other loan market participants or agents that originate or administer loans.

**Foreign Exchanges Risk.** A portion of the derivatives trades made by the Fund may take place on foreign markets. Neither existing CFTC regulations nor regulations of any other U.S. governmental agency apply to transactions on foreign markets. Some of these foreign markets, in contrast to U.S. exchanges, are so-called principals' markets in which performance is the responsibility only of the individual counterparty with whom the trader has entered into a commodity interest transaction and not of the exchange or clearing corporation. In these kinds of markets, there is risk of bankruptcy or other failure or refusal to perform by the counterparty.

**Foreign Investment Risk.** To the extent the Fund invest in foreign securities, 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 they would a mutual fund that invests exclusively in U.S. companies. The value of foreign securities is also affected by the value of the local currency relative to the U.S. dollar. There may also be less government supervision of foreign markets, resulting in non-uniform accounting practices and less publicly available information. The values 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. In addition, foreign brokerage commissions, custody fees and other costs of investing in foreign securities are generally higher than in the United States. Investments in foreign issuers 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. As a result, the Fund may be exposed to greater risk and will be more dependent on the Advisor's ability to assess such risk than if the Fund invested solely in more developed countries. Additionally, foreign custodial services are generally more expensive in foreign jurisdictions than in the United States. Because the procedures for settling securities transactions in foreign markets differ from those in the United States, it may be more difficult for the Fund to make intended purchases and sales of securities in foreign countries.

**Geographic Concentration Risk.** The Fund may be particularly susceptible to economic, political, regulatory, or other events or conditions affecting countries within the specific geographic regions in which the Fund invests. Currency devaluations could occur in countries that have not yet experienced currency devaluation to date, or could continue to occur in countries that have already experienced such devaluations. As a result, the Fund's net asset value may be more volatile than a more geographically diversified fund.

**Growth Stock Risk.** "Growth" stocks can react differently to issuer, political, market, and economic developments than the market as a whole and other types of stocks. "Growth" stocks also tend to be more expensive relative to their earnings or assets compared to other types of stocks. As a result, "growth" stocks tend to be sensitive to changes in their earnings and more volatile in price than the stock market as a whole. In addition, companies that the Advisor believes have significant growth potential are often companies with new, limited, or cyclical product lines, markets or financial resources, and the management of such companies may be dependent upon one or a few key people. The stocks of such companies can therefore be subject to more abrupt or erratic market movements than stocks of larger, more established companies or the stock market in general.

**Healthcare Sector Risk.** The healthcare sector may be affected by government regulations and government healthcare programs, increases, or decreases in the cost of medical products and services and product liability claims, among other factors. Many healthcare companies are heavily dependent on patent protection, and the expiration of a company's patent may adversely affect that company's profitability. Healthcare companies are subject to competitive forces that may result in price discounting and may be thinly capitalized and susceptible to product obsolescence.

**Income Risk.** The Fund's distributions to shareholders may decline when prevailing interest rates fall, when the Fund experiences deterioration of the underlying debt securities it holds, or when the Fund realizes a loss upon the sale of a debt security.

**Index Risk**. If the derivative is linked to the performance of an index, it will be subject to the risks associated with changes in that index.

 **Industrials Sector Risk***.* The value of securities issued by companies in the industrials sector may be adversely affected by supply and demand related to their specific products or services and industrials sector products in general. The products of manufacturing companies may face obsolescence due to rapid technological developments and frequent new product introduction. Government regulations, world events, economic conditions and exchange rates may adversely affect the performance of companies in the industrials sector. Companies in the industrials sector may be adversely affected by liability for environmental damage and product liability claims. Companies in the industrials sector, particularly aerospace and defense companies, may also be adversely affected by government spending policies because companies involved in this sector rely to a significant extent on government demand for their products and services.

**Inflation-Indexed Bond Risk.** Inflation-indexed bonds are fixed income securities whose principal values are periodically adjusted according to a measure of inflation. If the index measuring inflation falls, the principal value of inflation-indexed bonds will be adjusted downward, and consequently the interest payable on these securities (calculated with respect to a smaller principal amount) will be reduced. Repayment of the original bond principal upon maturity (as adjusted for inflation) is guaranteed in the case of U.S. Treasury inflation indexed bonds. For bonds that do not provide a similar guarantee, the adjusted principal value of the bond repaid at maturity may be less than the original principal. With regard to municipal inflation-indexed bonds and certain corporate inflation-indexed bonds, the inflation adjustment is reflected in the semi-annual coupon payment. As a result, the principal value of municipal inflation-indexed bonds and such corporate inflation indexed bonds does not adjust according to the rate of inflation. The value of inflation-indexed bonds is expected to change in response to changes in real interest rates. Real interest rates are tied to the relationship between nominal interest rates and the rate of inflation. If nominal interest rates increase at a faster rate than inflation, real interest rates may rise, leading to a decrease in value of inflation-indexed bonds. Inflation-indexed bonds may cause a potential cash flow mismatch to investors because an increase in the principal amount of an inflation-indexed bond will be treated as interest income currently subject to tax at ordinary income rates even though investors will not receive repayment of principal until maturity. If the Fund invests in such bonds, it will be required to distribute such interest income in order to qualify for treatment as a regulated investment company and eliminate the Fund-level tax, without a corresponding receipt of cash, and therefore may be required to dispose of portfolio securities at a time when it may not be desirable.

**Inflation Protected Securities Risk.** Inflation-protected debt securities tend to react to changes in real interest rates. Real interest rates represent nominal (stated) interest rates reduced by the expected impact of inflation. In general, the price of an inflation-protected debt security can fall when real interest rates rise and can rise when real interest rates fall. Interest payments on inflation-protected debt securities can be unpredictable and will vary as the principal and/or interest is adjusted for inflation.

**Information Technology Sector Risk.** Information technology companies face intense competition, both domestically and internationally, which may have an adverse effect on profit margins. Information technology companies may have limited product lines, markets, financial resources, or personnel. The products of information technology companies may face obsolescence due to rapid technological developments and frequent new product introduction, unpredictable changes in growth rates, and competition for the services of qualified personnel. Companies in the information technology sector are heavily dependent on patent and intellectual property rights. The loss or impairment of these rights may adversely affect the profitability of these companies.

**Interest Rate Risk.** Interest rate risk is the risk that bond prices overall, including the prices of securities held by the Fund, will decline over short or even long periods of time due to rising interest rates. Bonds with longer maturities tend to be more sensitive to interest rates than bonds with shorter maturities. For example, if interest rates go up by 1.0%, the price of a 4% coupon bond will decrease by approximately

1.0% for a bond with 1 year to maturity and approximately 4.4% for a bond with 5 years to maturity. The maturity and effective duration of the Fund's investment portfolio may vary materially from its target, from time to time, and there is no assurance that the Fund will achieve or maintain the target maturity or effective duration of its investment portfolio.

**Investment Style Risk.** The particular type of investments in which the Fund focuses (such as large-capitalization stocks or growth stocks) may underperform other asset classes or the overall market. Individual market segments such as the large-cap, mid-cap and small-cap U.S. equity market segments tend to go through cycles of performing better or worse than other types of securities. These periods may last as long as several years. Additionally, a particular market segment could fall out of favor with investors, causing the Fund that focuses on that market segment to underperform those that favor other kinds of securities.

**IPO Risk**. The Fund may invest in IPOs at the time of the offering and in post-IPO trading. The stocks of such companies are unseasoned equities lacking a trading history, a track record of reporting to investors and widely available research coverage. IPOs are thus often subject to extreme price volatility and speculative trading. Due to limited shares available on the IPO, the Fund purchases most of its holdings in post-IPO trading. These stocks may have above-average price appreciation in connection with the initial public offering prior to inclusion in the Fund. The price of stocks included in the Fund may not continue to appreciate and the performance of these stocks may not replicate the performance exhibited in the past. In addition, IPOs share similar liquidity risks as private equity and venture capital. Such liquidity risks exist when particular investments of the Fund would be difficult to purchase or sell, possibly preventing the Fund from selling such illiquid securities at an advantageous time or price, or possibly requiring the Fund to dispose of other investments at unfavorable times or prices in order to satisfy its obligations. The free float shares held by the public in an IPO are typically a small percentage of the market capitalization. The ownership of many IPOs often include large holdings by venture capital and private equity investors who seek to sell their shares in the public market in the months following an IPO when shares restricted by lock-up are released, causing greater volatility and possible downward pressure during the time that lock-up shares are released.

**Issuer-Specific Risk.** The value of the Fund may decrease in response to the activities and financial prospects of an individual security in the Fund's portfolio. The net asset value of the Fund will fluctuate based on changes in the value of the securities in which the Fund invests. The Fund invests in securities that may be more volatile and carry more risk than some other forms of investment. The price of securities may rise or fall because of economic or political changes. Security prices in general may decline over short or even extended periods of time. Market prices of securities in broad market segments may be adversely affected by a prominent issuer having experienced losses, lack of earnings, 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.

**Junk Bond Risk**. Lower-quality bonds, known as "high yield" or "junk" bonds, are considered to be speculative with respect to the issuer's ability to pay interest and principal when due and present a significant risk for loss of principal and interest. These bonds offer the potential for higher return, but also involve greater risk than bonds of higher quality, including an increased possibility that the bond's issuer, obligor or guarantor may not be able to make its payments of interest and principal (credit quality risk). If that happens, the value of the bond may decrease, and the Fund's share price may decrease and its income distribution may be reduced. An economic downturn or period of rising interest rates (interest rate risk) could adversely affect the market for these bonds and reduce the Fund's ability to sell the bonds in its portfolio (liquidity risk). Such securities may also include "Rule 144A" securities, which are subject to resale restrictions. The lack of a liquid market for these bonds could decrease the value of the Fund's portfolio and net asset value per share.

 **Large Capitalization Stock Risk.** Investments in larger, more established companies are subject to the risk that larger companies are sometimes unable to attain the high growth rates of successful, smaller companies, especially during extended periods of economic expansion. Large-capitalization companies may be less able than smaller capitalization companies to adapt to changing market conditions. Larger, more established companies may be unable to respond quickly to new competitive challenges, such as changes in consumer tastes or innovative smaller competitors, potentially resulting in lower markets for their common stock. During different market cycles, the performance of large capitalization companies has trailed the overall performance of the broader securities markets.

**Leverage Risk.** The use of leverage by the Fund, such as through the use of derivatives, will cause the Fund to incur additional expenses and magnify the Fund's gains or losses. Derivatives and other transactions that give rise to leverage, meaning that the Fund can obtain significant investment exposure in return for meeting a relatively small margin or other investment requirement, may cause the Fund's performance to be more volatile than if the Fund had not been leveraged. Relatively small market movements may result in large changes in the value of a leveraged derivatives position. Leveraging also may require that the Fund liquidate portfolio securities when it may not be advantageous to do so to satisfy its obligations. Leveraging may expose the Fund to losses in excess of the amounts invested or borrowed.

**Limited History of Operations Risk*.*** The Fund has a limited history of operations for investors to evaluate. Due to the Fund's small asset size, certain of the Fund's expenses and its portfolio transaction costs may be higher than those of the Fund with a larger asset size. There can be no assurance that the Fund will grow to an economically viable size, in which case the Fund may cease operations. In such an event, investors may be required to liquidate or transfer their investments at a loss.

**Liquidity Risk**. Liquidity risk exists when particular investments of the Fund would be difficult to purchase or sell, possibly preventing the Fund from selling such illiquid securities at an advantageous time or price, or possibly requiring the Fund to dispose of other investments at unfavorable times or prices in order to timely meet its redemption obligations. Liquid securities can become illiquid due to political, economic or issuer specific events; supply/demand imbalances; changes in a specific market's size or structure, including the number of participants; or overall market disruptions.

**Litigation Risk**. The Fund may be named in a lawsuit despite no wrongdoing by the Fund, its Advisor or any other service provider to the Fund. The defense of a lawsuit may detrimentally impact the Fund and its shareholders, including incurring legal defense cost, regulatory costs and increased insurance premiums.

**Loan Risk.** Investments in bank loans may subject the Fund to heightened credit risks because such loans tend to be highly leveraged and potentially more susceptible to the risks of interest deferral, default and/or bankruptcy. Senior floating rate loans are often rated below investment grade, but may also be unrated. The risks associated with these loans can be similar to the risks of below investment grade fixed income instruments. An economic downturn would generally lead to a higher non-payment rate, and a senior floating rate loan may lose significant market value before a default occurs. Moreover, any specific collateral used to secure a senior floating rate loan may decline in value or become illiquid, which would adversely affect the loan's value. Unlike the securities markets, there is no central clearinghouse for loan trades, and the loan market has not established enforceable settlement standards or remedies for failure to settle. Therefore, portfolio transactions in loans may have uncertain settlement time periods. Senior floating rate loans are subject to a number of risks described elsewhere in this Prospectus, including liquidity risk and the risk of investing in below-investment grade fixed income instruments.

**Lower Quality Debt Risk.** Lower-quality debt securities and certain types of other securities involve greater risk of default or price changes due to changes in the credit quality of the issuer. The value of lower-quality debt securities and certain types of other securities often fluctuates in response to company, political,

or economic developments and can decline significantly over short periods of time or during periods of general or regional economic difficulty. Lower-quality debt securities can be thinly traded or have restrictions on resale, making them difficult to sell at an acceptable price. The default rate for lower-quality debt securities is likely to be higher during economic recessions or periods of high interest rates.

**Machinery and Electrical Equipment Industry Risk**. The machinery and electrical equipment industries can be significantly affected by general economic trends, including employment, economic growth, and interest rates; changes in consumer sentiment and spending; overall capital spending levels, which are influenced by an individual company's profitability and broader factors such as interest rates and foreign competition; commodity prices; technical obsolescence; labor relations legislation; government regulation and spending; import controls; and worldwide competition. Companies in these industries also can be adversely affected by liability for environmental damage, depletion of resources, and mandated expenditures for safety and pollution control.

 **Managed Volatility Risk**. Techniques used by the Advisor to manage the volatility of the Fund's investments carry the risks that such techniques may not protect against market declines. The techniques may also limit the fund's participation in market gains, particularly during periods where market values are increasing but market volatility is high. Further, such techniques may increase portfolio transaction costs, which could result in losses or reduced gains. They also may not be successful, as the techniques are subject to the Advisor's ability to correctly analyze and implement, in a timely manner, the volatility management techniques.

 **Management Risk**. The ability of the Fund to meet its investment objective is directly related to the Advisor's proprietary investment process, as applicable. The Advisor's assessment of the relative value of securities, their attractiveness and potential appreciation of particular investments in which the Fund invests may prove to be incorrect and there is no guarantee that the Advisor's investment strategy or strategies will produce the desired results. As a result, the Fund could underperform other investment vehicles with similar investment objectives.

**Market Capitalization Risk.** Investing primarily in issuers in one market capitalization category (large, medium or small) carries the risk that, due to current market conditions, that category may be out of favor with investors. Larger, more established companies may be unable to respond quickly to new competitive challenges or attain the high growth rate of successful smaller companies. Stocks of smaller companies may be more volatile than those of larger companies due to, among other things, narrower product lines, more limited financial resources and fewer experienced managers. In addition, there is typically less publicly available information about small capitalization companies, and their stocks may have a more limited trading market than stocks of larger companies.

**Market Risk.** Overall market risks may also affect the value of the Fund. The market values of securities or other investments owned by the Fund will go up or down, sometimes rapidly or unpredictably. Factors such as economic growth and market conditions, interest rate levels, exchange rates and political events affect the securities markets. Changes in market conditions and interest rates generally do not have the same impact on all types of securities and instruments. Unexpected local, regional or global events and their aftermath, such as war; acts of terrorism; financial, political or social disruptions; trading and tariff arrangements; natural, environmental or man-made disasters; the spread of infectious illnesses or other public health issues; recessions and depressions; or other tragedies, catastrophes and events could have a significant impact on the Fund and its investments and could result in increased premiums or discounts to the Fund's net asset value, and may impair market liquidity, thereby increasing liquidity risk. Such events can cause investor fear and panic, which can adversely affect the economies of many companies, sectors, nations, regions and the market in general, in ways that cannot necessarily be foreseen. Significant tariff disputes between trading partners can cause affected countries to retaliate, resulting in "trade wars" which

can cause negative effects on the economies of such countries, as well as the global economy. The Fund could lose money over short periods due to short-term market movements and over longer periods during more prolonged market downturns. During a general market downturn, multiple asset classes may be negatively affected. In times of severe market disruptions, you could lose your entire investment.

**Market Volatility-Linked ETFs Risk**. ETFs that are linked to market volatility have the risks associated with investing in futures.

**Medium (Mid) Capitalization Stock Risk**. To the extent the Fund invests in the stocks of mid-sized companies, the Fund may be subject to additional risks. The earnings and prospects of these companies are more volatile than larger companies. These companies may experience higher failure rates than larger companies. Mid-sized companies normally have a lower trading volume than larger companies, which may tend to make their market price fall more disproportionately than larger companies in response to selling pressures. Mid-sized companies may also have limited markets, product lines or financial resources, and may lack management experience.

**Micro Capitalization Risk.** Micro capitalization companies may be newly formed or have limited product lines, distribution channels and financial and managerial resources. The risks associated with those investments are generally greater than those associated with investments in the securities of larger, more established companies. This may cause the Fund's net asset value to be more volatile when compared to investment companies that focus only on large capitalization companies.

Generally, securities of micro capitalization companies are more likely to experience sharper swings in market value and generally are more volatile than larger companies. Micro capitalization companies may trade in less liquid markets in which it may be more difficult for the Advisor to sell at times and at prices that the Advisor believes appropriate. Compared to large companies, micro capitalization companies are more likely to have (i) less information publicly available, (ii) more limited product lines or markets and less mature businesses, (iii) fewer capital resources, (iv) more limited management depth, and (v) shorter operating histories. Further, the equity securities of micro capitalization companies are often traded over the counter and generally experience a lower trading volume than is typical for securities that are traded on a national securities exchange. Consequently, the Fund may be required to dispose of these securities over a longer period of time (and potentially at less favorable prices) than would be the case for securities of larger companies, offering greater potential for gains and losses and associated tax consequences.

**MLP and MLP-Related Securities Risk**. Investments in MLPs and MLP-related securities involve risks different from those of investing in common stock, including risks related to limited control and limited rights to vote on matters affecting the MLP or MLP-related security, risks related to potential conflicts of interest between an MLP and the MLP's general partner, cash flow risks, dilution risks (which could occur if the MLP raises capital and then invests it in projects whose return fails to exceed the cost of capital raised), and risks related to the general partner's limited call right. MLPs and MLP-related securities are generally considered interest-rate sensitive investments. During periods of interest rate volatility, these investments may not provide attractive returns. Depending on the state of interest rates in general, the use of MLPs or MLP-related securities could enhance or harm the overall performance of the Fund.

**MLP Tax Risk.** MLPs do not pay U.S. federal income tax at the partnership level, subject to the application of certain partnership audit rules. Instead, each partner is allocated a share of the partnership's income, gains, losses, deductions and expenses. A change in current tax law or in the underlying business mix of a given MLP could result in an MLP being treated as a corporation for U.S. federal income tax purposes, which would result in such MLP being required to pay U.S. federal income tax on its taxable income. The classification of an MLP as a corporation for U.S. federal income tax purposes would have the effect of reducing the amount of cash available for distribution by the MLP. Thus, if any of the MLPs owned by the

Fund were treated as corporations for U.S. federal income tax purposes, it could result in a reduction of the value of your investment in the Fund and lower income as compared to an MLP that is not taxed as a corporation

**Model and Data Risk.** Like all quantitative analysis, the investment models utilized by the Advisor carry the risk that the ranking system, valuation results and predictions might be based on one or more incorrect assumptions, insufficient historical data, inadequate design, or may not be suitable for the purpose intended. In addition, models may not perform as intended for many reasons, including errors, omissions, imperfections, or malfunctions. Because the use of models is usually based on data supplied by third parties, the success of the Advisor's use of such models is dependent on the accuracy and reliability of the supplied data. Historical data inputs may be subject to revision or corrections, which may diminish data reliability and quality of predictive results. Changing and unforeseen market dynamics could also lead to a decrease in the short-term or long-term effectiveness of a model. Models may lose their predictive validity and incorrectly forecast future market behavior and asset prices, leading to potential losses. No assurance can be given that a model will be successful under all or any market conditions.

**Mortgage-Backed Securities Risk.** Mortgage-backed securities represent participating interests in pools of residential mortgage loans, some of which are guaranteed by the U.S. government, its agencies, or instrumentalities. However, the guarantee of these types of securities relates to the principal and interest payments and not the market value of such securities. In addition, the guarantee only relates to the mortgage-backed securities held by the Fund and not the purchase of shares of the Fund.

Mortgage-backed securities do not have a fixed maturity and their expected maturities may vary when interest rates rise or fall. An increased rate of prepayments on the Fund's mortgage-backed securities will result in an unforeseen loss of interest income to the Fund as the Fund may be required to reinvest assets at a lower interest rate. A decreased rate of prepayments lengthens the expected maturity of a mortgage-backed security, causing the price of the mortgage-backed securities and the Fund's net asset value per share to fall and making the mortgage-backed securities more sensitive to interest rate changes. The prices of mortgage-backed securities may decrease more than prices of other fixed-income securities when interest rates rise. An unexpectedly high rate of defaults on the mortgages held by a mortgage pool will adversely affect the value of mortgage-backed securities and will result in losses to the Fund. The liquidity of mortgage-backed securities may change over time. Mortgage-backed securities and other securities issued by participants in housing and commercial real estate finance, as well as other real estate-related markets, have experienced extraordinary weakness and volatility in certain years.

Mortgage-backed securities issued or guaranteed by private issuers are also known as "non-agency mortgage-backed securities." Non-agency mortgage-backed securities are not subject to the same underwriting requirements as those with government or government-sponsored entity guarantees and, therefore, mortgage loans underlying privately issued mortgage-related securities may have less favorable collateral, credit risk or other underwriting characteristics, and wider variances in interest rate, term, size, purpose, and borrower characteristics. The market for non-agency mortgage-backed securities is smaller and less liquid than the market for government-issued mortgage-backed securities.

Lower-quality notes, such as those considered "sub-prime," are more likely to default than those considered "prime" by a rating evaluation agency or service provider. An economic downturn or period of rising interest rates could adversely affect the market for sub-prime notes and reduce the Fund's ability to sell these securities. The lack of a liquid market for these securities could decrease the Fund's share price. Additionally, borrowers may seek bankruptcy protection which would delay resolution of security holder claims and may eliminate or materially reduce liquidity.

 **Municipal Bond Risk**. The value of municipal bonds that depend on a specific revenue source or general revenue source to fund their payment obligations may fluctuate as a result of changes in the cash flows generated by the revenue source(s) or changes in the priority of the municipal obligation to receive the cash flows generated by the revenue source(s). In addition, changes in federal tax laws or the activity of an issuer may adversely affect the tax-exempt status of municipal bonds. There is no guarantee that a municipality will be able to pay interest or repay principal. In addition, the ability of an issuer to make payments or repay interest may be affected by litigation or bankruptcy. In the event of such an issuer's bankruptcy, the Fund could experience delays in collecting principal and interest, and may not, in all circumstances, be able to collect all principal and interest to which it is entitled. To enforce its rights in the event of a default in the payment of interest or repayment of principal, or both, a debt holder may, in some instances, take possession of, and manage, the assets securing the issuer's obligations on such securities, which may increase the Fund's operating expenses. Any income derived from the Fund's ownership or operation of such assets may not be tax-exempt. Municipal bonds are generally subject to interest rate, credit and market risk.

Because many municipal bonds are issued to finance similar projects (such as those relating to education, health care, housing, transportation, and utilities), conditions in those sectors may affect the overall municipal securities market. In addition, changes in the financial condition of an individual municipal issuer can affect the overall municipal market. Municipal bonds backed by current or anticipated revenues from a specific project or specific assets can be negatively affected by the discontinuance of the supporting taxation or the inability to collect revenues for the specific project or specific assets. Municipal bonds are subject to the risk that the Internal Revenue Service (the "IRS") may determine that an issuer has not complied with applicable tax requirements and that interest from the municipal bond is taxable, which may result in a significant decline in the value of the security. Municipal bonds may be less liquid than taxable bonds and there may be less publicly available information on the financial condition of municipal bond issuers than for issuers of other securities, and the investment performance of the Fund may, therefore, be more dependent on the analytical abilities of the Advisor than if the Fund held other types of investments. The secondary market for municipal bonds also tends to be less well-developed or liquid than many other securities markets, a by-product of lower capital commitments to the asset class by the dealer community, which may adversely affect the Fund's ability to sell municipal bonds at attractive prices or value municipal bonds.

**Non-Diversification Risk**. A fund that is classified as non-diversified may invest a larger portion of its assets in a limited number of companies than a diversified fund. Because a relatively high percentage of a non-diversified fund's assets may be invested in the securities of a limited number of companies that could be in the same or related economic sectors, such fund's portfolio may be more susceptible to any single economic, technological or regulatory occurrence than the portfolio of a diversified fund.

**Over-the-Counter ("OTC") Trading Risk.** Certain of the derivatives in which the Fund may invest may be traded (and privately negotiated) in the OTC market. While the OTC derivatives market is the primary trading venue for many derivatives, it is largely unregulated. As a result, and similar to other privately negotiated contracts, the Fund is subject to counterparty credit risk with respect to such derivative contracts.

**Prepayment Risk.** The Fund may invest in debt securities that may be paid off early when the issuer of a debt security can repay the principal prior to a security's maturity. If interest rates are falling, the Fund may have to reinvest the unanticipated proceeds at lower interest rates, resulting in a decline in the Fund's income.

 **Real Estate Risk. The Fund is subject to the risks of the real estate market as a whole, such as taxation, regulations and economic and political factors that negatively impact the real estate market and the direct ownership of real estate. These may include decreases in real estate values, overbuilding, rising operating** 

 **costs, interest rates and property taxes. In addition, some real estate related investments are not fully diversified and are subject to the risks associated with financing a limited number of projects.**

 **REIT Risk. The Fund's investments in REITs are subject to the same risks as direct investments in real estate, including sensitivity to general economic downturns and the volatility of local real estate markets. REITs may have limited financial resources and their securities may trade infrequently and in limited volume, and thus they may be more volatile than other securities. The liquidity of REITs may change dramatically over time.**

**Regulatory Risk**. Regulatory authorities in the United States or other countries may adopt rules that restrict the ability of the Fund to fully implement its strategy, either generally, or with respect to certain securities, industries, or countries, which may impact the Fund's ability to fully implement its investment strategies. Regulators may interpret rules differently than the Fund or the mutual fund industry generally, and disputes over such interpretations can increase the legal expenses incurred by the Fund.

With respect to the Fund, the Advisor is subject to CFTC registration and regulation in its capacity as the Fund's CPO. Such Funds are also subject to regulation as commodity pools under the CEA. As a result, additional CFTC-mandated disclosure, reporting, and recordkeeping obligations apply with respect to the Fund and its Subsidiary, as applicable, and subject each to CFTC penalties if reporting was found to be deficient. Compliance with these regulatory requirements could increase the Fund's expenses. The Fund may incur additional expenses as a result of CFTC regulation obligations and certain investments may be limited or restricted.

**Repurchase and Reverse Repurchase Agreements Risk.** The Fund may enter into repurchase agreements in which it purchases a security (known as the "underlying security") from a securities dealer or bank. In the event of a bankruptcy or other default by the seller of a repurchase agreement, the Fund could experience delays in liquidating the underlying security. The Fund may also experience losses in the event of a decline in the value of the underlying security while the Fund is seeking to enforce its rights under the repurchase agreement. Reverse repurchase agreements involve the sale of securities held by the Fund with an agreement to repurchase the securities at an agreed-upon price, date and interest payment, and involve the risk that (i) the other party may fail to return the securities in a timely manner, or at all, and (ii) the market value of assets that are required to be repurchased decline below the purchase price of the asset that has to be sold, resulting in losses to the Fund.

**Restricted Securities Risk.** The Fund may hold securities that are restricted as to resale under the U.S. federal securities laws. There can be no assurance that a trading market will exist at any time for any particular restricted security. Limitations on the resale of these securities may prevent the Fund from disposing of them promptly at reasonable prices or at all. The Fund may have to bear the expense of registering the securities for resale and the risk of substantial delays in affecting the registration. Also, restricted securities may be difficult to value because market quotations may not be readily available, and the values of restricted securities may have significant volatility.

**Sector/Asset Class Risk.** The Fund may focus its investments in securities of a particular sector or asset class. Economic, legislative or regulatory developments may occur that significantly affect the sector or asset class. This may cause the Fund's net asset value to fluctuate more than that of the fund that does not focus in a particular sector.

**Sector Risk.** Sector risk is the possibility that securities within the same sector will decline in price due to sector-specific market or economic developments. If the Fund invests more heavily in a particular sector, the value of its shares may be especially sensitive to factors and economic risks that specifically affect that sector. As a result, the Fund's net asset value per share may fluctuate more widely than the value of shares

of a mutual fund that invests in a broader range of sectors. Additionally, some sectors could be subject to greater government regulation than other sectors. Therefore, changes in regulatory policies for those sectors may have a material effect on the value of securities issued by companies in those sectors.

**Security Risk**. The value of the Fund may decrease in response to the activities and financial prospects of an individual security in the Fund's portfolio. The net asset value of the Fund will fluctuate based on changes in the value of the securities in which the Fund invests. The Fund may invest in securities that may be more volatile and carry more risk than some other forms of investment. The price of securities may rise or fall because of economic or political changes. Security prices in general may decline over short or even extended periods of time. Market prices of securities in broad market segments may be adversely affected by a prominent issuer having experienced losses, lack of earnings, 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.

**Segregation Risk.** Under the federal securities laws, the Fund is required to maintain a segregated account of cash or liquid assets to cover its obligations in certain transactions. This requirement may cause the Fund to miss favorable trading opportunities, due to a lack of sufficient cash or readily marketable securities. This requirement may also cause the Fund to realize losses on offsetting or terminated derivative contracts or special transactions.

**Short Position Risk.** If a security or other instrument sold short increases in price, the Fund may have to cover its short position at a higher price than the short sale price, resulting in a loss. The Fund may have substantial short security positions and must borrow those securities to make delivery to the buyer. The Fund may not be able to borrow a security that it needs to deliver or it may not be able to close out a short position at an acceptable price and may have to sell related long positions before it had intended to do so. Thus, the Fund may not be able to successfully implement its short sale strategy due to limited availability of desired securities or for other reasons.

The Fund also may be required to pay a commission and other transaction costs, which would increase the cost of the security sold short. The amount of any gain will be decreased, and the amount of any loss increased, by the amount of the commission, dividends, interest or expenses the Fund may be required to pay in connection with the short sale.

Until the Fund replaces a borrowed security, it is required to maintain a segregated account of cash or liquid assets with a broker or custodian to cover the Fund's short position. Generally, securities held in a segregated account cannot be sold unless they are replaced with other liquid assets. The Fund's ability to access the pledged collateral may also be impaired in the event the broker fails to comply with the terms of the contract. In such instances the Fund may not be able to substitute or sell the pledged collateral. Additionally, the Fund must maintain sufficient liquid assets (less any additional collateral pledged to the broker), marked-to-market daily, to cover the short sale obligations. This may limit the Fund's investment flexibility, as well as its ability to meet redemption requests or other current obligations.

Because losses on short sales arise from increases in the value of the security sold short, such losses are theoretically unlimited. By contrast, a loss on a long position arises from decreases in the value of the security and is limited by the fact that a security's value cannot go below zero.

**Small Capitalization Stock Risk**. To the extent the Fund invests in the stocks of smaller-sized companies, the Fund may be subject to additional risks. The earnings and prospects of these companies are more volatile than larger companies. Smaller-sized companies may experience higher failure rates than do larger companies. The trading volume of securities of smaller-sized companies is normally less than that of larger companies and, therefore, may disproportionately affect their market price, tending to make them fall more

in response to selling pressure than is the case with larger companies. Smaller-sized companies may have limited markets, product lines or financial resources and may lack management experience.

**Sovereign Debt Risk.** The issuer of foreign debt or the governmental authorities that control the repayment of the debt may be unable or unwilling to repay principal or interest when due, and the Fund may have limited recourse in the event of a default. The market prices of sovereign debt, and the Fund's net asset value, may be more volatile than prices of U.S. debt obligations, and certain emerging markets may encounter difficulties in servicing their debt obligations.

**Structured Note Risk**. The Fund may seek investment exposure to sectors through structured notes that may be exchange traded or may trade in the over the counter market. These notes are typically issued by banks or brokerage firms and have interest and/or principal payments which are linked to changes in the price level of certain assets or to the price performance of certain indices. The value of a structured note will be influenced by time to maturity, level of supply and demand for this type of note, interest rate and market volatility, changes in the issuer's credit quality rating, and economic, legal, political, events that affect the industry, and adverse changes in the index or reference asset to which the payments are linked. In addition, there may be a lag between a change in the value of the underlying reference asset and the value of the structured note. Structured notes may also be subject to counterparty risk. The Fund may also be exposed to increased transaction costs when it seeks to sell such notes in the secondary market.

 **Target Volatility Strategy Risk.** The Trading Advisor's target volatility management strategy may not protect against declines, may tend to limit gains in up markets, may tend to increase transaction costs which may lead to losses or reduced gains, and may not be successful as a short-term strategy as it is subject to the Trading Advisor's ability to assess volatility conditions and the ability of the Advisor to execute related investment management techniques.

**Tax Risk.** Certain of the Underlying Fund's investment strategies may be subject to special tax rules, the effect of which may have adverse tax consequences for the Fund. By investing in commodities indirectly through a wholly-owned and controlled subsidiary of the Underlying Fund organized under the laws of the Cayman Islands (a "Subsidiary), an Underlying Fund would intend to obtain exposure to the commodities markets within the U.S. federal tax requirements that apply to the Underlying Fund. Because the Subsidiary is classified as a controlled foreign corporation for US tax purposes, any income received from its investments would be passed through to the Underlying Fund as ordinary income, which may be taxed at less favorable rates than capital gains. Typically, any gains/losses from trading in Section 1256 futures contracts are taxed 60% as long term capital gains/losses and 40% short term capital gains/losses. However, because the Subsidiary is a controlled foreign corporation, any income received from its investments will be passed through to the Fund as ordinary income and reflected on shareholder's tax Forms 1099 as such. The Subsidiary would declare and distribute a dividend to the Underlying Fund, no less than annually, as the sole shareholder of the Subsidiary, in an amount approximately equal to the total amount of "Subpart F" income (as defined in Section 951 of the Internal Revenue Code of 1986, as amended) generated by or expected to be generated by the Subsidiary's investments during the fiscal year. If the Subsidiary were to fail to make sufficient dividend distributions to the Underlying Fund, all or a portion of the income from the Underlying Fund's investment in the Subsidiary might not be qualifying income, and the Underlying Fund might not qualify as a regulated investment company for one or more years.

**Turnover Risk.** The Fund may have portfolio turnover rates significantly in excess of 100%. Increased portfolio turnover causes the Fund to incur higher brokerage costs, which may adversely affect the Fund's performance and may produce increased taxable distributions.

**Underlying Fund Risk**. Other investment companies, including mutual funds, BDCs, ETFs and closed-end funds ("Underlying Funds") in which the Fund invests are subject to investment advisory and other

expenses, which will be indirectly paid by the Fund. As a result, the cost of investing in the Fund will be higher than the cost of investing directly in the Underlying Funds and may be higher than other mutual funds that invest directly in stocks and bonds. In addition, when the Fund invests in Underlying Funds, there is a risk that the investment advisers of those Underlying Funds may make investment decisions that are detrimental to the performance of the Fund. Each of the Underlying Funds is subject to its own specific risks. Additional risks of investing in the Underlying Funds are described below:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;· **BDC Risk.** BDCs may carry risks similar to those of a private equity
or venture capital fund. BDC company securities are not redeemable at the option of the shareholder, and they may trade in the market
at a discount to their net asset value. A BDC is a form of investment company that is required to invest at least 70% of its total assets
in securities (typically debt) of private companies, thinly traded U.S. public companies, or short-term high quality debt securities.
The BDCs held by the Fund may leverage their portfolios through borrowings or the issuance of preferred stock. While leverage often serves
to increase the yield of a BDC, this leverage also subjects a BDC to increased risks, including the likelihood of increased volatility
and the possibility that a BDC's common share income will fall if the dividend rate of the preferred shares or the interest rate
on any borrowings rises. A significant portion of a BDC's investments are recorded at fair value as determined by its board of directors,
which may create uncertainty as to the value of the BDC's investments. Non-traded BDCs are illiquid, and it may not be possible
to redeem shares without paying a substantial penalty or at all. Publicly traded BDCs usually trade at a discount to their net asset value
because they invest in unlisted securities and have limited access to capital markets. BDCs are subject to high failure rates among the
companies in which they invest and federal securities laws impose restraints upon the organization and operations of BDCs that can limit
or negatively impact the performance of a BDC. However, the Fund does not believe it would be liable for the actions of any entity in
which it invests and that only its investment is at risk. Also, BDCs may engage in certain principal and joint transactions that a mutual
fund or closed-end fund may not without an exemptive order from the SEC.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;· **Closed-End Fund Risk.** Closed-end funds are subject to management
risk because the adviser to the underlying closed-end fund may be unsuccessful in meeting the fund's investment objective. Closed-end
funds may trade at a discount or premium to their net asset value and may trade at a larger discount or smaller premium subsequent to
purchase by the Fund. Since closed-end funds trade on exchanges, the Fund will also incur brokerage expenses and commissions when it buys
or sells closed-end fund shares.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;· **ETF Risk**. Like a mutual fund ,
the value of an ETF can fluctuate based on the prices of the securities owned by the ETF, and ETFs are also subject to the following additional
risks: (i) the ETF's market price may be less than its net asset value; (ii) an active market for the ETF may not develop or
be maintained ; and (iii) market trading in the ETF may be halted under
certain circumstances.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;· **ETF Tracking Risk.** Index-based or "passive" ETFs, which
seek to track the performance of an underlying index, 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, passive
ETFs will incur expenses not incurred by their applicable indices.
Certain securities comprising the indices tracked by the passive ETFs may, from time to time, temporarily be unavailable, which may further
impede the ETFs' ability
to track their applicable indices.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;· **Inverse Correlation Risk.** Underlying Funds that are inverse funds
are designed to lose value as the index or security tracked by such fund's benchmark increases in value; a result that is the opposite
from traditional mutual funds. Successful use of inverse funds requires that the Advisor correctly predict short-term market movements.
If the Fund invests in an inverse fund and markets rise, the Fund could lose money. Inverse funds may also employ leverage such that their
returns are more than one times that of their benchmark.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;· **Inverse ETF** **and ETN Risk.** Investing in inverse ETFs and ETNs may result in increased
volatility due to the ETF's or ETN's possible use of short
sales of securities and derivatives such as options and futures. The
use of leverage by an ETF or ETN increases risk to the Fund. The more the Fund invests in leveraged instruments, the more the leverage will magnify
any gains or losses on those investments. During periods of increased volatility, inverse ETFs and ETNs may not perform in the manner
they are designed.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;· **Leveraged ETF Risk.** Leveraged ETFs will amplify losses because they
are designed to produce returns that are a multiple of the index to which they are linked. Most leveraged ETFs "reset" daily.
Due to the effect of compounding, their performance over longer periods of time can differ significantly from the performance of their
underlying index or benchmark during the same period of time.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;· **Mutual Fund Risk.** Mutual funds are subject to management risk because
the adviser to the mutual fund may be unsuccessful in meeting the fund's investment objective and may temporarily pursue strategies
which are inconsistent with the investment objective of the Fund.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;· **Strategies Risk.** Each Underlying Fund is subject to specific risks,
depending on the nature of the fund. These risks could include liquidity risk, sector risk, and foreign currency risk, as well as risks
associated with fixed income securities and commodities.

**U.S. Government Obligations Risk.** U.S. Treasury obligations are backed by the "full faith and credit" of the U.S. government and generally have negligible credit risk. Securities issued or guaranteed by federal agencies or authorities and U.S. government-sponsored instrumentalities or enterprises may not be backed by the full faith and credit of the U.S. government.

**Utilities Sector Risk.** Deregulation may subject utility companies to greater competition and may adversely affect their profitability. As deregulation allows utility companies to diversify outside of their original geographic regions and their traditional lines of business, utility companies may engage in riskier ventures. In addition, deregulation may eliminate restrictions on the profits of certain utility companies but may also subject these companies to greater risk of loss. Companies in the utilities industry may have difficulty obtaining an adequate return on invested capital, raising capital, or financing large construction projects during periods of inflation or unsettled capital markets; face restrictions on operations and increased cost and delays attributable to environmental considerations and regulation; find that existing plants, equipment or products have been rendered obsolete by technological innovations; or be subject to increased costs because of the scarcity of certain fuels or the effects of man-made or natural disasters. Existing and future regulations or legislation may make it difficult for utility companies to operate profitably. Government regulators monitor and control utility revenues and costs, and therefore may limit utility profits. There is no assurance that regulatory authorities will grant rate increases in the future, or that such increases will be adequate to permit the payment of dividends on stocks issued by a utility company. Energy conservation and changes in climate policy may also have a significant adverse impact on the revenues and expenses of utility companies.

**Value Investing Risk.** The assessment of a stock's intrinsic value may never be fully recognized or realized by the market, and a stock judged to be undervalued may be appropriately priced or its price may decline. Value stocks may be trading at relatively low valuations as a result of experiencing adverse business developments or may be subject to special risks. Different types of stocks tend to fall in and out of favor depending on market conditions, and the market may not favor value style investing. Value stocks may lag behind growth stocks in an up market.

**Volatility Risk.** The Fund's performance may be volatile, which means that the Fund's performance may be subject to substantial short-term changes up or down.

**Wholly Owned Subsidiary Risk.** By investing in the Subsidiary, the Fund is indirectly exposed to the commodities risks associated with the Subsidiary's investments in commodity-related instruments. There can be no assurance that the Subsidiary's investments will contribute to the Fund's returns. The Subsidiary will not be registered under the 1940 Act and, unless otherwise noted in this Prospectus, will not be subject to all of the investor protections of the 1940 Act. Changes in the laws of the United States and/or the Cayman Islands, under which the Fund and the Subsidiary, respectively, are organized, could result in the inability of the Fund and/or Subsidiary to operate as described in this Prospectus and could negatively affect the Fund and its shareholders. Your cost of investing in the Fund will be higher because you indirectly bear the expenses of the Subsidiary.

**Portfolio Holdings Disclosure Policies**

A description of the Fund's policies regarding disclosure of the securities in the Fund's portfolio is found in the Statement of Additional Information.

**HOW TO BUY SHARES**

**Purchasing Shares**

You may buy shares on any business day. This includes any day that the Fund are open for business, other than weekends and days on which the New York Stock Exchange ("NYSE") is closed, including the following holidays: New Year's Day, Martin Luther King, Jr. Day, Presidents' Day, Good Friday, Memorial Day, Juneteenth National Independence Day, Independence Day, Labor Day, Thanksgiving and Christmas Day.

The Fund calculates its net asset value ("NAV") per share as of the close of regular trading on the NYSE every day the NYSE is open. The NYSE normally closes at 4:00 p.m. Eastern Standard Time ("EST"). The Fund's NAV is calculated by taking the total value of the Fund's assets, subtracting its liabilities, and then dividing by the total number of shares outstanding, rounded to the nearest cent.

All shares will be purchased at the NAV per share (plus applicable sales charges, if any) 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. EST will be processed on that same day. Requests received after 4:00 p.m. EST will be processed on the next business day.

**Good Order:** When making a purchase request, make sure your request is in good order. "Good order" means your purchase request includes:<br> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;· the name of the Fund and share class<br> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;· the dollar amount of shares to be purchased<br> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;· a completed purchase application or investment stub<br> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;· a check payable to the Fund<br>

**Multiple Classes**

The Fund offers three classes of shares: Class A, Class C, and Institutional shares. Not all share classes may be available in all states.

**Choosing a Share Class**

To choose the share class of the Fund that is best suited to your needs and goals, consider the amount of money you want to invest, how long you expect to invest it and whether you plan to make additional investments. As shown below, a sales charge structure applies to Class A and Class C shares. You should consider, for example, that it may be possible to reduce the front-end sales charges imposed on purchases of Class A shares. Among other ways, sales charges for Class A shares have a series of "breakpoints," which means that the front-end sales charges decrease (and can be eliminated entirely) as the amount invested increases. The breakpoint schedule is set out below under "Sales Charges."

The following are some of the main differences between Class A, Class C, and Institutional shares of the Fund:

*Class A Shares* 

• Front-end sales charges, as described below under "Sales Charges."

• A contingent deferred sales charge ("CDSC") may be assessed on shares redeemed within two years of purchase.

• Distribution (Rule 12b-1) fees of 0.25% of the Fund's average daily net assets.

• A non-Rule 12b-1 shareholder servicing fee of 0.25% of the Fund's average daily net assets.

*Class C Shares* 

• No front-end sales charges, all of your money goes to work for you right away.

• CDSCs on shares sold within 12 months of purchase and as described below under "Sales Charges."

• Distribution (Rule 12b-1) fees of 1.00% of the Fund's average daily net assets.

• A non-Rule 12b-1 shareholder servicing fee of 0.25% of the Fund's average daily net assets.

*Institutional Shares* 

• No sales charges.

• A non-Rule 12b-1 shareholder servicing fee of 0.25% of the Fund's average daily net assets.

Institutional shares may also be available on certain brokerage platforms. An investor transacting in Institutional shares through a broker acting as an agent for the investor may be required to pay a commission and/or other forms of compensation to the broker.

*For the estimated expenses of each share class, see the section entitled "Fees and Expenses of the Fund."* 

**Sales Charge Waivers and Reductions Available Through Certain Financial Intermediaries**

The availability of certain sales charge waivers and discounts may depend on whether you purchase your shares directly from the Fund or through a financial intermediary. Intermediaries may impose different sales charges other than those listed below for Class A and Class C shares and may have different policies and procedures regarding the availability of sales load waivers and reductions. Such intermediary-specific sales

charge variations are described in Appendix A to this prospectus, titled "Intermediary-Specific Sales Charge Reductions and Waivers." Appendix A is incorporated by reference into (or legally considered part of) this Prospectus.

In all instances, it is the shareholder's responsibility to notify the Fund or the shareholder's financial intermediary at the time of purchase of any relationship or other facts qualifying the shareholder for sales charge reductions or waivers. For reductions and waivers not available through a particular intermediary, shareholders will have to purchase Fund shares directly from the Fund or through another intermediary to receive these reductions or waivers.

**Sales Charges on Class A Shares**

Purchases of Class A shares of the Fund are subject to the following front-end sales charges. The front-end sales charges do not apply to Class A shares acquired through reinvestment of dividends and capital gains distributions.

---

| | | | |
|:---|:---|:---|:---|
| **Amount of Purchase** | **Sales Charge as % of Public Offering Price** | **Sales Charge as % of Net Amount Invested** | **Authorized Dealer Commission as % of Public Offering Price** |
| Less than $50,000 | 4.75% | 4.99% | 4.00% |
| $50,000 but less than $100,000 | 4.25% | 4.44% | 3.50% |
| $100,000 but less than $250,000 | 3.75% | 3.90% | 3.00% |
| $250,000 but less than $500,000 | 2.50% | 2.56% | 2.00% |
| $500,000 but less than $1,000,000 | 2.00% | 2.04% | 1.50% |
| $1,000,000 and above <sup>(1)</sup> | 0.00% | 0.00% | 0.00%<sup>(2)</sup> |

---

<sup>(1)</sup> A CDSC of 1.00% of the redemption amount applies to Class A shares redeemed up to 24 months after purchase under certain investment programs where an investment professional received an advance payment on the transaction (in the case of investments at or above the $1 million breakpoint). Certain intermediaries may provide different CDSC waivers or discounts which are described in Appendix A to this Prospectus, entitled "Intermediary-Specific Sales Charge Reductions and Waivers."

<sup>(2)</sup> The Advisor may pay a commission out of its own resources to broker-dealers who initiate and are responsible for the purchase of shares of $1 million or more in accordance with the following schedule: 1.00% of Class A shares purchases of $1,000,000 to $4,999,999; 0.50% of Class A shares purchases of $5,000,000 to $9,999,999; and 0.25% of Class A shares purchases of $10,000,000 and over.

Offering price includes the front-end sales load. The sales charge you pay may differ slightly from the amount set forth above because of rounding that occurs in the calculations used to determine your sales charge.

**How to Reduce Your Class A Sales Charge**

The Fund offers a number of ways to reduce or eliminate the front-end sales charge on Class A shares.

**Class A Shares, Reductions and Waivers**

There are no sales charges on reinvested distributions. Reduced sales charges are available to shareholders with investments of $50,000 or more. In addition, you may qualify for reduced sales charges under the following circumstances.

**Letter of Intent:** An investor may qualify for a reduced sales charge immediately by stating his or her intention to invest in one or more of the Fund, during a 13-month period, a dollar amount that would qualify for a reduced sales charge set forth in the table under the sub-section "Sales Charges" above, and by signing a Letter of Intent, which may be signed at any time within 90 days after the first investment to be included under the Letter of Intent. However, if an investor does not buy enough shares to qualify for the lower sales charge by the end of the 13-month period (or when you sell your shares, if earlier), the additional shares that were purchased due to the reduced sales charge credit the investor received will be liquidated to pay the additional sales charge owed.

**Rights of Accumulation:** You may add the current value of all of your existing Fund shares to determine the front-end sales charge to be applied to your current Class A purchase. Only balances currently held entirely at the Fund or, if held in an account through a financial services firm, at the same firm through whom you are making your current purchase, will be eligible to be added to your current purchase for purposes of determining your Class A sales charge. You may include the value of the Fund's investments held by the members of your immediately family, including the value of Funds' investments held by you or them in individual retirement plans, such as individual retirement accounts, or IRAs, provided such balances are also currently held entirely at the Fund or, if held in an account through a financial services firm, at the same financial services firm through whom you are making your current purchase. The value of shares eligible for a cumulative quantity discount equals the cumulative cost of the shares purchased (not including reinvested dividends) or the current account market value; whichever is greater. The current market value of the shares is determined by multiplying the number of shares by the previous day's NAV. If you believe there are cumulative quantity discount eligible shares that can be combined with your current purchase to achieve a sales charge breakpoint, you must, at the time of your purchase (including at the time of any future purchase), specifically identify those shares to your current purchase broker-dealer.

**Investments of $1 Million or More:** For the Fund, with respect to Class A shares, if you invest $1 million or more, either as a lump sum or through our rights of accumulation quantity discount or letter of intent programs, you can buy Class A shares without an initial sales charge. However, you may be subject to a 1.00% CDSC on shares redeemed within two years of purchase (excluding shares purchased with reinvested dividends and/or distributions). The CDSC for these Class A shares is based on the NAV at the time of purchase. The holding period for the CDSC begins on the day you buy your shares. Your shares will age one month on that same date the next month and each following month. For example, if you buy shares on the 15<sup>th</sup> of the month, they will age one month on the 15<sup>th</sup> day of the next month and each following month. To keep your CDSC as low as possible, each time you place a request to sell shares we will first sell any shares in your account that are not subject to a CDSC. If there are not enough of these to meet your request, we will sell the shares in the order they were purchased.

**Class A Sales Charge Waivers:** The Fund may sell Class A shares at NAV (i.e. without the investor paying any initial sales charge) to certain categories of investors, including: (1) investment advisory clients or investors referred by the Fund's Advisor or its affiliates; (2) officers and present or former Trustees of the Trust; directors and employees of selected dealers or agents; the spouse, sibling, direct ancestor or direct descendant (collectively "relatives") of any such person; any trust, individual retirement account or retirement plan account for the benefit of any such person or relative; or the estate of any such person or relative; if such shares are purchased for investment purposes (such shares may not be resold except to the Fund); (3) the Fund's Advisor or its affiliates and certain employee benefit plans for employees of the Fund's Advisor; (4) fee-based financial planners and registered investment advisors who are purchasing on behalf of their clients where there is an agreement in place with respect to such purchases; (5) registered representatives of broker-dealers who have entered into selling agreements with the Fund's Advisor for their own accounts; and (6) participants in no-transaction-fee programs of broker dealers that have entered into an agreement with respect to such purchases.

**For more information regarding which intermediaries may have agreements with the Fund or distributor and their policies and procedures with respect to purchases at NAV, see Appendix A to this prospectus, titled "Intermediary-Specific Sales Charge Reductions and Waivers." In addition, certain intermediaries may also provide for different sales charge discounts, which are also described in Appendix A to this Prospectus.**

**Sales Charges on Class C Shares**

Class C shares are sold without an initial front-end sales charge so that the full amount of your purchase is invested in the Fund. A deferred sales charge of 1.00% applies, however, if Class C shares are sold within 12 months of purchase.

Shares acquired through reinvestment of dividends or capital gains distributions are not subject to a deferred sales charge. In addition, the deferred sales charge may be waived in certain circumstances. See "Waiver of Deferred Sales Charge – Class C Shares" below. The deferred sales charge is based upon the lesser of: (1) the NAV of the shares redeemed or (2) the original purchase price of such shares.

The holding period for the deferred sales charge begins on the day you buy your shares. Your shares will age one month on that same date the next month and each following month. For example, if you buy shares on the 15<sup>th</sup> of the month, they will age one month on the 15<sup>th</sup> day of the next month and each following month. To keep your deferred sales charges as low as possible, each time you place a request to sell shares, we will first sell any shares in your account that are not subject to a deferred sales charge. If there are not enough of these shares available, we will sell shares that have the lowest deferred sales charge.

*For purposes of the deferred sales charge, we use the effective date for each individual purchase.*

**Waiver of Deferred Sales Charge – Class C Shares**

Certain intermediaries may provide for sales charge discounts, which are described in Appendix A to this prospectus, entitled "Intermediary-Specific Charge Reductions and Waivers."

**Distribution Plans**

The Fund has adopted a Distribution Plan (the "12b-1 Plan") on behalf of its Class A and Class C shares, that allow the Fund to pay fees to financial intermediaries (which may be paid through the Distributor) for the sale and distribution of these shares. Pursuant to the Fund's 12b-1 Plan, the Fund may finance from the assets of Class A, Class C, certain activities or expenses that are intended primarily to result in the sale of the Class A, Class C, or Institutional shares, as applicable. Because Rule 12b-1 fees are paid out of Fund assets on an ongoing basis, over time these fees will increase the cost of your investment and may cost you more than other types of sales charges.

The maximum Rule 12b-1 fee is 0.25% of the Fund's Class A shares average daily net assets.

With respect to Class C shares, the fee paid by the Fund is 1.00% of the average daily net assets of the Class C shares. Of this amount, 0.75% represents distribution fees and 0.25% represents shareholder servicing fees paid to institutions that have agreements with the Distributor to provide such services. Because these fees are paid out of the Fund's assets on an on-going basis, over time these fees will increase the cost of your investment and may cost you more than paying other types of sales charges.

In addition to paying fees under the 12b-1 Plan, the Fund may pay service fees to intermediaries such as banks, broker-dealers, financial advisors or other financial institutions, including affiliates of the Advisor

or Distributor, for sub-administration, sub-transfer agency and other shareholder services associated with shareholders whose shares are held of record in omnibus, other group accounts or accounts traded through registered securities clearing agents.

The Fund may waive or reduce the maximum amount of Rule 12b-1 fees they pay from time to time at their sole discretion. In addition, a financial intermediary (including the Distributor, the Advisor or their affiliates) may voluntarily waive or reduce any fees to which they may be entitled. From time to time, the Distributor may pay out of its reasonable profits and other resources (including those of its affiliates) advertising, marketing and other expenses for the benefit of the Fund.

**Shareholder Servicing Plan**

The Trust has adopted a Shareholder Servicing Plan with respect to the Fund's Class A, Class C, and Institutional shares. The Fund may pay Shareholder Services Fees up to 0.25% of the average daily net assets of Class A, Class C (in addition to those included in the Fund's 12b-1 fees above for Class C shares only), and Institutional shares to financial intermediaries for providing shareholder assistance, maintaining shareholder accounts, and communicating or facilitating purchases and redemptions of shares.

**Opening an Account**

You may purchase shares directly through the Fund's transfer agent or through a brokerage firm or other financial institution that has agreed to sell Fund shares. If you purchase shares through a brokerage firm or other financial institution, you may be charged a fee by the firm or institution.

To establish internet transaction privileges, you must enroll through the website. You automatically have the ability to establish internet transaction privileges unless you decline the privileges on your New Account Application or IRA Application. You will be required to enter into a user's agreement through the website in order to enroll in these privileges. To purchase shares through the website, you must also have ACH instructions on your account. Redemption proceeds may be sent to you by check to the address on record, or if your account has existing bank information, by wire or ACH. Only bank accounts held at domestic financial institutions that are ACH members can be used for transactions through the Fund's website. Transactions through the website are subject to the same minimums and maximums as other transaction methods. Please call for assistance in establishing online access.

You should be aware that the internet is an unsecured, unstable, unregulated and unpredictable environment. Your ability to use the website for transactions is dependent upon the internet and equipment, software, systems, data and services provided by various vendors and third parties. While the Fund and its service providers have established certain security procedures, the Fund, the distributor and the Transfer Agent cannot assure you that trading information will be completely secure.

There may also be delays, malfunctions, or other inconveniences generally associated with this medium. There also may be times when the website is unavailable for Fund transactions or other purposes. Should this happen, you should consider purchasing or redeeming shares by another method. Neither the Fund nor its Transfer Agent, distributor nor Advisor will be liable for any such delays or malfunctions or unauthorized interception or access to communications or account information. Send the completed Shareholder Account Application and payment to the Fund at one of the following addresses:

***Regular Mail***

Rational Funds

c/o Ultimus Fund Solutions, LLC

P.O. Box 46707

Cincinnati, OH 45246

or

***Express/Overnight Mail***

Rational Funds

c/o Ultimus Fund Solutions, LLC

225 Pictoria Dr, Suite 450

Cincinnati, OH 45246

All purchases must be made in U.S. dollars and checks must be drawn on U.S. banks. Payment for purchases made online may only be made through an ACH (Automated Clearing House) debit of your bank account. Only bank accounts held at domestic financial institutions that are ACH members can be used for transactions with the Fund. ACH payments will not be accepted for initial purchases, except those made online. No cash, credit cards or third-party checks will be accepted. A $20 fee will be charged against your account for any payment check returned to the transfer agent or for any incomplete electronic funds transfer, or for insufficient funds, stop payment, closed account or other reasons. If a check does not clear your bank or the Fund is unable to debit your pre-designated bank account on the day of purchase, the Fund reserves the right to cancel the purchase. If your purchase is canceled, you will be responsible for any losses or fees imposed by your bank and losses that may be incurred as a result of a decline in the value of the canceled purchase. Your investment in the Fund should be intended to serve as a long-term investment vehicle. The Fund are not designed to provide you with a means of speculating on the short-term fluctuations in the stock market. The Fund reserve the right to reject any purchase request that it regards as disruptive to the efficient management of the Fund, which includes investors with a history of excessive trading. The Fund also reserve the right to stop offering shares at any time.

If you choose to pay by wire, you must call the Fund's transfer agent, at 800-253-0412 to obtain instructions on how to set up your account and to obtain an account number and wire instructions.

Wire orders will be accepted only on a day on which the Fund, the custodian and the transfer agent are open for business. A wire purchase will not be considered made until the wired money and purchase order are received by the Fund. Any delays that may occur in wiring money, including delays that may occur in processing by the banks, are not the responsibility of the Fund or the transfer agent. The Fund presently do not charge a fee for the receipt of wired fund, but may charge shareholders for this service in the future.

To help the government fight the funding of terrorism and money laundering activities, federal law requires all financial institutions to obtain, verify, and record information that identifies each person who opens an account. This means that when you open an account, we will ask for your name, address, date of birth, and other information that will allow us to identify you. We may also ask for other identifying documents or information and may take additional steps to verify your identity. We may not be able to open your account or complete a transaction for you until we are able to verify your identity.

**Minimum Purchase Amount**

The minimum initial purchase for the Fund's Class A, Class C and Institutional shares is $1,000. For Class A and Class C shares, the minimum subsequent investment is $50; for Institutional shares, the minimum subsequent investment is $500. For Class A, Class C, and Institutional shares, the minimum

initial and subsequent investment through the Automatic Investment Plan ("AIP") is $50. The Fund reserve the right to change the amount of these minimums from time to time or to waive them in whole or in part for certain accounts. Investment minimums may be higher or lower for investors purchasing shares through a brokerage firm or other financial institution. To the extent investments of individual investors are aggregated into an omnibus account established by an investment advisor, broker or other intermediary, the account minimums apply to the omnibus account, not to the account of the individual investor.

**Automatic Investment Plan** 

You may invest on a regular basis in shares of the Fund through the AIP. To participate, you must open an account with the Trust by calling 800-253-0412, request and complete an application, and invest at least $50 at periodic intervals. Minimum initial and subsequent investment requirements may be different for accounts with your investment professional.

Once you have signed up for the AIP, the Trust will automatically withdraw money from your bank account and invest it, subject to any applicable sales charges, in either Class A, Class C or Institutional shares of the Fund or Funds, as you specify. Your participation in the AIP may be canceled if you do not maintain sufficient funds in your bank account to pay for your investment.

**Additional Investments**

The minimum subsequent investment for the Fund for Class A and Class C shares is $50 and the minimum subsequent investment for the Fund's Institutional shares is $500. You may purchase additional shares of the Fund by check, wire, or ACH debit of your bank account of record. Payment for shares purchased online may be made only through an ACH debit of your bank account of record. Your bank wire should be sent as outlined above. You also may purchase Fund shares by making automatic periodic investments from your bank account. To use this feature, select the automatic investment option in the account application and provide the necessary information about the bank account from which your investments will be made. You may revoke your election to make automatic investments by calling 800-253-0412 or by writing to the Fund at:

Rational Funds

c/o Ultimus Fund Solutions, LLC

225 Pictoria Dr, Suite 450

Cincinnati, OH 45246

**Other Purchase Information**

The Fund may limit the amount of purchases and refuse to sell to any person. If your electronic funds transfer is incomplete, payment is not completed due to insufficient funds, stop payment, closed account, a check does not clear your bank, or the Fund is unable to debit your predesignated bank account, you will be responsible for any loss incurred by the Fund. If you are already a shareholder, the Fund can, with notice, redeem shares from any identically registered account in the Fund as reimbursement for any loss incurred. You may be prohibited or restricted from making future purchases in the Fund.

You may invest in the Fund through brokers or agents who have entered into selling agreements with the Fund's distributor. The brokers and agents are authorized to receive purchase orders on behalf of the Fund. Such brokers are authorized to designate other intermediaries to receive purchase orders on the Fund's behalf. The Fund will be deemed to have received a purchase order when an authorized broker, or if applicable a broker's authorized designee, receives the order. The broker or agent may set their own initial and subsequent investment minimums. You may be charged a fee if you use a broker or agent to buy 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.

**Market Timing**

The Fund discourage market timing. Market timing is an investment strategy using frequent purchases, redemptions and/or exchanges in an attempt to profit from short term market movements. To the extent that the Fund significantly invests in small or mid-capitalization equity securities, because these securities are often infrequently traded, investors may seek to trade Fund shares in an effort to benefit from their understanding of the value of these securities (referred to as price arbitrage). Market timing may result in dilution of the value of Fund shares held by long-term shareholders, disrupt portfolio management and increase Fund expenses for all shareholders. The Board of Trustees has adopted a policy directing the Fund to reject any purchase order with respect to one investor, a related group of investors or their agent(s), where it detects a pattern of purchases and sales of the Fund that indicates market timing or trading that it determines is abusive. This policy applies uniformly to all Fund shareholders. While the Fund attempt to deter market timing, there is no assurance that they will be able to identify and eliminate all market timers. For example, certain accounts called "omnibus accounts" include multiple shareholders. Omnibus accounts typically provide the Fund with a net purchase or redemption request on any given day where purchasers of Fund shares and redeemers of Fund shares are netted against one another and the identities of individual purchasers and redeemers whose orders are aggregated are not known by the Fund. The netting effect often makes it more difficult for the Fund to detect market timing, and there can be no assurance that the Fund will be able to do so. Brokers maintaining omnibus accounts with the Fund have agreed to provide shareholder transaction information to the extent known to the broker, to the Fund upon request. If the Fund becomes aware of market timing in an omnibus account, it will work with the broker maintaining the omnibus account to identify the shareholder engaging in the market timing activity. In addition, the Fund reserves the right to reject any purchase order for any reason, including purchase orders that it does not think are in the best interest of the Fund or its shareholders, or if the Fund thinks that trading is abusive.

**HOW TO REDEEM SHARES**

You may redeem your shares on any business day. Redemption orders received in good order by the Fund's transfer agent or by a brokerage firm or other financial institution that sells Fund shares before 4:00 p.m. EST (or before the NYSE closes if the NYSE closes before 4:00 p.m. EST) will be effective at that day's NAV. Your brokerage firm or financial institution may have an earlier cut-off time.

The Fund typically expect that it will take up to seven calendar days following the receipt of your redemption request by any method to pay out redemption proceeds by check or electronic transfer. The Fund's transfer agent imposes a $15 fee for each wire redemption and deducts the fee directly from your account. Your bank may also impose a fee for the incoming wire. If you own an IRA or other retirement plan, you must indicate on your redemption request whether the Fund should withhold federal income tax. Unless you elect in your redemption request that you do not want to have federal tax withheld, the redemption will be subject to withholding.

You may redeem your shares in the Fund through brokers or agents who have entered into selling agreements with the Fund's distributor. The brokers and agents are authorized to receive redemption orders on behalf of the Fund. Such brokers are authorized to designate other intermediaries to receive redemption orders on the Fund's behalf. The Fund will be deemed to have received a redemption order when an authorized broker, or if applicable a broker's authorized designee, receives the order. You may be charged a fee if you use a broker or agent to 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

redeeming shares directly from the Fund. You should carefully read the program materials provided to you by your servicing agent.

Shares of the Fund may be redeemed by mail, telephone or online. Redemptions will be paid by check, wire or ACH transfer only to the address or bank account of record. Only bank accounts held at domestic financial institutions that are ACH members can be used for transactions with the Fund. If you redeem your shares through a broker-dealer or other institution, you may be charged a fee by that institution.

**By Mail.** You may redeem any part of your account in the Fund at no charge by mail. Your request, in good order, should be addressed to the Fund to one of the following addresses:

***Regular Mail***

Rational Funds

c/o Ultimus Fund Solutions, LLC

P.O. Box 46707

Cincinnati, OH 45246

or

***Express/Overnight Mail***

Rational Funds

c/o Ultimus Fund Solutions, LLC

225 Pictoria Dr, Suite 450

Cincinnati, OH 45246

**Good Order:** When making a redemption request, make sure your request is in good order. "Good order" means your redemption request includes:<br> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;· the Fund name and account number<br> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;· the account name(s) and address <br> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;· the dollar amount or number of shares you wish to redeem <br> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;· the signatures of all registered share owner(s) in the exact name(s) and any special capacity in which they are registered<br>

The Fund may require that the signatures be guaranteed. A medallion signature guarantee assures that a signature is genuine and protects you from unauthorized transfers. You may need your signature guaranteed:

· if you request the redemption check be mailed to an address other than the
address of record;

· if you request the redemption check be mailed to a mailing address that
has been changed within 30 days of the redemption request;

· if you request that the redemption be sent electronically to a bank account
other than the bank account on record;

· if the redemption request is in the amount of $100,000 or more; or

· in other circumstances, such as to prevent an unauthorized account transfer
or redemption.

You can obtain a signature guarantee from most banks and securities dealers, but not from a notary public. For joint accounts, both signatures must be guaranteed. Please call the transfer agent at 800-253-0412 if you have questions. At the discretion of the Fund, you may be required to furnish additional legal documents to ensure proper authorization.

**By Telephone.** You may redeem any part of your account in the Fund by calling the transfer agent at 800-253-0412. You must first complete the Optional Telephone Redemption and Exchange section of the investment application to institute this option. The Fund, the transfer agent and the custodian are not liable for following redemption instructions communicated by telephone to the extent that they reasonably believe the telephone instructions to be genuine. However, if they do not employ reasonable procedures to confirm that telephone instructions are genuine, they may be liable for any losses due to unauthorized or fraudulent instructions. Procedures employed may include recording telephone instructions and requiring a form of personal identification from the caller.

The Fund may terminate the telephone redemption procedures at any time. During periods of extreme market activity, it is possible that shareholders may encounter some difficulty in telephoning the Fund, although neither the Fund nor the transfer agent have ever experienced difficulties in receiving, and in a timely fashion responding, to telephone requests for redemptions or exchanges. If you are unable to reach the Fund by telephone, you may request a redemption or exchange by mail. *If you own an IRA, you will be asked whether or not the Fund should withhold federal income tax*.**

**Online Transactions.** Online transactions are subject to the same purchase minimums and maximums as other purchase methods. However, the maximum online redemption amount is $50,000. Only bank accounts held at domestic financial institutions that are ACH members can be used for transactions online.

You should be aware that there may be delays, malfunctions or other inconveniences associated with online transactions. There also may be times when the website is unavailable for Fund transactions or other purposes. Should this happen, you should consider performing transactions by another method.

**Systematic Withdrawal Plan**. You may participate in the Fund's Systematic Withdrawal Plan, an investment plan that automatically moves money to your bank account from the Fund through the use of electronic funds transfers. You may elect to make subsequent withdrawals by transfer of a minimum of $100 on specified days of each month into your established bank account. Please contact the Fund at 800-253-0412 for more information about the Fund's Systematic Withdrawal Plan.

**Redemption Fee and CDSC.** Currently, the Fund do not charge a redemption fee. Shareholders in the Fund who purchased $1 million or more Class A shares and did not pay a front-end sales charge will be assessed a 1.00% CDSC on shares redeemed less than 24 months after the date of their purchase. Shareholders who purchase Class C shares do not pay an initial front-end sales charge but will be assessed a 1.00% CDSC on shares redeemed less than 12 months after the date of their purchase.

The Fund use a "first in, first out" method for calculating the CDSC. This means that shares held the longest will be redeemed first, and shares held the shortest time will be redeemed last. The CDSC is paid to the Advisor to reimburse expenses incurred in providing distribution-related services to the Fund.

The Fund reserve the right to modify, waive or eliminate the CDSC at any time. If the Fund institutes a redemption fee, the Fund will notify you at least 60 days prior to the effective date of the change. The Statement of Additional Information contains further details about the CDSC and the conditions for waiving these fees.

**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 is greater than the lesser of $250,000 or 1% of the Fund's assets. The securities will be chosen by the Fund, may be either a pro rata payment of each of the securities held by the Fund or a representative sample of securities, and will be valued under the Fund's NAV procedures. A shareholder will be exposed to market risk until these securities are converted to cash and may incur transaction expenses in converting these securities to cash.

**Additional Information.** If you are not certain of the requirements for redemption please call the transfer agent at 800-253-0412. Redemptions specifying a certain date or share price cannot be accepted and will be returned. You will be mailed the proceeds on or before the seventh calendar day following the receipt of your redemption request to pay out redemption proceeds by check or electronic transfer. The Fund typically expect to pay redemptions from cash, cash equivalents, proceeds from the sale of fund shares, any lines of credit and then from the sale of portfolio securities. Under certain circumstances, as described immediately above, redemption proceeds may be paid in kind rather than in cash. These redemption payment methods will be used in regular and stressed market conditions. You may be assessed a fee if the Fund incurs bank charges because you request that the Fund re-issue a redemption check. Also, when the NYSE is closed (or when trading is restricted) for any reason other than its customary weekend or holiday closing or under any emergency circumstances, as determined by the Securities and Exchange Commission, the Fund may suspend redemptions or postpone payment dates.

Because the Fund incurs certain fixed costs in maintaining shareholder accounts, the Fund may require you to redeem all of your shares in the Fund on 30 days written notice if the value of your shares in the Fund is less than $1,000 due to redemption, or such other minimum amount as the Fund may determine from time to time. You may increase the value of your shares in the Fund to the minimum amount within the 30-day period. All shares of the Fund are also subject to involuntary redemption if the Board of Trustees determines to liquidate the Fund. An involuntary redemption will create a capital gain or a capital loss, which may have tax consequences about which you should consult your tax advisor.

An account may be turned over as unclaimed property to the investor's last known state of tax residence if the account is deemed "inactive" or "lost" during the time frame specified within the applicable state's unclaimed property laws. Investors who are residents of the state of Texas may designate a representative to receive legislatively required unclaimed property due diligence notifications. A Texas Designation of Representative Form is available for making such an election.

**Reinstatement Privilege:** Shareholders have a one-time right, within 60 days of redeeming Class A shares to reinvest the redemption proceeds at the next determined NAV in Class A shares without any sales charge. The investor must notify the Trust in writing of the reinvestment by the shareholder in order to eliminate a sales charge. If the shareholder redeems Class A shares and utilizes the reinstatement privilege, there may be tax consequences.

**Exchanging Shares**

On any business day when the NYSE is open, you may exchange shares of the Fund for the same class of shares of any other Rational Fund offering such shares, provided the account registration information of the other Fund is the same.

**Additional Information** 

In order to exchange shares of the Fund on a particular day, the Fund or its designated agent must receive your request before the close of regular trading on the NYSE (normally 4:00 p.m. Eastern Time) that day.

The Trust may terminate or modify the exchange privilege at any time. In the case of termination or material changes other than the elimination of applicable sales charges, you will be given 60 days prior notice. However, the Fund's management or Advisor may determine from the amount, frequency and pattern of exchanges that a shareholder is engaged in excessive trading that is detrimental to the Fund and other shareholders. If this occurs, the Fund may terminate the availability of exchanges to that shareholder and may bar that shareholder from purchasing shares of other Rational Funds. (See "Frequent Trading Policies.")

An exchange is treated as a sale for federal income tax purposes and, depending on the circumstances, you may realize a short or long-term capital gain or loss. In addition, if you exchange shares of the Fund that imposes a sales charge into another Rational Fund that imposes such a charge, there may be special tax consequences.

The SAI contains more information about exchanges.

**Exchanging Class A Shares** 

For Class A shares, the Trust makes exchanges at NAV (determined after the order is considered received), plus any applicable sales charges. A CDSC is not imposed on exchanges of Class A shares.

**Exchanging Class C Shares**

Class C shares of the Fund may be exchanged for Class C shares of any other Fund offering such shares. The Trust makes exchanges at NAV (determined after the order is considered received), without a sales charge.

**Exchanging Institutional Shares** 

For Institutional shares, the Trust makes exchanges at NAV (determined after the order is considered received), without a sales charge.

**How to Exchange Shares** 

&nbsp;&nbsp;&nbsp;&nbsp;1. **Satisfy the minimum account balance requirements** 

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• You must maintain the required minimum account balance in the Fund out of which you are exchanging shares.

&nbsp;&nbsp;&nbsp;&nbsp;2. **Satisfy the minimum investment requirements** 

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• You must meet the minimum investment requirements of the Fund into which you are exchanging shares.

&nbsp;&nbsp;&nbsp;&nbsp;3. **Call (You must have completed the appropriate section on your account application)** 

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• The Fund at 800-253-0412

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Your Investment Professional

OR

**Write**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Mutual Fund and Variable Insurance Trust

c/o Ultimus Fund Solutions, LLC

225 Pictoria Dr, Suite 450

Cincinnati, OH 45246.

**4. Provide the required information** 

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Name of the Fund from which you wish to make the exchange (exchange OUT OF)

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Specify the share class

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Your account number

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• The name and address on your account (account registrations must be identical)

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• The dollar amount or number of shares to be exchanged

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Name of the Fund into which you wish to make the exchange (exchange INTO) — (Make sure this Fund offers the applicable class
of shares)

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Your signature (for written requests)

(For corporations, executors, administrators, trustees and guardians, and in certain other special circumstances, telephone exchanges will not be available, and you will need a New Technology Medallion Signature Guarantee in order to make an exchange.)

**Converting Shares**

Shareholders of the Fund may elect on a voluntary basis to convert their shares in one class of the Fund into shares of a different class of the same Fund, subject to satisfying the eligibility requirements for investment in the new share class.

Shares held through a financial intermediary offering different programs and fee structures that has an agreement with the Advisor or the Fund's distributor may be converted by the financial intermediary, without notice, to another share class of the Fund, including share classes with a higher expense ratio than the original share class, if such conversion is consistent with the fee-based or wrap fee program's policies. An investor may directly, or through his or her financial intermediary, contact the Fund to request a

voluntary conversion between share classes of the same Fund as described above. You may be required to provide sufficient information to establish eligibility to convert to the new share class.

Class C shares convert automatically to Class A shares after ten years (unless otherwise specified by your financial intermediary), provided that the financial intermediary through which you purchased Class C shares has records verifying that the Class C shares have been held for at least ten years, Class A shares are available for purchase by persons in your state or territory of residence, and the shares are not subject to a CDSC. You should consult your financial representative for more information about eligibility for Class C share conversion.

All permissible conversions will be made on the basis of the relevant NAVs of the two classes without the imposition of any front-end sales load. A share conversion within the Fund will not result in a capital gain or loss for federal income tax purposes. The Fund may change, suspend or terminate this conversion feature at any time.

**ADDITIONAL PAYMENTS TO FINANCIAL INTERMEDIARIES**

The Advisor and/or its affiliates may pay out of their own profits and reasonable resources amounts (including items of material value) to certain financial intermediaries that support the sale of shares or provide services to Funds' shareholders. The amounts of these payments could be significant and may create an incentive for the financial intermediaries or their employees or associated persons to recommend or sell shares of the Fund to you. These payments are not reflected in the fees and expenses listed in the fee table section of the Fund's Prospectus because they are not paid by the Fund.

These payments are negotiated and may be based on such factors as the number or value of shares that the financial intermediary sells or may sell; the value of client assets invested; or the type and nature of services or support furnished by the financial intermediary. These payments may be in addition to payments made by the Fund to the financial intermediary under a Rule 12b-1 Plan and/or shareholder service fees arrangement. You can ask your financial intermediary for information about any payments it receives from the Advisor, its affiliates, or the Fund and any services the financial intermediary provides. The Fund's SAI contains additional information on the types of additional payments that may be paid.

**VALUING FUND ASSETS**

The Fund's assets are generally valued at their market value. If market prices are not available or, in the Advisor's opinion, market prices do not reflect fair value, or if an event occurs after the close of trading on the domestic exchange or market on which the security is principally traded (but prior to the time the NAV is calculated) that materially affects fair value, the Advisor will value the Fund's assets at their fair value according to policies approved by the Fund's Board of Trustees. 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. 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. If a security, such as a small cap security, is so thinly traded that reliable market quotations are unavailable, the Advisor may need to price the security using 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 Fund may use pricing services to determine market value. The Fund's NAV is calculated based

upon the NAV of the underlying investment companies in its portfolio, and the prospectuses of those companies explain the circumstances under which they will use fair value pricing and the effects of using fair value pricing. Certain Funds may invest in securities primarily listed on foreign exchanges, and these exchanges may trade on weekends or other days when the Fund does not price its 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.

**DIVIDENDS, DISTRIBUTIONS AND TAXES**

**Dividends and Distributions**

The Fund typically distributes substantially all of its net investment income in the form of dividends and taxable capital gains to its shareholders. These distributions are automatically reinvested in the Fund unless you request cash distributions on your application or through a written request to the Fund. The Fund expects that its distributions will consist of both capital gains and dividend income. The Fund may make distributions of its net realized capital gains (after any reductions for capital loss carry forwards) annually.

The Fund declare, have ex-dates and pay dividends on investment income, if any, monthly.

Please refer to the section headings "Additional Information About the Fund's Principal Investment Strategies and Related Risks – Principal Investment Strategies –Distribution Policy and Goals" and "Additional Information About the Fund's Principal Investment Strategies and Related Risks – Principal Investment Risks" for a detailed description of the Fund's distribution policy and tax consequences.

**Annual statements**

Each year, the Fund will send you an annual statement (Form 1099) of your account activity to assist you in completing your federal, state, and local tax returns. Distributions declared in December to shareholders of record in such month, but paid in January, are taxable as if they were paid in December. Prior to issuing your statement, the Fund makes every effort to reduce the number of corrected forms mailed to you. However, if the Fund finds it necessary to reclassify its distributions or adjust the cost basis of any covered shares (defined below) sold or exchanged after you receive your tax statement, the Fund will send you a corrected Form 1099.

**Avoid "buying a dividend"**

At the time you purchase your Fund shares, the Fund's NAV may reflect undistributed income, undistributed capital gains, or net unrealized appreciation in value of portfolio securities held by the Fund. For taxable investors, a subsequent distribution to you of such amounts, although constituting a return of your investment, would be taxable. Buying shares in the Fund just before it declares an income dividend or capital gains distribution is sometimes known as "buying a dividend."

**Tax considerations**

**Fund distributions.** The Fund expects, based on its investment objective and strategies, that its distributions, if any, will be taxable as ordinary income, capital gains, or some combination of both. This is true whether you reinvest your distributions in additional Fund shares or receive them in cash.

For federal income tax purposes, Fund distributions of short-term capital gains are taxable to you as ordinary income. Fund distributions of long-term capital gains are taxable to you as long-term capital gains no matter how long you have owned your shares. A portion of the income dividends reported by the Fund

may be qualified dividend income eligible for taxation by individual shareholders at long-term capital gain tax rates.

The use of derivatives by the Fund may cause the Fund to realize higher amounts of ordinary income or short-term capital gain, distributions from which are taxable to individual shareholders at ordinary income tax rates rather than at the more favorable tax rates for long-term capital gain.

If the Fund qualifies to pass through to you the tax benefits from foreign taxes it pays on its investments, and elects to do so, then any foreign taxes it pays on these investments may be passed through to you to be taken as a deduction or credit on your federal income tax return.

**Sale or redemption of Fund shares.** A sale or redemption of Fund shares is a taxable event and, accordingly, a capital gain or loss may be recognized. For tax purposes, an exchange of your Fund shares for shares of a different Rational Fund is the same as a sale. The Fund is required to report to you and the Internal Revenue Service ("IRS") annually on Form 1099-B not only the gross proceeds of Fund shares you sell or redeem but also the cost basis of Fund shares you sell or redeem that were purchased or acquired on or after Jan. 1, 2012 ("covered shares"). Cost basis will be calculated using the Fund's default method (i.e., average cost), unless you instruct the Fund to use a different calculation method. Shareholders should carefully review the cost basis information provided by the Fund and make any additional basis, holding period or other adjustments that are required when reporting these amounts on their federal income tax returns. If your account is held by your investment representative (financial advisor or other broker), please contact that representative with respect to reporting of cost basis and available elections for your account. Tax-advantaged retirement accounts will not be affected.

**Medicare tax.** An additional 3.8% Medicare tax is imposed on certain net investment income (including ordinary dividends and capital gain distributions received from the Fund and net gains from redemptions or other taxable dispositions of Fund shares) of US individuals, estates and trusts to the extent that such person's "modified adjusted gross income" (in the case of an individual) or "adjusted gross income" (in the case of an estate or trust) exceeds a threshold amount. This Medicare tax, if applicable, is reported by you on, and paid with, your federal income tax return.

**Backup withholding.** By law, if you do not provide the Fund with your proper taxpayer identification number and certain required certifications, you may be subject to backup withholding on any distributions of income, capital gains, or proceeds from the sale of your shares. The Fund also must withhold if the IRS instructs it to do so. When withholding is required, the amount will be 24% of any distributions or proceeds paid.

**State and local taxes.** Fund distributions and gains from the sale or exchange of your Fund shares generally are subject to state and local taxes.

**Non-US investors.** Non-US investors may be subject to US withholding tax at a 30% or lower treaty rate and US estate tax and are subject to special US tax certification requirements to avoid backup withholding and claim any treaty benefits. Exemptions from US withholding tax are provided for certain capital gain dividends paid by the Fund from net long-term capital gains, if any, interest-related dividends paid by the Fund from its qualified net interest income from US sources, and short-term capital gain dividends, if such amounts are reported by the Fund. However, notwithstanding such exemptions from US withholding at the source, any such dividends and distributions of income and capital gains will be subject to backup withholding at a rate of 24% if you fail to properly certify that you are not a US person.

**Other reporting and withholding requirements.** Under the Foreign Account Tax Compliance Act ("FATCA"), the Fund will be required to withhold a 30% tax on income dividends made by the Fund to

certain foreign entities, referred to as foreign financial institutions or non-financial foreign entities, that fail to comply (or be deemed compliant) with extensive reporting and withholding requirements designed to inform the U.S. Department of the Treasury of U.S.-owned foreign investment accounts. After December 31, 2018, FATCA withholding also would have applied to certain capital gain distributions, return of capital distributions, and the proceeds arising from the sale of Fund shares; however, based on proposed regulations issued by the IRS, which can be relied upon currently, such withholding is no longer required unless final regulations provide otherwise (which is not expected). The Fund may disclose the information that it receives from its shareholders to the IRS, non-U.S. taxing authorities or other parties as necessary to comply with FATCA or similar laws. Withholding also may be required if a foreign entity that is a shareholder of the Fund fails to provide the Fund with appropriate certifications or other documentation concerning its status under FATCA.

**This discussion of "Dividends, distributions, and taxes" is not intended or written to be used as tax advice. Because everyone's tax situation is unique, you should consult your tax professional about federal, state, local, or foreign tax consequences before making an investment in the Fund.**

**MANAGEMENT OF THE FUND**

**Advisor**

Rational Advisors, Inc. has been retained by the Trust under management agreements to act as the investment advisor to the Fund subject to the authority of the Board of Trustees. Management of mutual funds is currently its primary business. The Advisor is under common control with Catalyst Capital Advisors LLC ("Catalyst"), and AlphaCentric Advisors LLC, the investment advisers of other funds in the same group of investment companies also known as a "fund complex." The Advisor oversees the day-to-day investment decisions for the Fund and continuously reviews, supervises, and administers the Fund's investment program. MFund Services, LLC, an affiliate of the Advisor, provides the Fund with certain management, legal, administrative and compliance services. The address of the Advisor is 207 Calle del Parque, AM Tower, Floor 7, Suite 2, San Juan, PR 00912-3242.

Under the terms of the management agreement, the Advisor is responsible for formulating the Fund's investment policies, making ongoing investment decisions, and directing portfolio transactions.

**Portfolio Managers**

 ***[Portfolio Managers of Rational Premium Income Fund***

David Miller and Charles Ashley are jointly and primarily responsible for the day-to-day management of the Fund's portfolio..

 

 *David Miller,* **co-**Owner, Chief Investment Officer, and Senior Portfolio Manager of the Advisor since 2016**,** has served as the Portfolio Manager of the Fund since December 31, 2025. He is also the Chief Investment Officer of Catalyst, since 2016. He co-founded Catalyst in 2006 and is responsible for the day-to-day management of several funds managed by the Adviser and/or Catalyst. Mr. Miller is also a member of Catalyst International Advisors LLC since 2019 and Insights Media LLC since 2019. He received a BS in Economics from the University of Pennsylvania, Wharton School and an MBA in Finance from the University of Michigan, Ross School of Business.

 *Charles Ashley,* Portfolio Manager of the Advisor since 2017**,** has served as the Portfolio Manager of the Fund since December 2025.

Mr. Ashley joined the Advisor in 2016 as a senior analyst to provide investment

research and assist with the day-to-day management of several mutual funds. He also serves as a portfolio manager of Catalyst since 2017. Mr. Ashley has an MBA from the University of Michigan, Ross School of Business and a B.A. from the Michigan State University, Eli Broad College of Business.

\* \* \*

The Fund's SAI provides additional information about the portfolio managers' compensation, management of other accounts, and ownership of securities in the Fund.

**Manager-of-Managers Order**

An affiliate of the Advisor has obtained an exemptive order (the "Order") from the Securities and Exchange Commission that would permit the Advisor, with the Board of Trustees' approval, to enter into sub-advisory agreements with one or more sub-advisors with respect to the Fund without obtaining shareholder approval. The Order permits the Advisor, subject to the approval of the Board of Trustees, to replace sub-advisors or amend sub-advisory agreements, including with respect to sub-advisory fees, without shareholder approval whenever the Advisor and the Trustees believe such action will benefit the Fund and its shareholders. Shareholders will be notified if and when a new sub-advisor is employed by the Advisor within 90 days of such change.

**Regulation under the Commodity Exchange Act**

The Advisor is registered as a CPO under the CEA and the rules of the CFTC and is subject to CFTC regulation with respect to the Fund. The CFTC has adopted rules regarding the disclosure, reporting and recordkeeping requirements that apply with respect to the Fund as a result of the Advisor's registration as a CPO. Generally, these rules allow for substituted compliance with CFTC disclosure and shareholder reporting requirements, based on the Advisor's compliance with comparable SEC requirements. This means that for most of the CFTC's disclosure and shareholder reporting requirements applicable to the Advisor as the Fund's CPO, the Advisor's compliance with SEC disclosure and shareholder reporting requirements will be deemed to fulfill the Advisor's CFTC compliance obligations. However, as a result of CFTC regulation with respect to the Fund, the Fund may incur additional compliance and other expenses.

 **Advisory Services**

The Fund pay the Advisor management fees as a percentage of the Fund's average daily net assets for its services as investment advisor as set forth in the chart below and the paragraphs that immediately follow:

---

| | |
|:---|:---|
| **<u>Fund</u>** | **Percentage of Average Daily Net Assets** |
| Rational Premium Income Fund | 1.75% |

---

**Advisory Fees**

The Advisor has contractually agreed to waive fees and/or reimburse expenses, but only to the extent necessary to maintain the total annual operating expenses of the Fund (excluding (i) acquired fund fees and expenses; (ii) brokerage commissions and trading costs; (iii) interest (including borrowing costs and overdraft charges), (iv) taxes, (v) short sale dividends and interest expenses, and (vi) non-routine or extraordinary expenses, such as regulatory inquiry and litigation expenses. The arrangement may only be terminated prior to this date with the agreement of the Fund's Board of Trustees. Under certain conditions, the Advisor may recoup management fees that it waived or Fund expenses that it paid under this agreement for a period of three years from the date the fees were waived or expenses paid, if the recoupment can be

achieved without causing the expense ratio of the share class (after the recoupment is taken into account) to exceed (i) the expense limit in effect at the time the fees were waived or expenses paid, or (ii) the expense limit in place at the time of the recoupment.

The following table describes the expense limitation for the Fund, calculated as an annual percentage of the average daily net assets of each share class.

---

| | | | |
|:---|:---|:---|:---|
| **Fund** | **Expense Limitation** | **Expense Limitation** | **Expense Limitation** |
| **Fund** | **Class A** | **Class C** | **Institutional Shares** |
| Rational Premium Income Fund | 2.24% | 2.99% | 1.99% |

---

For the fiscal year ended December 31, 2024, the Fund paid the Advisor management fees (after waivers) as a percentage of the Fund's average daily net assets:

---

| | |
|:---|:---|
| **Fund** | **Net Advisory Fee Received** |
| Rational Premium Income Fund | 1.61% |

---

 

The Fund may directly enter into agreements with financial intermediaries (which may include banks, brokers, securities dealers and other industry professionals) pursuant to which the Fund will pay the financial intermediary for services such as networking or sub-transfer agency, including the maintenance of "street name" or omnibus accounts and related sub-accounting, record-keeping and administrative services provided to such accounts. The Fund, through its Rule 12b-1 distribution plan, or the Fund's respective Advisor (not the Fund) may also pay certain financial intermediaries a fee for providing distribution related services for each respective Fund's shareholders to the extent these institutions are allowed to do so by applicable statute, rule, or regulation. Please refer to the section of the SAI entitled "Additional Compensation to Financial Intermediaries" for more information.

The Trust's annual report to shareholders for the fiscal year ended December 31, 2024, contains discussions regarding the basis of the Board's renewal of the management agreement.

 **FINANCIAL HIGHLIGHTS**

 **Rational Premium Income Fund**

The financial highlights tables that follow are intended to help you understand the Fund's financial performance during the last five fiscal years or since the commencement of operations if less than five years. Certain information reflects financial results for a single Fund share. The total returns in the table represent the rate that an investor would have earned or lost on an investment in the Fund (assuming reinvestment of all dividends and distributions). This information has been derived from the Fund's financial statements. The information for each of the last five fiscal years ended December 31, 2024 has been audited by [AUDITOR NAME], an independent registered public accounting firm, whose report, along with the Fund's financial statements, is included in the annual report. The information for the six-month period ended June 30, 2025 is unaudited and is derived from the Fund's financial statements included in the Fund's most recent semi-annual Report. The Fund's annual and semi-annual reports are available upon request.

For a Share Outstanding Throughout Each Year

[INSERT FIHIs INCLUDING SEMI-ANNUAL PERIOD]

**APPENDIX A — INTERMEDIARY-SPECIFIC SALES CHARGE REDUCTIONS AND WAIVERS**

Specific intermediaries may have different policies and procedures regarding the availability of sales charge reductions and waivers, which are discussed below. In all instances, it is the shareholder's responsibility to notify the Fund or the shareholder's financial intermediary at the time of purchase of any relationship or other facts qualifying the shareholder for sales charge reductions or waivers.

**MERRILL LYNCH**

Purchases or sales of front-end (i.e. Class A) or level-load (i.e., Class C) mutual fund shares through a Merrill platform or account will be eligible only for the following sales load waivers (front-end, contingent deferred, or back-end waivers) and discounts, which differ from those disclosed elsewhere in this Fund's prospectus. Purchasers will have to buy mutual fund shares directly from the mutual fund company or through another intermediary to be eligible for waivers or discounts not listed below.

It is the client's responsibility to notify Merrill at the time of purchase or sale of any relationship or other facts that qualify the transaction for a waiver or discount. A Merrill representative may ask for reasonable documentation of such facts and Merrill may condition the granting of a waiver or discount on the timely receipt of such documentation.

Additional information on waivers and discounts is available in the Merrill Sales Load Waiver and Discounts Supplement (the "Merrill SLWD Supplement") and in the Mutual Fund Investing at Merrill pamphlet at ml.com/funds. Clients are encouraged to review these documents and speak with their financial advisor to determine whether a transaction is eligible for a waiver or discount.

*Front-end Load Waivers on Class A Shares available at Merrill Lynch*

&nbsp;&nbsp;&nbsp;&nbsp;· Shares of mutual funds available for purchase by employer-sponsored retirement, deferred compensation,
and employee benefit plans (including health savings accounts) and trusts used to fund those plans provided the shares are not held in
a commission-based brokerage account and shares are held for the benefit of the plan. For purposes of this provision, employer-sponsored
retirement plans do not include SEP IRAs, Simple IRAs, SAR-SEPs or Keogh plans

&nbsp;&nbsp;&nbsp;&nbsp;· Shares purchased through a Merrill investment advisory program

&nbsp;&nbsp;&nbsp;&nbsp;· Brokerage class shares exchanged from advisory class shares due to the holdings moving from a Merrill
investment advisory program to a Merrill brokerage account

&nbsp;&nbsp;&nbsp;&nbsp;· Shares purchased through the Merrill Edge Self-Directed platform

&nbsp;&nbsp;&nbsp;&nbsp;· Shares purchased through the systematic reinvestment of capital gains distributions and dividend reinvestment
when purchasing shares of the same mutual fund in the same account

&nbsp;&nbsp;&nbsp;&nbsp;· Shares exchanged from level-load shares to front-end load shares of the same mutual fund in accordance
with the description in the Merrill SLWD Supplement

&nbsp;&nbsp;&nbsp;&nbsp;· Shares purchased by eligible employees of Merrill or its affiliates and their family members who purchase
shares in accounts within the employee's Merrill Household (as defined in the Merrill SLWD Supplement)

&nbsp;&nbsp;&nbsp;&nbsp;· Shares purchased by eligible persons associated with the fund as defined in this prospectus (e.g. the
fund's officers or trustees)

&nbsp;&nbsp;&nbsp;&nbsp;· Shares purchased from the proceeds of a mutual fund redemption in front-end load shares provided (1)
the repurchase is in a mutual fund within the same fund family; (2) the repurchase occurs within 90 calendar days from the redemption
trade date, and (3) the redemption and purchase occur in the same account (known as Rights of Reinstatement). Automated transactions

(i.e. systematic purchases and withdrawals) and purchases made after shares are automatically sold to pay Merrill's account maintenance fees are not eligible for Rights of Reinstatement

*CDSC Waivers on Class A and C Shares available at Merrill Lynch*

&nbsp;&nbsp;&nbsp;&nbsp;· Shares sold due to the client's death or disability (as defined by Internal Revenue Code Section
22I(3))

&nbsp;&nbsp;&nbsp;&nbsp;· Shares sold pursuant to a systematic withdrawal program subject to Merrill's maximum systematic
withdrawal limits as described in the Merrill SLWD Supplement

&nbsp;&nbsp;&nbsp;&nbsp;· Shares sold due to return of excess contributions from an IRA account

&nbsp;&nbsp;&nbsp;&nbsp;· Shares sold as part of a required minimum distribution for IRA and retirement accounts due to the investor
reaching the qualified age based on applicable IRS regulation

&nbsp;&nbsp;&nbsp;&nbsp;· Front-end or level-load shares held in commission-based, non-taxable retirement brokerage accounts (e.g.
traditional, Roth, rollover, SEP IRAs, Simple IRAs, SAR-SEPs or Keogh plans) that are transferred to fee-based accounts or platforms and
exchanged for a lower cost share class of the same mutual fund

*Class A Shares Front-end load Discounts Available at Merrill Lynch: Breakpoints, Rights of Accumulation & Letters of Intent*

&nbsp;&nbsp;&nbsp;&nbsp;· Breakpoint discounts, as described in this prospectus, where the sales load is at or below the maximum
sales load that Merrill permits to be assessed to a front-end load purchase, as described in the Merrill SLWD Supplement

&nbsp;&nbsp;&nbsp;&nbsp;· Rights of Accumulation (ROA), as described in the Merrill SLWD Supplement, which entitle clients to
breakpoint discounts based on the aggregated holdings of mutual fund family assets held in accounts in their Merrill Household

&nbsp;&nbsp;&nbsp;&nbsp;· Letters of Intent (LOI), which allow for breakpoint discounts on eligible new purchases based on anticipated
future eligible purchases within the fund family at Merrill, in accounts within your Merrill Household, as further described in the Merrill
SLWD Supplement

**MORGAN STANLEY WEALTH MANAGEMENT** 

Front-end Sales Charge Waivers on Class A Shares available at Morgan Stanley

* Employer-sponsored retirement plans (e.g., 401(k) plans, 457 plans, employer-sponsored
403(b) plans, profit sharing and money purchase pension plans and defined benefit plans). For purposes of this provision, employer-sponsored
retirement plans do not include SEP IRAs, Simple IRAs, SAR-SEPs or Keogh plans 

* Morgan Stanley employee and employee-related accounts according to Morgan
Stanley's account linking rules 

* Shares purchased through reinvestment of dividends and capital gains distributions
when purchasing shares of the same fund 

* Shares purchased through a Morgan Stanley self-directed brokerage account 

* Class C (i.e., level-load) shares that are no longer subject to a contingent
deferred sales charge and are converted to Class A shares of the same fund pursuant to Morgan Stanley Wealth Management's share
class conversion program 

* Shares purchased from the proceeds of redemptions within the same fund
family, provided (i) the repurchase occurs within 90 days following the redemption, (ii) the redemption and purchase occur in the same
account, and (iii) redeemed shares were subject to a front-end or deferred sales charge.

**RBC CAPITAL MARKETS, LLC ("RBC")**

*Front-end Sales Load Waivers on Class A Shares available at RBC*

· Employer-sponsored retirement plans.

**RAYMOND JAMES & ASSOCIATES, INC., RAYMOND JAMES FINANCIAL SERVICES, INC. AND EACH ENTITY'S AFFILIATES ("RAYMOND JAMES")** 

Effective March 1, 2019, shareholders purchasing fund shares through a Raymond James platform or account, or through an introducing broker-dealer or independent registered investment adviser for which Raymond James provides trade execution, clearance, and/or custody services, will be eligible only for the following load waivers (front-end sales charge waivers and contingent deferred, or back-end, sales charge waivers) and discounts, which may differ from those disclosed elsewhere in this fund's prospectus or SAI.

**Front-end sales load waivers on Class A shares available at Raymond James** 

&nbsp;&nbsp;&nbsp;&nbsp;· Shares purchased in an investment advisory program.

&nbsp;&nbsp;&nbsp;&nbsp;· Shares purchased within the same fund family through a systematic reinvestment of capital gains and
dividend distributions.

&nbsp;&nbsp;&nbsp;&nbsp;· Employees and registered representatives of Raymond James or its affiliates and their family members
as designated by Raymond James.

&nbsp;&nbsp;&nbsp;&nbsp;· Shares purchased from the proceeds of redemptions within the same fund family, provided (1) the repurchase
occurs within 90 days following the redemption, (2) the redemption and purchase occur in the same account, and (3) redeemed shares were
subject to a front-end or deferred sales load (known as Rights of Reinstatement).

&nbsp;&nbsp;&nbsp;&nbsp;· A shareholder in the Fund's Class C shares will have their shares converted at net asset value
to Class A shares (or the appropriate share class) of the Fund if the shares are no longer subject to a CDSC and the conversion is in
line with the policies and procedures of Raymond James.

**CDSC Waivers on Classes A, B and C shares available at Raymond James** 

&nbsp;&nbsp;&nbsp;&nbsp;• Death or disability of the shareholder.

&nbsp;&nbsp;&nbsp;&nbsp;• Shares sold as part of a systematic withdrawal plan as described in the fund's prospectus.

&nbsp;&nbsp;&nbsp;&nbsp;• Return of excess contributions from an IRA Account.

&nbsp;&nbsp;&nbsp;&nbsp;• Shares sold as part of a required minimum distribution for IRA and retirement accounts due to the shareholder
reaching the qualified age based on applicable IRS regulations as described in the fund's prospectus.

&nbsp;&nbsp;&nbsp;&nbsp;• Shares sold to pay Raymond James fees but only if the transaction is initiated by Raymond James.

&nbsp;&nbsp;&nbsp;&nbsp;• Shares acquired through a right of reinstatement.

**Front-end load discounts available at Raymond James: breakpoints, rights of accumulation, and/or letters of intent** 

&nbsp;&nbsp;&nbsp;&nbsp;• Breakpoints as described in this prospectus.

&nbsp;&nbsp;&nbsp;&nbsp;• Rights of accumulation which entitle shareholders to breakpoint discounts will be automatically calculated
based on the aggregated holding of fund family assets held by accounts within the purchaser's household at Raymond James. Eligible
fund family assets not held at Raymond James may be included in the calculation of rights of accumulation only if the shareholder notifies
his or her financial advisor about such assets.

&nbsp;&nbsp;&nbsp;&nbsp;• Letters of intent which allow for breakpoint discounts based on anticipated purchases within the fund
family, over a 13-month time period. Eligible fund family assets not held at Raymond James may be included in the calculation of letters
of intent only if the shareholder notifies his or her financial advisor about such assets.

**STIFEL**

**WAIVERS APPLICABLE TO PURCHASES THROUGH STIFEL NICHOLAS & CO.**

Shareholders purchasing or holding Fund shares, including existing Fund shareholders, through a Stifel Nicolaus & Co. (Stifel) or affiliated platform that provides trade execution, clearance, and/or custody services, will be eligible for the following sales charge load waivers (including front-end sales charge waivers and contingent deferred, or back-end, (CDSC) sales charge waivers) and discounts, which may differ from those disclosed elsewhere in this Prospectus or the Fund's Statement of Additional Information (SAI).

**CLASS A SHARES**

As described elsewhere in this Prospectus, Stifel may receive compensation out of the front-end sales charge if you purchase Class A shares through Stifel.

**Rights of Accumulation (ROA)**

Rights of accumulation (ROA) that entitle shareholders to breakpoint discounts on front-end sales charges will be calculated by Stifel based on the aggregated holding of eligible assets in the Rational family of funds held by accounts within the purchaser's household at Stifel. Fund family assets not held at Stifel may be included in the calculation of ROA only if the shareholder notifies his or her financial advisor about such assets.

The employer maintaining a SEP IRA plan and/or SIMPLE IRA plan may elect to establish or change ROA for the IRA accounts associated with the plan to a plan-level grouping as opposed to including all share classes at a shareholder or pricing group level.

**Front-End Sales Charge Waivers on Class A Shares Available at Stifel**

Sales charges may be waived for the following shareholders in the following situations:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;· Class C shares that have been held for more than seven (7) years may be converted to Class A shares
or other front-end share class(es) of the same Fund pursuant to Stifel's policies and procedures. To the extent that this Prospectus
elsewhere provides for a waiver with respect to the exchange or conversion of such shares following a shorter holding period, those provisions
shall continue to apply.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;· Shares purchased by employees and registered representatives of Stifel or its affiliates and their family
members as designated by Stifel.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;· Shares purchased in a Stifel fee-based advisory program, often referred to as a "wrap" program.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;· Shares purchased through reinvestment of capital gains distributions and dividend reinvestment when
purchasing shares of the same or other fund within the Rational family of funds.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;· Shares purchased from the proceeds of redeemed shares of the fund within the Rational family of funds
so long as the proceeds are from the sale of shares from an account with the same owner/beneficiary within 90 days of the purchase. For
the absence of doubt, automated transactions (i.e. systematic purchases, including salary deferral transactions and withdrawals) and purchases
made after shares are sold to cover Stifel Nicolaus' account maintenance fees are not eligible for rights of reinstatement.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;· Shares from rollovers into Stifel from retirement plans to IRAs.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;· Shares exchanged into Class A shares from another share class so long as the exchange is into the same
Fund and was initiated at the direction of Stifel. Stifel is responsible for any remaining CDSC due to the Fund, if applicable. Any future
purchases are subject to the applicable sales charge as disclosed in this Prospectus.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;· Purchases of Class 529-A shares through a rollover from another 529 plan.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;· Purchases of Class 529-A shares made for reinvestment of refunded amounts.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;· Employer-sponsored retirement plans (e.g., 401(k) plans, 457 plans, employer-sponsored 403(b) plans,
profit sharing and money purchase pension plans and defined benefit plans). For purposes of this provision, employer sponsored retirement
plans do not include SEP IRAs, Simple IRAs or SAR-SEPs.

**Contingent Deferred Sales Charges Waivers on Class A and C Shares**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;· Death or disability of the shareholder or, in the case of 529 plans, the account beneficiary.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;· Shares sold as part of a systematic withdrawal plan not to exceed 12% annually.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;· Return of excess contributions from an IRA Account.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;· Shares sold as part of a required minimum distribution for IRA and retirement accounts due to the shareholder
reaching the qualified age based on applicable IRS regulations.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;· Shares acquired through a right of reinstatement.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;· Shares sold to pay Stifel fees or costs in such cases where the transaction is initiated by Stifel.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;· Shares exchanged or sold in a Stifel fee-based program.

**Share Class Conversions in Advisory Accounts**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;· Stifel continually looks to provide our clients with the lowest cost share class available based on
account type. Stifel reserves the right to convert shares to the lowest cost share class available at Stifel upon transfer of shares into
an advisory program.

**The information disclosed in the appendix is part of, and incorporated in, the prospectus.**

 ****

 ***PRIVACY NOTICE***

**Mutual Fund & Variable Insurance Trust** 

**Rev. June 2022** 

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| | | |
|:---|:---|:---|
| **FACTS** | **FACTS** | **WHAT DOES MUTUAL FUND & VARIABLE INSURANCE TRUST DO WITH YOUR PERSONAL INFORMATION?** |
| **Why?** | Financial companies choose how they share your personal information. Federal law gives consumers the right to limit some, but not all sharing. Federal law also requires us to tell you how we collect, share, and protect your personal information. Please read this notice carefully to understand what we do. | Financial companies choose how they share your personal information. Federal law gives consumers the right to limit some, but not all sharing. Federal law also requires us to tell you how we collect, share, and protect your personal information. Please read this notice carefully to understand what we do. |

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| | |
|:---|:---|
| **What?** | The types of personal information we collect and share depends on the product or service that you have with us. This information can include:<br> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;· Social Security number and wire transfer instructions<br> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;· account transactions and transaction history<br> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;· investment experience and purchase history<br> When you are *no longer* our customer, we continue to share your information as described in this notice. |

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| | |
|:---|:---|
| **How?** | All financial companies need to share customers' personal information to run their everyday business. In the section below, we list the reasons financial companies can share their customers' personal information; the reasons Mutual Fund & Variable Insurance Trust chooses to share; and whether you can limit this sharing. |

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| | | |
|:---|:---|:---|
| **Reasons we can share your personal information:** | **Does Mutual Fund & Variable Insurance Trust share information?** | **Can you limit this sharing?** |
| **For our everyday business purposes -** such as to process your transactions, maintain your account(s), respond to court orders and legal investigations, or report to credit bureaus. | **YES** | **NO** |
| **For our marketing purposes -** to offer our products and services to you. | **NO** | **We don't share** |
| **For joint marketing with other financial companies.** | **NO** | **We don't share** |
| **For our affiliates' everyday business purposes -** information about your transactions and records. | **NO** | **We don't share** |
| **For our affiliates' everyday business purposes -** information about your credit worthiness. | **NO** | **We don't share** |
| **For our affiliates to market to you** | **NO** | **We don't share** |
| **For non-affiliates to market to you** | **NO** | **We don't share** |

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 ****

***PRIVACY NOTICE***

**Mutual Fund & Variable Insurance Trust** 

 ****

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| | |
|:---|:---|
| **What we do** **:** | **What we do** **:** |
| <br> **How does Mutual Fund & Variable Insurance Trust protect my personal information?** | To protect your personal information from unauthorized access and use, we use security measures that comply with federal law. These measures include computer safeguards and secured files and buildings.<br> Our service providers are held accountable for adhering to strict policies and procedures to prevent any misuse of your nonpublic personal information. |
| <br> **How does Mutual Fund & Variable Insurance Trust collect my personal information?** | We collect your personal information, for example, when you:<br> · open an account or deposit money<br> · direct us to buy securities or direct us to sell your securities<br> · seek advice about your investments<br>We also collect your personal information from others, such as credit bureaus, affiliates, or other companies. |
| <br> **Why can't I limit all sharing?** | Federal law gives you the right to limit only:<br> · sharing for affiliates' everyday business purposes – information about your creditworthiness.<br> · affiliates from using your information to market to you.<br> · sharing for non-affiliates to market to you. <br>State laws and individual companies may give you additional rights to limit sharing. |

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| | |
|:---|:---|
| **Definitions** | **Definitions** |
| **Affiliates** | Companies related by common ownership or control. They can be financial and non-financial companies.<br> · *Mutual Fund & Variable Insurance Trust does not share with affiliates.* |
| **Non-affiliates** | Companies not related by common ownership or control. They can be financial and non-financial companies.<br> · *Mutual Fund & Variable Insurance Trust doesn't share with non-affiliates so they can market to you.* |
| **Joint marketing** | A formal agreement between nonaffiliated financial companies that together market financial products or services to you.<br> · *Mutual Fund & Variable Insurance Trust doesn't jointly market*. |

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| | |
|:---|:---|
| **QUESTIONS?** | **Call 1-800-253-0412** |

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**FOR MORE INFORMATION**

Several additional sources of information are available to you. The Statement of Additional Information ("SAI"), incorporated into this Prospectus by reference, contains detailed information on the Fund's policies and operations, including policies and procedures relating to the disclosure of portfolio holdings by the Fund's affiliates. The annual reports contain management's discussion of market conditions and investment strategies that significantly affected the Fund's performance results as of the Fund's latest annual fiscal year end.

Call the Fund at (800) 253-0412 to request free copies of the SAI, the annual report, and the semi-annual report, to request other information about the Fund and to make shareholder inquiries. You may also obtain this information from the Fund's internet site at www.rationalmf.com.

Copies of information about the Fund may be obtained from the SEC, after paying a duplicating fee, by electronic request at the following e-mail address: publicinfo@sec.gov.

Investment Company Act File No. 811-05010

![](image_003.jpg)

**STATEMENT OF ADDITIONAL INFORMATION** 

 **[December 31], 2025**

**MUTUAL FUND AND VARIABLE INSURANCE TRUST**

**Rational** **Premium Income Fund**

 **(formerly, Rational Tactical Return Fund)**

Class A Shares: HRSAX Class C Shares: HRSFX Institutional Shares: HRSTX

4221 North 203rd Street, Suite 100<br> Elkhorn, Nebraska 68022-3474

This Statement of Additional Information ("SAI") contains information that may be of interest to investors in the Rational Premium Income Fund (the "Fund"), a series of Mutual Fund and Variable Insurance Trust (the "Trust"), but that is not included in the Fund's prospectus for Class A, Class C, or Institutional shares, dated **[December 31],** 2025 (the "Prospectus"). This SAI is not a prospectus and is only authorized for distribution when accompanied or preceded by the Prospectus. This SAI should be read together with the Prospectus. The SAI incorporates by reference the audited financial statements and Report of Independent Registered Public Accounting Firm in the Fund's [Annual Report](https://www.sec.gov/ix?doc=/Archives/edgar/data/810695/000158064225001637/rational-ncsr.htm) for the fiscal year or period ended December 31, 2024 and the unaudited financial statements in the Fund's Semi-Annual Report for the six month period ended June 30, 2025.

Copies of the Prospectus, the Annual Report, or the Semi-Annual Report may be obtained at no charge from the Trust by writing to the address above or calling 800-253-0412.

 ****TABLE OF CONTENTS** [TO BE UPDATED]**

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| | |
|:---|:---|
| MUTUAL FUND AND VARIABLE INSURANCE TRUST | 1 |
| INVESTMENT RESTRICTIONS | 1 |
| OTHER INVESTMENT POLICIES | 2 |
| ADDITIONAL INFORMATION ABOUT INVESTMENTS AND RISKS | 2 |
| TRUSTEES AND OFFICERS | 42 |
| PRINCIPAL HOLDERS OF SECURITIES | 48 |
| ADVISOR AND FORMER SUB-ADVISOR | 49 |
| CODE OF ETHICS | 53 |
| TRANSFER AGENT, FUND ACCOUNTING AGENT AND ADMINISTRATOR | 53 |
| COMPLIANCE SERVICES | 55 |
| CUSTODIAN | 55 |
| INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM | 55 |
| COUNSEL | 55 |
| DISTRIBUTOR | 55 |
| SHAREHOLDER SERVICES | 57 |
| ADDITIONAL PAYMENTS TO FINANCIAL INTERMEDIARIES | 57 |
| PROXY VOTING POLICY | 58 |
| PORTFOLIO TURNOVER | 59 |
| PORTFOLIO TRANSACTIONS | 59 |
| PURCHASES AND REDEMPTIONS OF SHARES | 61 |
| SALES CHARGE WAIVERS AND REDUCTIONS AVAILABLE THROUGH CERTAIN FINANCIAL INTERMEDIARIES | 61 |
| WAIVERS AND REDUCTIONS OF UP-FRONT SALES CHARGE ON CLASS A SHARES | 62 |
| WAIVERS OF DEFERRED SALES CHARGE ON CLASS C SHARES | 63 |
| FRONT-END SALES CHARGE REALLOWANCES 64 |  |
| SHAREHOLDER RIGHTS | 64 |
| ADDITIONAL INFORMATION ON PURCHASES, EXCHANGES AND REDEMPTIONS | 65 |
| NET ASSET VALUE | 67 |
| TAX INFORMATION | 67 |
| PERFORMANCE INFORMATION | 84 |
| FINANCIAL STATEMENTS | 84 |
| APPENDIX A | A-1 |
| APPENDIX B | B-1 |

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 **MUTUAL FUND AND VARIABLE INSURANCE TRUST**

The Trust is a Delaware statutory trust, which was formed on June 23, 2006. The Trust is registered under the Investment Company Act of 1940, as amended (the "1940 Act"), as an open-end management investment company. Effective February 22, 2016, the name of the Trust was changed from the Huntington Funds to Mutual Fund and Variable Insurance Trust. As of the date of this SAI, the Trust operates eight separate series or mutual funds. The Fund is diversified. Much of the information contained in this SAI expands upon subjects discussed in the Prospectus. No investment in units of beneficial interest ("Shares") of the Fund should be made without first reading the Prospectus.

Rational Advisors, Inc. (the "Advisor" or "Rational") acts as investment advisor to the Fund.

The Trust does not issue share certificates. All shares are held in non-certificate form registered on the books of the Trust and the Trust's transfer agent for the account of the shareholder. Each share of a series represents an equal proportionate interest in the assets and liabilities belonging to the applicable class of that series and is entitled to such dividends and distributions out of income belonging to the applicable class of that series as are declared by the Trustees. The shares do not have cumulative voting rights or any preemptive or conversion rights, and the Trustees have the authority from time to time to divide or combine the shares of any series into a greater or lesser number of shares of that series so long as the proportionate beneficial interest in the assets belonging to that series and the rights of shares of any other series are in no way affected. In case of any liquidation of a series, the holders of shares of the series being liquidated will be entitled to receive as a class a distribution out of the assets, net of the liabilities, belonging to that series. Expenses attributable to any class of a series are borne by that class, and thus the net asset values per share of the classes may differ. There can be no assurance that a series will grow to an economically viable size, in which case the Trustees may determine to liquidate the series at a time that may not be opportune for shareholders. Any general expenses of the Trust not readily identifiable as belonging to a particular series are allocated by or under the direction of the Trustees in such manner as the Trustees determine to be fair and equitable. No shareholder is liable to further calls or to assessment by the Trust without his or her express consent.

The Trust has established several classes of shares. As of the date of this SAI, the Fund only offers Class A Shares, Class C Shares, and Institutional Shares. Each share class represents an interest in the same assets of the Fund, has the same rights and is identical in all material respects, except that (i) each class of shares may bear different distribution fees; (ii) each class of shares may be subject to different (or no) sales charges; (iii) certain other class specific expenses will be borne solely by the class to which such expenses are attributable; and (iv) each class has exclusive voting rights with respect to matters relating to its own distribution arrangements. The Board of Trustees (the "Board" or the "Trustees") may classify and reclassify the shares of the Fund into additional classes of shares at a future date.

**INVESTMENT RESTRICTIONS**

The Fund has adopted the following fundamental investment restrictions that may not be changed without approval by a "majority of the outstanding shares" of the Fund which, as used in this SAI, means the vote of (a) 67% or more of the shares of the Fund represented at a meeting, if the holders of more than 50% of the outstanding shares of the Fund are present or represented by proxy, or (b) more than 50% of the outstanding shares of the Fund. The investment restrictions pertain to the Fund. Except as discussed below, the Fund will consider the concentration of underlying investment companies when determining compliance with its own policy.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(1) May not concentrate investments in a particular industry or group of industries as concentration is defined
under the 1940 Act, or the rules or regulations thereunder, as such statute, rules or regulations may be amended from time to time.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(2) May issue senior securities to the extent permitted by the 1940 Act, or the rules or regulations thereunder,
as such statute, rules or regulations may be amended from time to time.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(3) May lend or borrow money to the extent permitted by the 1940 Act, or the rules or regulations thereunder,
as such statute, rules or regulations may be amended from time to time.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(4) May purchase or sell commodities, commodities contracts, futures contracts, or real estate to the extent
permitted by the 1940 Act, or the rules or regulations thereunder, as such statute, rules or regulations may be amended from time to time.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(5) May underwrite securities to the extent permitted by the 1940 Act, or the rules or regulations thereunder,
as such statute, rules or regulations may be amended from time to time.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(6) May pledge, mortgage or hypothecate any of its assets to the extent permitted by the 1940 Act, or the
rules or regulations thereunder, as such statute, rules or regulations may be amended from time to time.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(7) May purchase securities of any issuer only when consistent with the maintenance of its status as a diversified
company under the 1940 Act, or the rules or regulations thereunder, as such statute, rules or regulations may be amended from time to
time.

If a restriction on the Fund's investments is adhered to at the time an investment is made, a subsequent change in the percentage of Fund assets invested in certain securities or other instruments resulting from changes in the value of the Fund's total assets will not be considered a violation of the restriction, with the exception of the Fund's limitations on borrowings and illiquid investments as described herein or unless otherwise noted herein.

The fundamental limitations of the Fund have been adopted to avoid wherever possible the necessity of shareholder meetings otherwise required by the 1940 Act. This recognizes the need to react quickly to changes in the law or new investment opportunities in the securities markets and the cost and time involved in obtaining shareholder approvals for diversely held investment companies. However, the Fund also has adopted non-fundamental limitations, set forth below, which in some instances may be more restrictive than their fundamental limitations. Any changes in the Fund's non-fundamental limitations will be communicated to the Fund's shareholders prior to effectiveness.

**1940 Act Restrictions** **.** Under the 1940 Act, and the rules, regulations and interpretations thereunder, a "diversified company," as to 75% of its total assets, may not purchase securities of any issuer (other than obligations of, or guaranteed by, the U.S. Government, its agencies or its instrumentalities and securities of other investment companies) if, as a result, more than 5% of the value of its total assets would be invested in the securities of such issuer or more than 10% of the issuer's voting securities would be held by the fund. "Concentration" is generally interpreted under the 1940 Act to refer to an investment of more than 25% of net assets in an industry or group of industries. The 1940 Act limits the ability of investment companies to borrow and lend money and to underwrite securities. The 1940 Act currently prohibits an open-end fund from issuing senior securities, as defined in the 1940 Act, except under very limited circumstances.

Additionally, the 1940 Act limits the Fund's ability to borrow money, prohibiting the Fund from issuing senior securities, except the Fund may borrow from any bank provided that immediately after any such borrowing there is an asset coverage of at least 300% for all borrowings by the Fund and provided further, that in the event that such asset coverage shall at any time fall below 300%, the Fund shall, within three days thereafter or such longer period as the SEC may prescribe by rules and regulations, reduce the amount of its borrowings to such an extent that the asset coverage of such borrowing shall be at least 300%.

 *Regulatory Compliance.* The Fund may follow non-fundamental operational policies that are more restrictive than their fundamental investment limitations, as set forth in the Prospectus and this SAI, in order to comply with applicable laws and regulations, including the provisions of and regulations under the 1940 Act. The Fund may change these operational policies to reflect changes in the laws and regulations without the approval of its shareholders.

**ADDITIONAL INFORMATION ABOUT INVESTMENTS AND RISKS**

The Prospectus discusses the principal investment strategies of the Fund and the underlying funds, if any. Below you will find more detail about the types of investments and investment practices permitted by the Fund, including the underlying funds, if any, including those which are not part of the Fund's and/or any underlying fund's principal investment strategy.

**Adjustable Rate Notes and Variable and Floating Rate Instruments** 

Adjustable rate notes include variable rate notes and floating rate notes. A floating rate note is one whose terms provide for the readjustment of its interest rate whenever a specified interest rate changes and that, at any time, can reasonably be expected to have a market value that approximates its amortized cost. Variable or floating rate securities may have provisions that allow them to be tendered back to remarketing agents at par value plus accrued interest. Liquidity for these securities is provided by irrevocable letters of credit and stand-by purchase agreements. The absence of an active secondary market, however, could make it difficult for the Fund to dispose of a variable or floating rate note in the event the issuer of the note defaulted on its payment obligations and the Fund could, as a result or for other reasons, suffer a loss to the extent of the default. Variable or floating rate notes may be secured by bank letters of credit or insured as to payment of principal and interest. A demand instrument with a demand notice period exceeding seven days may be considered illiquid if there is no secondary market for such security.

**American Depositary Receipts ("ADRs"), European Depositary Receipts ("EDRs"), Continental Depositary Receipts ("CDRs") and Global Depositary Receipts ("GDRs")** 

ADRs are securities, typically issued by a U.S. financial institution (a "depositary"), that evidence ownership interests in a security or a pool of securities issued by a foreign issuer and deposited with the depositary. ADRs include American Depositary Shares and New York Shares. EDRs, which are sometimes referred to as CDRs, are securities, typically issued by a non-U.S. financial institution, that evidence ownership interests in a security or a pool of securities issued by either a U.S. or foreign issuer. GDRs are issued globally and evidence a similar ownership arrangement. Generally, ADRs are designed for trading in the U.S. securities markets, EDRs are designed for trading in European securities markets and GDRs are designed for trading in non-U.S. securities markets. ADRs, EDRs, CDRs and GDRs may be available for investment through "sponsored" or "unsponsored" facilities. A sponsored facility is established jointly by the issuer of the security underlying the receipt and a depositary, whereas an unsponsored facility may be established by a depositary without participation by the issuer of the receipt's underlying security. Holders of an unsponsored depositary receipt generally bear all the costs of the unsponsored facility. The depositary of an unsponsored facility frequently is under no obligation to distribute shareholder communications received from the issuer of the deposited security or to pass through to the holders of the receipts voting rights with respect to the deposited securities.

**Asset-backed Securities (Non-mortgage)** 

Asset-backed securities are instruments secured by company receivables, truck and auto loans, leases, and credit card receivables. Such securities are generally issued as pass-through certificates, which represent undivided fractional ownership interests in the underlying pools of assets. Such securities also may be debt instruments, which are also known as collateralized obligations and are generally issued as the debt of a special purpose entity, such as a trust, organized solely for the purpose of owning such assets and issuing such debt.

The purchase of non-mortgage asset-backed securities raises risk considerations particular to the financing of the instruments underlying such securities. Like mortgages underlying mortgage-backed securities, underlying automobile sales contracts or credit card receivables are subject to substantial prepayment risk, which may reduce the overall return to certificate holders. Certificate holders may also experience delays in payment on the certificates if the full amounts due on underlying sales contracts or receivables are not realized by the trust because of unanticipated legal or administrative costs of enforcing the contracts or because of depreciation or damage to the collateral (usually automobiles) securing certain contracts, or other factors.

**Certificates of Deposit** 

For a discussion of Certificates of Deposit, please see the "Money Market Instruments" discussion in this section.

**Commercial Paper** 

For a discussion of Commercial Paper, please see the "Money Market Instruments" discussion in this section.

**Common Stock** 

Common stock is a type of equity security which represents an ownership interest in a corporation and the right to a portion of the assets of the corporation in the event of liquidation. This right, however, is subordinate to that of preferred stockholders and any creditors, including holders of debt issued by the corporation. Owners of common stock are generally entitled to vote on important matters. A corporation may pay dividends on common stock.

**Convertible Securities** 

Convertible securities include fixed income securities that may be exchanged or converted into a predetermined number of shares of the issuer's underlying common stock at the option of the holder during a specified period. Convertible securities may take the form of convertible preferred stock, convertible bonds or debentures, units consisting of "usable" bonds and warrants or a combination of the features of several of these securities. The investment characteristics of each convertible security vary widely, which allows convertible securities to be employed for a variety of investment strategies. The Fund will exchange or convert the convertible securities held in its portfolio into shares of the underlying common stock when, in the Advisor's opinion, the investment characteristics of the underlying common shares will assist the Fund in achieving its investment objective. Otherwise, the Fund may hold or trade convertible securities.

**Corporate Debt (Including Bonds, Notes and Debentures)** 

Corporate debt includes any obligation of a corporation to repay a borrowed amount at maturity and usually to pay the holder interest at specific intervals. Corporate debt can have a long or short maturity and is often rated by one or more Nationally Recognized Statistical Rating Organizations ("NRSROs"). See "**INVESTMENT RATINGS**" in Appendix A to this SAI for a description of these ratings.

The credit risk of an issuer's debt security may vary based on its priority for repayment. For example, higher ranking (senior) debt securities have a higher priority than lower ranking (subordinated) securities. This means that the issuer might not make payments on subordinated securities while continuing to make payments on senior securities. In addition, in the event of bankruptcy, holders of senior securities may receive amounts otherwise payable to the holders of subordinated securities. Some subordinated securities, such as trust preferred and capital securities notes, also permit the issuer to defer payments under certain circumstances. For example, insurance companies issue securities known as surplus notes that permit the insurance company to defer any payment that would reduce its capital below regulatory requirements.

**Credit-Enhanced Securities** 

Credit-enhanced securities are securities whose credit rating has been enhanced, typically by the existence of a guarantee, letter of credit, insurance or unconditional demand feature. In most cases, the Advisor evaluates the credit quality and ratings of credit-enhanced securities based upon the financial condition and ratings of the party providing the credit enhancement (the "credit enhancer") rather than the issuer. However, except where prohibited by Rule 2a-7 under the 1940 Act, credit-enhanced securities will not be treated as having been issued by the credit enhancer for diversification purposes, unless the Fund has invested more than 10% of its assets in securities issued, guaranteed or otherwise credit enhanced by the credit enhancer, in which case the securities will be treated as having been issued both by the issuer and the credit enhancer. The bankruptcy, receivership or default of the credit enhancer will adversely affect the quality and marketability of the underlying security. A default on the underlying security or other event that terminates a demand feature prior to its exercise will adversely affect the liquidity of the underlying security.

**Defensive Investments** 

At times, the Advisor may determine that conditions in securities markets may make pursuing the Fund's principal investment strategies inconsistent with the best interests of the Fund's shareholders. At such times, the Advisor may temporarily use alternative strategies, primarily designed to reduce fluctuations in the value of the Fund's assets. In implementing these temporary "defensive" strategies, the Fund may temporarily place all or a portion of its assets in

cash, U.S. Government securities, debt securities which the Advisor considers to be of comparable quality to the acceptable investments of the Fund and other investments which the Advisor considers consistent with such strategies.

**Demand Notes** 

For a discussion of Demand Notes, please see the "Money Market Instruments" discussion in this section.

**Derivative Contracts** 

Derivative contracts are financial instruments that require payments based upon changes in the values of designated (or underlying) securities, currencies, commodities, financial indices or other assets. Some derivative contracts (such as futures, forwards and options) require payments relating to a future trade involving the underlying asset. Other derivative contracts (such as swaps) require payments relating to the income or returns from the underlying asset. The other party to a derivative contract is referred to as a counterparty.

Depending upon how the Fund uses derivative contracts and the relationships between the market value of a derivative contract and the underlying asset, derivative contracts may increase or decrease the Fund's exposure to interest rate and currency risks, among other risks, and may also expose the Fund to liquidity and leverage risks. Over-the-counter ("OTC") contracts also expose the Fund to credit risks in the event that a counterparty defaults on the contract.

**Equity Securities** 

Equity securities include both foreign and domestic common stocks, preferred stocks, securities convertible or exchangeable into common or preferred stocks, and other securities which the Advisor believes have common stock characteristics, such as rights and warrants.

**Exchange-Traded Commodity Funds ("ETCFs")** 

ETCFs invest in commodities, either directly or through derivative contracts, and are treated as partnerships or grantor trusts for U.S. tax purposes. ETCFs may invest in a single commodity (such as gold) or manage a pool of derivative contracts that tracks a commodity index (such as the Dow Jones-AIG Commodity Index).

**Exchange-Traded Funds ("ETFs")/Index-Based Securities and Ultrashort ETFs**

The Fund may invest in ETFs or Index-based Securities and Ultrashort ETFs as an efficient means of carrying out their investment strategies. Index-based securities are often interests in a unit investment trust ("UIT") that may be obtained from the UIT or purchased in the secondary market. ETFs may be structured as a UIT, but may also be structured as an open-end investment company. Ultrashort ETFs are designed to correspond to twice the inverse of the daily performance of an underlying index. Ultrashort ETFs invest in financial instruments (including derivatives) which the advisor to the Ultrashort ETF believes should, in combination, achieve such daily return characteristics. As with index-based securities, ETFs sell their interests directly through authorized participants or the interests may be purchased in a secondary market. ETFs, Index-based Securities and Ultrashort ETFs are traded on stock exchanges.

As with traditional mutual funds, ETFs and Index-based Securities charge asset-based fees, although these fees tend to be relatively low. ETFs and Index-based Securities do not charge initial sales charges or redemption fees and investors pay only customary brokerage fees to buy and sell the shares.

A UIT will generally issue Index-based Securities in aggregations of 50,000, known as "Creation Units", in exchange for a "Portfolio Deposit" consisting of (a) a portfolio of securities substantially similar to the component securities (Index Securities) of the applicable index (Index), (b) a cash payment equal to a pro rata portion of the dividends accrued on the UIT's portfolio securities since the last dividend payment by the UIT, net of expenses and liabilities, and (c) a cash payment or credit (Balancing Amount) designed to equalize the net asset value ("NAV") of the Index and the NAV of a Portfolio Deposit. ETFs structured as investment companies also issue large Creation Units generally in exchange for a basket of securities in a proportion similar to the current holdings of the ETF and/or a cash payment.

ETFs and Index-based Securities are not individually redeemable, except upon termination of the UIT or ETF. To redeem, the Fund must accumulate enough Index-based Securities or ETF shares to constitute a Creation Unit (large aggregations of Index-based Securities or ETF shares). The liquidity of holdings of ETFs and Index-based Securities, therefore, will depend upon the existence of a secondary market. Upon redemption of a Creation Unit, the Fund will generally receive Index Securities (or ETF portfolio securities) and cash identical to the Portfolio Deposit required of an investor wishing to purchase a Creation Unit that day.

**Fixed Income Securities** 

Fixed income securities include corporate debt securities, U.S. Government securities, mortgage-related securities, tax-exempt securities and any other securities which provide a stream of fixed payments to the holder.

**Foreign Currency Options (also see "Options")** 

Options on foreign currencies operate similarly to options on securities and are traded primarily in the OTC market (so-called "OTC options"), although options on foreign currencies have recently been listed on several exchanges. Options will be purchased or written only when the Advisor believes that a liquid secondary market exists for such options. There can be no assurance that a liquid secondary market will exist for a particular option at any specific time. Options on foreign currencies are affected by all of those factors which influence exchange rates and investments generally.

Purchases and sales of options may be used to increase current return. They are also used in connection with hedging transactions. See "Foreign Currency Transactions and Foreign Exchange Contracts." Writing covered call options on currencies may offset some of the costs of hedging against fluctuations in currency exchange rates. For transaction hedging purposes, the Fund may also purchase exchange-listed and OTC put and call options on foreign currency futures contracts and on foreign currencies. A put option on a futures contract gives the Fund the right to assume a short position in the futures contract until expiration of the option. A call option on a futures contract gives the Fund the right to assume a long position in the futures contract until the expiration of the option.

The value of a foreign currency option is dependent upon the value of the foreign currency and the U.S. dollar, and may have no relationship to the investment merits of a foreign security. Because foreign currency transactions occurring in the interbank market involve substantially larger amounts than those that may be involved in the use of foreign currency options, investors may be disadvantaged by having to deal in an odd lot market (generally consisting of transactions of less than $1 million) for the underlying foreign currencies at prices that are less favorable than for round lots.

There is no systematic reporting of last sale information for foreign currencies and there is no regulatory requirement that quotations available through dealers or other market sources be firm or revised on a timely basis. Available quotation information is generally representative of very large transactions in the interbank market and thus may not reflect relatively smaller transactions (less than $1 million) where rates may be less favorable. The interbank market in foreign currencies is a global, around-the-clock market. To the extent that the U.S. options markets are closed while the markets for the underlying currencies remain open, significant price and rate movements may take place in the underlying markets that cannot be reflected in the U.S. options markets. Options contracts are generally valued at the mean of the bid and asked price as reported on the highest-volume exchange (in terms of the number of option contracts traded for that issue) on which such options are traded.

**Foreign Currency Transactions and Foreign Exchange Contracts** 

Foreign currency transactions and foreign exchange contracts include purchasing and selling foreign currencies, entering into forward or futures contracts to purchase or sell foreign currencies (see "Forward Foreign Currency and Foreign Currency Futures Contracts"), and purchasing and selling options on foreign currencies (see "Foreign Currency Options"). Foreign currency transactions may be used to hedge against uncertainty in the level of future foreign currency exchange rates and to increase current return.

Purchases and sales of foreign currencies on a spot basis are used to increase current return. They are also used in connection with both "transaction hedging" and "position hedging."

Transaction hedging involves entering into foreign currency transactions with respect to specific receivables or payables generally arising in connection with the purchase or sale of portfolio securities. Transaction hedging is used to "lock in" the U.S. dollar price of a security to be purchased or sold, or the U.S. dollar equivalent of a dividend or interest payment in a foreign currency. The goal is to protect against a possible loss resulting from an adverse change in the relationship between the U.S. dollar and the applicable foreign currency during the period between the date on which the security is purchased or sold, or on which the dividend or interest payment is declared, and the date on which such payments are made or received.

Position hedging involves entering into foreign currency transactions either to protect against: (i) a decline in the value of a foreign currency in which a security held or to be sold is denominated; or (ii) an increase in the value of a foreign currency in which a security to be purchased is denominated. In connection with position hedging, the Fund may purchase put or call options on foreign currency and foreign currency futures contracts and/or buy or sell forward contracts and foreign currency futures contracts.

Neither transaction nor position hedging eliminates fluctuations in the underlying prices of the securities which the Fund owns or intends to purchase or sell. They simply establish a rate of exchange which can be achieved at some future point in time. Additionally, although these techniques tend to minimize the risk of loss due to a decline in the value of the hedged currency, they also tend to limit any potential gain which might result from the increase in the value of such currency.

Hedging transactions are subject to correlation risk due to the fact that the amounts of foreign currency exchange transactions and the value of the portfolio securities involved will not generally be perfectly matched. This is because the future value of such securities in foreign currencies will change as a consequence of market movements in the values of those securities between the dates the currency exchange transactions are entered into and the dates they mature.

The Fund does not consider currencies or other financial commodities or contracts and financial instruments to be physical commodities (which include, for example, oil, precious metals and grains). Accordingly, the Fund interprets its fundamental restriction regarding purchasing and selling physical commodities to permit the Fund (subject to the Fund's investment objectives and general investment policies as stated in the Prospectus and this SAI) to invest directly in foreign currencies and other financial commodities and to purchase, sell or enter into foreign currency futures contracts and options thereon, foreign currency forward contracts, foreign currency options, currency, commodity and financial instrument-related swap agreements, hybrid instruments, interest rate, securities-related or foreign currency-related futures contracts or other currency-, commodity- or financial instrument-related derivatives, subject to compliance with any applicable provisions of the federal securities or commodities laws. The Fund also interprets its fundamental restriction regarding purchasing and selling physical commodities to permit the Fund to invest in exchange-traded products or other entities that invest in physical and/or financial commodities, subject to the limits described in the Prospectus and this SAI.

**Forward Foreign Currency and Foreign Currency Futures Contracts**

A forward foreign currency contract involves an obligation to purchase or sell a specific currency at a future date, which may be any fixed number of days from the date of the contract as agreed by the parties, at a price set at the time of the contract. In the case of a cancelable forward contract, the holder has the unilateral right to cancel the contract at maturity by paying a specified fee. The contracts are traded in the interbank market conducted directly between currency traders (usually large commercial banks) and their customers. A forward contract generally has no deposit requirement, and no commissions are charged at any stage for trades.

A foreign currency futures contract is a standardized contract for the future delivery of a specified amount of a foreign currency at a future date at a price set at the time of the contract. Foreign currency futures contracts traded in the United States are designed by and traded on exchanges regulated by the Commodity Futures Trading Commission ("CFTC"), such as the Chicago Mercantile Exchange.

Forward foreign currency contracts differ from foreign currency futures contracts in certain respects. For example, the maturity date of a forward contract may be any fixed number of days from the date of the contract agreed upon by the parties, rather than a predetermined date in a given month. Forward contracts may be in any amounts agreed upon by the parties rather than predetermined amounts. Also, forward foreign currency contracts are traded directly between currency traders so that no intermediary is required. A forward contract generally requires no margin or other deposit.

At the maturity of a forward or futures contract, the Fund may either accept or make delivery of the currency specified in the contract, or at or prior to maturity enter into a closing transaction involving the purchase or sale of an offsetting contract. Closing transactions with respect to forward contracts are usually effected with the currency trader who is a party to the original forward contract. Closing transactions with respect to futures contracts are effected on a commodities exchange; a clearing corporation associated with the exchange assumes responsibility for closing out such contracts.

Forward foreign currency contracts and foreign currency futures contracts can be used to increase current return. They are also used in connection with both "transaction hedging" and "position hedging." See "Foreign Currency Transactions and Foreign Exchange Contracts."

Among the risks of using foreign currency futures contracts is the fact that positions in these contracts (and any related options) may be closed out only on an exchange or board of trade which provides a secondary market. Although it is intended that the Fund will only purchase or sell foreign currency futures contracts and related options on exchanges or boards of trade where there appears to be an active secondary market, there is no assurance that a secondary market on an exchange or board of trade will exist for any particular contract or option or at any particular time. In such event, it may not be possible to close a futures or related option position and, in the event of adverse price movements, the Fund would continue to be required to make daily cash payments of variation margin on its futures positions.

In addition, it is impossible to forecast with precision the market value of a security at the expiration or maturity of a forward or futures contract. Accordingly, it may be necessary to purchase additional foreign currency on the spot market (and bear the expense of such purchase) if the market value of the security being hedged is less than the amount of foreign currency the Fund is obligated to deliver and if a decision is made to sell the security and make delivery of the foreign currency. Conversely, it may be necessary to sell on the spot market some of the foreign currency received upon the sale of the hedged portfolio security if the market value of such security exceeds the amount of foreign currency the Fund is obligated to deliver.

The purchase and sale of foreign currency futures contracts also subjects the Fund to margin payment requirements. See "Futures Contracts and Options on Futures Contracts — Margin Payments" below.

**Foreign Securities (including Emerging Markets Securities and Foreign Government Securities)** 

Foreign securities are those securities which are issued by companies located outside the United States and principally traded in foreign markets. This includes equity and debt securities of foreign entities and obligations of foreign branches of U.S. and foreign banks. Permissible investments may consist of obligations of foreign branches of U.S. banks and foreign or domestic branches of foreign banks, including European Certificates of Deposit, European Time Deposits, Canadian Time Deposits and Yankee Bonds and Certificates of Deposit, and investments in Canadian Commercial Paper, foreign securities and europaper. In addition, the Fund may invest in depositary receipts. The Fund may also invest in securities issued or guaranteed by foreign corporations or foreign governments, their political subdivisions, agencies or instrumentalities and obligations of supranational entities such as the World Bank and the Asian Development Bank. Investment in foreign securities is subject to a number of special risks.

Since foreign securities are normally denominated and traded in foreign currencies, the value of the Fund's assets invested in such securities may be affected favorably or unfavorably by currency exchange rates and exchange control regulation. Exchange rates with respect to certain currencies may be particularly volatile. Additionally, although foreign exchange dealers do not charge a fee for currency conversion, they do realize a profit based on the difference (the "spread") between prices at which they buy and sell various currencies. Thus, a dealer may offer to sell a foreign currency to the Fund at one rate, while offering a lesser rate of exchange should the Fund desire to resell that currency to the dealer. For additional information see "Foreign Currency Transactions and Foreign Exchange Contracts."

There may be less information publicly available about a foreign company than about a U.S. company, and foreign companies are not generally subject to accounting, auditing, and financial reporting standards and practices comparable to those in the United States. The securities of some foreign companies are less liquid and at times more volatile than securities of comparable U.S. companies. Foreign brokerage commissions and other fees are also generally higher than in the United States. Foreign settlement procedures and trade regulations may involve certain risks (such as delays in payment or delivery of securities or in the recovery of the Fund's assets held abroad) and expenses not present in the settlement of domestic investments.

In addition, with respect to certain foreign countries, there is a possibility of nationalization or expropriation of assets, confiscatory taxation, political or financial instability and diplomatic developments, including sanctions imposed by other countries or governmental entities, which could affect the value of investments in those countries. In certain countries, legal remedies available to investors may be more limited than those available with respect to investments in the United States or other countries. The laws of some foreign countries may limit the Fund's ability to invest in securities of certain issuers located in those countries. Special tax considerations apply to foreign securities.

Investing in emerging market securities involves risks which are in addition to the usual risks inherent in foreign investments. Some emerging markets countries may have fixed or managed currencies that are not free-floating against the U.S. dollar. Further, certain currencies may not be traded internationally. Certain of these currencies have experienced a steady devaluation relative to the U.S. dollar. Any devaluation in the currencies in which the Fund's securities are denominated may have a detrimental impact on the Fund.

The taxation systems at the federal, regional and local levels in developing or emerging market countries may be less transparent and inconsistently enforced, and subject to sudden change. Developing or emerging market countries may also have a higher degree of corruption and fraud than developed market countries, as well as counterparties and financial institutions with less financial sophistication, creditworthiness and/or resources. Emerging markets countries may have less developed legal systems allowing for enforcement of private property rights and/or redress for injuries to private property, such as bankruptcy. The ability to bring and enforce actions in developing or emerging market countries, or to obtain information needed to pursue or enforce such actions, may be limited and shareholder claims may be difficult or impossible to pursue.

Emerging markets countries may also have less stringent regulatory, disclosure, financial reporting, accounting, auditing and recordkeeping standards than companies in more developed countries and, as a result, the nature and quality of such information may vary. Information about such companies may be less available and reliable and, therefore, the ability to conduct adequate due diligence in developing or emerging markets may be limited which can impede the Fund's ability to evaluate such companies. In addition, certain developing or emerging market countries may impose material limitations on Public Company Accounting Oversight Board ("PCAOB") inspection, investigation and enforcement capabilities that hinder the PCAOB's ability to engage in independent oversight or inspection of accounting firms located in or operating in certain developing or emerging markets. There is no guarantee that the quality of financial reporting or the audits conducted by audit firms of developing or emerging market issuers meet PCAOB standards.

Some countries with emerging securities markets have experienced substantial, and in some periods, extremely high, rates of inflation for many years. Inflation and rapid fluctuation in inflation rates have had and may continue to have negative effects on the economies and securities markets of certain countries. Moreover, the economies of some countries may differ favorably or unfavorably from the U.S. economy in such respects as rate of growth of gross domestic product, the rate of inflation, capital reinvestment, resource self-sufficiency, number and depth of industries forming the economy's base, governmental controls and investment restrictions that are subject to political change and balance of payments position. Further, there may be greater difficulties or restrictions with respect to investments made in emerging markets countries.

Emerging markets typically have substantially less volume than U.S. markets. In addition, securities in many such markets are less liquid, and their prices often are more volatile, than securities of comparable U.S. companies. Such markets often have different clearance and settlement procedures for securities transactions, and in some markets there have been times when settlements have been unable to keep pace with the volume of transactions, making it difficult to conduct transactions. Delays in settlement could result in temporary periods when assets may be uninvested.

Settlement problems in emerging markets countries also could cause the Fund to miss attractive investment opportunities. Satisfactory custodial services may not be available in some emerging markets countries, which may result in the Fund incurring additional costs and delays in the transportation and custody of such securities. Emerging securities markets may also be subject to unexpected market closures.

Foreign government securities generally consist of fixed income securities supported by national, state or provincial governments or similar political subdivisions. Foreign government securities also include debt obligations of supranational entities, such as international organizations designed or supported by governmental entities to promote economic reconstruction or development, international banking institutions and related government agencies. Examples of these include, but are not limited to, the International Bank for Reconstruction and Development (the "World Bank"), the Asian Development Bank, the European Investment Bank and the Inter-American Development Bank.

Foreign government securities also include fixed income securities of quasi-governmental agencies that are either issued by entities owned by a national, state or equivalent government or are obligations of a political unit that are not backed by the national government's full faith and credit.

**Futures Contracts and Options on Futures Contracts** 

A futures contract is a binding contractual commitment which, if held to maturity, will result in an obligation to make or accept delivery of a security at a specified future time and price. By purchasing futures (assuming a "long" position) the Fund will legally obligate itself to accept the future delivery of the underlying security and pay the agreed price. By selling futures (assuming a "short" position) the Fund will legally obligate itself to make the future delivery of the security against payment of the agreed price. Open futures positions on underlying securities will be valued at the most recent settlement price. Positions taken in the futures markets are not normally held to maturity, but are instead liquidated through offsetting transactions which may result in a profit or a loss. While futures positions taken by the Fund will usually be liquidated in this manner, the Fund may instead make or take delivery of the underlying securities whenever it appears economically advantageous to the Fund to do so. A clearing corporation associated with the exchange on which futures are traded assumes responsibility for such closing transactions and guarantees that the Fund's sale and purchase obligations under closed-out positions will be performed at the termination of the contract. Futures contracts are considered to be commodity contracts.

Futures and options on futures are regulated by the CFTC.

Hedging by use of futures contracts seeks to establish more certainty than would otherwise be possible of the effective rate of return on portfolio securities. The Fund may, for example, take a "short" position in the futures market by selling contracts for the future delivery of securities held by the Fund (or securities having characteristics similar to those held by the Fund) in order to hedge against an anticipated rise in interest rates that would adversely affect the value of the Fund's portfolio securities. When hedging of this character is successful, any depreciation in the value of portfolio securities may be offset by appreciation in the value of the futures position.

On other occasions, the Fund may take a "long" position by purchasing futures on underlying securities. This would be done, for example, when the Advisor expects to purchase for the Fund particular securities when it has the necessary cash, but expects the rate of return available in the securities markets at that time to be less favorable than rates currently available in the futures markets. If the anticipated rise in the price of the securities should occur (with its corresponding reduction in yield), the increased cost to the Fund of purchasing the securities may be offset by the rise in the value of the futures position taken in anticipation of the subsequent securities purchase.

Successful use by the Fund of futures contracts is subject to the Advisor's ability to predict correctly movements in the direction of interest rates and other factors affecting markets for the underlying securities. For example, if the Fund has hedged against the possibility of an increase in interest rates that would adversely affect the market prices of debt securities held by it and the prices of such securities increase instead, the Fund will lose part or all of the benefit of the increased value of its securities which it has hedged because it will have offsetting losses in its futures positions.

In addition, in such situations, if the Fund has insufficient cash, it may have to sell securities to meet daily margin maintenance requirements. The Fund may have to sell securities at a time when it may be disadvantageous to do so.

The Fund may purchase and write put and call options on futures contracts, as they become available. Such options are similar to options on securities except that options on futures contracts give the purchaser the right, in return for the premium paid, to assume a position in a futures contract (a long position if the option is a call and a short position if the option is a put) at a specified exercise price at any time during the period of the option. As with options on securities, the holder or writer of an option may terminate its position by selling or purchasing an option of the same series. There is no guarantee that such closing transactions can be effected. The Fund will be required to deposit initial margin and variation margin with respect to put and call options on futures contracts written by it pursuant to brokers' requirements, and, in addition, net option premiums received will be included as initial margin deposits. Compared to the purchase or sale of futures contracts, the purchase of call or put options on futures contracts involves less potential risk to the Fund because the maximum amount at risk is the premium paid for the options plus transactions costs. However, there may be circumstances when the purchases of call or put options on a futures contract would result in a loss to the Fund when the purchase or sale of the futures contracts would not, such as when there is no movement in the prices of the underlying securities. The writing of a put or call option on a futures contract involves risks similar to those risks relating to the purchase or sale of futures contracts.

Futures contracts and options thereon may also be used for non-hedging purposes, including to seek to increase liquidity, provide efficient portfolio management, broaden investment opportunities, implement a tax or cash management strategy, gain exposure to a particular security or segment of the market, modify the effective duration of the Fund's portfolio investments and/or enhance total return. However these instruments are used, their successful use is not assured and will depend upon, among other factors, the Advisor's ability to predict and understand relevant market movements.

*Margin payments.* When the Fund purchases or sells a futures contract, it is required to deposit with its custodian an amount of cash, U.S. Treasury bills, or other permissible collateral equal to a small percentage of the amount of the futures contract. This amount is known as "initial margin." The nature of initial margin is different from that of margin in security transactions in that it does not involve borrowing money to finance transactions. Rather, initial margin is similar to a performance bond or good faith deposit that is returned to the Fund upon termination of the contract, assuming the Fund satisfies its contractual obligations. Subsequent payments to and from the broker occur on a daily basis in a process known as "marking to market." These payments are called "variation margin" and are made as the value of the underlying futures contract fluctuates. For example, when the Fund sells a futures contract and the price of the underlying debt security rises above the delivery price, the Fund's position declines in value. The Fund then pays the broker a variation margin payment equal to the difference between the delivery price of the futures contract and the market price of the securities underlying the futures contract. Conversely, if the price of the underlying security falls below the delivery price of the contract, the Fund's futures position increases in value. The broker then must make a variation margin payment equal to the difference between the delivery price of the futures contract and the market price of the securities underlying the futures contract.

When the Fund terminates a position in a futures contract, a final determination of variation margin is made, additional cash is paid by or to the Fund, and the Fund realizes a loss or a gain. Such closing transactions involve additional commission costs.

 *Liquidity risks.* Positions in futures contracts may be closed out only on an exchange or board of trade which provides a secondary market for such futures. Although the Fund intends to purchase or sell futures only on exchanges or boards of trade where there appears to be an active secondary market, there is no assurance that a liquid secondary market on an exchange or board of trade will exist for any particular contract or at any particular time. If there is not a liquid secondary market at a particular time, it may not be possible to close a futures position at such time and, in the event of adverse price movements, the Fund would continue to be required to make daily cash payments of variation margin. However, in the event financial futures are used to hedge portfolio securities, such securities will not generally be sold until the financial futures can be terminated. In such circumstances, an increase in the price of the portfolio securities, if any, may partially or completely offset losses on the financial futures.

In addition to the risks that apply to all options transactions, there are several special risks relating to options on futures contracts. The ability to establish and close out positions in such options will be subject to the development and

maintenance of a liquid secondary market. It is not certain that such a market will develop. Although the Fund generally will purchase only those options for which there appears to be an active secondary market, there is no assurance that a liquid secondary market on an exchange will exist for any particular option or at any particular time. In the event that no such market exists for particular options, it might not be possible to effect closing transactions in such options, with the result that the Fund would have to exercise the options in order to realize any profit.

 *Hedging risks.* There are several risks in connection with the use by the Fund of futures contracts and related options as a hedging device. One risk arises because of the imperfect correlation between movements in the prices of the futures contracts and options and movements in the prices of securities which are the subject of the hedge. The Advisor will, however, attempt to reduce this risk by purchasing and selling, to the extent possible, futures contracts and related options on securities and indices the movements of which will, in its judgment, correlate closely with movements in the prices of the portfolio securities sought to be hedged.

Successful use of futures contracts and options by the Fund for hedging purposes is also subject to the Advisor's ability to predict correctly movements in the direction of the market. It is possible that, where the Fund has purchased puts on futures contracts to hedge its portfolio against a decline in the market, the securities or index on which the puts are purchased may increase in value and the value of securities held in the portfolio may decline. If this occurred, the Fund would lose money on the puts and also experience a decline in value in its portfolio securities. In addition, the prices of futures, for a number of reasons, may not correlate perfectly with movements in the underlying securities or index due to certain market distortions. First, all participants in the futures market are subject to margin deposit requirements. Such requirements may cause investors to close futures contracts through offsetting transactions which could distort the normal relationship between the underlying security or index and futures markets. Second, the margin requirements in the futures markets are less onerous than margin requirements in the securities markets in general, and as a result the futures markets may attract more speculators than the securities markets do. Increased participation by speculators in the futures markets may also cause temporary price distortions. Due to the possibility of price distortion, even a correct forecast of general market trends by the Advisor may still not result in a successful hedging transaction over a very short time period.

 *Other risks.* The Fund will incur brokerage fees in connection with their futures and options transactions. In addition, while futures contracts and options on futures will be purchased and sold to reduce certain risks, those transactions themselves entail certain other risks. Thus, while the Fund may benefit from the use of futures and related options, unanticipated changes in interest rates, stock price movements or other factors affecting the underlying security may result in a poorer overall performance for the Fund than if it had not entered into any futures contracts or options transactions. Moreover, in the event of an imperfect correlation between the futures position and the portfolio position that is intended to be protected, the desired protection may not be obtained, and the Fund may be exposed to risk of loss.

**Regulation under the Commodity Exchange Act**

The Advisor is registered as a commodity pool operator ("CPO") under the Commodity Exchange Act ("CEA") and the rules of the CFTC and is subject to CFTC regulation with respect to the Fund. The CFTC has adopted rules regarding the disclosure, reporting and recordkeeping requirements that apply with respect to the Fund as a result of the Advisor's registration as a CPO. Generally, these rules allow for substituted compliance with CFTC disclosure and shareholder reporting requirements, based on the Advisor's compliance with comparable SEC requirements. This means that for most of the CFTC's disclosure and shareholder reporting requirements applicable to the Advisor as the Fund's CPO, the Advisor's compliance with SEC disclosure and shareholder reporting requirements will be deemed to fulfill the Advisor's CFTC compliance obligations. However, as a result of CFTC regulation with respect to the Fund, the Fund may incur additional compliance and other expenses.

**Index Futures Contracts and Options on Index Futures Contracts** 

An index futures contract is a contract to buy or sell units of a specified index at a specified future date at a price agreed upon when the contract is made. A unit is the current value of the index.

The following example illustrates generally the manner in which index futures contracts operate. The Standard & Poor's 100 Stock Index ("S&P 100") is composed of 100 selected common stocks, most of which are listed on the New York Stock Exchange ("NYSE"). The S&P 100 assigns relative weightings to the common stocks included in the Index, and the Index fluctuates with changes in the market values of those common stocks. In the case of the S&P 100, contracts are to buy or sell 100 units. Thus, if the value of the S&P 100 were $180, one contract would be worth $18,000 (100 units X $180). An index futures contract specifies that no delivery of the actual securities making up the index will take place. Instead, settlement in cash must occur upon the termination of the contract, with the settlement being the difference between the contract price and the actual level of the index at the expiration of the contract. For example, if the Fund enters into a futures contract to buy 100 units of the S&P 100 at a specified future date at a contract price of $180 and the S&P 100 is at $184 on that future date, the Fund will gain $400 (100 units X gain of $4). If the Fund enters into a futures contract to sell 100 units of the index at a specified future date at a contract price of $180 and the S&P 100 is at $182 on that future date, the Fund will lose $200 (100 units X loss of $2). The Fund may purchase or sell futures contracts with respect to any index. Positions in index futures may be closed out only on an exchange or board of trade which provides a secondary market for such futures.

Purchases and sales of index futures may be used to hedge an investment, as well as for non-hedging, or speculative, purposes. To hedge an investment successfully, however, the Fund must invest in futures contracts with respect to indices or sub-indices the movements of which will have a significant correlation with movements in the prices of the Fund's securities.

Options on index futures contracts are similar to options on securities except that options on index futures contracts give the purchaser the right, in return for the premium paid, to assume a position in an index futures contract (a long position if the option is a call and a short position if the option is a put) at a specified exercise price at any time during the period of the option. Upon exercise of the option, the holder assumes the underlying futures position and receives a variation margin payment of cash or securities approximating the increase in the value of the holder's option position. If an option is exercised on the last trading day prior to the expiration date of the option, the settlement is made entirely in cash based on the difference between the exercise price of the option and the closing level of the index on which the futures contract is based on the expiration date. Purchasers of options who fail to exercise their options prior to the exercise date suffer a loss of the premium paid.

As an alternative to purchasing call and put options on index futures contracts, the Fund may purchase put and call options on the underlying indices themselves to the extent that such options are traded on national securities exchanges. Index options are similar to options on individual securities in that the purchaser of an index option acquires the right to buy, and the writer undertakes the obligation to sell, an index at a stated exercise price during the term of the option. Instead of giving the right to take or make actual delivery of securities, the holder of an index option has the right to receive a cash "exercise settlement amount." This amount is equal to the amount by which the fixed exercise price of the option exceeds (in the case of a put) or is less than (in the case of a call) the closing value of the underlying index on the date of the exercise, multiplied by a fixed "index multiplier." The Fund will enter into an option position only if there appears to be a liquid secondary market for such options.

The Fund will not engage in transactions in options on indices for speculative purposes but only to protect appreciation attained, to offset capital losses and to take advantage of the liquidity available in the option markets. The aggregate premium paid on all options on indices will not exceed 20% of the Fund's total assets.

**Inflation-Protected Securities** 

Inflation-protected securities are fixed income securities whose principal value or interest rate is adjusted periodically according to changes in a specific price index (such as the Consumer Price Index for All Urban Consumers). If the price index falls (deflation), the principal value or interest rate of the securities will be adjusted downward, and, consequently, the interest payable on these securities will be reduced. U.S. Treasury Inflation-Protected Securities, also known as "TIPS," are adjusted as to principal; repayment of the original principal upon maturity of the security is guaranteed if the security is purchased when originally issued. With respect to other types of inflation-protected securities that are adjusted to the principal amount, the adjusted principal value of the security repaid at maturity may be less than the original principal. Most other types of inflation-protected securities, however, are adjusted with respect to the interest rate, which has a minimum of 0%, and the principal value does not change.

**Interests in Other Business Organizations** 

Entities such as limited partnerships, limited liability companies, business trusts and companies organized outside the United States may issue securities comparable to common or preferred stock. Limited partnerships are partnerships consisting of one or more general partners, by whom the business is conducted, and one or more limited partners, who contribute capital to the partnership. Limited liability companies frequently consist of one or more managing members, by whom the business is conducted, and other members, who contribute capital to the company. Limited partners and members of limited liability companies generally are not liable for the debts of the partnership beyond their capital contributions or commitments. Limited partners and non-managing members are not involved in the day-to-day management of the partnership or limited liability company. They receive income and capital gains from the partnership or company in accordance with the terms established in the partnership or operating agreement. Typical limited partnerships and limited liability companies are involved in real estate, oil and gas, and equipment leasing, but they also finance movies, research and development, and other projects.

For an organization classified as a partnership under the Code (including most limited partnerships and limited liabilities companies), each item of income, gain, loss, deduction and credit is not taxed at the partnership level but flows through with the same character to the partners or members. This allows the partnership to avoid double taxation.

A master limited partnership ("MLP") is a publicly traded limited partnership or limited liability company. MLPs combine the tax advantages of a partnership with the liquidity of a publicly traded security. MLPs must limit their operations to avoid being taxed as corporations under the Code.

**Investment Company Securities, including Money Market Mutual Funds** 

The Fund may invest in securities of other investment companies ("Acquired Funds"), including ETFs, as an efficient means of carrying out their investment policies and managing their uninvested cash. The Fund's shareholders indirectly bear the expenses of the Acquired Funds in which the Fund invests.

Except under exemptive rules or relief from the SEC, including Rule 12d1-4 discussed below, the Fund may not invest more than 10% of its total assets at any one time in the shares of other investment companies (funds), 5% of its total assets in the shares of any one investment company, or own more than 3% of the shares of any one investment company. When the Fund invests in the shares of other investment companies, investment advisory and other fees will apply, and the investment's yield will be reduced accordingly.

Rule 12d1-4 under the 1940 Act allows the fund to acquire the securities of another investment company in excess of the limitations imposed by Section 12 without obtaining an exemptive order from the SEC, subject to certain terms and conditions. Among other conditions, the rule generally requires that, prior to acquiring the securities of another fund in reliance on the rule, the acquiring fund must enter into the fund of funds investment agreement with the acquired fund.

Rule 12d1-4 also is designed to limit the use of complex fund structures. Under Rule 12d1-4, an acquired fund is prohibited from purchasing or otherwise acquiring the securities of another investment company or private fund if, immediately after the purchase, the securities of investment companies and private funds owned by the acquired fund have an aggregate value in excess of 10% of the value of the acquired fund's total assets, subject to certain limited exceptions.

Accordingly, to the extent the Fund's shares are sold to other investment companies in reliance on Rule 12d1-4, the Fund will be limited in the amount it could invest in other investment companies and private funds.

In addition to Rule 12d1-4, the 1940 Act and related rules provide other exemptions from these restrictions. For example, these limitations do not apply to investments by the Fund in investment companies that are money market funds, including money market funds that have the Advisor or an affiliate of the Advisor as an investment adviser.

 **Commercial Paper, Demand Notes, Variable Amount Demand Notes and Variable Amount Master Demand Notes** 

Consistent with its investment objective, policies, and restrictions, the Fund may invest in commercial paper (including commercial paper sold through private placements pursuant to Section 4(2) of the Securities Act of 1933, as amended (the "1933 Act") and variable amount master demand notes. Commercial paper consists of unsecured promissory notes issued by corporations normally having maturities of 270 days or less and rates of return which are fixed. These investments may include Canadian Commercial Paper, which is U.S. dollar denominated commercial paper issued by a Canadian corporation or a Canadian counterpart of a U.S. corporation, and europaper, which is U.S. dollar denominated commercial paper of a foreign issuer.

Demand notes and variable rate demand notes ("VRDNs") are unsecured, direct lending arrangements between the Fund, as the lender, and a corporation, financial institution, government agency, municipality or other entity.

VRDNs have interest rates which float or which are adjusted at regular intervals ranging from daily to annually. Although the VRDNs are not generally traded, the Fund may demand payment of principal and accrued interest according to its arrangement with the borrower (usually upon no more than seven days' notice). VRDNs are, therefore, treated as maturing on the later of the next interest adjustment or the date on which the Fund may next demand payment. Some VRDNs are backed by bank letters of credit.

The Fund may only invest in VRDNs that satisfy its credit requirements for commercial paper.

Variable amount master demand notes are unsecured demand notes that permit the indebtedness thereunder to vary and provide for periodic adjustments in the interest rate according to the terms of the instrument. Because master demand notes are direct lending arrangements between the Fund and the issuer, they are not normally traded. Although there is no secondary market in the notes, the Fund may demand payment of principal and accrued interest at any time. A variable amount master demand note will be deemed to have a maturity equal to the longer of the period of time remaining until the next readjustment of its interest rate or the period of time remaining until the principal amount can be recovered from the issuer through demand.

**Money Market Instruments** 

Except where otherwise noted, the Fund may, for temporary defensive or liquidity purposes, invest up to 100% of their assets in money market instruments.

 *Other money market instruments* may include: obligations (certificates of deposit, time deposits, bank master notes, and bankers' acceptances) of thrift institutions, and savings and loan associations, provided that such institutions or associations have total assets of $1 billion or more as shown on their last published financial statements at the time of investment; short-term corporate obligations rated within the three highest rating categories by an NRSRO (for example, at least A by S&P Global Ratings ("S&P") or A by Moody's Investors Service, Inc. ("Moody's")) at the time of investment, or, if not rated, determined by the Advisor to be of comparable quality; general obligations issued by the U.S. Government and backed by its full faith and credit, and obligations issued or guaranteed as to principal and interest by agencies or instrumentalities of the U.S. Government (for example, obligations issued by Farmers Home Administration, Government National Mortgage Association, Federal Farm Credit Bank and Federal Housing Administration); receipts, including Treasury Receipts, Treasury Income Growth Receipts and Certificates of Accrual on Treasuries; repurchase agreements involving such obligations; shares of money market funds, and foreign commercial paper.

*Bank Obligations* 

Bank obligations are short-term obligations issued by U.S. and foreign banks, including bankers' acceptances, certificates of deposit, time deposits and similar securities.

Bankers' acceptances are negotiable drafts or bills of exchange typically drawn by an importer or exporter to pay for specific merchandise that are "accepted" by a bank, meaning, in effect, that the bank unconditionally agrees to pay the face value of the instrument on maturity. Investments in bankers' acceptances will be limited to those guaranteed by domestic and foreign banks having, at the time of investment, total assets of $1 billion or more (as of the date of the institution's most recently published financial statements).

*Certificates of Deposit and Time Deposits* 

Certificates of deposit and time deposits represent funds deposited in a commercial bank or a savings and loan association for a definite period of time and earning a specified return.

Investments in certificates of deposit and time deposits may include Eurodollar Certificates of Deposit, which are U.S. dollar denominated certificates of deposit issued by offices of foreign and domestic banks located outside the United States: Yankee Certificates of Deposit: which are certificates of deposit issued by a U.S. branch of a foreign bank denominated in U.S. dollars and held in the United States, Eurodollar Time Deposits, which are U.S. dollar denominated deposits in a foreign branch of a U.S. bank or a foreign bank: and Canadian Time Deposits, which are U.S. dollar denominated certificates of deposit issued by Canadian offices of major Canadian banks. All investments in certificates of deposit and time deposits will be limited to those (a) of domestic and foreign banks and savings and loan associations which, at the time of investment, have total assets of $1 billion or more (as of the date of the institution's most recently published financial statements) or (b) the principal amount of which is insured by the Federal Deposit Insurance Corporation.

**Mortgage Dollar Roll Transactions** 

A dollar roll transaction is a transaction through which the Fund sells certain of its securities to financial institutions such as banks and broker-dealers, and agrees to repurchase substantially similar securities at a mutually agreed upon date and price. At the time the Fund enters into a dollar roll agreement, it will place in a segregated custodial account assets such as U.S. Government securities or other liquid assets consistent with its investment restrictions having a value equal to the repurchase price (including accrued interest), and will subsequently continually monitor the account to insure that such equivalent value is maintained at all times. Dollar roll agreements involve the risk that the market value of securities sold by the Fund may decline below the price at which it is obligated to repurchase the securities. The Fund may experience a negative impact on its NAV if interest rates rise during the term of a dollar roll agreement. The Fund generally will invest the proceeds of such borrowings only when such borrowings will enhance the Fund's liquidity or when the Fund reasonably expects that the interest income to be earned from the investment of the proceeds is greater than the interest expense of the transaction. Although mortgage dollar rolls could add leverage to the Fund's portfolio, the Fund does not consider the purchase and/or sale of a mortgage dollar roll to be a borrowing for purposes of the Fund's fundamental restrictions or other limitations on borrowing.

**Mortgage-Related Securities** 

Mortgage-related securities are securities that, directly or indirectly, represent participations in, or are secured by and payable from, loans secured by real property. Mortgage-related securities include mortgage pass-through securities, adjustable rate mortgage securities and derivative securities such as collateralized mortgage obligations and stripped mortgage-backed securities. Mortgage-related securities fall into three categories: (a) those issued or guaranteed by the U.S. Government or one of its agencies or instrumentalities, such as Government National Mortgage Association ("GNMA"), Federal National Mortgage Association ("FNMA") and Federal Home Loan Mortgage Corporation ("FHLMC"); (b) those issued by non-governmental issuers that represent interests in, or are collateralized by, mortgage-related securities issued or guaranteed by the U.S. Government or one of its agencies or instrumentalities; and (c) those issued by non-governmental issuers that represent an interest in, or are collateralized by, whole mortgage loans or mortgage-related securities without a government guarantee but usually with over-collateralization or some other form of private credit enhancement. Non-governmental issuers include originators of investors in mortgage

loans, including savings and loan associations, mortgage bankers, commercial banks, investment banks and special purpose subsidiaries of the foregoing.

There are a number of important differences both among the agencies and instrumentalities of the U.S. Government that issue mortgage-related securities and among the securities themselves. "Ginnie Maes" are mortgage pass-through certificates issued by GNMA, which is a wholly-owned U.S. Government corporation within the Department of Housing and Urban Development. Ginnie Maes are guaranteed as to the timely payment of principal and interest by GNMA and GNMA's guarantee is backed by the full faith and credit of the U.S. Treasury. In addition, Ginnie Maes are supported by the authority of GNMA to borrow funds from the U.S. Treasury to make payments under GNMA's guarantee. Mortgage-related securities issued by the FNMA include FNMA guaranteed mortgage pass-through certificates (also known as "Fannie Maes") which are solely the obligations of the FNMA. FNMA is a government-sponsored organization. Fannie Maes are guaranteed as to timely payment of principal and interest by FNMA but are not backed by or entitled to the full faith and credit of the U.S. Treasury. Mortgage-related securities issued by the FHLMC include FHLMC Mortgage Participation Certificates (also known as "Freddie Macs" or "PCs"). The FHLMC is a corporate instrumentality of the U.S. Government, created pursuant to an Act of Congress. Freddie Macs are not guaranteed by the U.S. Treasury or by any Federal Home Loan Bank and do not constitute a debt or obligation of the U.S. Government or of any Federal Home Loan Bank. Freddie Macs entitle the holder to timely payment of interest, which is guaranteed by the FHLMC. The FHLMC guarantees either ultimate collection or timely payment of all principal payments on the underlying mortgage loans. When the FHLMC does not guarantee timely payment of principal, FHLMC may remit the amount due on account of its guarantee of ultimate payment of principal at any time after default on an underlying mortgage, but in no event later than one year after it becomes payable.

In September 2008, the U.S. Treasury announced that FNMA and FHLMC were placed in conservatorship by the Federal Housing Finance Agency ("FHFA"), a newly created independent regulator. The conservatorship has no specified termination date. FNMA also has entered into a senior preferred stock purchase agreement with the U.S. Department of the Treasury pursuant to which the Treasury has committed to provide funding to FNMA under specified circumstances. There can be no assurance as to when or how the conservatorship will be terminated or whether FNMA or FHLMC will continue to exist following the conservatorship or what their respective business structures will be during or following the conservatorship. The FHFA, as conservator, has the power to repudiate any contract entered into by FNMA or FHLMC prior to its appointment if it determines that performance of the contract is burdensome and repudiation of the contract promotes the orderly administration of FNMA's or FHLMC's affairs. Further, the FHFA has the right to transfer or sell any asset or liability of FNMA or FHLMC without any approval, assignment or consent. If FHFA were to transfer any such guaranty obligation to another party, holders of FNMA or FHLMC mortgage-backed securities would have to rely on that party for satisfaction of the guaranty obligation and would be exposed to the credit risk of that party.

mortgages, to the extent that real properties securing such assets may be located in the same geographical region, may also be subject to a greater risk of default than other comparable securities in the event of adverse economic, political or business developments that may affect such region and, ultimately, the ability of property owners to make payments of principal and interest on the underlying mortgages. Non-government mortgage-related securities are generally subject to greater price volatility than those issued, guaranteed or sponsored by government entities because of the greater risk of default in adverse market conditions. Where a guarantee is provided by a private guarantor, the Fund is subject to the credit risk of such guarantor, especially when the guarantor doubles as the originator.

Although certain mortgage-related securities are guaranteed by a third party or otherwise similarly secured, the market value of the security, which may fluctuate, is not so secured. If the Fund purchases a mortgage-related security at a premium, that portion may be lost if there is a decline in the market value of the security whether resulting from changes in interest rates or prepayments in the underlying mortgage collateral. As with other interest-bearing securities, the prices of mortgage-related securities are inversely affected by changes in interest rates. However, though the value of a mortgage-related security may decline when interest rates rise, the converse is not necessarily true, since in periods of declining interest rates the mortgages underlying the security are prone to prepayment. For this and other reasons, a mortgage-related security's effective maturity may be shortened by unscheduled prepayments on the underlying mortgages and, therefore, it is not possible to predict accurately the security's return to the Fund. In addition, regular payments received in respect of mortgage-related securities include both interest and principal. No assurance can be given as to the return the Fund will receive when these amounts are reinvested.

Mortgage-backed securities that are issued or guaranteed by the U.S. government, its agencies or instrumentalities, are not subject to the Fund's industry concentration restrictions, set forth under "Investment Restrictions," by virtue of the exclusion from that test available to securities issued or guaranteed by the U.S. government or any of its agencies or instrumentalities. In the case of privately issued mortgage-backed securities, the Fund categorizes the securities by the issuer's industry for purposes of the Fund's industry concentration restrictions.

**Mortgage Pass-through Securities** 

Mortgage pass-through securities provide for the pass-through to investors of their pro-rata share of monthly payments (including any prepayments) made by the individual borrowers on the pooled mortgage loans, net of any fees paid to the guarantor of such securities and the servicer of the underlying mortgage loans.

**Adjustable Rate Mortgage Securities** 

Adjustable rate mortgage securities ("ARMS") are pass-through mortgage securities collateralized by mortgages with interest rates that are adjusted from time to time. The adjustments usually are determined in accordance with a predetermined interest rate index and may be subject to certain limits. While the values of ARMS, like other debt securities, generally vary inversely with changes in market interest rates (increasing in value during periods of declining interest rates and decreasing in value during periods of increasing interest rates), the values of ARMS should generally be more resistant to price swings than other debt securities because the interest rates of ARMS move with market interest rates. The adjustable rate feature of ARMS will not, however, eliminate fluctuations in the prices of ARMS, particularly during periods of extreme fluctuations in interest rates. Also, since many adjustable rate mortgages only reset on an annual basis, it can be expected that the prices of ARMS will fluctuate to the extent that changes in prevailing interest rates are not immediately reflected in the interest rates payable on the underlying adjustable rate mortgages.

ARMS typically have caps which limit the maximum amount by which the interest rate may be increased or decreased at periodic intervals or over the life of the loan. To the extent that interest rates increase in excess of the caps, ARMS can be expected to behave more like traditional debt securities and to decline in value to a greater extent than would be the case in the absence of such caps. The extent to which the prices of ARMS fluctuate with changes in interest rates will also be affected by the indices underlying the ARMS. Some indices, such as the one-year constant maturity Treasury note rate, closely mirror changes in market interest rate levels. Others, such as the 11th District Federal

Reserve Cost of Funds Index (often related to ARMS issued by FNMA), tend to lag changes in market levels and tend to be somewhat less volatile.

**Derivative Mortgage Securities** 

Collateralized mortgage obligations are derivative mortgage securities and are debt instruments issued by special purpose entities which are secured by pools of mortgage loans or other mortgage-related securities. Multi-class pass-through securities are equity interests in a trust composed of mortgage loans or other mortgage-related securities. Both are considered derivative mortgage securities and are collectively referred to as "CMOs." Payments of principal and interest on underlying collateral provide the Fund to pay debt service on the collateralized mortgage obligation or make scheduled distributions on the multi-class pass-through security.

In a CMO, a series of bonds or certificates is issued in multiple classes. Each class of CMO, often referred to as a "tranche," is issued at a specific coupon rate and has a stated maturity or final distribution date. Principal prepayments on collateral underlying a CMO may cause it to be retired substantially earlier than the stated maturities or final distribution dates.

The principal and interest on the underlying mortgages may be allocated among the several tranches of a CMO in many ways. For example, certain tranches may have variable or floating interest rates and others may provide only the principal or interest feature of the underlying security. Generally, the purpose of the allocation of the cash flow of a CMO to the various tranches is to obtain a more predictable cash flow to certain of the individual tranches than exists with the underlying collateral of the CMO. As a general rule, the more predictable the cash flow is on a CMO tranche, the lower the anticipated yield will be on that tranche at the time of issuance relative to prevailing market yields on mortgage-related securities. As part of the process of creating more predictable cash flows on most of the tranches of a CMO, one or more tranches generally must be created that absorb most of the volatility in the cash flows on the underlying mortgage loans. The yields on these tranches, which may include inverse floaters, stripped mortgage-backed securities, and Z tranches, discussed below, are generally higher than prevailing market yields on mortgage-related securities with similar maturities. As a result of the uncertainty of the cash flows of these tranches, the market prices of and yield on these tranches generally are more volatile.

An inverse floater is a CMO tranche with a coupon rate that moves inversely to a benchmark rate or a designated index, such as the Secured Overnight Financing Rate (SOFR) or Cost of Funds Index (COFI) (each, a reference rate). Like most other fixed income securities, the value of inverse floaters will decrease as interest rates increase. Inverse floaters, however, exhibit greater price volatility than the majority of mortgage pass-through securities or CMOs. Coupon rates on inverse floaters typically change at a multiple of the change in the relevant reference rate. Thus, any rise in the reference rate (as a consequence of an increase in interest rates) causes a correspondingly greater drop in the coupon rate of an inverse floater while any drop in the reference rate causes a correspondingly greater increase in the coupon of an inverse floater. Some inverse floaters also exhibit extreme sensitivity to changes in prepayments. Inverse floaters may be purchased by the Fund in an attempt to protect against a reduction in the income earned on the Fund's investments due to a decline in interest rates.

Z tranches of CMOs defer interest and principal payments until one or more other classes of the CMO have been paid in full. Interest accretes on the Z tranche, being added to principal, and is compounded through the accretion period. After the other classes have been paid in full, interest payments begin and continue through maturity. Z tranches have characteristics similar to zero coupon bonds. Like a zero coupon bond, during its accretion period a Z tranche has the advantage of eliminating the risk of reinvesting interest payments at lower rates during a period of declining market interest rates. At the same time, however, and also like a zero coupon bond, the market value of a Z tranche can be expected to fluctuate more widely with changes in market interest rates than would the market value of a tranche which pays interest currently. In addition, changes in prepayment rates on the underlying mortgage loans will affect the accretion period of a Z tranche, and therefore also will influence its market value.

Stripped mortgage-backed securities ("SMBSs") may represent an interest solely in the principal repayments or solely in the interest payments on mortgage-backed securities. SMBSs are derivative multi-class securities. SMBSs are usually structured with two classes and receive different proportions of the interest and principal distributions on the pool of underlying mortgage-backed securities. Due to the possibility of prepayments on the underlying mortgages, SMBSs may be more interest-rate sensitive than other securities purchased. If prevailing interest rates fall below the level at which SMBSs were issued, there may be substantial prepayments on the underlying mortgages, leading to the relatively early prepayments of principal-only SMBSs (the principal-only or "PO" class) and a reduction in the amount of payments made to holders of interest-only SMBSs (the interest-only or "IO" class). Therefore, the IO class generally increases in value as interest rates rise and decreases in value as interest rates fall, counter to the PO class and to changes in value experienced by most fixed income securities. If the underlying mortgages experience slower than anticipated prepayments of principal, the yield on a PO class will be affected more severely than would be the case with a traditional mortgage-related security. Because the yield to maturity of an IO class is extremely sensitive to the rate of principal payments (including prepayments) on the related underlying mortgage-backed securities, it is possible that the Fund might not recover its original investment on interest-only SMBSs if there are substantial prepayments on the underlying mortgages. The Fund's inability to fully recoup its investment in these securities as a result of a rapid rate of principal prepayments may occur even if the securities are rated AAA by an NRSRO. In view of these considerations, the Advisor intends to use these characteristics of interest-only SMBSs to reduce the effects of interest rate changes on the value of the Fund's portfolio, while continuing to pursue current income.

**Municipal Securities** 

Municipal securities generally include debt obligations (bonds, notes or commercial paper) issued by or on behalf of any of the 50 states and their political subdivisions, agencies and public authorities. The interest paid on municipal securities generally is tax-exempt. Municipal securities are issued to obtain funds for various public purposes, including the construction of public facilities, such as airports, bridges, highways, housing, hospitals, mass transportation, schools, streets, water and sewer works, gas, and electric utilities. They may also be issued to refund outstanding obligations or to obtain funds for general operating expenses. Municipal leases are issued by a state or local government to acquire equipment or facilities, the obligations of which are typically secured by the leased equipment or facilities.

**Non-Investment Grade Securities** 

The fixed income securities in which the Fund may invest may be rated BB+ or lower by S&P or Ba or lower by Moody's (referred to as "junk bonds"). Securities rated below investment grade generally entail greater interest rate, liquidity and credit risks than investment grade securities.

**Obligations of Supranational Entities** 

For a discussion of Obligations of Supranational Entities, please see the "Foreign Securities" discussion in this section.

**Options** 

A call option gives the purchaser of the option the right to buy a security at a stated price from the writer (seller) of the option. A put option gives the purchaser of the option the right to sell a security at a stated price to the writer of the option. In a covered call option, during the option period the writer owns the security (or a comparable security sufficient to satisfy securities exchange requirements) which may be sold pursuant to the option. In a covered put option, the writer holds cash and/or short-term debt instruments sufficient in an amount equal to the exercise price of the option. In addition, a put or call option will be considered covered if and to the extent that some or all of the risk of the option has been offset by another option. The Fund may write combinations of covered puts and calls on the same underlying security.

In general, the Fund may write options in an attempt to increase returns or purchase options for hedging purposes.

The premium received from writing a put or call option increases the Fund's return on the underlying security in the event that the option expires unexercised or is closed out at a profit. The amount of the premium reflects, among other things, the relationship between the exercise price and the current market value of the underlying security, the volatility of the underlying security, the amount of time remaining until expiration, current interest rates, and the effect of supply and demand in the options market and in the market for the underlying security. A put option locks in the price at which the Fund may sell a security it holds, thus hedging against market declines and a call option locks in the price at which the Fund may purchase a security, thus hedging against inflation. Such protection is provided during the life of the put option since the Fund, as holder of the option, is able to sell the underlying security at the option's exercise price regardless of any decline in the underlying security's market price. By writing a call option, the Fund limits its opportunity to profit from any increase in the market value of the underlying security above the exercise price of the option but continues to bear the risk of a decline in the value of the underlying security. By writing a put option, the Fund assumes the risk that it may be required to purchase the underlying security for an exercise price higher than its then current market value, resulting in a potential capital loss unless the security substantially appreciates in value.

The Fund may terminate an option that it has written prior to its expiration by entering into a closing purchase transaction, in which it purchases an offsetting option. The Fund realizes a profit or loss from a closing transaction if the cost of the transaction (option premium plus transaction costs) is less or more than the premium received from writing the option. Because increases in the market price of a call option generally reflect increases in the market price of the security underlying the option, any loss resulting from a closing purchase transaction may be offset in whole or in part by unrealized appreciation of the underlying security owned by the Fund.

In order for a put option to be profitable, the market price of the underlying security must decline sufficiently below the exercise price to cover the premium and transaction costs. By using put options in this manner the Fund will reduce any profit it might otherwise have realized from appreciation of the underlying security by the premium paid for the put option and by transaction costs.

In order for a call option to be profitable, the market price of the underlying security must rise sufficiently above the exercise price to cover the premium and transaction costs.

The successful use of options depends on the ability of the Advisor to forecast interest rate and market movements. For example, if the Fund were to write a call option based on the Advisor's expectation that the price of the underlying security will fall, but the price rises instead, the Fund could be required to sell the security upon exercise at a price below the current market price. Similarly, if the Fund were to write a put option based on the Advisor's expectations that the price of the underlying security will rise, but the price falls instead, the Fund could be required to purchase the security upon exercise at a price higher than the current market price.

When the Fund purchases an option, it runs the risk that it will lose its entire investment in the option in a relatively short period of time, unless the Fund exercises the option or enters into a closing sale transaction with respect to the option during the life of the option. If the price of the underlying security does not rise (in the case of a call) or fall (in the case of a put) to an extent sufficient to cover the option premium and transaction costs, the Fund will lose part or all of its investment in the option. This contrasts with an investment by the Fund in the underlying security, since the Fund will not lose any of its investment in such security if the price does not change.

The use of options also involves the risk of imperfect correlation between movements in option prices and movements in the value of the underlying securities.

The effective use of options also depends on the Fund's ability to terminate option positions at times when the Advisor deems it desirable to do so. Although the Fund will take an option position only if the Advisor believes there is a liquid secondary market for the option, there is no assurance that the Fund will be able to effect a closing transaction at any particular time or at an acceptable price.

The Fund generally expects that its options transactions will be conducted on recognized exchanges. In certain instances, however, the Fund may purchase and sell options in the OTC markets. The Fund's ability to terminate options in the OTC market may be more limited than for exchange-traded options and may also involve the risk that securities dealers participating in such transactions would be unable to meet their obligations to the Fund. The Fund will, however, engage in OTC market transactions only when appropriate exchange-traded transactions are unavailable and when, in the opinion of the Advisor, the pricing mechanism and liquidity of the OTC market is satisfactory and the participants are responsible parties likely to meet their contractual obligations.

If a secondary trading market in options were to become unavailable, the Fund could no longer engage in closing transactions. Lack of investor interest might adversely affect the liquidity of the market for particular options or series of options. A market may discontinue trading of a particular option or options generally. In addition, a market could become temporarily unavailable if unusual events—such as volume in excess of trading or clearing capability—were to interrupt its normal operations.

A market may at times find it necessary to impose restrictions on particular types of options transactions, such as opening transactions. For example, if an underlying security ceases to meet qualifications imposed by the market or the Options Clearing Corporation, new series of options on that security will no longer be opened to replace expiring series, and opening transactions in existing series may be prohibited. If an options market were to become unavailable, the Fund as a holder of an option would be able to realize profits or limit losses only by exercising the option, and the Fund, as option writer, would remain obligated under the option until expiration.

Disruptions in the markets for the securities underlying options purchased or sold by the Fund could result in losses on the options. If trading is interrupted in an underlying security, the trading of options on that security is normally halted as well. As a result, the Fund as purchaser or writer of an option will be unable to close out its positions until options trading resumes, and it may be faced with considerable losses if trading in the security reopens at a substantially different price. In addition, the Options Clearing Corporation or other options markets may impose exercise restrictions. If a prohibition on exercise is imposed at the time when trading in the option has also been halted, the Fund as a purchaser or writer of an option will be locked into its position until one of the two restrictions has been lifted. If the Options Clearing Corporation were to determine that the available supply of an underlying security appears insufficient to permit delivery by the writers of all outstanding calls in the event of exercise, it may prohibit indefinitely the exercise of put options by holders who would be unable to deliver the underlying interest. The Fund, as holder of such a put option, could lose its entire investment if the prohibition remained in effect until the put option's expiration and the Fund was unable either to acquire the underlying security or to sell the put option in the market.

Special risks are presented by internationally-traded options. Because of time differences between the United States and various foreign countries, and because different holidays are observed in different countries, foreign options markets may be open for trading during hours or on days when U.S. markets are closed. As a result, option premium may not reflect the current prices of the underlying interest in the United States.

An exchange-listed option may be closed out only on an exchange which provides a secondary market for an option of the same series. There is no assurance that a liquid secondary market on an exchange will exist for any particular option or at any particular time. If no secondary market were to exist, it would be impossible to enter into a closing transaction to close out an option position. As a result, the Fund may be forced to continue to hold, or to purchase at a fixed price, a security on which it has sold an option at a time when the Advisor believes it is inadvisable to do so.

Higher than anticipated trading activity or order flow or other unforeseen events might cause the Options Clearing Corporation or an exchange to institute special trading procedures or restrictions that might restrict the Fund's use of options. The exchanges have established limitations on the maximum number of calls and puts of each class that may be held or written by an investor or group of investors acting in concert. It is possible that the Fund and other clients of the Advisor may be considered such a group. These position limits may restrict the Fund's ability to purchase or sell options on particular securities. Options which are not traded on national securities exchanges may be closed out only with the other party to the option transaction. For that reason, it may be more difficult to close out unlisted options

than listed options. Furthermore, unlisted options are not subject to the protection afforded purchasers of listed options by the Options Clearing Corporation.

**Preferred Stock** 

Preferred stock is a type of equity security which represents an ownership interest in a corporation and the right to a portion of the assets of the corporation in the event of a liquidation. This right, however, is subordinate to that of any creditors, including holders of debt issued by the corporation. Owners of preferred stock ordinarily do not have voting rights, but are entitled to dividends at a specified rate.

**Real Estate Investment Trusts ("REITs")** 

REITs are pooled investment vehicles that invest primarily in income producing real estate or real estate-related loans or interest. REITs are generally classified as equity REITs, mortgage REITs or a combination of equity and mortgage REITs. Equity REITs invest the majority of their assets directly in real property and derive income primarily from the collection of rents. Equity REITs can also realize capital gains by selling property that has appreciated in value. Mortgage REITs invest the majority of their assets in real estate mortgages and derive income from the collection of interest payments. The real property and mortgages serving as investment vehicles for REITs may be either residential or commercial in nature. Similar to investment companies, REITs are not taxed on income distributed to shareholders provided they comply with several requirements of the Code. Such tax requirements limit a REIT's ability to respond to changes in the commercial real estate market.

Investments in REITs are subject to the same risks as direct investments in real estate. Real estate values rise and fall in response to many factors, including local, regional and national economic conditions, the demand for rental property, and interest rates. In addition, REITs may have limited financial resources, may trade less frequently and in limited volume and may be more volatile than other securities.

**Repurchase Agreements** 

Repurchase agreements are agreements through which banks, broker-dealers and other financial institutions approved by the Trustees, sell securities (usually U.S. Government securities) to the Fund and agree to repurchase those securities at a specified price and time (usually not more than seven days from the original sale). The seller's obligation to pay the repurchase price is secured by the securities to be repurchased. These securities are required to be held by the Fund, its custodian or a third-party custodian. In order to protect the Fund's interest, collateral securities must have a value of at least 100% of the resale price at all times. (The seller must provide additional collateral in the event that this condition is not met). In general, the Advisor will require collateral securities to have a value of at least 102% of the resale price at the time the repurchase agreement is made. The collateral is marked to market on a daily basis, thus enabling the Advisor to determine when to request additional collateral from the seller.

If a seller defaults on its repurchase obligation, the Fund could realize a loss on the sale of the underlying securities to the extent that the proceeds of the sale (including accrued interest) are less than the resale price. In addition, even though the U.S. Bankruptcy Code provides protection to the Fund if the seller becomes bankrupt or insolvent, the Fund may suffer losses in such event.

**Restricted and Illiquid Securities** 

Generally, an "illiquid security" or "illiquid investment" is any investment that the Fund reasonably expects cannot be sold or disposed of in current market conditions in seven calendar days or less without the sale or disposition significantly changing the market value of the investment. Illiquid investments generally include investments for which no market exists or which are legally restricted as to their transfer (such as those issued pursuant to an exemption from the registration requirements of the federal securities laws). Restricted securities are generally sold in privately negotiated transactions, pursuant to an exemption from registration under the 1933 Act. If registration of a security

previously acquired in a private transaction is required, the Fund, as the holder of the security, may be obligated to pay all or part of the registration expense and a considerable period may elapse between the time it decides to seek registration and the time it will be permitted to sell a security under an effective registration statement. If, during such a period, adverse market conditions were to develop, the Fund might obtain a less favorable price than prevailed when it decided to seek registration of the security. To the extent it is determined that there is a liquid institutional or other market for certain restricted securities, the Fund would consider them to be liquid securities. An example is a restricted security that may be freely transferred among qualified institutional buyers pursuant to Rule 144A under the 1933 Act, and for which a liquid institutional market has developed. Rule 144A securities may be subject, however, to a greater possibility of becoming illiquid than securities that have been registered with the SEC.

The following factors may be taken into account in determining whether a restricted security is properly considered a liquid security: (i) the frequency of trades and quotes for the security; (ii) the number of dealers willing to buy or sell the security and the number of other potential buyers; (iii) any dealer undertakings to make a market in the security; and (iv) the nature of the security and of the marketplace trades (e.g., any demand, put or tender features, the method of soliciting offers, the mechanics and other requirements for transfer, and the ability to assign or offset the rights and obligations of the security). The nature of the security and its trading includes the time needed to sell the security, the method of soliciting offers to purchase or sell the security, and the mechanics of transferring the security, including the role of parties such as foreign or U.S. custodians, sub-custodians, currency exchange brokers, and depositories.

The sale of illiquid investments often requires more time and results in higher brokerage charges or dealer discounts and other selling expenses than the sale of investments eligible for trading on national securities exchanges or in the over-the-counter (OTC) markets. Illiquid investments often sell at a price lower than similar investments that are not subject to restrictions on resale.

The risk to the Fund in holding illiquid investments is that they may be more difficult to sell if the Fund wants to dispose of the investment in response to adverse developments or in order to raise money for redemptions or other investment opportunities. Illiquid trading conditions may also make it more difficult for the Fund to realize an investment's fair value.

The Fund may also be unable to achieve its desired level of exposure to a certain investment, issuer, or sector due to overall limitations on its ability to invest in illiquid investments and the difficulty in purchasing such investments.

The Fund may not acquire any illiquid investment if, immediately after the acquisition, the Fund would have invested more than 15% of its net assets in illiquid investments that are assets. Because illiquid investments may not be readily marketable, the portfolio managers and/or investment personnel may not be able to dispose of them in a timely manner. As a result, the Fund may be forced to hold illiquid investments while their price depreciates. Depreciation in the price of illiquid investments may cause the net asset value of the Fund to decline.

**Reverse Repurchase Agreements** 

The Fund may borrow funds for temporary purposes by entering into reverse repurchase agreements, provided such action is consistent with the Fund's investment objective and fundamental investment restrictions. As a matter of non-fundamental policy, the Fund intends to limit total borrowings under reverse repurchase agreements to no more than 10% of the value of its total assets. Pursuant to a reverse repurchase agreement, the Fund will sell portfolio securities to financial institutions such as banks or to broker-dealers, and agree to repurchase the securities at a mutually agreed-upon date and price. The Fund intends to enter into reverse repurchase agreements only to avoid otherwise selling securities during unfavorable market conditions to meet redemptions. Reverse repurchase agreements involve the risk that the market value of the securities sold by the Fund may decline below the price at which the Fund is obligated to repurchase the securities.

**Securities Lending** 

In order to generate additional income, the Fund may lend its portfolio securities on a short-term basis to certain brokers, dealers or other financial institutions. In determining whether to lend to a particular broker, dealer or financial institution, the Advisor will consider all relevant facts and circumstances, including the size, creditworthiness and reputation of the borrower. Any loans made will be continuously secured by collateral in cash at least equal to 100% of the value of the securities on loan for the Fund. The Fund may lend up to 33 ⅓% of its total assets. Such loans must be fully collateralized by cash or U.S. government obligations and marked to market daily. Although the loan is fully collateralized, if the borrower defaults, the Fund could lose money.

While portfolio securities are on loan, the borrower will pay to the lending Fund any dividends or interest received on the securities. In addition, the Fund retains all or a portion of the interest received on investment of the collateral or receives a fee from the borrower. Although voting rights, or rights to consent, with respect to the loaned securities pass to the borrower, the lending Fund retains the right to call the loans at any time on reasonable notice, and it will do so to enable the Fund to exercise voting rights on any matters materially affecting the investment. The Fund may also call such loans in order to sell the securities.

One of the risks in lending portfolio securities, as with other extensions of credit, is the possible delay in recovery of the securities or possible loss of rights in the collateral should the borrower fail financially. There is also the risk that, when lending portfolio securities, the securities may not be available to the Fund on a timely basis and the Fund may, therefore, lose the opportunity to sell the securities at a desirable price. In addition, in the event that a borrower of securities would file for bankruptcy or become insolvent, disposition of the securities may be delayed pending court action.

**Small Cap/Special Equity Situation Securities** 

The Fund may invest in the securities of small capitalization companies and companies in special equity situations. Companies are considered to have a small market capitalization if their capitalization is within the range of those companies in the S&P SmallCap 600 Index. Companies are considered to be experiencing special equity situations if they are experiencing unusual and possibly non-repetitive developments, such as mergers; acquisitions; spin-offs; liquidations; reorganizations; and new products, technology or management. These companies may offer greater opportunities for capital appreciation than larger, more established companies, but investment in such companies may involve certain special risks. These risks may be due to the greater business risks of small size, limited markets and financial resources, narrow product lines and frequent lack of depth in management. The securities of such companies are often traded in the OTC market and may not be traded in volumes typical on a national securities exchange. Thus, the securities of such companies may be less liquid, and subject to more abrupt or erratic market movements than securities of larger, more established growth companies. Since a "special equity situation" may involve a significant change from a company's past experiences, the uncertainties in the appraisal of the future value of the company's equity securities and the risk of a possible decline in the value of the Fund's investments are significant.

**Special Purpose Acquisition Companies**

The Fund may invest in stocks, warrants, and other securities of special purpose acquisition companies ("SPACs") or similar special purpose entities that pool funds to seek potential acquisition opportunities. A SPAC is a publicly traded company that raises funds through an initial public offering ("IPO") for the purpose of acquiring or merging with another company to be identified subsequent to the SPAC's IPO. The securities of a SPAC are often issued in "units" that include one share of common stock and one right or warrant (or partial right or warrant) conveying the right to purchase additional shares or partial shares. In some cases, the rights and warrants may be separated from the common stock at the election of the holder, after which they may become freely tradeable. If the Fund purchases shares of a SPAC in an IPO it will generally bear a sales commission, which may be significant.

Unless and until a transaction is completed, a SPAC generally invests its assets (less a portion retained to cover expenses) in U.S. government securities, money market funds and similar investments whose returns or yields may be significantly lower than those of the Fund's other investments. If an acquisition or merger that meets the requirements for the SPAC is not completed within a pre-established period of time, the invested funds are returned to the SPAC's shareholders, less certain permitted expenses, and any rights or warrants issued by the SPAC will expire worthless. Under any circumstances in which the Fund receives a refund of all or a portion of its original investment, the returns on that investment may be negligible, and the Fund may be subject to opportunity costs to the extent that alternative investments would have produced higher returns. Further, the Fund may be delayed in receiving any redemption or liquidation proceeds from a SPAC to which it is entitled.

An investment in a SPAC may be diluted by additional subsequent offerings of interests in the SPAC or by other investors exercising existing rights to purchase shares of the SPAC. Due to the risk of the loss of sponsors' and other initial investors' capital if an acquisition is not consummated, sponsors of SPACs may be incentivized to consummate acquisitions at less attractive valuations at the expense of SPAC shareholders. In addition, as the number of SPACs grows, there is greater competition between SPACs and traditional purchasers of companies, which further increases the likelihood that sponsors may be incentivized to consummate acquisitions at less attractive valuations.

SPACs and similar entities are in essence "blank check" companies without operating histories or ongoing business operations (other than identifying and pursuing acquisitions) and the potential for the long term capital appreciation of their securities is particularly dependent on the ability of the SPAC's management to identify and complete a profitable acquisition. There is no guarantee that the SPACs in which the Fund invests will complete an acquisition or that any acquisitions completed by the SPACs in which the Fund invests will be profitable. The values of investments in SPACs may be highly volatile and may depreciate significantly over time. Some SPACs may pursue acquisitions only within certain industries or regions, which may ultimately lead to an increase in the volatility of their prices following the acquisition. In addition, some of these securities may be considered illiquid and/or subject to restrictions on resale, leaving the Fund unable to sell its interest in a SPAC or to sell its interest only at a price below what the Fund believes is the SPAC interest's intrinsic value.

**Swaps**

The Fund may enter into swap contracts to invest in a market without owning or taking physical custody of securities in various circumstances, including circumstances where direct investment in the securities is restricted for legal reasons or is otherwise impracticable. Swaps may also be used for hedging purposes or to seek to increase total return. Swap contracts may be structured in different ways. For example, a counterparty may agree to pay the Fund the amount, if any, by which the notional amount of the swap contract would have increased in value had it been invested in the particular stocks (or a group of stocks), plus the dividends that would have been received on those stocks. In these cases, the Fund may agree to pay to the counterparty a floating rate of interest on the notional amount of the swap contract plus the amount, if any, by which that notional amount would have decreased in value had it been invested in such stocks. Therefore, the return to the Fund on the swap contract should be the gain or loss on the notional amount plus dividends on the stocks less the interest paid by the Fund on the notional amount. In other cases, the counterparty and the Fund may each agree to pay the other the difference between the relative investment performances that would have been achieved if the notional amount of the swap contract had been invested in different stocks (or a group of stocks).

The Fund will generally enter into swaps on a net basis, which means that the two payment streams are netted out, with the Fund receiving or paying, as the case may be, only the net amount of the two payments. Payments may be made at the conclusion of a swap contract or periodically during its term. Swaps normally do not involve the delivery of securities or other underlying assets. Accordingly, the risk of loss with respect to swaps is normally limited to the net amount of payments that the Fund is contractually obligated to make. If the other party to a swap defaults, the Fund's risk of loss consists of the net amount of payments that the Fund is contractually entitled to receive, if any.

**Regulatory Risk**

The regulation of derivatives is a rapidly changing area of law and is subject to modification by government and judicial action. In addition, the SEC, CFTC and the exchanges are authorized to take extraordinary actions in the event of a market emergency, including, for example, the implementation or reduction of speculative position limits, the implementation of higher margin requirements, the establishment of daily price limits and the suspension of trading.

It is not possible to predict fully the effects of current or future regulation. However, it is possible that developments in government regulation of various types of derivative instruments, such as speculative position limits on certain types of derivatives, or limits or restrictions on the counterparties with which the Fund engages in derivative transactions, may limit or prevent the Fund from using or limit the Fund's use of these instruments effectively as a part of its investment strategy, and could adversely affect the Fund's ability to achieve its investment objective. The Advisor will continue to monitor developments in the area, particularly to the extent regulatory changes affect the Fund's ability to enter into desired swap agreements. New requirements, even if not directly applicable to the Fund, may increase the cost of the Fund's investments and cost of doing business.

The SEC has adopted a new regulatory framework governing the use of derivatives by registered investment companies ("Rule 18f-4"). Pursuant to Rule 18f-4, if the fund that utilizes derivatives qualifies as a "limited derivatives user" (generally, the fund that limits the notional amount of its derivatives transactions to 10% or less of its net assets), it is required to adopt and implement policies and procedures reasonably designed to manage the fund's derivatives risks. If the fund does not so qualify, it is required to adopt and implement a written derivatives risk management program and comply with a quantitative limit on the estimated potential risk of loss that the fund incurs from its derivatives transactions.

**Tax-Exempt Commercial Paper and Tax-Exempt Securities** 

Tax-exempt commercial paper typically represents very short-term, unsecured, negotiable promissory notes. These obligations are often issued to meet seasonal working capital needs of municipalities or to provide interim construction financing. The obligations are paid from general revenues of municipalities or are refinanced with long-term debt. In most cases, tax-exempt commercial paper is backed by letters of credit, lending agreements, note repurchase agreements or other credit facility agreements offered by banks or other institutions which may be called upon in the event of default by the issuer of the commercial paper.

Tax-exempt securities are debt obligations the interest on which is, in the opinion of bond counsel for the issuing governmental entity or agency, excluded from gross income for federal income tax purposes. Examples of tax-exempt securities include fixed and floating or variable rate municipal obligations, tax-exempt notes, certificates of participation, trust and partnership interests in municipal obligations, tax-exempt commercial paper, stand-by commitments and private activity bonds.

Tax-exempt securities are issued to obtain monies for various public purposes, including the construction of a wide range of public facilities such as bridges, highways, roads, schools, water and sewer works, and other utilities. Other public purposes for which tax-exempt securities may be issued include refunding outstanding obligations, obtaining monies for general operating expenses and to lend to other public institutions and facilities. The two principal classifications of tax-exempt securities are general obligation and limited obligation (or revenue) securities. General obligation securities are obligations involving the credit of an issuer possessing taxing power and are payable from the issuer's general unrestricted revenues and not from any particular fund or source. The characteristics and methods of enforcement of general obligation securities vary according to the law applicable to the particular issuer.

Limited obligation securities are payable only from the revenues derived from a particular facility or class or facilities or, in some cases, from the proceeds of a special excise or other specific revenue source, and generally are not payable from the unrestricted revenues of the issuer. Private activity bonds generally are limited obligation securities, the credit

and quality of which are usually directly related to the credit of the private user of the facilities. Payment of principal of and interest on these bonds is the responsibility of the private user (and any guarantor).

Tax-exempt notes and tax-exempt commercial paper are generally used to provide for short-term capital needs, seasonal working capital needs of municipalities or to provide interim construction financing, and generally have maturities of one year or less. Tax-exempt notes include tax anticipation notes ("TANs"), revenue anticipation notes ("RANs") and bond anticipation notes ("BANs"). TANs are issued to finance working capital needs of municipalities. Generally, they are issued in anticipation of various seasonal tax revenues, such as income, sales, use and business taxes, and are payable from these specific future taxes. RANs are issued in expectation of receipt of other kinds of revenue, such as federal revenues or grants available under the federal revenue sharing programs. BANs are issued to provide interim financing until long-term financing can be arranged. In most cases, the long-term bonds then provide the money for the repayment of the notes. Tax-exempt commercial paper is typically backed by letters of credit, lending agreements, note repurchase agreements or other credit facility agreements offered by banks or other institutions and is actively traded.

Private activity bonds (sometimes called "industrial development bonds") may be issued by or on behalf of public authorities to obtain funds to support certain privately owned or operated facilities. Because dividends attributable to interest on such bonds may not be tax exempt, it may not be desirable for an investor to purchase shares of the Fund which invests in private activity bonds if such investor is a "substantial user" of facilities which are financed by private activity bonds or industrial development bonds or a "related person" of such a substantial user.

Tax-exempt securities may be purchased through the acquisition of certificates of accrual or similar instruments evidencing direct ownership of interest payments or principal payments, or both, on tax-exempt securities. In such arrangements, any discount accruing on a certificate or instrument that is purchased at a yield not greater than the coupon rate of interest on the related tax-exempt securities must be exempt from federal income tax and applicable state income taxes to the same extent as interest on such tax-exempt securities, in the opinion of counsel to the initial seller of each such certificate or instrument.

Tax-exempt securities may also be acquired by purchasing from banks participation interests in all or part of specific holdings of tax-exempt securities. Such participations may be backed in whole or in part by an irrevocable letter of credit or guarantee of the selling bank. The Fund will have the right to sell the interest back to the bank or other financial institutions and draw on the letter of credit on demand, generally on seven days' notice, for all or any part of the Fund's participation interest in the par value of the municipal obligation plus accrued interest. The Advisor will generally exercise the demand on a letter of credit only under the following circumstances: (1) upon default of any of the terms of the documents of the municipal obligation, (2) as needed to provide liquidity in order to meet redemptions, or (3) in order to maintain a high-quality investment portfolio. The selling bank may receive a fee in connection with the arrangement. Banks and financial institutions are subject to extensive governmental regulations which may limit the amounts and types of loans and other financial commitments that may be made and interest rates and fees which may be charged. The profitability of banks and financial institutions is largely dependent upon the availability and cost of capital funds to finance lending operations under prevailing money market conditions. General economic conditions also play an important part in the operations of these entities and exposure to credit losses arising from possible financial difficulties of borrowers may affect the ability of a bank or financial institution to meet its obligations with respect to a participation interest. The Fund that purchases a participation interest must receive an opinion of counsel or a ruling of the Internal Revenue Service stating that interest earned by it on the tax-exempt securities in which it holds such participation interest is excluded from gross income for federal regular income tax purposes and applicable state income taxes.

Prices and yields on tax-exempt securities are dependent on a variety of factors, including general money market conditions, the financial condition of the issuer, general conditions in the market for tax-exempt obligations, the size of a particular offering, and the maturity of the obligation and ratings of particular issues, and are subject to change from time to time. Information about the financial condition of an issuer of tax-exempt bonds or notes may not be as extensive as that which is made available by corporations whose securities are publicly traded.

Congress or state legislatures may seek to extend the time for payment of principal or interest, or both, or to impose other constraints upon enforcement of tax-exempt securities. There is also the possibility that, as a result of litigation or other conditions, the power or ability of issuers to meet their obligations to pay interest on and principal of their tax-exempt securities may be materially impaired or their obligations may be found to be invalid or unenforceable. Such litigation or conditions may from time to time have the effect of introducing uncertainties in the market for tax exempt obligations or certain segments thereof, or may materially affect the credit risk with respect to particular bonds or notes. Adverse economic, business, legal or political developments might affect all or a substantial portion of tax-exempt securities in the same manner. Obligations of issuers of tax-exempt securities are subject to the provisions of bankruptcy, insolvency and other laws, such as the Federal Bankruptcy Code, affecting the rights and remedies of creditors.

The Code imposes certain continuing requirements on issuers of tax-exempt securities regarding the use, expenditure and investment of bond proceeds and the payment of rebates to the United States. Failure by the issuer to comply with certain of these requirements subsequent to the issuance of tax-exempt bonds could cause interest on the bonds to become includable in gross income retroactive to the date of issuance.

**Time Deposits** 

For a discussion of Time Deposits, please see the "Money Market Instruments" discussion in this section.

**Treasury Receipts** 

For a discussion of Treasury Receipts, please see the "Money Market Instruments" discussion in this section.

**Unit Investment Trusts** 

Unit Investment Trusts are a type of investment company, registered with the SEC under the 1940 Act, that purchases a fixed portfolio of income-producing securities, such as corporate, municipal, or government bonds, mortgage-backed securities, or preferred stock. Unit holders receive an undivided interest in both the principal and the income portion of the portfolio in proportion to the amount of capital they invest. The portfolio of securities remains fixed until all the securities mature and unit holders have recovered their principal. Certain exchange traded funds are organized as unit investment trusts.

**U.S. Government Securities** 

U.S. Government securities are securities that are either issued or guaranteed as to payment of principal and interest by the U.S. Government, its agencies or instrumentalities. U.S. Government securities are limited to: direct obligations of the U.S. Treasury; such as bills, notes, and bonds of the U.S. Treasury, and notes, bonds, and discount notes of U.S. Government agencies or instrumentalities, including certain mortgage securities.

Some obligations issued or guaranteed by agencies or instrumentalities of the U.S. Government, such as GNMA participation certificates, are backed by the full faith and credit of the U.S. Treasury.

Other such obligations are only supported by: the issuer's right to borrow an amount limited to a specific line of credit from the U.S. Treasury; the discretionary authority of the U.S. Government to purchase certain obligations of an agency or instrumentality; or the credit of the agency or instrumentality.

Agency securities are issued or guaranteed by a federal agency or other government sponsored entity ("GSE") acting under federal authority. Some GSE securities are supported by the full faith and credit of the U.S. Government and some GSE securities are not. GSE securities backed by the full faith and credit of the U.S. Government include the GNMA, Small Business Administration, Farm Credit System Financial Assistance Corporation, Farmer's Home Administration, Federal Financing Bank, General Services Administration, Department of Housing and Urban

Development, Export-Import Bank, Overseas Private Investment Corporation, and Washington Metropolitan Area Transit Authority Bonds.

GSE securities, which are not backed by the full faith and credit of the U.S. Government but receive support through federal subsidies, loans or other benefits include those issued by the Federal Home Loan Bank System, FHLMC, FNMA and Tennessee Valley Authority in support of such obligations.

Certain other GSE securities are not backed by the full faith and credit of the U.S. Government and have no explicit financial support, including the Farm Credit System, Financing Corporation, and Resolution Funding Corporation.

Investors regard agency securities as having low credit risks, but not as low as Treasury securities. The Fund treats mortgage-backed securities guaranteed by a GSE as if issued or guaranteed by a federal agency. Although such a guarantee protects against credit risks, it does not reduce market and prepayment risks.

From time to time uncertainty regarding the status of negotiations in the U.S. Government to increase the statutory debt limit, commonly called the "debt ceiling," could increase the risk that the U.S. Government may default on payments on certain U.S. Government securities, cause the credit rating of the U.S. Government to be downgraded, increase volatility in the stock and bond markets, result in higher interest rates, reduce prices of U.S. Treasury securities, and/or increase the costs of various kinds of debt. If the Fund holds securities of a U.S. Government-sponsored entity that is negatively impacted by legislative or regulatory action, is unable to meet its obligations, or its creditworthiness declines, the performance of the Fund will be adversely impacted.

**U.S. Treasury Obligations** 

For a discussion of U.S. Treasury Obligations, please see the "U.S. Government Securities" discussion above.

**Warrants** 

Warrants are options to purchase common stock at a specific price (usually at a premium above the market value of the optioned common stock at issuance) valid for a specific period of time. Warrants may have a life ranging from less than a year to twenty years or may be perpetual. However, most warrants have expiration dates after which they are worthless. In addition, if the market price of the common stock does not exceed the warrant's exercise price during the life of the warrant, the warrant will expire as worthless. Warrants have no voting rights, pay no dividends, and have no rights with respect to the assets of the corporation issuing them. The percentage increase or decrease in the market price of the warrant may tend to be greater than the percentage increase or decrease in the market price of the optioned common stock.

**When-Issued and Delayed Delivery Transactions** 

When-issued securities are securities purchased for delivery beyond the normal settlement date at a stated price and yield and thereby involve risk that the yield obtained in the transaction will be less than that available in the market when the delivery takes place or that the seller will fail to complete the transaction. In addition, because of delayed settlement, the Fund may pay more than market value on the settlement date. The Advisor may choose to dispose of a commitment prior to settlement. The Fund will not pay for such securities or start earning interest on them until they are received.

**Zero-Coupon Securities** 

Zero-coupon securities are debt obligations which are generally issued at a discount and payable in full at maturity, and which do not provide for current payments of interest prior to maturity. Zero-coupon securities usually trade at a deep discount from their face or par value and are subject to greater market value fluctuations from changing interest rates than debt obligations of comparable maturities which make current distributions of interest. As a result, the NAV

of shares of the Fund investing in zero-coupon securities may fluctuate over a greater range than shares of other mutual funds investing in securities making current distributions of interest and having similar maturities.

Zero-coupon securities may include U.S. Treasury bills issued directly by the U.S. Treasury or other short-term debt obligations, and longer-term bonds or notes and their unmatured interest coupons which have been separated by their holder, typically a custodian bank or investment brokerage firm. A number of securities firms and banks have stripped the interest coupons from the underlying principal (the "corpus") of U.S. Treasury securities and resold them in custodial receipt programs with a number of different names, including TIGRS and CATS. The underlying U.S. Treasury bonds and notes themselves are held in book-entry form at the Federal Reserve Bank or, in the case of bearer securities (i.e., unregistered securities which are owned ostensibly by the bearer or holder thereof), in trust on behalf of the owners thereof.

In addition, the U.S. Treasury has facilitated transfers of ownership of zero-coupon securities by accounting separately for the beneficial ownership of particular interest coupons and corpus payments on U.S. Treasury securities through the Federal Reserve book-entry record-keeping system. The Federal Reserve program, as established by the U.S. Treasury Department, is known as "STRIPS" or "Separate Trading of Registered Interest and Principal of Securities." Under the STRIPS program, the Fund will be able to have its beneficial ownership of U.S. Treasury zero-coupon securities recorded directly in the book-entry record-keeping system in lieu of having to hold certificates or other evidence of ownership of the underlying U.S. Treasury securities. When debt obligations have been stripped of their unmatured interest coupons by the holder, the stripped coupons are sold separately. The principal or corpus is sold at a deep discount because the buyer receives only the right to receive a future fixed payment on the security and does not receive any rights to periodic cash interest payments. Once stripped or separated, the corpus and coupons may be sold separately.

Typically, the coupons are sold separately or grouped with other coupons with like maturity dates and sold in such bundled form. Purchasers of stripped obligations acquire, in effect, discount obligations that are economically identical to the zero-coupon securities issued directly by the obligor.

**INVESTMENT RISKS** 

There are many factors which may affect an investment in the Fund. The Fund's principal risks are described in the Prospectus. Additional risk factors are outlined below.

**Active Trading Risk**

Active trading will cause the Fund to have an increased portfolio turnover rate, which is likely to generate shorter-term gains (losses) for its shareholders, which are taxed at a higher rate than longer-term gains (losses). Actively trading portfolio securities increases the Fund's trading costs and may have an adverse impact on the Fund's performance.

**ADRs and Domestically Traded Foreign Securities Risk** 

Because the Fund may invest in ADRs and other domestically traded securities of foreign companies, the Fund's share price may be more affected by foreign economic and political conditions, taxation policies and accounting and auditing standards than would otherwise be the case. Foreign companies may not provide information as frequently or to as great an extent as companies in the United States. Foreign companies may also receive less coverage than U.S. companies by market analysts and the financial press. In addition, foreign companies may lack uniform accounting, auditing and financial reporting standards or regulatory requirements comparable to those applicable to U.S. companies. These factors may prevent the Fund and its Advisor from obtaining information concerning foreign companies that is as frequent, extensive and reliable as the information concerning companies in the United States.

**Asset-Backed Securities Risk** 

Asset-backed securities include interests in pools of debt securities, commercial or consumer loans, or other receivables. The value of these securities depends on many factors, including changes in interest rates, the availability of information concerning the pool and its structure, the credit quality of the underlying assets, the market's perception of the servicer of the pool, and any credit enhancement provided. In addition, asset-backed securities have prepayment risks similar to mortgage-backed securities.

**Call Risk** 

Call risk is the possibility that an issuer may redeem a fixed income security before maturity (a call) at a price below its current market price. An increase in the likelihood of a call may reduce the security's price.

If a fixed income security is called, the Fund may have to reinvest the proceeds in other fixed income securities with lower interest rates, higher credit risks, or other less favorable characteristics.

**Class/Sector/Region Focus Risk** 

When the Fund invests more than 25% of its net assets in securities of issuers within a particular geographic region, industry or sector or asset class, such as real estate-related or commodities-related securities, it is subject to increased risk. Performance will generally depend on the performance of the particular region, industry or sector or asset class, which may differ in direction and degree from that of the overall stock market. In addition, financial, economic, business and political developments affecting the region, industry or sector or asset class may have a greater effect on the Fund than it would on the fund that did not focus on the region, industry or sector or asset class.

**Counterparty Risk** 

This is the risk that the guarantor of a fixed-income security, the counterparty to an OTC derivatives contract or a borrower of the Fund's securities will be unable or unwilling to make timely principal, interest or settlement payments, or otherwise honor its obligations.

**Credit Enhancement Risk** 

The securities in which the Fund invests may be subject to credit enhancement (for example, guarantees, letters of credit or bond insurance). Credit enhancement is designed to assure timely payment of the security; it does not protect the Fund against losses caused by declines in a security's value due to changes in market conditions. Securities subject to credit enhancement generally would be assigned a lower credit rating if the rating were based primarily on the credit quality of the issuer without regard to the credit enhancement. If the credit quality of the credit enhancement provider (for example, a bank or bond insurer) is downgraded, the rating on a security credit enhanced by such credit enhancement provider also may be downgraded.

A single bank, bond insurer or other enhancement provider may provide credit enhancement to more than one of the Fund's investments. Having multiple securities credit enhanced by the same enhancement provider will increase the adverse effects on the Fund that are likely to result from a downgrading of, or a default by, such an enhancement provider. Adverse developments in the banking or bond insurance industries also may negatively affect the Fund, as the Fund may invest its assets in securities credit enhanced by banks or by bond insurers without limit. Bond insurers that provide credit enhancement for large segments of the fixed income markets, particularly the municipal bond market, may be more susceptible to being downgraded or defaulting during recessions or similar periods of economic stress.

**Credit Risk** 

Credit risk is the possibility that an issuer may default on a security by failing to pay interest or principal when due. If an issuer defaults, the Fund will lose money.

Many fixed income securities receive credit ratings from NRSROs which assign ratings to securities by assessing the likelihood of issuer default. Lower credit ratings correspond to higher credit risk. If a security has not received a rating, the Fund must rely entirely upon the Advisor's credit assessment.

Fixed income securities generally compensate for greater credit risk by paying interest at a higher rate. The difference between the yield of a security and the yield of a U.S. Treasury security with a comparable maturity (the spread) measures the additional interest paid for risk. Spreads may increase generally in response to adverse economic or market conditions. A security's spread may also increase if the security's rating is lowered, or the security is perceived to have an increased credit risk. An increase in the spread will cause the price of the security to decline.

**Derivative Contracts and Hybrid Instruments Risk** 

The Fund's investments in derivatives can significantly increase the Fund's exposure to market risk or credit risk of the counterparty. Derivatives also involve the risk of mispricing or improper valuation and the risk that changes in the value of the derivative may not correlate perfectly with the relevant assets, rates and indices.

When a derivative or other instrument is used as a hedge against an offsetting position that the Fund also holds, any loss generated by that derivative or other instrument will be substantially offset by the gains on the hedged security, and vice versa. To the extent the Fund uses a derivative security or other instrument for purposes other than as a hedge, or, if the Fund hedges imperfectly, the Fund is directly exposed to the risks of that derivative or other instrument and the risk that any loss generated by that derivative or other instrument will not be offset by a gain.

Derivative contracts and hybrid instruments involve risks different from, or possibly greater than, risks associated with investing directly in securities and other traditional investments. Specific risk issues related to the use of such contracts and instruments include valuation and tax issues, increased potential for losses and/or costs to the Fund, and a potential reduction in gains to the Fund. Each of these issues is described in greater detail in the Prospectus. Derivative contracts and hybrid instruments may also involve other risks described in the Prospectus or this SAI, such as market, interest rate, credit, currency, liquidity and leverage risks.

**Digital Assets Futures Risk**

A fund that is indirectly exposed to risks of investing in digital assets through its investments in digital asset futures contracts, such as Bitcoin and/or Ether. In addition to the risks of futures contracts generally, the markets for digital asset futures contracts have additional unique risks. The markets for digital asset futures contracts may be less developed, less liquid and more volatile than more established futures markets. Digital assets such as Bitcoin and Ether are technological innovations with a limited history and, while the markets for Bitcoin and Ether futures contracts markets have grown substantially since they commenced trading, there can be no assurance that this volume and growth will continue.

Digital asset futures contracts may be subject to larger collateral requirements and have exposure limits imposed by brokers and exchanges. These limits may impact a fund's ability to achieve its desired exposure. As with other futures markets, during periods of high volatility or illiquidity, it may be difficult to execute a trade at a specific price when there is a relatively small volume of buy and sell orders in a market. A materially adverse development in one or more of the factors that influences the liquidity of the market for digital assets futures may cause the market to become illiquid, for short or long periods. In such markets, a Fund's subsidiary (through which such fund would purchase

digital asset futures contracts) may not be able to buy and sell digital asset futures contracts quickly (or at all) or at the desired price. Such market illiquidity may cause losses for the fund.

The price of digital asset futures contracts is based on the expected price of the respective digital asset on certain digital asset exchanges on the expiration date of the digital asset futures contracts. Digital asset futures prices reflect the price of the respective digital asset on certain digital asset exchanges only, and not cash markets. The liquidity of markets for digital asset futures depends on, among other things: the supply and demand for the digital asset; the adoption of the digital asset for commercial uses; the anticipated increase of investments in and investment products related to the digital asset by retail and institutional investors; speculative interest in the digital asset, futures on the digital asset and investment products related to the digital asset; regulatory or other restrictions on investors' ability to invest in digital asset futures; and the potential ability to hedge against the price of digital asset with the related digital asset futures (and vice versa).

**Emerging Markets Risk**

In addition to all of the risks of investing in foreign developed markets, emerging market securities involve risks attendant to less mature and stable governments and economies, such as lower trading volume, trading suspension, security price volatility, repatriation restrictions, government confiscation, inflation, deflation, currency devaluation and adverse government regulations of industries or markets. As a result of these risks, the prices of emerging market securities tend to be more volatile than the securities of issuers located in developed markets.

**Equity Securities Risk** 

Equity securities include common, preferred and convertible preferred stocks and securities the values of which are tied to the price of certain securities, such as rights, warrants and convertible debt securities. Common and preferred stocks represent equity ownership in a company. Stock markets are volatile, and the price of equity securities will fluctuate and can decline, based on changes in a company's financial condition and overall market and economic conditions, reducing the value of the Fund.

To the extent that the Fund invests in high quality or "blue chip" equity securities or securities of established companies with large market capitalizations (which generally have strong financial characteristics), it can be negatively impacted by poor overall market and economic conditions. Companies with large market capitalizations may also have less growth potential than smaller companies and may be able to react less quickly to changes in the marketplace.

The Fund may maintain substantial exposure to equities and generally do not attempt to time the market. Because of this exposure, the possibility that stock market prices in general will decline over short or extended periods subjects the Fund to unpredictable declines in the value of their investments, as well as periods of poor performance.

**ETCFs Risk**

Commodities are tangible assets such as oil, agriculture, livestock, industrial metals, and precious metals such as gold or silver. The values of ETCFs are highly dependent on the prices of the commodities in which they invest; however, most ETCFs utilize futures trading to implement their strategies, which may produce returns that differ from those that would result from owning the underlying commodity. The demand and supply of these commodities may fluctuate widely based on such factors as interest rates, investors' expectations with respect to the rate of inflation, currency exchange rates, the production and cost levels of producing countries and/or forward selling by such producers, global or regional political, economic, or financial events, purchases and sales by central banks, and trading activities by hedge funds and other commodity funds. ETCFs may use derivatives, such as futures, options and swaps, which exposes them to further risks, including counterparty risk (i.e., the risk that the institution on the other side of their trade will default). There may be times when the market price and NAV of an ETCF may vary significantly, and because the Fund buys and sells ETCFs at market price, it may pay more than NAV when buying an ETCF and receive less than NAV when selling an ETCF. Additionally, an active trading market for an ETCF's shares may not develop

or be maintained. The trading of an ETCF's shares may be halted if the listing exchange's officials deem such action appropriate, the shares are delisted from the exchange, or by the activation of market-wide "circuit breakers" (which are tied to large decreases in stock prices) that halt stock trading generally. Finally, the Fund incurs certain transaction costs in purchasing and selling ETCFs in the secondary market.

**Exchange-Traded Funds/Index-Based Securities Risk** 

An investment in an ETF or Index-based Security generally presents the same primary risks as an investment in a mutual fund that has the same investment objectives, strategies, and policies. The price of an ETF or Index-based Security can fluctuate up or down, and the Fund could lose money investing in an ETF or Index-based Security if the prices of the securities owned by the ETF or Index-based Security decrease. In addition, ETFs and Index-based Securities may be subject to the following risks that do not apply to conventional mutual funds: (i) the market price of an ETF's or Index-based Security's shares may trade above or below their NAV; (ii) an active trading market for an ETF's or Index-based Security's shares may not develop or be maintained; or (iii) trading of an ETF's or Index-based Security's shares may be halted if the listing exchange's officials deem such action appropriate, the shares are delisted from the exchange, or by the activation of market-wide "circuit breakers" (which are tied to large decreases in stock prices) that halt stock trading generally. See also "Ultrashort ETFs Risk" for further discussion of risks associated with investments in ETFs.

**Extension Risk**

Extension risk is the possibility that rising interest rates may cause prepayments on underlying obligations to occur at a slower than expected rate. This particular risk may effectively change a security which was considered short- or intermediate-term at the time of purchase into a long-term security. Long-term securities generally fluctuate more widely in response to changes in interest rates than short- or intermediate-term securities.

**Foreign Investment/Currency Risk** 

Compared with investing in the United States, investing in foreign markets involves a greater degree and variety of risk. Investors in international or foreign markets may face delayed settlements, currency controls and adverse economic developments, as well as higher overall transaction costs. In addition, fluctuations in the U.S. dollar's value versus other currencies may erode or reverse gains from investments denominated in foreign currencies or widen losses. Exchange rates for currencies fluctuate daily. Foreign governments may expropriate assets, impose capital or currency controls, impose punitive taxes, impose limits on ownership or nationalize a company or industry. Any of these actions could have a severe effect on security prices and impair the fund's ability to bring its capital or income back to the U.S. Exchange rate fluctuations also may impair an issuer's ability to repay U.S. dollar denominated debt, thereby increasing credit risk of such debt. Finally, the value of foreign securities may be affected by incomplete, less frequent or inaccurate financial information about their issuers, social upheavals or political actions ranging from tax code changes to governmental collapse. Foreign companies may also receive less coverage than U.S. companies by market analysts and the financial press. In addition, foreign countries may lack uniform accounting, auditing and financial reporting standards or regulatory requirements comparable to those applicable to U.S. companies. These risks are greater in emerging markets. The combination of currency risk and market risk tends to make securities traded in foreign markets more volatile than securities traded exclusively in the United States.

Foreign custodial services and other costs relating to investment in international securities markets are generally more expensive than in the United States. Such markets have settlement and clearance procedures that differ from those in the United States. In certain markets, particularly emerging markets, there have been times when settlements have been unable to keep pace with the volume of securities transactions, making it difficult to conduct such transactions. The inability of the Fund to make intended securities purchases due to settlement problems could cause the Fund to miss attractive investment opportunities. Inability to dispose of a portfolio security caused by settlement problems could result in losses to the Fund due to a subsequent decline in value of the portfolio security. In addition, security

settlement and clearance procedures in some emerging market countries may not fully protect the Fund against loss or theft of its assets.

Certain foreign companies may be subject to sanctions, embargoes, or other governmental actions that may impair or otherwise limit the ability to invest in, receive, hold or sell the securities of such companies. These factors may affect the value of investments in those companies. In addition, certain companies may operate in, or have dealings with, countries that the U.S. Government has identified as state sponsors of terrorism. As a result, such companies may be subject to specific constraints or regulations under U.S. law and, additionally, may be subject to negative investor perception, either of which could adversely affect such companies' performance.

**Government Intervention and Extreme Volatility Risk**

In the past, instability in the financial markets led the U.S. Government and other governments to take a number of unprecedented actions designed to support certain financial institutions and segments of the financial markets that experienced extreme volatility, and in some cases a lack of liquidity. Federal, state, and other governments, their regulatory agencies, or self-regulatory organizations could take actions that affect the regulation of the instruments in which the Fund invests, or the issuers of such instruments, in ways that are unforeseeable. Legislation or regulation may also change the way in which the Fund is regulated. Such legislation or regulation could limit or preclude the Fund's ability to achieve its investment objective.

Reduced liquidity in credit and fixed-income markets may adversely affect many issuers worldwide. Reduced liquidity may also result in less money being available to purchase raw materials, goods and services from emerging markets, which may, in turn, bring down the prices of these economic staples. It may also result in emerging market issuers having more difficulty obtaining financing, which may, in turn, cause a decline in their stock prices. If they arise, these issues may have an adverse effect on the Fund.

In the wake of the financial crises that began in 2008, the Federal Reserve System attempted to stabilize the U.S. economy and support the U.S. economic recovery by keeping the federal funds rate at a low level. A low interest rate environment may have an adverse impact on the Fund's ability to provide a positive yield to its shareholders and pay expenses out of Fund assets because of the low yields from the Fund's portfolio investments.

However, continued economic recovery and rising interest rates could cause the value of the Fund that invests in fixed income securities to decrease. Federal Reserve policy changes may expose fixed-income and related markets to heightened volatility and may reduce liquidity for certain Fund investments, which could cause the value of the Fund's investments and the Fund's share price to decline or create difficulties for the Fund in disposing of investments. The Fund that invests in derivatives tied to fixed-income markets may be more substantially exposed to these risks than the Fund that does not invest in derivatives. If rising interest rates cause the Fund to lose enough value, the Fund could also face increased shareholder redemptions, which could force the Fund to liquidate its investments at disadvantageous times or prices, thereby adversely affecting the Fund. To the extent the Fund experiences high redemptions because of these policy changes, the Fund may experience increased portfolio turnover, which will increase the costs that the Fund incurs and lower the Fund's performance.

**Hedging Risk**

When a derivative (a security whose value is based on that of another security or index) is used as a hedge against an opposite position that the fund holds, any loss on the derivative should be substantially offset by gains on the hedged investment, and vice versa. Although hedging can be an effective way to reduce the Fund's risk, it may not always be possible to perfectly offset one position with another. As a result, there is no assurance that the Fund's hedging transactions will be effective.

**Interest Rate Risk** 

Prices of fixed income securities rise and fall in response to changes in the interest rate paid by similar securities. Generally, when interest rates rise, prices of fixed income securities fall. However, market factors, such as the demand for particular fixed income securities, may cause the price of certain fixed income securities to fall while the prices of other securities rise or remain unchanged. Interest rate changes have a greater effect on the price of fixed income securities with longer durations. Duration measures the price sensitivity of a fixed income security to changes in interest rates. See also "Government Intervention and Extreme Volatility Risk."

Changing interest rates may have unpredictable effects on markets, may result in heightened market volatility and increased redemptions, and may detract from the Fund's performance to the extent the Fund is exposed to such interest rates and/or volatility. An increase in prevailing interest rates typically causes the value of existing debt securities to fall and often has a greater impact on longer-duration debt securities and higher quality debt securities. A general rise in interest rates may cause investors to move out of fixed income securities on a large scale, which could adversely affect the price and liquidity of fixed income securities and could also result in increased redemptions for the Fund. During periods when inflation rates are high or rising, the Fund may be subject to a greater risk of rising interest rates.

In a low or negative interest rate environment, debt securities may trade at, or be issued with, negative yields, which means the purchaser of the security may receive at maturity less than the total amount invested. In addition, in a negative interest rate environment, if a bank charges negative interest, instead of receiving interest on deposits, a depositor must pay the bank fees to keep money with the bank. To the extent the Fund holds a negatively-yielding debt security or has a bank deposit with a negative interest rate, the Fund would generate a negative return on that investment. Cash positions may also subject the Fund to increased counterparty risk to the Fund's bank. Debt market conditions are highly unpredictable and some parts of the market are subject to dislocations.

If low or negative interest rates become more prevalent in the market and/or if low or negative interest rates persist for a sustained period of time, some investors may seek to reallocate assets to other income-producing assets. This may cause the price of such higher yielding instruments to rise, could further reduce the value of instruments with a negative yield, and may limit the Fund's ability to locate fixed income instruments containing the desired risk/return profile. Changing interest rates, including, rates that fall below zero, could have unpredictable effects on the markets and may expose fixed income markets to heightened volatility, increased redemptions, and potential illiquidity.

The low interest rate environment observed in prior years was created in part by actions taken by the Board of Governors of the Federal Reserve System (the "Federal Reserve") to keep the federal funds rate at a low level, including expanding the scope of its repurchase agreement operations, and purchasing large quantities of securities issued or guaranteed by the U.S. government, its agencies or instrumentalities on the open market. In recent years, the Federal Reserve has "tapered" its quantitative easing programs and, in 2022, began implementing increases to the federal funds rate. The current outlook for interest rates is unclear. As interest rates rise, there is risk that rates across the financial system also may rise. Changes in government intervention may have adverse effects on the Fund's investments, volatility, and illiquidity in debt markets. Interest rate increases could cause the value of the Fund to decrease to the extent that it invests in fixed income securities. Federal Reserve policy changes may expose fixed-income and related markets to heightened volatility and may reduce liquidity for certain Fund investments, which could cause the value of the Fund's investments and share price to decline. If the Fund invests in derivatives tied to fixed-income markets, the Fund may be more substantially exposed to these risks than the fund that does not invest in derivatives. To the extent the Fund experiences high redemptions because of these policy changes, the Fund may experience increased portfolio turnover, which will increase the costs the Fund incurs and may lower its performance. Furthermore, if rising interest rates cause the Fund to lose enough value, the Fund could also face increased shareholder redemptions, which could force the Fund to liquidate investments at disadvantageous times or prices, thereby adversely affecting the Fund. In addition, decreases in fixed income dealer market-making capacity may persist in the future, potentially leading to decreased liquidity and increased volatility in the fixed income markets.

**Investment Style Risk** 

The particular type of investment on which the Fund focuses (such as small cap value stocks or large-cap growth stocks) may underperform other asset classes or the overall market. Individual market segments tend to go through cycles of performing better or worse than other types of securities. These periods may last as long as several years. Additionally, a particular market segment could fall out of favor with investors, causing the Fund that focuses on that market segment to underperform those funds that favor other kinds of securities.

**Leverage Risk** 

Leverage risk is created when an investment exposes the Fund to a level of risk that exceeds the amount invested. Changes in the value of such an investment magnify the Fund's risk of loss and potential for gain.

Some transactions may give rise to a form of leverage. These transactions may include, among others, derivatives and reverse repurchase agreements, and may expose the Fund to greater risk and increase its costs. When transactions create leverage, adverse changes in the value or level of the underlying asset, reference rate or index can result in a loss substantially greater than the amount invested in the derivatives or other instruments themselves. Certain transactions have the potential for unlimited loss, regardless of the size of the initial investments. Increases and decreases in the value of the securities held by the Fund, and therefore in the Fund's NAV, will be magnified when the Fund uses leverage because leverage tends to increase the Fund's exposure to market risk, interest rate risk or other risks by, in effect, increasing assets available for investment. The Advisor will monitor and manage leverage risk in compliance with its derivatives risk management program. For discussion of the impact of new government regulations on the Fund's approach to managing leverage risk, see "Regulatory Risk" above.

**Liquidity Risk** 

Liquidity risk refers to the possibility that the Fund may not be able to sell a security or close out a derivative contract when it wants to. If this happens, the Fund will be required to continue to hold the security or keep the position open, and the Fund could incur losses. OTC derivative contracts generally carry greater liquidity risk than exchange-traded contracts.

**Management Risk**

The Advisor's judgment about the attractiveness, value and potential appreciation of particular stocks or other securities in which the Fund invests may prove to be incorrect and there is no guarantee that the portfolio manager's judgment will produce the desired results.

**Market Capitalization Risk** 

Stocks fall into three broad market capitalization categories—large, medium and small. The Fund that invests primarily in one of these categories, it is subject to the risk that that category may be out of favor with investors due to current market conditions. If valuations of large capitalization companies appear to be greatly out of proportion to the valuations of small or medium capitalization companies, investors may migrate to the stocks of small and medium-sized companies. Larger, more established companies may also be unable to respond quickly to new competitive challenges such as changes in technology and consumer tastes. Many larger companies also may not be able to attain the high growth rate of successful smaller companies, especially during extended periods of economic expansion. Investing in medium and small capitalization companies may be subject to special risks associated with narrower product lines, more limited financial resources, fewer experienced managers, dependence on a few key employees, and a more limited trading market for their stocks, as compared with larger companies. In addition, securities of these companies are subject to the risk that, during certain periods, the liquidity of particular issuers or industries will shrink or disappear with little forewarning as a result of adverse economic or market conditions, or adverse investor perceptions, whether or not accurate. Securities of medium and smaller capitalization issuers may therefore be subject to greater price volatility and may decline more significantly in market downturns than securities of larger companies.

Smaller and medium capitalization issuers may also require substantial additional capital to support their operations, to finance expansion or to maintain their competitive position; and may have substantial borrowings or may otherwise have a weak financial condition and may be susceptible to bankruptcy. Transaction costs for these investments are often higher than those of larger capitalization companies. There is typically less publicly available information about small capitalization companies. Some small and medium capitalization companies also may be relatively new issuers, which carries additional risks. Investments in new issuers may be more speculative because such companies are relatively unseasoned. These companies will often be involved in the development or marketing of a new product with no established market, which could lead to significant losses.

**Market Risk** 

Market risk is the risk that the value of a security will move up or down, sometimes rapidly and unpredictably, in response to expected, real or perceived, economic, political or financial events in the U.S. or global markets. Market disruptions caused by local or regional events such as financial institution failures, changes in government, fiscal, regulatory and/or trade policy, war, acts of terrorism, the spread of infectious illness (including epidemics and pandemics) or other public health issues, trading and tariff arrangements, recessions or other events or adverse investor sentiment could have a significant impact on the Fund and its investments and could result in the Fund's shares trading at increased premiums or discounts to the Fund's NAV. Market risk may affect a single issuer, industry or sector of the economy or the market as a whole. Significant tariff disputes between trading partners can cause affected countries to retaliate, resulting in "trade wars" which can cause negative effects on the economies of such countries, as well as the global economy. Market risk is common to most investments, including stocks and bonds, and the mutual funds that invest in them. The risks of investing in bonds can vary significantly depending upon factors such as issuer and maturity. The bonds of some companies may be riskier than the stocks of others. During periods of market disruption, the Fund's exposure to risks described elsewhere in this summary will likely increase.

**Mortgage-Backed and Asset-Backed Securities Risk** 

Mortgage-backed securities represent participating interests in pools of residential mortgage loans, some of which are guaranteed by the U.S. Government, its agencies or instrumentalities. However, the guarantee of these types of securities relates to the principal and interest payments and not the market value of such securities. In addition, the guarantee only relates to the mortgage-backed securities held by the Fund and not the purchase of shares of the Fund.

Mortgage-backed securities do not have a fixed maturity and their expected maturities may vary when interest rates rise or fall. An increased rate of prepayments on the Fund's mortgage-backed securities will result in an unforeseen loss of interest income to the Fund as the Fund may be required to reinvest assets at a lower interest rate. A decreased rate of prepayments lengthens the expected maturity of a mortgage-backed security. The prices of mortgage-backed securities may decrease more than prices of other fixed-income securities when interest rates rise.

Collateralized Mortgage Obligations: The Fund may invest in mortgage-backed securities called collateralized mortgage obligations ("CMOs"). CMOs are issued in separate classes with different stated maturities. As the mortgage pool experiences prepayments, the pool pays off investors in classes with shorter maturities first. By investing in CMOs, the Fund may manage the prepayment risk of mortgage-backed securities. However, prepayments may cause the actual maturity of a CMO to be substantially shorter than its stated maturity.

Asset-Backed Securities: Asset-backed securities include interests in pools of debt securities, commercial or consumer loans, or other receivables. The value of these securities depends on many factors, including changes in interest rates, the availability of information concerning the pool and its structure, the credit quality of the underlying assets, the market's perception of the servicer of the pool, and any credit enhancement provided. In addition, asset-backed securities have prepayment risks similar to those of mortgage-backed securities.

**Non-Investment Grade Securities Risk**

The securities in which the Fund may invest may be rated below investment grade. Such securities are known as junk bonds. Junk bonds generally entail greater market, credit and liquidity risks than investment grade securities. For example, their prices are more volatile, economic downturns and financial setbacks may affect their prices more negatively, and their trading market may be more limited.

**Prepayment Risk** 

Many types of fixed income securities are subject to prepayment risk, including mortgage-backed securities. Prepayment risk occurs when the issuer of a security repays principal prior to the security's maturity. This is more likely to occur when interest rates fall. The prepayment of principal can adversely affect the return of the Fund since it may have to reinvest the proceeds in securities that pay a lower interest rate.

Generally, mortgage-backed securities compensate for the increased risk associated with prepayments by paying a higher yield. The additional interest paid for risk is measured by the difference between the yield of a mortgage-backed security and the yield of a U.S. Treasury security with a comparable maturity (the spread). An increase in the spread may cause the price of the mortgage-backed security to decline. Spreads generally increase in response to adverse economic or market conditions. Spreads may also increase if the security is perceived to have an increased prepayment risk or is perceived to have less market demand.

**Securities Linked to the Real Estate Market and REIT Risk** 

Investing in securities of companies in the real estate industry subjects the Fund to the risks associated with the direct ownership of real estate. These risks include:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• declines in the value of real estate;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• risks related to general and local economic conditions;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• possible lack of availability of mortgage funds;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• overbuilding;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• extended vacancies of properties;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• increased competition;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• increases in property taxes and operating expenses;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• change in zoning laws;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• losses due to costs resulting from the clean-up of environmental problems;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• liability to third parties for damages resulting from environmental problems;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• casualty or condemnation losses;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• limitations on rents;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• changes in neighborhood values and the appeal of properties to tenants; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• changes in interest rates.

Therefore, for the Fund investing a substantial amount of its assets in securities of companies in the real estate industry, the value of the Fund's shares may change at different rates compared to the value of shares of the Fund with investments in a variety of different industries.

Securities of companies in the real estate industry include REITs, including equity REITs and mortgage REITs. Equity REITs may be affected by changes in the value of the underlying property owned by the trusts, while mortgage REITs may be affected by the quality of any credit extended. Further, equity and mortgage REITs are dependent upon management skills and generally may not be diversified. Equity and mortgage REITs are also subject to heavy cash

flow dependency, defaults by borrowers and self-liquidations. In addition, equity and mortgage REITs could possibly fail to qualify for tax free pass-through of income under the Code, or to maintain their exemptions from registration under the 1940 Act. These factors may also adversely affect a borrower's or a lessee's ability to meet its obligations to the REIT. In the event of a default by a borrower or lessee, the REIT may experience delays in enforcing its rights as a mortgagee or lessor and may incur substantial costs associated with protecting its investments.

In addition, even the larger REITs in the industry tend to be small to medium-sized companies in relation to the equity markets as a whole. See "Market Capitalization Risk" for a discussion of the risks associated with investments in these companies.

**Security-Specific Risk**

Security-specific risk is the risk that the value of a particular security may or may not move in the same direction as the market as a whole. All investment funds, including the Fund, are subject to this type of risk.

**Ultrashort ETFs Risk** 

Ultrashort ETFs use investment techniques that may be considered aggressive, including the use of futures contracts, options on futures contracts, securities and indices, forward contracts, swap agreements and similar instruments. An Ultrashort ETF's investment in financial instruments may involve a small investment relative to the amount of investment exposure assumed and may result in losses exceeding the amounts invested. Such instruments, particularly when used to create leverage, may expose the Ultrashort ETF and consequently, the Fund, to potentially dramatic changes (losses or gains) in the value of the instruments and imperfect correlation between the value of the instruments and the security or index. The use of aggressive investment techniques also exposes the Fund to risks different from, or possibly greater than, the risks associated with investing directly in securities contained in an index underlying an Ultrashort ETF, including: (1) the risk that an instrument is mispriced; (2) credit or performance risk on the amount the Ultrashort ETF expects to receive from a counterparty; (3) the risk that securities prices, interest rates and currency markets will move adversely and the Ultrashort ETF will incur significant losses; (4) the risk that there may be imperfect correlation between the price of financial instruments and movements in the prices of the underlying securities; (5) the risk that the cost of holding a financial instrument might exceed its total return; and (6) the possible absence of a liquid secondary market for any particular instrument and/or possible exchange-imposed price fluctuation limits, which may make it difficult or impossible to adjust an Ultrashort ETF's position in a particular financial instrument when desired.

**Unrated Securities Risk** 

To the extent that the Fund invests in unrated securities, these securities may prove less liquid than rated securities as less information is available regarding the securities and a market may not exist for the securities at a given point in time.

**DISCLOSURE OF PORTFOLIO HOLDINGS**

The Board has adopted policies and procedures for the public and nonpublic disclosure of the Fund's portfolio securities.

As a general matter, no information concerning the portfolio holdings of the Fund may be disclosed to any unaffiliated third party except (1) to service providers that require such information in the course of performing their duties (for example, the Fund's custodian, administrator, investment advisor, sub-investment advisor, independent public accountants, attorneys, officers and trustees) and are subject to a duty of confidentiality, including a duty not to trade on non-public information, and (2) pursuant to certain exceptions that serve a legitimate business purpose. These exceptions may include: (1) disclosure of portfolio holdings only after such information has been publicly disclosed on the Fund's website, in marketing materials (provided the portfolio holdings disclosed in the materials are at least 15 days old) or through filings with the SEC as described below and (2) to third-party vendors, that (a) agree to not distribute the portfolio holdings or results of the analysis to third parties, other departments or persons who are likely

to use the information for purposes of purchasing or selling the Fund before the portfolio holdings or results of the analysis become publicly available; and (b) sign a written confidentiality agreement. The confidentiality agreement must provide, but is not limited to, that the recipient of the portfolio holdings information agrees to limit access to the portfolio holdings information to its employees who, on a need to know basis are (1) authorized to have access to the portfolio holdings information and (2) subject to confidentiality obligations, including duties not to trade on non-public information, no less restrictive than the confidentiality obligations contained in the confidentiality agreement.

The Fund's portfolio holdings are currently disclosed to the public through filings with the SEC. The Fund discloses its portfolio holdings by mailing the annual and semi-annual reports to shareholders approximately two months after the end of the fiscal year and semi-annual period. In addition, the Fund discloses its portfolio holdings on Form N-CSR and Form N-PORT two months after the end of each semi-annual period/quarter.

The Fund and the Advisor may not enter into any arrangement providing for the disclosure of non-public portfolio holding information for the receipt of compensation or benefit of any kind. Any exceptions to the policies and procedures may only be made by the consent of the Trust's chief compliance officer upon a determination that such disclosure serves a legitimate business purpose and is in the best interests of the Fund and will be reported to the Board at the Board's next regularly scheduled meeting.

**TRUSTEES AND OFFICERS**

The following tables provide information about the Board and the senior officers of the Trust. The Board is composed of three Trustees, two of whom are not "interested persons" of the Trust, as that term is defined in the 1940 Act (each an "Independent Trustee" and collectively, the "Independent Trustees"). Each Trustee oversees all portfolios of the Trust and serves for an indefinite term (subject to mandatory retirement provisions). Information about each Trustee is provided below and includes each person's: name, address, year of birth, present position(s) held with the Trust and principal occupations for at least the past five years. Unless otherwise noted, the business address of each person listed below is c/o Mutual Fund and Variable Insurance Trust, 36 North New York Avenue, Huntington, NY 11743. Unless otherwise noted, each officer is elected annually by the Board. Each Trustee and officer also serves in the same capacity for Strategy Shares, another open-end investment company that includes other series managed by the Advisor. The 'Fund Complex' includes series of registered investment companies advised by the Advisor, AlphaCentric Advisors LLC and Catalyst Capital Advisors LLC.

**<u>Independent Trustees Background</u>**

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| | | | | | |
|:---|:---|:---|:---|:---|:---|
| **Name, Address and Year of Birth** | **Position with<br> the Trust** | **Term of Office and<br> Length of Time Served\*** | **Principal Occupation(s)<br> During Past 5 Years** | **Number of<br> Portfolios in<br> Fund** <br> **Complex<br> Overseen by<br> Trustee** | **Other Directorships<br> Held During Past 5 Years** |

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| | | | | | |
|:---|:---|:---|:---|:---|:---|
| Tobias Caldwell<br> Year of Birth: 1967<br>| Chairman of the Board and Trustee | Since 2016 | Manager, Genovese Family Enterprises, LLC (and affiliates, family office) 1999-present, Managing Member, Bear Properties, LLC (real estate firm) (2006-present).<br>| [ ] | Lead Independent Trustee and Chair of Audit Committee, Mutual Fund Series Trust, since 2006; Chairman of the Board of Strategy Shares since 2016; Trustee of IDX Funds Trust (formerly, M3Sixty Funds Trust) since 2016; Chairman of the Board of AlphaCentric Prime Meridian Income Fund from 2018 to August 2023.<br>|
| Stephen P. Lachenauer<br> Year of Birth: 1967<br>| Trustee and Chair of the Audit, Risk and Compliance, and Investment Committees | Trustee and Chair of Audit and Risk and Compliance Committees since 2016; Chair of Investment Committee since November 2020 | Attorney, private practice, since 2010. | [ ] | Trustee and Chair of the Audit and Risk and Compliance Committees since 2016, and Chair of the Investment Committee since November 2020, Strategy Shares; Trustee and Chair of the Audit and Risk and Compliance Committees from 2018 to 2023, and Chair of the Investment Committee from 2020 to 2023, AlphaCentric Prime Meridian Income Fund; Trustee, Mutual Fund Series Trust since April 2022. |

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\* The term of office of each Trustee is indefinite.

**<u>Interested Trustee Background</u>**

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| | | | | | |
|:---|:---|:---|:---|:---|:---|
| **Name, Address and Year of Birth** | **Position with<br> the Trust** | **Term of Office and<br> Length of Time Served\*** | **Principal Occupation(s)<br> During Past 5 Years** | **Number of<br> Portfolios in<br> Fund** <br> **Complex<br> Overseen by<br> Trustee** | **Other Directorships<br> Held During Past 5 Years** |
| Donald McIntosh\*\*<br> Year of Birth: 1967<br>| Trustee | Since 2016 | Internal Audit Supervisor, Santander Bank, since 2021; Commercial Banking Business Control Officer, Santander Bank, 2017-2021.<br>| [ ] | Trustee, Strategy Shares, since 2016; Trustee, AlphaCentric Prime Meridian Income Fund from 2018 to 2023. |

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\* The term of office of each Trustee is indefinite.

\*\* Mr. McIntosh is considered an interested person of the Trust by reason of a financial connection between certain of his family members and management personnel of the Advisor.

**<u>Officers</u>\*** 

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| | | | |
|:---|:---|:---|:---|
| **Name, Address,<br> Year of Birth** | **Position(s) Held<br> with Registrant** | **Term and Length Served\*** | **Principal Occupation(s) <br> During Past 5 Years** |
| Michael Schoonover<br> 207 Calle del Parque, AM Tower <br> Floor 7, Suite 2 <br> San Juan, PR 00912-3242 <br>Year of Birth: 1983 | President | Since 2022 | Vice President of the Trust, 2018-2021; Chief Operating Officer ("COO"), Catalyst Capital Advisors LLC and Rational Advisors, Inc. since 2017; Portfolio Manager, Catalyst Capital Advisors LLC, 2013 – May 2021; President, MFund Distributors LLC since January 2020; COO, Catalyst International Advisors LLC, since 2019; COO, Insights Media LLC since 2019; COO, MFund Management LLC since 2019; COO, AlphaCentric Advisors LLC since January 2021. |
| Alex Merino<br> 207 Calle del Parque, AM Tower <br> Floor 7, Suite 2 <br> San Juan, PR 00912-3242 <br>Year of Birth: 1985 | Vice President | Since 2022 | Investment Operations Manager, MFund Management LLC since 2022; Investment Operations Analyst, MFund Management LLC, 2020--2021. |
| Thomas Hamel<br>Year of Birth: 1969<br>| Vice President | Since 2024 | Vice President, Mutual Fund Series Trust and Catalyst/Perini Strategic Income Fund, November 2024 – Present; Managing Director, Head of Investment Operations, Catalyst Capital Advisors LLC, AlphaCentric Advisors LLC and Rational Advisors, Inc, since January 2024; COO, Head of Investment Operations & Accounting, Captain Technologies, 2020–2024; Head of Client & Investment Operations, Aksia LLC, 2009—2020. |
| Erik Naviloff<br> 225 Pictoria Dr, Suite 450<br> Cincinnati, OH 45246<br> Year of Birth: 1968<br>| Treasurer | Since 2016 | Vice President—Fund Administration, Ultimus Fund Solutions, LLC since 2012. |
| Frederick J. Schmidt<br> Year of Birth: 1959 | Chief Compliance Officer | Since 2016 | Director, MFund Services LLC since 2015. |
| Jennifer A. Bailey<br> Year of Birth: 1968 | Secretary | Since 2016 | Director of Legal Services, MFund Services LLC since 2012. |

---

\* Officers do not receive any compensation from the Trust.

**Compensation of the Board** 

The Trustees are paid a quarterly retainer, and receive compensation for each meeting of the Trust's Risk and Compliance Committee, telephonic Board meeting, and special in-person Board meeting attended. Officers receive

no compensation from the Trust. The Chairman of the Board and the Chairmen of the Audit and Risk and Compliance Committees receive an additional fee per Fund per quarter. The Trust reimburses each of the Trustees for travel and other expenses incurred in connection with attendance at such meetings. The Trust has no retirement or pension plans.

The following table describes the compensation paid to the Trustees of the Trust during the fiscal year ended December 31, 2024.

---

| | | | |
|:---|:---|:---|:---|
| **Compensation Table** | **Compensation Table** | **Compensation Table** | **Compensation Table** |
| **Trustee** | **Mr. Caldwell** | **Mr. Lachenauer** | **Mr. McIntosh** |
| Aggregate Compensation from the Trust | $[ ] | $[ ] | $[ ] |
| Total Compensation from Fund and the Fund Complex | $[ ] | $[ ] | $[ ]<sup>1</sup> |

---

<sup>1</sup> Does not include compensation from Mutual Fund Series Trust and Catalyst/Perini Strategic Income Fund, of which he did not serve on the Board during the fiscal year ended December 31, 2024.

**Trustee Ownership of Shares in the Fund and in the Fund Complex as of December 31, 2024**

---

| | | | |
|:---|:---|:---|:---|
| | **Trustees** | **Trustees** | **Trustees** |
| **Dollar Range of Equity Securities** | **Mr. Caldwell** | **Mr. Lachenauer** | **Mr. McIntosh** |
| Rational Premium Income Fund | [ ] | None | None |
| Aggregate Dollar Range of Equity Securities in all Registered Investment Companies Overseen by Trustee in the Fund Complex | [ ] | [ ] | None |

---

As of December 31, 2024, none of the Trustees (including their immediate family members) owned beneficially or of record securities of the Advisor or Distributor (as defined below) or any entity directly or indirectly controlling, controlled by, or under common control with the Advisor or Distributor.

**Qualifications and Experience of the Trustees**

The following provides an overview of the considerations that led the Board to conclude that each individual serving as a Trustee of the Trust should so serve. Generally, no one factor was decisive in the original selection of an individual to join the Board. Among the factors the Board considered when concluding that an individual should serve on the Board were the following: (1) the individual's business and professional experience and accomplishments; (2) the individual's prior experience serving on the boards of public companies, and other complex enterprises and

organizations; and (3) how the individual's skills, experience, and attributes would contribute to an appropriate mix of relevant skills and experience on the Board.

In respect of each current Trustee, the individual's substantial professional accomplishments and prior experience, including, in some cases, in fields related to the operations of the Trust, were a significant factor in the determination that the individual should serve as a Trustee of the Trust.

In addition to the information set forth above, the following sets forth additional information about the qualifications and experience of each of the Trustees that lead to the conclusion that each Trustee should serve as Trustee of the Trust.

**Tobias Caldwell**

Mr. Caldwell is the manager of a real estate investment firm. Mr. Caldwell has served on the boards of mutual funds for over ten years, including as chair of the audit committee for over ten years. Mr. Caldwell also serves as a Trustee of other registered investment companies, including other registered investment companies within the Fund Complex. His experience in the real estate and investment industries provides the Board with an additional perspective and understanding of investment strategies used by advisors to the Fund.

**Stephen Lachenauer**

Mr. Lachenauer has been an attorney in private practice for over fifteen years, providing advice and counsel to small businesses and individuals on real estate, commercial contracts, general business and financial matters. Mr. Lachenauer's previous experience at large law firms and as an attorney at a large investment bank provides the Board with knowledge of financial and investment regulatory matters. Mr. Lachenauer also serves on the boards of other registered investment companies in the Fund Complex.

**Donald McIntosh**

Mr. McIntosh is an Internal Audit Supervisor for a large international financial services company, and he has many years of credit analysis and loan servicing experience. Mr. McIntosh's experience in evaluating companies' financial condition provides the Board with knowledge about investment strategies used by the advisors of the Fund. Mr. McIntosh also serves as a Trustee of other registered investment companies in the Fund Complex.

**Board Structure**

The Board is responsible for overseeing the management and operations of the Trust. The Board consists of three Trustees. The Chairperson of the Trust, Tobias Caldwell, is an Independent Trustee.

The Board holds four regular meetings each year to consider and address matters involving the Fund and the Trust. The Board also may hold special meetings to address matters arising between regular meetings. In addition, the Trustees regularly meet outside the presence of management and are advised by independent legal counsel. These meetings may take place in-person or by telephone.

The Board reviews its structure regularly and believes that its leadership structure, including having two Independent Trustees, coupled with an Independent Chairperson, is appropriate and in the best interests of the Trust, given its specific characteristics. The Board also believes its leadership structure facilitates the orderly and efficient flow of information to the Trustees from Trust management.

When considering potential nominees to fill vacancies on the Board, and as part of its annual self-evaluation, the Board reviews the mix of skills and other relevant experiences of the Trustees.

 **Committees of the Board**

The Board has three standing committees, the Audit Committee, the Risk and Compliance Committee, and the Investment Committee.

**Audit Committee.** The Audit Committee is currently comprised of Mr. Caldwell and Mr. Lachenauer. The primary function of the Audit Committee is to assist the full Board in fulfilling its oversight responsibilities to the shareholders and the investment community relating to fund accounting, reporting practices, and the quality and integrity of the financial reports. To satisfy these responsibilities, the Audit Committee reviews with the independent auditors the audit plan and results and recommendations following independent audits, reviews the performance of the independent auditors and recommends engagement or discharge of the auditors to the full Board, reviews the independence of the independent auditors, reviews the adequacy of the Fund's internal controls, and prepares and submits Committee meeting minutes and supporting documentation to the full Board. The Audit Committee met three times during the fiscal year ended December 31, 2024.

**Risk and Compliance Committee.** The Risk and Compliance Committee is comprised of each of the Trustees. The Risk and Compliance Committee is responsible for general oversight of the Trust's compliance with the legal and regulatory requirements of the Trust's operations. The Risk and Compliance Committee also serves as a means to provide feedback and guidance to the Trust's CCO and assists the Board in identifying and managing risks. The Risk and Compliance Committee met four times during the fiscal year ended December 31, 2024.

**Investment Committee.** The Investment Committee is comprised of each of the Trustees. The primary purpose of the Investment Committee is to oversee and guide the process by which the Board evaluates the investment performance of each of the Trust's series. The Investment Committee also considers and evaluates each investment advisor or sub-advisor (including unaffiliated sub-advisors) or portfolio manager framework for identifying, prioritizing, and managing investment risk. The Investment Committee met twice during the fiscal year ended December 31, 2024.

**Board Oversight of Risk**

An integral part of the Board's overall responsibility for overseeing the management and operations of the Trust is the Board's oversight of the risk management of the Trust's investment programs and business affairs. The Fund is subject to a number of risks, such as investment risk, valuation risk, risk of operational failure or lack of business continuity, and legal, compliance and regulatory risk. The Fund, the Advisor, and other service providers to the Trust have implemented various processes, procedures, and controls to identify risks to the Fund, to lessen the probability of their occurrence, and to mitigate any adverse effect should they occur. Different processes, procedures, and controls are employed with respect to different types of risks.

The Board exercises oversight of the risk management process through the Audit Committee and through oversight by the Board itself. The Board holds four regular meetings each year to consider and address matters involving the Fund.

In addition to adopting, and periodically reviewing, policies and procedures designed to address risks to the Fund, the Board requires management of the Advisor and the Trust, including the Trust's Chief Compliance Officer ("CCO"), to report to the Board and the Audit Committee on a variety of matters, including matters relating to risk management, at regular and special meetings. The Board and the Audit Committee receive regular reports from the Trust's independent public accountants on internal control and financial reporting matters. On at least a quarterly basis, the Independent Trustees meet with the Trust's CCO, including outside the presence of management, to discuss issues related to compliance. Furthermore, the Board receives a quarterly report from the Trust's CCO regarding the operation of the compliance policies and procedures of the Trust and its primary service providers. The Board monitors the Fund's investment policies and procedures, as well as valuation of the Fund's securities. The Board also receives quarterly reports from the Advisor on the investments and securities trading of the Fund, including their investment performance compared to appropriate benchmarks, as well as reports regarding the valuation of the Fund's securities.

The Board also receives reports from the Trust's primary service providers regarding their operations as they relate to the Fund.

The Board also considers liquidity risk management issues as part of its general oversight responsibilities and oversees the Fund's liquidity risk through, among other things, receiving periodic reporting and presentations by the Advisor that address liquidity matters. As required by Rule 22e-4 under the 1940 Act, the Board, including a majority of the Independent Trustees, has approved the Trust's Liquidity Risk Management ("LRM") Program, which is reasonably designed to assess and manage the Trust's liquidity risk, and has appointed the LRM Program Administrator that is responsible for administering the LRM Program. The Board also reviews, no less frequently than annually, a written report prepared by the LRM Program Administrator that addresses, among other items, the operation of the program and assesses its adequacy and effectiveness of implementation.

**PRINCIPAL HOLDERS OF SECURITIES**

Information is provided below regarding each person who owns of record or is known by the Trust to own beneficially 5% or more of any class of Shares of the Fund. As of [ ], 2025, the following shareholders owned of record, beneficially, or both, 5% or more of outstanding Shares:

 ***Rational Premium Income Fund***

**Class A Shares**

---

| | | |
|:---|:---|:---|
| **Name and Address<br> of Beneficial Owner** | **Number of Record<br> and Beneficial (Shares)** | **Percent (%) of Class** |
| [ ] <br>| &nbsp;&nbsp; [ ] | &nbsp;&nbsp; [ ] |

---

As of [ ], 2025, securities of Rational Premium Income Fund's Class A shares owned by all officers and Trustees, including beneficial ownership, as a group represented less than 1% of the outstanding Class A Shares of the Fund**.**

**Class C Shares**

---

| | | |
|:---|:---|:---|
| **Name and Address<br> of Beneficial Owner** | **Number of Record<br> and Beneficial (Shares)** | <br> **Percent (%) of Class** |
| [ ] <br>| [ ] | [ ] |

---

\*Shareholders owning 25% or more of outstanding Shares may be in control and be able to affect the outcome of certain matters presented for a vote of Shareholders.

As of [ ], 2025, securities of Rational Premium Income Fund's Class C shares owned by all officers and Trustees, including beneficial ownership, as a group represented less than 1% of the outstanding Class C Shares of the Fund**.**

**Institutional Shares**

---

| | | |
|:---|:---|:---|
| **Name and Address<br> of Beneficial Owner** | **Number of Record<br> and Beneficial (Shares)** | <br> **Percent (%) of Class** |
| [ ] <br>| [ ] | [ ] |

---

\*Shareholders owning 25% or more of outstanding Shares may be in control and be able to affect the outcome of certain matters presented for a vote of Shareholders.

As of [ ], 2025, securities of Rational Premium Income Fund's Institutional Shares owned by all officers and Trustees, including beneficial ownership, as a group represented less than 1% of the outstanding Institutional Shares of the Fund.

The shareholders listed above own shares for investment purposes and have no known intention of exercising any control of the Fund.

 **ADVISOR [AND FORMER SUB-ADVISOR]** 

Rational Advisors, Inc., has been retained by the Trust under a Management Agreement to act as the investment advisor to the Fund, subject to the authority of the Board. The Advisor (formerly a wholly owned subsidiary of Huntington National Bank and known as Huntington Asset Advisors, Inc.) was organized under the laws of Ohio in 2001. The Advisor oversees the day-to-day investment decisions for the Fund and continuously reviews, supervises and administers the Fund's investment programs. The address of the Advisor is 207 Calle del Parque, AM Tower, Floor 7, Suite 2, San Juan, PR 00912-3242. The Advisor is under common control with Catalyst Capital Advisors LLC, and AlphaCentric Advisors LLC, the investment advisors of other funds in the same group of investment companies also known as a "fund complex."

The Management Agreement provides that the Advisor will provide the Fund with investment advice and supervision and will continuously furnish an investment program for the Fund consistent with the investment objectives and policies of the Fund.

Under the terms of the Management Agreement, the Advisor manages the investment of the assets of the Fund in conformity with the investment objectives and policies of the Fund. It is the responsibility of the Advisor to make investment decisions for the Fund and to provide continuous supervision of the investment portfolio of the Fund.

For its services under the Management Agreement, the Advisor is paid a monthly management fee at the annual rates noted in the table below, based upon the average daily net assets of the Fund. The Advisor pays expenses incurred by it in connection with acting as advisor, other than costs (exclusive of acquired fund fees and expenses, brokerage costs, interest, taxes and dividends, and extraordinary expenses) of securities purchased for the Fund and other expenses paid by the Fund as detailed in the Management Agreement. The Advisor pays for all employees, office space and facilities required by it to provide services under the Management Agreement, except for specific items of expense referred to below.

---

| | |
|:---|:---|
| **<u>Fund</u>** | **Percentage of Average Daily Net Assets** |
| Rational Premium Income Fund | 1.75% |

---

Except for the expenses described above that have been assumed by the Advisor, all expenses incurred in administration of the Fund will be charged to the Fund, including investment management fees; fees and expenses of the Board; interest charges; taxes; brokerage commissions; expenses of valuing assets; expenses of continuing registration and qualification of the Fund and the shares under federal and state law; share issuance expenses; fees and disbursements of independent accountants and legal counsel; fees and expenses of custodians, including sub-custodians and securities depositories, transfer agents and shareholder account servicing organizations; expenses of preparing, printing and mailing prospectuses, reports, proxies, notices and statements sent to shareholders; expenses of shareholder meetings; costs of investing in underlying funds; and insurance premiums. The Fund is also liable for

nonrecurring expenses, including litigation to which it may from time to time be a party. Expenses incurred for the operation of the Fund, including the expenses of communications with its shareholders, are paid by the Fund.

The Advisor has entered into an expense limitation agreement with the Fund (the "Expense Agreement"), under which the Advisor has contractually agreed to waive all or a portion of its investment advisory fee (based on average daily net assets) and/or reimburse certain operating expenses of the Fund to the extent necessary in order to limit the Fund's total annual fund operating expenses (excluding (i) acquired fund fees and expenses; (ii) brokerage commissions and trading costs; (iii) interest (including borrowing costs and overdraft charges), (iv) taxes, (v) short sale dividends and interest expenses, and (vi) non-routine or extraordinary expenses, such as regulatory inquiry and litigation expenses, through April 30, 2027. Under certain conditions, the Advisor may recoup management fees that it waived or Fund expenses that it paid under this agreement for a period of three years from the date the fees were waived or expenses paid, if the recoupment can be achieved without causing the expense ratio of the share class (after the recoupment is taken into account) to exceed (i) the expense limit in effect at the time the fees were waived or expenses paid, or (ii) the expense limit in place at the time of the recoupment. The Expense Agreement shall terminate automatically upon the termination of the Management Agreement. The Advisor may elect in its discretion to terminate the Expense Agreement for any period following the term period of the Expense Agreement, but no such termination shall affect the obligation (including the amount of the obligation) of the Fund to repay amounts of waived fees or reimbursed expenses with respect to periods prior to such termination.

---

| | | | |
|:---|:---|:---|:---|
| **Fund** | **Expense Limitation <br> (as a percentage of average daily net assets)** | **Expense Limitation <br> (as a percentage of average daily net assets)** | **Expense Limitation <br> (as a percentage of average daily net assets)** |
| | **Class A** | **Class C** | **Institutional** |
| Rational Premium Income Fund | 2.24% | 2.99% | 1.99% |

---

The Management Agreement with the Fund continues in effect for an initial two-year term and then from year to year as long as its continuation is approved at least annually by the Board, including a majority of the Trustees who are not "interested persons," or by the shareholders of the Fund. The Management Agreement may be terminated at any time upon 60 days' written notice by the Fund or by a majority vote of the outstanding shares or 90 days' written notice by the Advisor and will terminate automatically upon assignment.

A discussion of the matters considered by the Board in connection with the renewal or approval, as applicable, of the Management Agreement with respect to the Fund is available in the Fund's Annual Report to Shareholders for the fiscal year ended December 31, 2024.

The Management Agreement provides that the Advisor shall not be liable for any error of judgment or mistake of law or for any loss suffered by the Trust in connection with the performance of its duties, except a loss resulting from a breach of fiduciary duty with respect to the receipt of compensation for services or a loss resulting from willful misfeasance, bad faith, or gross negligence on the part of the Advisor in the performance of its duties, or from reckless disregard of its duties and obligations thereunder.

From time to time, the Advisor may use a portion of its reasonable resources and profits to pay for certain administrative services provided by financial institutions for Shareholders of the Fund.

The table below provides information about the advisory fees paid to the Advisor for the Fund for each of the last three fiscal years ended December 31 and the six-month period ended June 30, 2025:

---

| | | | | |
|:---|:---|:---|:---|:---|
| **Fund** | **December 31, 2022** | **December 31, 2023** | **December 31, 2024** | **June 30, 2025** |

---

---

| | | | | | |
|:---|:---|:---|:---|:---|:---|
| Rational Premium Income Fund | Total Advisory Fee | $4829049 | $2949032 | $1730308 | $[ ] |
| Rational Premium Income Fund | Waiver/Reimbursement | $(91334) | $(133607) | $(145342) | $[ ] |
| Rational Premium Income Fund | Net Advisory Fee | $4737715 | $2815425 | $1584966 | $[ ] |

---

 **Former Investment Sub-Advisor** 

Prior to January 1, 2026, Warrington Asset Management LLC ("Warrington"), an investment advisory firm, the predecessor of which was founded in 2008, served as the sub-advisor to the Fund under a Sub-Advisory Agreement with the Advisor.

As compensation for the sub-advisory services it provided to the Fund, the Advisor paid Warrington 50% of the net advisory fees earned by the Advisor from the Fund. For this purpose, "net advisory fees" mean advisory fees collected from the Fund (net of fee waivers due to expense caps) less any revenue sharing and asset-based fees paid to broker-dealers or custodians with assets in the Fund. The fee paid to Warrington by the Advisor was paid from the Advisor's advisory fee and was not an additional cost to the Fund. For the fiscal years ended December 31, 2022, 2023, and 2024, Warrington received, $2,368,858, $1,407,713, and $792,483, respectively, in sub-advisory fees for its services to the Fund.]

**Portfolio Manager Information**

David Miller, co-Owner, Chief Investment Officer and Senior Portfolio Manager of the Advisor, and Charles Ashley, Portfolio Manager of the Advisor, serve as the portfolio managers of the Fund and have served in this capacity since December.Mr. Miller's compensation from the Advisor is based on a percentage of the overall profits of the Advisor. He is also entitled to a portion of the proceeds if the Advisor sells all or a portion of the Advisor's business. He also participates in a pension plan. Mr. Ashley's compensation from the Advisor is a fixed base salary and a discretionary bonus based on the discretion of the Advisor.

As of November 30, 2025, the number of, and total assets in all, registered investment companies (other than the Fund), other pooled investment vehicles, and other accounts overseen by the portfolio manager(s) of the Fund are shown below:

 **Rational Premium Income Fund**

**Total Other Accounts Managed**

---

| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
| **Portfolio Manager** | **Registered Investment Company Accounts** | **Assets<br> Managed<br> ($ millions)** | **Pooled<br> Investment<br> Vehicle<br> Accounts** | **Assets<br> Managed**<br> **($ millions)** | **Other<br> Accounts** | **Assets Managed**<br> **($ millions)** |
| David Miller | [ ] | [ ] | [ ] | [ ] | [ ] | [ ] |
| Charles Ashley | [ ] | [ ] | [ ] | [ ] | [ ] | [ ] |

---

**Other Accounts Managed Subject to Performance-Based Fees**

---

| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
| **Portfolio Manager** | **Registered Investment Company Accounts** | **Assets<br> Managed<br> ($ millions)** | **Pooled<br> Investment<br> Vehicle<br> Accounts** | **Assets<br> Managed<br> ($ millions)** | **Other<br> Accounts** | **Assets Managed<br> ($ millions)** |
| David Miller | [ ] | [ ] | [ ] | [ ] | [ ] | [ ] |

---

Charles Ashley <u> [ ] </u> <u> [ ] </u> <u> [ ] </u> <u> [ ] </u> <u> [ ] </u> <u> [ ] </u>

**Ownership of Fund Shares**

The table below shows the portfolio managers' fund ownership as of November 30, 2025:

---

| | |
|:---|:---|
| **Portfolio Manager** | **Dollar Range of Equity Securities** |
| David Miller Rational Fund | [ ] |
| Charles Ashley Rational Fund | [ ] |

---

**Potential Conflicts of Interest**

Actual or apparent conflicts of interest may arise when a portfolio manager has day-to-day management responsibilities with respect to more than one fund or other accounts. More specifically, portfolio managers who manage multiple funds are presented with the following potential conflicts:

The management of multiple accounts may result in a portfolio manager devoting unequal time and attention to the management of each account. The management of multiple funds and accounts also may give rise to potential conflicts of interest if the fund and accounts have different objectives, benchmarks, time horizons, and fees as the portfolio manager must allocate his time and investment ideas across multiple funds and accounts.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;· With respect to securities transactions
for the Fund, the Advisor determines which broker to use to execute each order, consistent with the duty to seek best execution of
the transaction. The portfolio manager may execute transactions for another fund or account that may adversely impact the value of securities
held by the Fund. Securities selected for funds or accounts other than the Fund may outperform the securities selected for the Fund.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;· The appearance of a conflict
of interest may arise where the Advisor has an incentive, such as a performance-based management fee. The management of personal accounts
may give rise to potential conflicts of interest; there is no assurance that the Fund's code of ethics will adequately address such
conflicts. One of the portfolio manager's numerous responsibilities is to assist in the sale of Fund shares. Because the
portfolio manager's compensation is indirectly linked to the sale of Fund shares, they may have an incentive to devote
time to marketing efforts designed to increase sales of Fund shares.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;· The Fund may invest in affiliated
funds advised by the Advisor. Conflicts of interest may arise in allocating
the Fund's assets among the affiliated funds. The Advisor will receive more revenue when it selects
an affiliated fund rather than an unaffiliated fund for inclusion in the Fund's portfolio. This conflict may provide an incentive
for the Advisor to invest Fund assets in affiliated funds that do not perform as well as
unaffiliated funds. The Advisor may have an incentive to allocate the Fund's assets to those affiliated funds for which the net
advisory fees payable to the Advisor are higher than the fees payable by other affiliated funds.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;· The Fund and Advisor have each adopted a code of ethics that, among other things, permits personal trading by employees
under conditions where it has been determined that such trades would not adversely impact

client accounts. Nevertheless, the management of personal accounts may give rise to potential conflicts of interest, and there is no assurance that these codes of ethics will adequately address such conflicts.

The Advisor and the Fund have adopted certain compliance procedures which are designed to address these types of conflicts. However, there is no guarantee that such procedures will detect each and every situation in which a conflict arises.

**CODE OF ETHICS**

Each of the Trust, the Advisor and the Distributor has adopted a code of ethics in accordance with Rule 17j-1(c) under the 1940 Act. The purpose of each code is to avoid potential conflicts of interest and to prevent fraud, deception or misconduct with respect to the Fund. Such codes of ethics permit personnel covered by the codes to invest in securities that may be purchased or held by Fund, subject to the restrictions of the codes. The codes are filed as exhibits to the Trust's registration statement.

**TRANSFER AGENT, FUND ACCOUNTING AGENT AND ADMINISTRATOR**

Ultimus Fund Solutions, LLC ("Ultimus"), which has its principal office at 225 Pictoria Dr, Suite 450<br> Cincinnati, OH 45246, serves as administrator, fund accountant and transfer agent for the Fund pursuant to the Fund Services Agreement (the "Agreement") with the Fund and subject to the supervision of the Board. Ultimus is primarily in the business of providing administrative, fund accounting and transfer agent services to retail and institutional mutual funds. Ultimus is an affiliate of the Distributor. Prior to December 10, 2021, Gemini Fund Services, LLC, an affiliate of Ultimus ("GFS"), served as the Fund's administrator, fund accountant and transfer agent pursuant to a substantially similar fund services agreement.

Ultimus may also provide persons to serve as officers of the Trust. Such officers may be directors, officers or employees of Ultimus or its affiliates.

The Agreement will remain in effect for an initial term of three years from the effective date for the Fund, and will continue in effect for successive twelve-month periods provided that such continuance is specifically approved at least annually by a majority of the Board. The Agreement is terminable by the Board or Ultimus on 90 days' written notice and may be assigned by either party, provided that the Trust may not assign this agreement without the prior written consent of Ultimus. The Agreement provides that Ultimus shall be without liability for any action reasonably taken or omitted pursuant to the Agreement.

Under the Agreement, Ultimus performs the following administrative services, among others: (1) monitor the performance of administrative and professional services rendered to the Trust by other service providers; (2) monitor Fund holdings and operations for post-trade compliance with the Fund's registration statement and applicable laws and rules; (3) prepare and coordinate the printing of semi-annual and annual financial statements; (4) prepare selected reports for performance and compliance analyses; (5) prepare materials for and attend and participate in meetings of the Board; (6) determine income and capital gains available for distribution and calculate distributions required to meet regulatory, income, and excise tax requirements; (7) review the Trust's federal, state, and local tax returns as prepared and signed by the Trust's independent public accountants; (8) prepare and maintain the Trust's operating expense budget to determine proper expense accruals to be charged to the Fund to calculate its daily net asset value; (9) assist in the preparation, filing, printing and, where applicable, dissemination of periodic reports to the Trustees, shareholders and the SEC, notices pursuant to Rule 24f-2, proxy materials and reports to the SEC on Forms N-CEN, N-CSR, N-PORT, and N-PX; (10) coordinate the Trust's audits and examinations by assisting the Fund's independent public accountants; (11) determine, in consultation with others, the jurisdictions in which shares of the Trust shall be registered or qualified for sale and facilitate such registration or qualification; (12) monitor sales of shares and ensure that the shares are properly and duly registered with the SEC; (13) monitor the calculation of performance data for the Fund; (14) prepare, or cause to be prepared, expense and financial reports; (15) prepare authorization for the payment of Trust expenses and pay, from Trust assets, all bills of the Trust; (16) provide information typically supplied in the investment company industry to companies that track or report price, performance or other information with respect

to investment companies; (17) upon request, assist the Fund in the evaluation and selection of other service providers, such as independent public accountants, printers, EDGAR providers and proxy solicitors (such parties may be affiliates of Ultimus); and (18) perform other services, recordkeeping and assistance relating to the affairs of the Trust as the Trust may, from time to time, reasonably request.

Ultimus also provides the Fund with accounting services, including: (i) daily computation of net asset value; (ii) maintenance of security ledgers and books and records as required by the 1940 Act; (iii) production of the Fund's listing of portfolio securities and general ledger reports; (iv) reconciliation of accounting records; (v) calculation of yield and total return for the Fund; (vi) maintaining certain books and records described in Rule 31a-1 under the 1940 Act, and reconciling account information and balances among the Fund's custodian and Advisor; and (vii) monitoring and evaluating daily income and expense accruals, and sales and redemptions of shares of the Fund.

Ultimus also acts as transfer, dividend disbursing, and shareholder servicing agent for the Fund pursuant to the Agreement. Under the agreement, Ultimus is responsible for administering and performing transfer agent functions, dividend distribution, shareholder administration, and maintaining necessary records in accordance with applicable rules and regulations.

For the services rendered to the Fund by Ultimus, the Fund pays Ultimus the greater of an annual minimum fee or an asset-based fee, which scales downward based upon net assets. The Fund also pays Ultimus for any reasonable out-of-pocket expenses or advances incurred by Ultimus in the performance of its duties under the Agreement.

The following table sets forth the amounts paid to GFS and Ultimus for administrative, accounting and transfer agent services for the last three fiscal years or periods ended December 31 and the six-month period ended June 30, 2025.

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| | | | | |
|:---|:---|:---|:---|:---|
| **Fund** | **December 31, 2022** | **December 31, 2023** | **December 31, 2024** | **June 30, 2025** |
| Rational Premium Income Fund | $157995 | $109680 | $83036 | $[ ] |

---

MFund Services LLC ("MFund") provides the Fund with various management and legal administrative services pursuant to a Management Services Agreement with the Fund. For these services, the Fund pays MFund an annual asset-based fee in accordance with the schedule set forth below applied at the Fund family level (i.e., all the Fund in the Trust advised by the Advisor):

0.10% of net assets up to $50 million;

0.07% of net assets from $50 million to $100 million;

0.05% of net assets from $100 million to $250 million;

0.04% of net assets from $250 million to $500 million;

0.03% of net assets from $500 million to $1 billion;

0.02% of net assets from $1 billion to $5 billion;

0.01% of assets from $5 billion and above

Prior to April 1, 2022, the Fund also paid MFund an annual fixed fee. In addition, the Fund reimburse MFund for any reasonable out-of-pocket expenses incurred in the performance of its duties under the Management Services Agreement. Jerry Szilagyi is the controlling member of MFund, the controlling member of the Advisor, Catalyst Capital Advisors LLC, and AlphaCentric Advisors LLC (each an investment advisor to certain series of the Trust and other affiliated investment companies).

For the last three fiscal years or periods ended December 31 and the six-month period ended June 30, 2025, the Fund paid MFund the following fees for its management services:

---

| | | | | |
|:---|:---|:---|:---|:---|
| **Fund** | **December 31, 2022** | **December 31, 2023** | **December 31, 2024** | **June 30, 2025** |
|  Rational Premium Income Fund | $96179 | $59717 | $36035 | $[ ] |

---

**COMPLIANCE SERVICES**

Pursuant to a Compliance Services Agreement, MFund provides chief compliance officer services to the Fund. For these services, the Fund pays MFund a monthly base fee plus an asset-based fee. In addition, the Fund reimburses MFund for any reasonable out-of-pocket expenses incurred in the performance of its duties under the Services Agreement.

The following table sets forth the amounts the Fund paid to MFund for compliance services for the last three fiscal years or periods ended December 31 and six-month period ended June 30, 2025.

---

| | | | | |
|:---|:---|:---|:---|:---|
| **Fund** | **December 31, 2022** | **December 31, 2023** | **December 31, 2024** | **June 30, 2025** |
| Rational Premium Income Fund | $19018 | $18437 | $14345 | $[ ] |

---

**CUSTODIAN**

Pursuant to a Custody Agreement with the Trust, U.S. Bank National Association (the "Custodian"), 1555 N. Rivercenter Drive, Suite 302, Milwaukee, WI 53212, serves as the custodian of the Fund. The Custodian has custody of all securities and cash of the Fund. The Custodian, among other things, attends to the collection of principal and income and payment for and collection of proceeds of securities bought and sold by the Fund.

**INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM**

The Fund's independent registered public accounting firm is [NAME AND ADDRESS]. Shareholders will receive annual financial statements, together with a report of independent accountants, and semiannual unaudited financial statements of the Fund. [NAME] will report on the Fund's annual financial statements and review certain regulatory reports. [NAME], an affiliate of [NAME] provides and performs other professional accounting, tax, and advisory services when engaged to do so by the Fund.

**COUNSEL**

Stradley Ronon Stevens & Young, LLP, 2005 Market Street, Suite 2600, Philadelphia, PA 19103-7018, serves as counsel for the Trust and the Independent Trustees.

**DISTRIBUTOR**

Northern Lights Distributors, LLC, located at 4221 North 203rd Street, Suite 100, Elkhorn, Nebraska 68022-3474 (the "Distributor"), serves as the principal underwriter and national distributor for the shares of the Fund pursuant to an Underwriting Agreement with the Trust (the "Underwriting Agreement"). The Distributor is registered as a broker-dealer under the Securities Exchange Act of 1934, as amended, and each state's securities laws and is a member of the Financial Industry Regulatory Authority (FINRA). The offering of the Fund's shares is continuous. The Underwriting Agreement provides that the Distributor, as agent in connection with the distribution of Fund shares, will use its reasonable efforts to facilitate the sale of the Fund's shares.

The Underwriting Agreement provides that, unless sooner terminated, it will continue in effect for two years initially and thereafter shall continue from year to year, subject to annual approval by (a) the Board or a vote of a majority of the outstanding shares of the Fund, and (b) by a majority of the Trustees who are not interested persons of the Trust or of the Distributor by vote cast in person at a meeting called for the purpose of voting on such approval.

The Underwriting Agreement may be terminated by the Fund at any time, without the payment of any penalty, by vote of a majority of the entire Board of the Trust or by vote of a majority of the outstanding shares of the Fund on 60 days'

written notice to the Distributor, or by the Distributor at any time, without the payment of any penalty, on 60 days' written notice to the Fund. The Underwriting Agreement will automatically terminate in the event of its assignment.

The Distributor received the following commissions and other compensation during the fiscal year ended December 31, 2024.

---

| | | | | |
|:---|:---|:---|:---|:---|
| | **Net Underwriting Discounts and Commissions** | **Compensation on Redemptions and Repurchases** | **Brokerage Commissions** | **Other Compensation** |
| &nbsp;&nbsp; Rational Premium Income Fund <br>Class A<br> Class C | $196<br> $12 | $0<br> $0 | $1021<br> $943 | $0<br> $0 |

---

The Distributor received the following commissions and other compensation during the six-month period ended June 30, 2025.

---

| | | | | |
|:---|:---|:---|:---|:---|
| | **Net Underwriting Discounts and Commissions** | **Compensation on Redemptions and Repurchases** | **Brokerage Commissions** | **Other Compensation** |
| &nbsp;&nbsp; Rational Premium Income Fund <br> Class A <br> Class C  | $[ ] <br> $[ ]  | $[ ] <br> $[ ]  | $[ ] <br> $[ ]  | $[ ] <br> $[ ]  |

---

**12b-1 Plans**

As a compensation-type plan, the Rule 12b-1 Plan (the "Plan") is designed to pay a financial intermediary (including the Distributor, the Advisor and their affiliates) for activities principally intended to result in the sale of Shares such as advertising and marketing of Shares (including printing and disseminating prospectuses and sales literature to prospective shareholders and financial intermediaries) and providing incentives to financial intermediaries to sell Shares. The Plan is also designed to cover the cost of administrative services performed in conjunction with the sale of Shares, including, but not limited to, shareholder services, recordkeeping services and educational services, as well as the costs of implementing and operating the Plan. In accordance with the Plan, the Distributor or the Fund may enter into agreements with financial intermediaries and dealers relating to distribution and/or marketing services with respect to the Class A, Class C, and Institutional shares of the Fund, as applicable. The Distributor or the Fund may also enter into Rule 12b-1 related agreements with financial institutions (including fiduciaries, custodians for public funds, and investment advisors) to provide distribution related and other services with respect to each class of shares. The Rule 12b-1 Plan may benefit the Fund in a number of ways. For example, it is anticipated that the Plan may help the Fund attract and retain assets, thus providing cash for orderly portfolio management and Share redemptions and possibly helping to stabilize or reduce other operating expenses.

In addition, the Plan is integral to the multiple class structure of the Fund, which promotes the sale of Shares by providing a range of options to investors. The Fund's service providers that receive asset-based fees also benefit from stable or increasing Fund assets.

Under the 12b-1 Plan, the Fund may compensate a financial intermediary more or less than its actual marketing and administrative expenses. In no event will the Fund pay for any expenses of a financial intermediary that exceed the maximum Rule 12b-1 Plan fee permitted by the Plan for the applicable class of shares of the Fund.

The fee paid to the Advisor and/or Distributor by the Fund is computed on an annualized basis reflecting the average daily net assets of the class. Class A Shares of the Fund pay a maximum distribution and service fee of 0.25% of the Fund's Class A Shares' average daily net assets. Class C Shares of the Fund pay a maximum distribution and service fee of 1.00% of the Fund's Class C Shares' average daily net assets. Of this amount, 0.75% represents distribution 12b-1 fees and 0.25% represents shareholder servicing fees.

The table below states the amounts paid by the Fund's Class A and Class C shares under the distribution plan for the fiscal year or period ended December 31, 2024. All amounts paid by the Fund were paid as commissions to broker dealers.

---

| | | |
|:---|:---|:---|
| | **Class A** | **Class C** |
| Rational Premium Income Fund | $15111 | $38484 |

---

The table below states the amounts paid by the Fund's Class A and Class C shares under the distribution plan for the six-month period ended June 30, 2025. All amounts paid by the Fund were paid as commissions to broker dealers.

---

| | | |
|:---|:---|:---|
| | **Class A** | **Class C** |
| Rational Premium Income Fund | $[ ] | $[ ] |

---

**SHAREHOLDER SERVICES**

With respect to Class A and Institutional Shares, the Fund may pay a shareholder servicing fee of up to 0.25% of its average daily net assets to financial intermediaries, including the Distributor, the Advisor and their affiliates for providing shareholder services and maintaining shareholder accounts. The financial intermediary may select others to perform these services for their customers and may pay them fees.

**ADDITIONAL PAYMENTS TO FINANCIAL INTERMEDIARIES**

The Fund may directly enter into agreements with "financial intermediaries" pursuant to which the Fund will pay the financial intermediary for services such as networking or sub-transfer agency, including the maintenance of "street name" or omnibus accounts and related sub-accounting, record-keeping and administrative services provided to such accounts. Payments made pursuant to such agreements are generally based on either: (1) a percentage of the average daily net assets of clients serviced by such financial intermediary, or (2) the number of accounts serviced by such financial intermediary. Any payments made pursuant to such agreements may be in addition to, rather than in lieu of, Rule 12b-1 or shareholder service fees the financial intermediary may also be receiving. From time to time, the Advisor or its affiliates may pay a portion of the fees for networking or sub-transfer agency at its or their own expense and out of its or their legitimate profits. These payments may be material to financial intermediaries relative to other compensation paid by the Fund and/or the Distributor, the Advisor and their affiliates. The payments described above may differ and may vary from amounts paid to the Fund's transfer agent or other service providers for providing similar services to other accounts. The financial intermediaries are not audited by the Fund, the Advisor or their service providers to determine whether such intermediaries are providing the services for which they are receiving such payments.

The Advisor or affiliates of the Advisor may also, at their own expense and out of their own legitimate profits, provide additional cash payments to financial intermediaries who sell shares of the Fund. These additional cash payments are payments over and above sales commissions or reallowances, distribution fees or servicing fees (including networking, administration and sub-transfer agency fees) payable to a financial intermediary which are disclosed elsewhere in the prospectus or this SAI. These additional cash payments are generally made to financial intermediaries that provide sub- accounting, sub-transfer agency, shareholder or administrative services or marketing support. Marketing support may include: (i) access to sales meetings or conferences, sales representatives and financial intermediary management representatives; (ii) inclusion of the Fund on a sales list, including a preferred or select sales list, or other sales programs to which financial intermediaries provide more marketing support than to other sales programs on which the Advisor or its affiliates may not need to make additional cash payments to be included; (iii) promotion of the sale of the Fund's shares in communications with a financial intermediary's customers, sales representatives or management representatives; and/or (iv) other specified services intended to assist in the distribution and marketing of the Fund's shares. These additional cash payments also may be made as an expense reimbursement in cases where the financial intermediary provides shareholder services to Fund shareholders. The Advisor and its affiliates may also pay cash compensation in the form of finders' fees or referral fees that vary depending on the dollar amount of shares sold.

The amount and value of additional cash payments vary for each financial intermediary. The availability of these additional cash payments, the varying fee structure within a particular additional cash payment arrangement and the basis for and manner in which a financial intermediary compensates its sales representatives may create a financial incentive for a particular financial intermediary and its sales representatives to recommend the Fund's shares over the shares of other mutual funds based, at least in part, on the level of compensation paid. A financial intermediary and its sales representatives may have similar financial incentives to recommend a particular class of the Fund's shares over other classes of the Fund's shares. You should consult with your financial adviser and review carefully any disclosure by the financial firm as to compensation received by your financial adviser.

Although the Fund may use financial firms that sell its shares to effect portfolio transactions for the Fund, the Fund and the Advisor will not consider the sale of Fund shares as a factor when choosing financial firms to effect those transactions.

**PROXY VOTING POLICY**

The Board has delegated responsibilities for decisions regarding proxy voting for securities held by the Fund to Rational.

Rational may further delegate such proxy voting to a third party proxy voting service provider. The proxy voting delegates will vote such proxies in accordance with their proxy policies and procedures. In some instances, the proxy voting delegates may be asked to cast a proxy vote that presents a conflict between its interests and the interests of the Fund's shareholders. In such a case, the Trust's policy requires that the proxy voting delegates abstain from making a voting decision and forward all necessary proxy voting material to the Trust to enable the Board to make a voting decision. When the Board is required to make a proxy voting decision, only the Trustees without a conflict of interest with regard to the security in question or the matter to be voted upon shall be permitted to participate in the decision of how the Fund's vote will be cast. Rational has developed a detailed proxy voting policy that has been approved by the Board. A copy of the proxy voting policies of Rational with authority to vote proxies are attached as appendices hereto.

Information on how the Fund voted proxies relating to portfolio securities is available without charge, upon request, by calling 1-800-253-0412 or on the SEC's Internet site at www.sec.gov. In addition, a copy of the Fund's proxy voting policies and procedures is also available by calling 1-800-253-0412 and will be sent within three business days of receipt of a request.

 **PORTFOLIO TURNOVER**

The portfolio turnover rate of the Fund is defined by the SEC as the ratio of the lesser of annual sales or purchases to the monthly average value of the portfolio, excluding from both the numerator and the denominator securities with maturities at the time of acquisition of one year or less. Portfolio turnover generally involves some expense to the Fund, including brokerage commissions or dealer mark-ups and other transactions costs on the sale of securities and reinvestment in other securities.

For the fiscal years or period ended December 31, 2023, and 2024, and the six-month period ended June 30, 2025, the portfolio turnover rates for the Fund were as follows:

---

| | | | |
|:---|:---|:---|:---|
| &nbsp;&nbsp;**Fund** | **December 31, 2023** | **December 31, 2024** | **June 30, 2025** |
|  Rational Premium Income Fund | 0% | 0% | [ ]% |

---

**PORTFOLIO TRANSACTIONS**

Purchases and sales of securities on a securities exchange are effected by brokers, and the Fund pay brokerage commissions for this service. In transactions on stock exchanges, these commissions are negotiated. In the over-the-counter market, securities (e.g., debt securities) are normally traded on a "net" basis with dealers acting as principal for their own accounts without a stated commission, although the price of the securities usually includes a profit to the dealer. In underwritten offerings, securities are purchased at a fixed price, which includes an amount of compensation to the underwriter, generally referred to as the underwriter's concession or discount.

The primary consideration in placing portfolio security transactions with broker-dealers for execution is to obtain and maintain the availability of execution at the most favorable prices and in the most effective manner possible. The Advisor attempts to achieve this result by selecting broker-dealers to execute portfolio transactions on behalf of the Fund on the basis of the broker-dealers' professional capability, the value and quality of their brokerage services and the level of their brokerage commissions.

Although commissions paid on every transaction will, in the judgment of the Advisor, be reasonable in relation to the value of the brokerage services provided, under the Management Agreement and as permitted by Section 28(e) of the Securities Exchange Act of 1934, the Advisor may cause the Fund to pay a commission to broker-dealers who provide brokerage and research services to the Advisor for effecting a securities transaction for the Fund. Such commission may exceed the amount other broker-dealers would have charged for the transaction if the Advisor determines in good faith that the greater commission is reasonable relative to the value of the brokerage and the research and investment information services provided by the executing broker-dealer viewed in terms of either a particular transaction or the Advisor's overall responsibilities to the Fund and to its other clients. Such research and investment information services may include advice as to the value of securities, the advisability of investing in, purchasing or selling securities, the availability of securities or of purchasers or sellers of securities, furnishing analyses and reports concerning issuers, industries, securities, economic factors and trends, portfolio strategy and the performance of accounts, and effecting securities transactions and performing functions incidental thereto such as clearance and settlement.

Research provided by brokers is used for the benefit of all of the clients of the Advisor and not solely or necessarily for the benefit of the Fund. The Advisor's investment management personnel attempt to evaluate the quality of research provided by brokers. Results of this effort are sometimes used by the Advisor as a consideration in the selection of brokers to execute portfolio transactions.

The investment advisory fees that the Fund pays to the Advisor will not be reduced as a consequence of the Advisor's receipt of brokerage and research services. To the extent that the Fund's portfolio transactions are used to obtain such

services, the brokerage commissions paid by the Fund will exceed those that might otherwise be paid, by an amount, that cannot be presently determined. Such services would be useful and of value to the Advisor in serving both the Fund and other clients and, conversely, such services obtained by the placement of brokerage business of other clients would be useful to the Advisor in carrying out its obligations to the Fund.

Certain investments may be appropriate for the Fund and also for other clients advised by the Advisor. Investment decisions for the Fund and other clients are made with a view to achieving their respective investment objectives and after consideration of such factors as their current holdings, availability of cash for investment and the size of their investments generally. To the extent possible, Fund transactions are traded separately from trades of other clients advised by the Advisor. Occasionally, a particular security may be bought or sold for one or more clients in different amounts. In such event, and to the extent permitted by applicable law and regulations, such transactions with respect to the Advisor will be allocated among the clients in a manner believed to be equitable to each. Ordinarily, such allocation will be made on the basis of the weighted average price of such transactions effected during a trading day.

No Fund has an obligation to deal with any broker or dealer in the execution of its transactions. However, the Fund may place substantially all or a significant portion of its transactions, both in stocks and options, with affiliates of the Advisor or the Distributor. As the level of securities trading increases, the level of commissions paid by the Fund to the affiliates increases. Such transactions will be executed at competitive commission rates through the affiliated broker's clearing broker. Because the affiliates receive compensation based on the number of transactions completed, there could be an incentive on the part of the Advisor to effect as many transactions as possible, thereby maximizing the commissions and premiums it receives. In connection with the execution of transactions, subject to its policy of best execution, the Fund may pay higher brokerage commissions to the affiliate than it might pay to unaffiliated broker-dealers.

In order for the affiliated broker to effect any portfolio transactions for the Fund on an exchange, the commissions, fees or other remuneration received by the affiliated broker must be reasonable and fair compared to the commissions, fees or other remuneration paid to other brokers in connection with comparable transactions involving similar securities being purchased or sold on an exchange during a comparable period of time. This standard would allow the affiliated broker to receive no more than the remuneration that would be expected to be received by an unaffiliated broker in a commensurate arms-length transaction.

Under the 1940 Act, persons affiliated with the Advisor or the Distributor, or persons affiliated with an affiliate of the Advisor or the Distributor, may be prohibited from dealing with the Fund as a principal in the purchase and sale of securities. Therefore, affiliates of the Advisor or Distributor will not serve as the Fund's dealer in connection with over-the-counter transactions. However, affiliates of the Advisor may serve as the Fund's broker in over-the-counter transactions conducted on an agency basis and will receive brokerage commissions in connection with such transactions. Such agency transactions will be executed through the clearing broker.

The Fund will not effect any brokerage transactions in its portfolio securities with an affiliate if such transactions would be unfair or unreasonable to Fund shareholders, and the commissions will be paid solely for the execution of trades and not for any other services. The Management Agreement provides that affiliates of the Advisor may receive brokerage commissions in connection with effecting such transactions for the Fund. In determining the commissions to be paid to an affiliated broker, it is the policy of the Trust that such commissions will, in the judgment of the Board, be (a) at least as favorable to the Fund as those which would be charged by other qualified brokers having comparable execution capability; and (b) at least as favorable to the Fund as commissions contemporaneously charged by the affiliated broker on comparable transactions for its most favored unaffiliated customers, except for customers of the affiliated broker considered by a majority of the Independent Trustees not to be comparable to the Fund. The Independent Trustees from time to time review, among other things, information relating to the commissions charged by an affiliated broker to the Fund and its other customers, and rates and other information concerning the commissions charged by other qualified brokers.

The Management Agreement does not provide for a reduction of the Distributor's or Advisor's fee by the amount of any profits earned by an affiliated broker from brokerage commissions generated from portfolio transactions of the Fund. While other brokerage business may be given from time to time to other firms, the affiliated brokers will not receive reciprocal brokerage business as a result of the brokerage business placed by the Fund with others.

The Fund will not acquire portfolio securities issued by, or enter into repurchase agreements or reverse repurchase agreements with, the Advisor, the Distributor or their affiliates.

The following brokerage commissions were paid by the Fund for the last three fiscal years or period ended December 31:

---

| | | |
|:---|:---|:---|
| | **December 31, 2023** | **December 31, 2024** |
| Rational Premium Income Fund | $1753486 | $1289656 |

---

During the fiscal year ended December 31, 2024, Rational Premium Income Fund experienced material differences in brokerage commissions due to a decline in the Fund's assets under management.

**PURCHASES AND REDEMPTIONS OF SHARES**

Fund shares may be purchased from investment dealers who have sales agreements with the Fund's Distributor or from the Distributor directly. As described in the Prospectus, the Fund provides you with alternative ways of purchasing Fund shares based upon your individual investment needs and preferences by offering multiple classes of shares. Additional information about sales charges (loads) for the purchase of Class A and Class C shares of the Fund is below.

Shares may be purchased at the public offering price through any securities dealer having a sales agreement with the Distributor. Shares may also be purchased through banks and certain other financial institutions that have agency agreements with the Distributor. These financial institutions will receive transaction fees that are the same as the commissions to dealers and may charge their customers service fees relating to investments in the Fund. Purchase requests should be addressed to the dealer or agent from which the Prospectus was received which has a sales agreement with the Distributor. Such dealer or agent may place a telephone order with the Distributor for the purchase of Fund shares. It is a dealer's or broker's responsibility to promptly forward payment and registration instructions (or completed applications) to the Transfer Agent for shares being purchased in order for investors to receive the next determined net asset value (or public offering price).

Reference should be made to the wire order to ensure proper settlement of the trade. Payment for redemptions of shares purchased by telephone will typically be processed within three business days. Payment must be received within seven days of the order or the trade may be canceled, and the dealer or broker placing the trade will be liable for any losses.

**SALES CHARGE WAIVERS AND REDUCTIONS AVAILABLE THROUGH CERTAIN FINANCIAL INTERMEDIARIES**

The availability of certain sales charge waivers and discounts may depend on whether you purchase your shares directly from the Fund or through a financial intermediary. Intermediaries may impose different sales charges other than those listed below for Class A and Class C shares and may have different policies and procedures regarding the availability of sales load and waivers or reductions. Such intermediary-specific sales charge variations are described in Appendix A to the Prospectus entitled "Intermediary-Specific Sales Charge Reductions and Waivers."

In all instances, it is the shareholder's responsibility to notify the Fund or the shareholder's financial intermediary at the time of purchase of any relationship or other facts qualifying the shareholder for sales charge reductions or waivers. For reductions and waivers not available through a particular intermediary, shareholders will have to purchase Fund shares directly from the Fund or through another intermediary to receive these reductions or waivers.

**Class A Shares** 

You may purchase Class A shares at a public offering price equal to the applicable net asset value per share plus an up-front sales charge imposed at the time of purchase as set forth in the Prospectus.

**18f-1 Election**

The Trust has elected to be governed by Rule 18f-1 under the 1940 Act pursuant to which the Trust is obligated during any 90-day period to redeem shares for any one shareholder of record solely in cash up to the lesser of $250,000 or 1% of the NAV of the Fund at the beginning of such period. The Trust has made this election to permit certain funds of the Trust to deliver, in lieu of cash, readily marketable securities from its portfolio should a redemption exceed such limitations. The securities delivered will be selected at the sole discretion of such Fund, will not necessarily be representative of the entire portfolio and may be securities which the Fund would otherwise sell. The redeeming shareholder will usually incur brokerage costs in converting the securities to cash. The method of valuing securities used to make the redemptions in kind will be the same as the method of valuing portfolio securities and such valuation will be made as of the same time the redemption price is determined. However, the Board has determined that, until otherwise approved by the Board, all redemptions in the Fund be made in cash only. If the Board determines to allow the Fund to redeem in kind in the future, the Fund will provide shareholders with notice of such change to the redemption policy.

**WAIVERS AND REDUCTIONS OF UP-FRONT SALES CHARGE ON CLASS A SHARES**

**Class A Shares**

**Letters of Intent**

An investor may qualify for a reduced sales charge on Class A shares immediately by stating his or her intention to invest in Class A shares of the Fund, during a 13-month period, an amount that would qualify for a reduced sales charge shown in the Prospectus under "How to Buy Shares — Class A Shares" and by signing a non-binding Letter of Intent, which may be signed at any time within 90 days after the first investment to be included under the Letter of Intent. After signing the Letter of Intent, each investment in Class A shares made by an investor will be entitled to the sales charge applicable to the total investment indicated in the Letter of Intent. If an investor does not complete the purchases under the Letter of Intent within the 13-month period, the sales charge will be adjusted upward, corresponding to the amount actually purchased. When an investor signs a Letter of Intent, Class A shares of the Fund with a value of up to 5% of the amount specified in the Letter of Intent will be restricted. If the total purchases of Class A shares made by an investor under the Letter of Intent, less redemptions, prior to the expiration of the 13-month period equals or exceeds the amount specified in the Letter of Intent, the restriction on the shares will be removed. In addition, if the total purchases of Class A shares exceed the amount specified and qualify for a further quantity discount, the Distributor will make a retroactive price adjustment and will apply the adjustment to purchase additional Class A shares at the then current applicable offering price. If an investor does not complete purchases under a Letter of Intent, the sales charge is adjusted upward, and, if after written notice to the investor, he or she does not pay the increased sales charge, sufficient Class A restricted shares will be redeemed at the current net asset value to pay such charge.

**Rights of Accumulation** 

A right of accumulation ("ROA") permits an investor to aggregate shares (of any class) owned by the investor, his spouse, children and grandchildren under 21 (cumulatively, the "Investor") in the Fund to reach a breakpoint discount. This includes accounts held with other financial institutions and accounts established for a single trust estate or single fiduciary account, including a qualified retirement plan such as an IRA, 401(k) or 403(b) plan (some restrictions may apply). The value of shares eligible for a cumulative quantity discount equals the cumulative cost of the shares purchased (not including reinvested dividends) or the current account market value; whichever is greater. The current market value of the shares is determined by multiplying the number of shares by the previous day's NAV.

To qualify for a ROA on a purchase of Class A shares through a broker-dealer, when each purchase is made, the individual investor or the broker-dealer must provide the respective Fund with sufficient information to verify that the purchase qualifies for the discount.

**Investments of $1 Million or More.**

With respect to Class A shares, if you invest $1 million or more, either as a lump sum or through our rights of accumulation quantity discount or letter of intent programs, you can buy Class A shares without an initial sales charge. However, you may be subject to a 1% contingent deferred sales charge ("CDSC") on shares redeemed within two years of purchase (excluding shares purchased with reinvested dividends and/or distributions).

**Waivers of Up-Front Sales Charge on Class A Shares**

The Prospectus describes the classes of persons that may purchase shares without an up-front sales charge. The elimination of the up-front sales charge for purchases by certain classes of persons is provided because of anticipated economies of scale and sales related efforts.

To qualify for a waiver of the up-front sales charge on a purchase of Class A shares through a broker-dealer, when each purchase is made, the individual investor or the broker-dealer must provide the Fund with sufficient information to verify that the purchase qualifies for the discount.

The Fund makes available, free of charge, more information about sales charge reductions and waivers through the prospectus or through your financial advisor.

**WAIVERS OF DEFERRED SALES CHARGE ON CLASS C SHARES**

Certain intermediaries may provide for sales charge discounts or waivers, including with respect to the CDSC assessed on certain sales of Class C shares, which are described in Appendix A to the Prospectus entitled "Intermediary-Specific Charge Reductions and Waivers."

Class C Shares are sold without an initial front-end sales charge, but a deferred sales charge of 1.00% applies, however, if Class C Shares are sold within 12 months of purchase. The deferred sales charge on Class C Shares may be waived for:

· Certain post-retirement withdrawals from an IRA or other
retirement plan if you are over 70<sup>1</sup>/<sub>2</sub>;

· Redemptions by certain eligible 401(a) and 401(k) plans
and certain retirement plan rollovers;

· Redemptions where your dealer of record notifies the Distributor,
prior to the time of investment, that the dealer waives the 1.00% advance payment otherwise payable to such dealer;

· Withdrawals resulting from shareholder death or disability,
provided that the redemption is requested within one year of death or disability; and

· Withdrawals through the Systematic Withdrawal Plan.

**FRONT-END SALES CHARGE REALLOWANCES**

The Distributor receives a front-end sales charge on certain Share sales. The Distributor generally pays a portion of this charge to eligible financial intermediaries for sales of Fund shares and/or administrative services. The Distributor retains any portion not paid to a financial intermediary, and can make this available for marketing and sales-related activities and expenses, including those of the Advisor and its affiliates.

**SHAREHOLDER RIGHTS**

The Trust is an open-end management investment company, whose Declaration of Trust permits the Trust to offer separate series of Shares of beneficial interest, representing interests in separate portfolios of securities. The Shares in any one portfolio may be offered in two or more separate classes. As of the date of this SAI, the Trustees have established four classes of Shares, known as Class A Shares, Class C Shares, Institutional Shares, and Class T shares. Class T shares are not currently offered. Each class of shares of the Fund are fully transferable. Each class is entitled to dividends from the respective class assets of the Fund as declared by the Trustees, and, if the Trust (or the Fund) were liquidated, the shareholders of each class would receive the net assets of the Fund attributable to each respective class.

All shareholders are entitled to one vote for each Share held on the record date for any action requiring a vote by the shareholders and a proportionate fractional vote for each fractional Share held. Shareholders of the Trust will vote in the aggregate and not by Fund or class except (i) as otherwise expressly required by law or when the Trustees determine that the matter to be voted upon affects only the interests of the shareholders of the Fund or class, or (ii) only holders of Class A Shares, Class C Shares and Institutional Shares will be entitled to vote on matters submitted to shareholder vote with respect to the Rule 12b-1 Plan applicable to such class or classes.

The rights of shareholders cannot be modified without a majority vote.

The Trust is not required to hold annual meetings of shareholders for the purpose of electing Trustees except that: (i) the Trust is required to hold a shareholder meeting for the election of Trustees at such time as less than a majority of the Trustees holding office have been elected by shareholders and (ii) if, as a result of a vacancy on the Board, less than two-thirds of the Trustees holding office have been elected by the shareholders, that vacancy may only be filled by a vote of the shareholders. In addition, a Trustee may be removed from office by a written consent signed by the holders of Shares representing two-thirds of the outstanding Shares of the Trust at a meeting duly called for the purpose, which meeting must be held upon written request of not less than 10% of the outstanding Shares of the Trust. Upon written request by the holders of Shares representing 1% of the outstanding Shares of the Trust stating that such shareholders wish to communicate with the other shareholders for the purpose of obtaining the signatures necessary to demand a meeting to consider removal of a Trustee, the Trust will provide a list of shareholders or disseminate appropriate materials (at the expense of the requesting shareholders). Except as set forth above, a Trustee may continue to hold office and may appoint successor Trustees.

The Declaration of Trust provides a process for the bringing of derivative actions by shareholders for claims beyond the process otherwise required by law. This derivative actions process is intended to permit legitimate inquiries and claims while avoiding the time, expense, distraction, and other harm that can be caused to the Fund or its shareholders as a result of spurious shareholder demands and derivative actions. Prior to bringing a derivative action, a pre-suit demand by the complaining shareholder must first be made on the Board, unless such action is excused because a majority of the members of the Board have a material personal financial interest in the action at issue. Following receipt of the demand, the Trustees must be afforded a reasonable amount of time to investigate and consider the demand.

Under the Declaration of Trust, the Trustees have the power to liquidate any series of the Trust without shareholder approval. While the Trustees have no present intent to exercise this power, they may do so if a series fails to reach a viable size within a reasonable amount of time or for such other reasons as may be determined by the Board.

The rights of shareholders cannot be modified without a majority vote of the shareholders.

Shareholder inquiries regarding the Fund should be directed to the Trust, c/o Ultimus Fund Solutions, LLC, P.O. Box 46707, Cincinnati, OH 45246.

**ADDITIONAL INFORMATION ON PURCHASES, EXCHANGES AND REDEMPTIONS**

Class A and Class C Shares may be purchased, exchanged for the same class of another fund within the Rational family of funds, or redeemed by contacting the Trust or your investment professional. Class A and Class C Shares may also be offered through other financial intermediaries.

Institutional Shares may be purchased only through fiduciary, advisory, agency and other similar accounts maintained by or on behalf of Rational or its affiliates or correspondent banks, as well as similar customers of third-party financial institutions. Individuals who receive Institutional Shares as a result of a Trust distribution or similar transaction or by operation of law will be permitted to retain such Shares, but may not purchase additional Institutional Shares, except by means of the reinvestment of dividends or distributions. Exchanges of Institutional Shares, if permitted by the account agreement, as well as redemptions of Institutional Shares, are made by contacting the Trust.

Telephone purchase, exchange or redemption requests may be recorded and will be binding upon an investor. Use of the telephone for exchanges or redemptions involves the possible risk of loss, since anyone providing the required information may be able to use the service without the shareholder's permission. If reasonable procedures are not followed by the Trust, it may be liable for losses due to unauthorized or fraudulent telephone instructions.

In times of extreme economic or market conditions, shareholders may have difficulty making redemptions or exchanges by telephone. If a shareholder cannot make contact by telephone, redemption or exchange requests should be made in writing and sent by overnight mail to the Trust.

In connection with certain redemption or exchange requests, a shareholder may be required to obtain a signature guarantee for authentication purposes. Only New Technology Medallion imprints will be accepted as signature guarantees.

**Other Purchase Information** 

Purchases of all classes of Shares are made at NAV, plus (for Class A Shares only) any applicable sales charge. All purchases are subject to minimum purchase requirements, but these requirements may be waived by the Distributor. Payment for Class A Shares and Class C Shares may not be by third party check, and any checks drawn from a bank located outside the U.S. will result in a delay in processing until the check has cleared.

If at any time the right to purchase Shares is suspended, although no new purchases may be made, in some circumstances existing shareholders may be permitted to purchase additional Shares and have dividends reinvested.

 *Payment in Kind.* In addition to payment by check, Shares of the Fund may be purchased by customers of the Advisor in exchange for securities held by an investor which are acceptable to that Fund. Investors interested in exchanging securities must first telephone the Fund at 800-253-0412 for instructions regarding submission of a written description of the securities the investor wishes to exchange. Within five business days of the receipt of the written description, the Fund will advise the investor by telephone whether the securities to be exchanged are acceptable to the Fund whose Shares the investor desires to purchase and will instruct the investor regarding delivery of the securities. There is no charge for this review. Securities which have been accepted by the Fund must be delivered within five days following acceptance.

Securities accepted by the Fund are valued in the manner and on the days described in the section entitled "Determination of Net Asset Value" as of 4:00 p.m. (Eastern Time).

The value of the securities to be exchanged and of the Shares of the Fund may be higher or lower on the day Fund Shares are offered than on the date of receipt by the Fund of the written description of the securities to be exchanged. The basis of the exchange of such securities for Shares of the Fund will depend on the value of the securities and the NAV of Fund Shares next determined following acceptance on the day Fund Shares are offered. Securities to be exchanged must be accompanied by a transmittal form which is available from the Fund.

A gain or loss for federal income tax purposes may be realized by the investor upon the securities exchange depending upon the cost basis of the securities tendered. All interest, dividends, subscription or other rights with respect to accepted securities which go "ex" (the interval between the announcement and the payments of the next dividend or right) after the time of valuation become the property of the Fund and must be delivered to the Fund by the investor forthwith upon receipt from the issuer. Further, the investor must represent and agree that all securities offered to the Fund are not subject to any restrictions upon their sale by the Fund under the 1933 Act, or otherwise.

*Sales Charge Reductions/Waivers (Class A Shares)*. Class A Shares may be purchased without an initial sales charge by any investor who buys Class A Shares through an investment professional that does not accept a sales commission from the Fund's Distributor. Investment professionals wishing to offer this sales charge waiver should call the Trust. Also, sales charges applicable to purchases of Class A Shares may be reduced for certain investors or groups of investors who make larger investments. Investors wishing to take advantage of these sales charge reductions should call the Trust.

*Reinstatement Privilege.* Every shareholder has a one-time right, within 60 days of redeeming Class A shares, to reinvest the redemption proceeds at the next-determined NAV in Class A Shares without any sales charge. The investor must notify the Trust in writing of the reinvestment by the shareholder in order to eliminate a sales charge.

If the shareholder redeems Class A Shares and utilizes the reinstatement privilege, there may be tax consequences.

**Other Exchange Information** 

Exchanges may only be made between funds having identical shareholder registrations. For any other exchanges you must obtain a New Technology Medallion Signature Guarantee.

Unless otherwise specified in writing, the existing registration and reinvestment options relating to the Fund being exchanged will be used for any new fund accounts required to be opened in the exchange.

Exchanges will not be available for Shares purchased by check until the check has cleared.

**Other Redemption Information** 

Redemptions of all classes of Shares are made at NAV, less any applicable contingent deferred sales charge ("CDSC"). If you make exchanges of your Class C Shares among the Fund, the holding period for purposes of determining the applicable CDSC will be determined based on the purchase date of your original Shares.

If a shareholder wishes to wire redemption proceeds to a bank other than the one previously designated, redemption may be delayed by as much as seven days. To change the name of the bank account to which redemption proceeds will be wired, a shareholder should send a written request (and, if necessary, with a New Technology Medallion Signature Guarantee) to the Trust, P.O. Box 6110, Indianapolis, IN 46206-6110.

Proceeds from the redemption of Shares purchased by check will not be available until the check has cleared.

 *Redemption in kind.* Although the Fund intend to pay Share redemptions in cash, they reserve the right, as described below, to pay the redemption price in whole or in part by a distribution of the Fund's portfolio securities.

Because the Fund has elected to be governed by Rule 18f-1 under the 1940 Act, the Fund is obligated to pay Share redemptions to any one shareholder in cash only up to the lesser of $250,000 or 1% of the net assets represented by such Share class during any 90-day period.

Any Share redemption payment greater than this amount will also be in cash unless the Fund determines that payment should be in kind. In such a case, the Fund will pay all or a portion of the remainder of the redemption in portfolio securities, valued in the same way as the Fund determines its NAV. The portfolio securities will be selected in a manner that the Fund's Trustees deem fair and equitable and, to the extent available, such securities will be readily marketable.

Redemption in kind is not as liquid as a cash redemption. If redemption is made in kind, shareholders receiving the portfolio securities and selling them before their maturity could receive less than the redemption value of the securities and could incur certain transaction costs.

 **NET ASSET VALUE**

Net asset value per share is determined by dividing the total value of the Fund's assets, less any liabilities, by the number of shares of the Fund outstanding.

The NAV per share of the Fund is determined by the Administrator as of the close of regular trading on the New York Stock Exchange (normally 4:00 p.m., EST) on each day when the New York Stock Exchange is open for trading. The New York Stock Exchange is closed on the following holidays: New Year's Day, Martin Luther King, Jr. Day, Presidents' Day, Good Friday, Memorial Day, Juneteenth National Independence Day, Independence Day, Labor Day, Thanksgiving Day and Christmas Day as observed.

Assets for which market quotations are available are valued as follows: (a) each listed security is valued at its closing price obtained from the respective primary exchange on which the security is listed, or, if there were no sales on that day, at its last reported current bid price; (b) each unlisted security is valued at the last current bid price obtained from the National Association of Securities Dealers Automated Quotation System; (c) United States Government and agency obligations are valued based upon bid quotations from the Federal Reserve Bank for identical or similar obligations; (d) short-term money market instruments (such as certificates of deposit, bankers' acceptances and commercial paper) are most often valued by bid quotation or by reference to bid quotations of available yields for similar instruments of issuers with similar credit ratings. All of these prices are obtained by the Administrator from services, which collect and disseminate such market prices. Bid quotations for short-term money market instruments reported by such a service are the bid quotations reported to it by the major dealers.

Certain securities may be valued on the basis of valuations provided by an independent pricing service when such prices the Advisor believes reflect the fair value of such securities. These securities would normally be those which have no available recent market value, have few outstanding shares and therefore infrequent trades, or for which there is a lack of consensus on the value, with quoted prices covering a wide range. The lack of consensus would result from relatively unusual circumstances such as no trading in the security for long periods of time, or a company's involvement in merger or acquisition activity, with widely varying valuations placed on the company's assets or stock. Prices provided by an independent pricing service may be determined without exclusive reliance on quoted prices and may take into account appropriate factors such as institutional-size trading in similar groups of securities, yield, quality, coupon rate, maturity, type of issue, trading characteristics and other market data.

In the absence of an ascertainable market value, assets are valued at their fair value. Under the valuation procedures adopted by the Board, the Board has delegated day-to-day responsibility for fair value determinations to a Valuation Committee comprised of representatives from the Advisor.

Short-term securities with remaining maturities of sixty days or less for which market quotations and information pricing service are not readily available are valued either at amortized cost or at original cost, plus accrued interest, both of which approximate current value.

**TAX INFORMATION**

The following is a summary of certain additional tax considerations generally affecting the Fund (sometimes referred to as the Fund) and its shareholders that are not described in the Prospectus. No attempt is made to present a detailed explanation of the tax treatment of the Fund or its shareholders, and the discussion here and in the Prospectus is not intended as a substitute for careful tax planning.

This "Tax Information" section is based on the Internal Revenue Code of 1986, as amended ("Code") and applicable regulations in effect on the date of this SAI. Future legislative, regulatory or administrative changes including provisions of current law that sunset and thereafter no longer apply, or court decisions may significantly change the tax rules applicable to the Fund and its shareholders. Any of these changes or court decisions may have a retroactive effect.

***This is for general information only and not tax advice. All investors should consult their own tax advisors as to the federal, state, local and foreign tax provisions applicable to them.***

**Taxation of the Fund**. The Fund has elected and intends to qualify (or, if newly organized, intends to elect and qualify) each year as a "regulated investment company" (sometimes referred to as a "RIC" or fund) under Subchapter M of the Code. If the Fund qualifies, the Fund will not be subject to federal income tax on the portion of its investment company taxable income (i.e., generally, taxable interest, dividends, net short-term capital gains and other taxable ordinary income net of expenses without regard to the deduction for dividends paid) and net capital gain (i.e., the excess of net long-term capital gains over net short-term capital losses) that it distributes to shareholders.

*Qualification as a regulated investment company*. In order to qualify for treatment as a RIC, the Fund must satisfy the following requirements:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;· Distribution Requirement – the Fund must distribute an amount equal to the sum of at least 90% of its investment company taxable income and 90% of its net tax-exempt income, if any, for the tax year (certain distributions made by the Fund after the close of its tax year are considered distributions attributable to the previous tax year for purposes of satisfying this requirement).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;· Income Requirement – the Fund must derive at least 90% of its gross income from dividends, interest, certain payments with respect to securities loans, and gains from the sale or other disposition of stock, securities or foreign currencies, or other income (including, but not limited to, gains from options, futures or forward contracts) derived from its business of investing in such stock, securities or currencies and net income derived from qualified publicly traded partnerships ("QPTPs").

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;· Asset Diversification Test – the Fund must satisfy the following asset diversification test at the close of each quarter of the Fund's tax year: (1) at least 50% of the value of the Fund's assets must consist of cash and cash items, U.S. Government Securities, securities of other regulated investment companies, and securities of other issuers (as to which the Fund has not invested more than 5% of the value of the Fund's total assets in securities of an issuer and as to which the Fund does not hold more than 10% of the outstanding voting securities of the issuer); and (2) no more than 25% of the value of the Fund's total assets may be invested in the securities of any one issuer (other than U.S. Government Securities or securities of other regulated investment companies) or of two or more issuers which the Fund controls and which are engaged in the same or similar trades or businesses, or, collectively, in the securities of QPTPs.

In some circumstances, the character and timing of income realized by the Fund for purposes of the Income Requirement or the identification of the issuer for purposes of the Asset Diversification Test is uncertain under current law with respect to a particular investment, and an adverse determination or future guidance by the Internal Revenue Service ("IRS") with respect to such type of investment may adversely affect the Fund's ability to satisfy these requirements. See "Tax Treatment of Portfolio Transactions" with respect to the application of these requirements to certain types of investments. In other circumstances, the Fund may be required to sell portfolio holdings in order to meet the Income Requirement, Distribution Requirement, or Asset Diversification Test, which may have a negative impact on the Fund's income and performance.

The Fund may use "equalization accounting" (in lieu of making some cash distributions) in determining the portion of its income and gains that has been distributed. If the Fund uses equalization accounting, it will allocate a portion of its undistributed investment company taxable income and net capital gain to redemptions of Fund shares and will correspondingly reduce the amount of such income and gains that it distributes in cash. If the IRS determines that the Fund's allocation is improper and that the Fund has under-distributed its income and gain for any taxable year, the Fund may be liable for federal income and/or excise tax. If, as a result of such adjustment, the Fund fails to satisfy the Distribution Requirement, the Fund will not qualify that year as a regulated investment company the effect of which is described in the following paragraph.

If for any taxable year the Fund does not qualify as a regulated investment company, all of its taxable income (including its net capital gain) would be subject to tax at the corporate income tax rate without any deduction for dividends paid to shareholders, and the dividends would be taxable to the shareholders as ordinary income (or possibly as qualified dividend income) to the extent of the Fund's current and accumulated earnings and profits. Failure to qualify as a regulated investment company thus would have a negative impact on the Fund's income and performance. Subject to savings provisions for certain inadvertent failures to satisfy the Income Requirement or Asset Diversification Test which, in general, are limited to those due to reasonable cause and not willful neglect, it is possible that the Fund will not qualify as a regulated investment company in any given tax year. Even if such savings provisions apply, the Fund may be subject to a monetary sanction of $50,000 or more. Moreover, the Board reserves the right not to maintain the qualification of the Fund as a regulated investment company if it determines such a course of action to be beneficial to shareholders.

*Portfolio turnover*. For investors that hold their Fund shares in a taxable account, a high portfolio turnover rate may result in higher taxes. This is because the fund with a high turnover rate may accelerate the recognition of capital gains and more of such gains are likely to be taxable as short-term rather than long-term capital gains in contrast to a comparable fund with a low turnover rate. Any such higher taxes would reduce the Fund's after-tax performance. See "Taxation of Fund Distributions ― Capital gain dividends" below. For non-U.S. investors, any such acceleration of the recognition of capital gains that results in more short-term and less long-term capital gains being recognized by the Fund may cause such investors to be subject to increased U.S. withholding taxes. See "Non-US Investors — Capital gain dividends" and "— Interest-related dividends and short-term capital gain dividends" below.

*Capital loss carryovers*. The capital losses of the Fund, if any, do not flow through to shareholders. Rather, the Fund may use its capital losses, subject to applicable limitations, to offset its capital gains without being required to pay taxes on or distribute to shareholders such gains that are offset by the losses. If the Fund has a "net capital loss" (that is, capital losses in excess of capital gains), the excess (if any) of the Fund's net short-term capital losses over its net long-term capital gains is treated as a short-term capital loss arising on the first day of the Fund's next taxable year, and the excess (if any) of the Fund's net long-term capital losses over its net short-term capital gains is treated as a long- term capital loss arising on the first day of the Fund's next taxable year. Any such net capital losses of the Fund that are not used to offset capital gains may be carried forward indefinitely to reduce any future capital gains realized by the Fund in succeeding taxable years. The amount of capital losses that can be carried forward and used in any single year is subject to an annual limitation if there is a more than 50% "change in ownership" of the Fund. An ownership change generally results when shareholders owning 5% or more of the Fund increase their aggregate holdings by more than 50% over a three-year look-back period. An ownership change could result in capital loss carryovers being used at a slower rate, thereby reducing the Fund's ability to offset capital gains with those losses. An increase in the amount of taxable gains distributed to the Fund's shareholders could result from an ownership change. The Fund undertakes no obligation to avoid or prevent an ownership change, which can occur in the normal course of shareholder purchases and redemptions or as a result of engaging in a tax-free reorganization with another fund. Moreover, because of circumstances beyond the Fund's control, there can be no assurance that the Fund will not experience, or has not already experienced, an ownership change.

As of December 31, 2024, the following Funds had capital loss carryovers, as shown below.

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| | | | |
|:---|:---|:---|:---|
| **Fund** | **Short-Term Carryover** | **Long-Term Carryover** | **Total Carryover** |
| Rational Premium Income Fund\* | $143036 | $1671393 | $1814429 |

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 *\*Rational Premium Income Fund experienced a shareholder change in ownership resulting in an annual limitation on the amount of pre- change capital loss carry forwards available to be recognized in each year. Due to IRC Section 382 limitations, utilization of these carry forwards is limited to a maximum of $92,691 per year.*

*Deferral of late year losses*. The Fund may elect to treat part or all of any "qualified late year loss" as if it had been incurred in the succeeding taxable year in determining the Fund's taxable income, net capital gain, net short-term capital gain, and earnings and profits. The effect of this election is to treat any such "qualified late year loss" as if it had been incurred in the succeeding taxable year, which may change the timing, amount, or characterization of Fund

distributions (see "Taxation of Fund Distributions Capital gain dividends" below). A "qualified late year loss" includes:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i) any net capital loss incurred after October 31 of the current taxable year, or, if there is no such loss, any net long-term capital loss or any net short-term capital loss incurred after October 31 of the current taxable year (post-October capital losses), and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii) the sum of (1) the excess, if any, of (a) specified losses incurred after October 31 of the current taxable year, over (b) specified gains incurred after October 31 of the current taxable year and (2) the excess, if any, of (a) ordinary losses incurred after December 31 of the current taxable year, over (b) the ordinary income incurred after December 31 of the current taxable year.

The terms "specified losses" and "specified gains" mean ordinary losses and gains from the sale, exchange, or other disposition of property (including the termination of a position with respect to such property), foreign currency losses and gains, and losses and gains resulting from holding stock in a passive foreign investment company ("PFIC") for which a mark-to-market election is in effect. The terms "ordinary losses" and "ordinary income" mean other ordinary losses and income that are not described in the preceding sentence. Since the Fund has a fiscal year ending in December, the amount of qualified late-year losses (if any) is computed without regard to any items of ordinary income or losses that are incurred after December 31 of the taxable year.

*Undistributed capital gains*. The Fund may retain or distribute to shareholders its net capital gain for each taxable year. The Fund currently intends to distribute net capital gains. If the Fund elects to retain its net capital gain, the Fund will be taxed thereon (except to the extent of any available capital loss carryovers) at the corporate income tax rate. If the Fund elects to retain its net capital gain, it is expected that the Fund also will elect to have shareholders treated as if each received a distribution of its pro rata share of such gain, with the result that each shareholder will be required to report its pro rata share of such gain on its tax return as long-term capital gain, will receive a refundable tax credit for its pro rata share of tax paid by the Fund on the gain and will increase the tax basis for its shares by an amount equal to the deemed distribution less the tax credit.

*Asset allocation funds*. If the Fund is the fund of funds, asset allocation fund, or a feeder fund in a master-feeder structure (collectively referred to as a "fund of funds" which invests in one or more underlying funds taxable as regulated investment companies) distributions by the underlying funds, redemptions of shares in the underlying funds and changes in asset allocations may result in taxable distributions to shareholders of ordinary income or capital gains. The fund of funds (other than a feeder fund in a master-feeder structure) generally will not be able currently to offset gains realized by one underlying fund in which the fund of funds invests against losses realized by another underlying fund. If shares of an underlying fund are purchased within 30 days before or after redeeming at a loss, other shares of that underlying fund (whether pursuant to a rebalancing of the Fund's portfolio or otherwise), all or a part of the loss will not be deductible by the Fund and instead will increase its basis for the newly purchased shares. Also, except with respect to a qualified fund of funds, the fund of funds (a) is not eligible to pass-through to shareholders foreign tax credits from an underlying fund that pays foreign income taxes and (b) is not eligible to pass-through to shareholders exempt-interest dividends from an underlying fund. A qualified fund of funds, i.e., the fund at least 50 percent of the value of the total assets of which (at the close of each quarter of the taxable year) is represented by interests in other RICs, is eligible to pass- through to shareholders (a) foreign tax credits and (b) exempt-interest dividends. Also, the fund of funds, whether or not it is a qualified fund of funds, is eligible to pass-through to shareholders qualified dividends earned by an underlying fund (see "Taxation of Fund Distributions ― Qualified dividend income for individuals" and — "Corporate dividends-received deduction" below). However, dividends paid to shareholders by the fund of funds from interest earned by an underlying fund on U.S. Government obligations are unlikely to be exempt from state and local income tax.

*Federal excise tax*. To avoid a 4% non-deductible excise tax, the Fund must distribute by December 31 of each year an amount equal to at least: (1) 98% of its ordinary income for the calendar year, (2) 98.2% of capital gain net income (the excess of the gains from sales or exchanges of capital assets over the losses from such sales or exchanges) for the one-year period ended on October 31 of such calendar year (or, at the election of a regulated investment company

having a taxable year ending November 30 or December 31, for its taxable year), and (3) any prior year undistributed ordinary income and capital gain net income. The Fund may elect to defer to the following year any net ordinary loss incurred for the portion of the calendar year which is after the beginning of the Fund's taxable year. Also, the Fund will defer any "specified gain" or "specified loss" which would be properly taken into account for the portion of the calendar after October 31. Any net ordinary loss, specified gain, or specified loss deferred shall be treated as arising on January 1 of the following calendar year. Generally, the Fund may make sufficient distributions to avoid liability for federal income and excise tax, but can give no assurances that all or a portion of such liability will be avoided. In addition, under certain circumstances temporary timing or permanent differences in the realization of income and expense for book and tax purposes can result in the Fund having to pay an excise tax.

*Foreign income tax*. Investment income received by the Fund from sources within foreign countries may be subject to foreign income tax withheld at the source, and the amount of tax withheld generally will be treated as an expense of the Fund. The United States has entered into tax treaties with many foreign countries that entitle the Fund to a reduced rate of, or exemption from, tax on such income. Some countries require the filing of a tax reclaim or other forms to receive the benefit of the reduced tax rate; whether or when the Fund will receive the tax reclaim is within the control of the individual country. Information required on these forms may not be available such as shareholder information; therefore, the Fund may not receive the reduced treaty rates or potential reclaims. Other countries have conflicting and changing instructions and restrictive timing requirements which may cause the Fund not to receive the reduced treaty rates or potential reclaims. Other countries may subject capital gains realized by the Fund on sale or disposition of securities of that country to taxation. It is impossible to determine the effective rate of foreign tax in advance since the amount of the Fund's assets to be invested in various countries is not known. Under certain circumstances, the Fund may elect to pass-through foreign taxes paid by the Fund to shareholders, although it reserves the right not to do so. If the Fund makes such an election and obtains a refund of foreign taxes paid by the Fund in a prior year, the Fund may be eligible to reduce the amount of foreign taxes reported by the Fund to its shareholders, generally by the amount of the foreign taxes refunded, for the year in which the refund is received.

*Income requirement*. As described above, the Fund must derive at least 90% of its gross income from qualifying sources to qualify as a regulated investment company. Gains from the disposition of commodities, including precious metals, are not considered qualifying income for purposes of satisfying the Income Requirement. See "Tax Treatment of Portfolio Transactions Investments in commodities — structured notes, corporate subsidiary and certain ETFs." Also, the IRS has issued a revenue ruling which holds that income derived from commodity-linked swaps is not qualifying income under Subchapter M of the Code. As a result, the Fund's ability to directly invest in commodity-linked swaps as part of its investment strategy is limited to a maximum of 10% of its gross income. The IRS has issued a number of private letter rulings, which indicate that income from the Fund's investment in certain commodity-linked notes and a wholly owned foreign subsidiary that invests in commodity-linked derivatives, such as the Subsidiary, constitutes qualifying income. However, the portion of such rulings relating to the treatment of a corporation as a regulated investment company that require a determination of whether a financial instrument or position is a security under section 2(a)(36) of the 1940 Act was revoked because of changes in the IRS's position. (A financial instrument or position that constitutes a security under section 2(a)(36) of the 1940 Act generates qualifying income for a corporation taxed as a regulated investment company.) Applicable regulations treat "Subpart F" income (defined in Section 951 of the Code to include passive income such as income from commodity-linked derivatives) as qualifying income, even if a foreign corporation, such as a Subsidiary, does not make a distribution of such income. If a distribution is made, such income will be treated as a dividend by the Fund to the extent that, under applicable provisions of the Code, there is a distribution out of the earnings and profits of the foreign corporation attributable to the distribution. The Fund anticipates that its respective Subsidiary will distribute the "Subpart F" income earned by such Subsidiary each year, which the Fund will treat as dividend income to the extent attributable to the earnings and profits of the foreign corporation and, therefore, as qualifying income to the Fund.

Accordingly, the extent to which the Fund invests in commodities or commodity-linked derivatives may be limited by the Income Requirement, which the Fund must continue to satisfy to maintain its status as a RIC. The tax treatment of the Fund and its shareholders in the event the Fund fails to qualify as a RIC is described above under "Taxation of the Fund ─Qualification as a regulated investment company."

 *Asset diversification test*. For purposes of the Asset Diversification Test, the Fund's investment in the Subsidiary would be considered a security of one issuer. Accordingly, the Fund intends to limit its investment in the Subsidiary to no more than 25% of the value of the Fund's total assets in order to satisfy the Asset Diversification Test.

*Taxation of the Subsidiary*. On the basis of current law and practice, the Subsidiary will not be liable for income tax in the Cayman Islands. Distributions by the Subsidiary to the Fund will not be subject to withholding tax in the Cayman Islands. In addition, the Subsidiary's investment in commodity-linked derivatives and other assets held as collateral are anticipated to qualify for a safe harbor under Code Section 864(b) so that the Subsidiary will not be treated as conducting a U.S. trade or business. Thus, the Subsidiary should not be subject to U.S. federal income tax on a net basis. However, if certain of the Subsidiary's activities were determined not to be of the type described in the safe harbor (which is not expected), then the activities of the Subsidiary may constitute a U.S. trade or business, or be taxed as such.

In general, a foreign corporation, such as the Subsidiary, that does not conduct a U.S. trade or business is nonetheless subject to tax at a flat rate of 30 percent (or lower tax treaty rate), generally payable through withholding, on the gross amount of certain U.S.-source income that is not effectively connected with a U.S. trade or business, subject to certain exemptions, including among others, exemptions for capital gains, portfolio interest and income from notional principal contracts. It is not anticipated that the Subsidiary will be subject to material amounts of U.S. withholding tax on its portfolio investments. The Subsidiary intends to properly certify its status as a non-U.S. person to each custodian and withholding agent to avoid U.S. backup withholding requirements discussed below. Additionally, the Subsidiary intends to qualify as a "participating FFI" or otherwise qualify for an exemption under Chapter 4 of the Code to avoid U.S. withholding tax under the Foreign Account Tax Compliance Act as such terms are described below under the heading, "Foreign Account Tax Compliance Act ("FATCA")."

**Taxation of Fund Distributions**. The Fund anticipates distributing substantially all of its investment company taxable income and net capital gain for each taxable year. Distributions by the Fund will be treated in the manner described regardless of whether such distributions are paid in cash or reinvested in additional shares of the Fund (or of another Fund). The Fund will send you information annually as to the federal income tax consequences of distributions made (or deemed made) during the year.

*Distributions of ordinary income*. The Fund receives income generally in the form of dividends and/or interest on its investments. The Fund may also recognize ordinary income from other sources, including, but not limited to, certain gains on foreign currency-related transactions. This income, less expenses incurred in the operation of the Fund, constitutes the Fund's net investment income from which dividends may be paid to you. If you are a taxable investor, distributions of net investment income generally are taxable as ordinary income to the extent of the Fund's earnings and profits. In the case of the Fund whose strategy includes investing in stocks of corporations, a portion of the income dividends paid to you may be qualified dividends eligible to be taxed at reduced rates.

Capital gain dividends. Taxes on distributions of capital gains are determined by how long the Fund owned the investments that generated them, rather than how long a shareholder has owned his or her shares. In general, the Fund will recognize long-term capital gain or loss on the sale or other disposition of assets it has owned for more than one year, and short-term capital gain or loss on investments it has owned for one year or less. Distributions of net capital gain (the excess of net long- term capital gain over net short-term capital loss) that are properly reported by the Fund to shareholders as capital gain dividends generally will be taxable to a shareholder receiving such distributions as long- term capital gain. Long-term capital gain rates applicable to individuals are 0%, 15%, 20% or 25% depending on the nature of the capital gain and the individual's taxable income. Distributions of net short-term capital gains for a taxable year in excess of net long-term capital losses for such taxable year generally will be taxable to a shareholder receiving such distributions as ordinary income.

*Qualified dividend income for individuals*. Ordinary income dividends reported by the Fund to shareholders as derived from qualified dividend income will be taxed in the hands of individuals and other noncorporate shareholders at the rates applicable to long-term capital gain. Qualified dividend income means dividends paid to the Fund (a) by domestic

corporations, (b) by foreign corporations that are either (i) incorporated in a possession of the United States, or (ii) are eligible for benefits under certain income tax treaties with the United States that include an exchange of information program, or (c) with respect to stock of a foreign corporation that is readily tradable on an established securities market in the United States. Both the Fund and the investor must meet certain holding period requirements to qualify Fund dividends for this treatment. Income derived from investments in derivatives, fixed-income securities, U.S. REITs, PFICs, CFCs and income received "in lieu of" dividends in a securities lending transaction generally is not eligible for treatment as qualified dividend income. If the qualifying dividend income received by the Fund is equal to 95% (or a greater percentage) of the Fund's gross income (exclusive of net capital gain) in any taxable year, all of the ordinary income dividends paid by the Fund will be qualifying dividend income.

 *Qualified REIT dividends.* Under the Tax Cuts and Jobs Act ("TCJA"), "qualified REIT dividends" (i.e., ordinary REIT dividends other than capital gain dividends and portions of REIT dividends designated as qualified dividend income) are treated as eligible for a 20% deduction by noncorporate taxpayers. This deduction, if allowed in full, equates to a maximum effective tax rate of 29.6% (37% top rate applied to income after 20% deduction). The Fund may choose to report the special character of "qualified REIT dividends" to a shareholder, provided both the Fund and a shareholder meet certain holding period requirements with respect to their shares. A noncorporate shareholder receiving such dividends would treat them as eligible for the 20% deduction, provided the RIC shares were held by the shareholder for more than 45 days during the 91-day period beginning on the date that is 45 days before the date on which the shares become ex-dividend with respect to such dividend. The amount of a RIC's dividends eligible for the 20% deduction for a taxable year is limited to the excess of the RIC's qualified REIT dividends for the taxable year over allocable expenses.

*Corporate dividends-received deduction*. Ordinary income dividends reported by the Fund to shareholders as derived from qualified dividends from domestic corporations will qualify for the 50% dividends-received deduction generally available to corporations. The availability of the dividends- received deduction is subject to certain holding period and debt financing restrictions imposed under the Code on the corporation claiming the deduction. Income derived by the Fund from investments in derivatives, fixed-income and foreign securities generally is not eligible for this treatment.

*Return of capital distributions*. Distributions by the Fund that are not paid from earnings and profits will be treated as a return of capital to the extent of (and in reduction of) the shareholder's tax basis in his shares; any excess will be treated as gain from the sale of his shares. Thus, the portion of a distribution that constitutes a return of capital will decrease the shareholder's tax basis in his Fund shares (but not below zero) and will result in an increase in the amount of gain (or decrease in the amount of loss) that will be recognized by the shareholder for tax purposes on the later sale of such Fund shares. Return of capital distributions can occur for a number of reasons including, among others, the Fund overestimates the income to be received from certain investments such as those classified as partnerships or equity REITs. See "Tax Treatment of Portfolio Transactions ― Investments in U.S. REITs."

*Impact of realized but undistributed income and gains, and net unrealized appreciation of portfolio securities*. At the time of your purchase of shares, the Fund's net asset value may reflect undistributed income, undistributed capital gains, or net unrealized appreciation of portfolio securities held by the Fund. A subsequent distribution to you of such amounts, although constituting a return of your investment, would be taxable and would be taxed as either ordinary income (some portion of which may be taxed as qualified dividend income) or capital gain unless you are investing through a tax-advantaged arrangement, such as a 401(k) plan or an individual retirement account. The Fund may be able to reduce the amount of such distributions by utilizing its capital loss carryovers, if any.

 *Pass-through of foreign tax credits*. If more than 50% of the value of the Fund's total assets at the end of a fiscal year is invested in foreign securities, or if the Fund is a qualified fund of funds (i.e., a fund at least 50 percent of the value of the total assets of which, at the close of each quarter of the taxable year, is represented by interests in other RICs), the Fund may elect to "pass-through" to the Fund's shareholders the amount of foreign income tax paid by the Fund (the Foreign Tax Election) in lieu of deducting such amount in determining its investment company taxable income. Pursuant to the Foreign Tax Election, shareholders will be required (i) to include in gross income, even though not actually received, their respective pro-rata shares of the foreign income tax paid by the Fund that are attributable to

any distributions they receive; and (ii) either to deduct their pro-rata share of foreign tax in computing their taxable income or to use it (subject to various Code limitations) as a foreign tax credit against federal income tax (but not both). No deduction for foreign tax may be claimed by a noncorporate shareholder who does not itemize deductions or who is subject to the alternative minimum tax. Shareholders may be unable to claim a credit for the full amount of their proportionate shares of the foreign income tax paid by the Fund due to certain limitations that may apply. The Fund reserves the right not to pass-through to its shareholders the amount of foreign income taxes paid by the Fund. Additionally, any foreign tax withheld on payments made "in lieu of" dividends or interest will not qualify for the pass-through of foreign tax credits to shareholders. See "Tax Treatment of Portfolio Transactions - Securities lending" below.

*Tax credit bonds*. If the Fund holds, directly or indirectly, one or more "tax credit bonds" (including build America bonds, clean renewable energy bonds and qualified tax credit bonds) on one or more applicable dates during a taxable year, the Fund may elect to permit its shareholders to claim a tax credit on their income tax returns equal to each shareholder's proportionate share of tax credits from the applicable bonds that otherwise would be allowed to the Fund. In such a case, shareholders must include in gross income (as interest) their proportionate share of the income attributable to their proportionate share of those offsetting tax credits. A shareholder's ability to claim a tax credit associated with one or more tax credit bonds may be subject to certain limitations imposed by the Code. (Under the TCJA, build America bonds, clean renewable energy bonds and certain other qualified bonds may no longer be issued after December 31, 2017.) Even if the Fund is eligible to pass-through tax credits to shareholders, the Fund may choose not to do so.

 *U.S. Government interest*. Income earned on certain U.S. Government obligations is exempt from state and local personal income taxes if earned directly by you. States also grant tax-free status to dividends paid to you from interest earned on direct obligations of the U.S. Government, subject in some states to minimum investment or reporting requirements that must be met by the Fund. Income on investments by the Fund in certain other obligations, such as repurchase agreements collateralized by U.S. Government obligations, commercial paper and federal agency-backed obligations (e.g., GNMA or FNMA obligations), generally does not qualify for tax-free treatment. The rules on exclusion of this income are different for corporations. If the Fund is a fund of funds, see "Taxation of the Fund ― Asset allocation funds."

*Dividends declared in December and paid in January*. Ordinarily, shareholders are required to take distributions by the Fund into account in the year in which the distributions are made. However, dividends declared in October, November or December of any year and payable to shareholders of record on a specified date in such a month will be deemed to have been received by the shareholders (and made by the Fund) on December 31 of such calendar year if such dividends are actually paid in January of the following year. Shareholders will be advised annually as to the U.S. federal income tax consequences of distributions made (or deemed made) during the year in accordance with the guidance that has been provided by the IRS.

*Medicare tax*. A 3.8% Medicare tax is imposed on net investment income earned by certain individuals estates and trusts. "Net investment income," for these purposes, means investment income, including ordinary dividends and capital gain distributions received from the Fund and net gains from redemptions or other taxable dispositions of Fund shares, reduced by the deductions properly allocable to such income. In the case of an individual, the tax will be imposed on the lesser of (1) the shareholder's net investment income or (2) the amount by which the shareholder's modified adjusted gross income exceeds $250,000 (if the shareholder is married and filing jointly or a surviving spouse), $125,000 (if the shareholder is married and filing separately) or $200,000 (in any other case). This Medicare tax, if applicable, is reported by you on, and paid with, your federal income tax return.

**Sale or Redemption of Fund Shares**. A shareholder will recognize gain or loss on the sale or redemption of shares of the Fund in an amount equal to the difference between the proceeds of the sale or redemption and the shareholder's adjusted tax basis in the shares. If you owned your shares as a capital asset, any gain or loss that you realize will be considered capital gain or loss and will be long-term capital gain or loss if the shares were held for longer than one

year. Capital losses in any year are deductible only to the extent of capital gains plus, in the case of a noncorporate taxpayer, $3,000 of ordinary income.

*Tax basis information*. The Fund is required to report to you and the IRS annually on Form 1099- B the cost basis of shares purchased or acquired on or after January 1, 2012 where the cost basis of the shares is known by the Fund (referred to as "covered shares") and which are disposed of after that date. However, cost basis reporting is not required for certain shareholders, including shareholders investing in the Fund through a tax-advantaged retirement account, such as a 401(k) plan or an individual retirement account. When required to report cost basis, the Fund will calculate it using the Fund's default method of average cost, unless you instruct the Fund to use a different calculation method. In general, average cost is the total cost basis of all your shares in an account divided by the total number of shares in the account. To determine whether short-term or long-term capital gains taxes apply, the IRS presumes you redeem your oldest shares first.

The IRS permits the use of several methods to determine the cost basis of mutual fund shares. The method used will determine which specific shares are deemed to be sold when there are multiple purchases on different dates at differing share prices, and the entire position is not sold at one time. The Fund does not recommend any particular method of determining cost basis, and the use of other methods may result in more favorable tax consequences for some shareholders. It is important that you consult with your tax advisor to determine which method is best for you and then notify the Fund if you intend to utilize a method other than average cost for covered shares.

The Fund will compute and report the cost basis of your Fund shares sold or exchanged by taking into account all of the applicable adjustments to cost basis and holding periods as required by the Code and Treasury regulations for purposes of reporting these amounts to you and the IRS. However, the Fund is not required to, and in many cases the Fund does not possess the information to, take all possible basis, holding period or other adjustments into account in reporting cost basis information to you. Therefore, shareholders should carefully review the cost basis information provided by the Fund. If you hold your Fund shares through a broker (or other nominee), please contact that broker (nominee) with respect to the reporting of cost basis and available elections for your account.

*Wash sale rule*. All or a portion of any loss so recognized may be deferred under the wash sale rules if the shareholder purchases other shares of the Fund within 30 days before or after the sale or redemption.

*Sales at a loss within six months of purchase*. Any capital loss arising from the sale or redemption of shares held for six months or less will be treated as a long-term capital loss to the extent of the amount of capital gain dividends received on such shares.

*Deferral of basis*. If a shareholder (a) incurs a sales load in acquiring shares of the Fund, (b) disposes of such shares less than 91 days after they are acquired, and (c) subsequently acquires shares of the Fund or another Fund by January 31 of the calendar year following the calendar year in which the disposition of the original shares occurred at a reduced sales load pursuant to a right to reinvest at such reduced sales load acquired in connection with the acquisition of the shares disposed of, then the sales load on the shares disposed of (to the extent of the reduction in the sales load on the shares subsequently acquired) shall not be taken into account in determining gain or loss on the shares disposed of, but shall be treated as incurred on the acquisition of the shares subsequently acquired. The wash sale rules may also limit the amount of loss that may be taken into account on disposition after such adjustment.

*Conversion of shares of the Fund into other shares of the same Fund.* The conversion of shares of one class of the Fund into shares of another class of the same Fund is not taxable for federal income tax purposes and no gain or loss will be reported on the transaction. This is true whether the conversion occurs automatically pursuant to the terms of the class or is initiated by the shareholder. Shareholders should consult their tax advisors regarding the state and local tax consequences of a conversion of shares.

 *Exchange of shares of the Fund for shares of another Fund.* The exchange of shares in one fund for shares of another Fund is taxable for federal income tax purposes and the exchange will be reported as a taxable sale. An exchange

occurs when the purchase of shares of the Fund is made using the proceeds from a redemption of shares of another Fund and is effectuated on the same day as the redemption. Shareholders should consult their tax advisors regarding the state and local tax consequences of an exchange of shares.

*Reportable transactions*. Under Treasury regulations, if a shareholder recognizes a loss with respect to the Fund's shares of $2 million or more for an individual shareholder or $10 million or more for a corporate shareholder (or certain greater amounts over a combination of years), the shareholder must file with the IRS a disclosure statement on Form 8886. The fact that a loss is reportable under these regulations does not affect the legal determination of whether the taxpayer's treatment of the loss is proper. Shareholders should consult their tax advisors to determine the applicability of these regulations in light of their individual circumstances.

 **Tax Treatment of Portfolio Transactions**. Set forth below is a general description of the tax treatment of certain types of securities, investment techniques and transactions that may apply to the Fund. This section should be read in conjunction with the discussion under "Description of the Fund and its Investments and Risks ― Investment Strategies and Risks" for a detailed description of the various types of securities and investment techniques that apply to the Fund.

 *In general*. In general, gain or loss recognized by the Fund on the sale or other disposition of portfolio investments will be a capital gain or loss. Such capital gain and loss may be long-term or short- term depending, in general, upon the length of time a particular investment position is maintained and, in some cases, upon the nature of the transaction. Property held for more than one year generally will be eligible for long-term capital gain or loss treatment. The application of certain rules described below may serve to alter the manner in which the holding period for a security is determined or may otherwise affect the characterization as long-term or short-term, and also the timing of the realization and/or character, of certain gains or losses.

 *Certain fixed-income investments*. Gain recognized on the disposition of a debt obligation purchased by the Fund at a market discount (generally, at a price less than its principal amount) will be treated as ordinary income to the extent of the portion of the market discount that accrued during the period of time the Fund held the debt obligation unless the Fund made a current inclusion election to accrue market discount into income as it accrues. If the Fund purchases a debt obligation (such as a zero- coupon security or pay-in-kind security) that was originally issued at a discount, the Fund generally is required to include in gross income each year the portion of the original issue discount that accrues during such year. Therefore, the Fund's investment in such securities may cause the Fund to recognize income and make distributions to shareholders before it receives any cash payments on the securities. To generate cash to satisfy those distribution requirements, the Fund may have to sell portfolio securities that it otherwise might have continued to hold or to use cash flows from other sources such as the sale of fund shares.

*Investments in debt obligations that are at risk of or in default present tax issues for the Fund*. Tax rules are not entirely clear about issues such as whether and to what extent the Fund should recognize market discount on a debt obligation, when the Fund may cease to accrue interest, original issue discount or market discount, when and to what extent the Fund may take deductions for bad debts or worthless securities and how the Fund should allocate payments received on obligations in default between principal and income. These and other related issues will be addressed by the Fund in order to ensure that it distributes sufficient income to preserve its status as a regulated investment company.

 *Options, futures, forward contracts, swap agreements and hedging transactions*. In general, option premiums received by the Fund are not immediately included in the income of the Fund. Instead, the premiums are recognized when the option contract expires, the option is exercised by the holder, or the Fund transfers or otherwise terminates the option (e.g., through a closing transaction). If an option written by the Fund is exercised and the Fund sells or delivers the underlying stock, the Fund generally will recognize capital gain or loss equal to (a) the sum of the strike price and the option premium received by the Fund minus (b) the Fund's basis in the stock. Such gain or loss generally will be short-term or long-term depending upon the holding period of the underlying stock. If securities are purchased by the Fund pursuant to the exercise of a put option written by it, the Fund generally will subtract the premium received from its cost basis in the securities purchased. The gain or loss with respect to any termination of the Fund's obligation under

an option other than through the exercise of the option and related sale or delivery of the underlying stock generally will be short-term gain or loss depending on whether the premium income received by the Fund is greater or less than the amount paid by the Fund (if any) in terminating the transaction. Thus, for example, if an option written by the Fund expires unexercised, the Fund generally will recognize short-term gain equal to the premium received.

The tax treatment of certain futures contracts entered into by the Fund as well as listed non-equity options written or purchased by the Fund on U.S. exchanges (including options on futures contracts, broad-based equity indices and debt securities) may be governed by section 1256 of the Code (section 1256 contracts). Gains or losses on section 1256 contracts generally are considered 60% long-term and 40% short-term capital gains or losses (60/40), although certain foreign currency gains and losses from such contracts may be treated as ordinary in character. Also, any section 1256 contracts held by the Fund at the end of each taxable year (and, for purposes of the 4% excise tax, on certain other dates as prescribed under the Code) are "marked-to-market" with the result that unrealized gains or losses are treated as though they were realized and the resulting gain or loss is treated as ordinary or 60/40 gain or loss, as applicable. Section 1256 contracts do not include any interest rate swap, currency swap, basis swap, interest rate cap, interest rate floor, commodity swap, equity swap, equity index swap, credit default swap, or similar agreement.

In addition to the special rules described above in respect of options and futures transactions, the Fund's transactions in other derivative instruments (including options, forward contracts and swap agreements) as well as its other hedging, short sale, or similar transactions, may be subject to one or more special tax rules (including the constructive sale, notional principal contract, straddle, wash sale and short sale rules). These rules may affect whether gains and losses recognized by the Fund are treated as ordinary or capital or as short-term or long-term, accelerate the recognition of income or gains to the Fund, defer losses to the Fund, and cause adjustments in the holding periods of the Fund's securities. These rules, therefore, could affect the amount, timing and/or character of distributions to shareholders. Moreover, because the tax rules applicable to derivative financial instruments are in some cases uncertain under current law, an adverse determination or future guidance by the IRS with respect to these rules (which determination or guidance could be retroactive) may affect whether the Fund has made sufficient distributions and otherwise satisfied the relevant requirements to maintain its qualification as a regulated investment company and avoid the fund-level tax.

Certain of the Fund's investments in derivatives and foreign currency-denominated instruments, and the Fund's transactions in foreign currencies and hedging activities, may produce a difference between its book income and its taxable income. If the Fund's book income is less than the sum of its taxable income and net tax-exempt income (if any), the Fund could be required to make distributions exceeding book income to qualify as a regulated investment company. If the Fund's book income exceeds the sum of its taxable income and net tax-exempt income (if any), the distribution of any such excess will be treated as (i) a dividend to the extent of the Fund's remaining earnings and profits (including current earnings and profits arising from tax-exempt income, reduced by related deductions), (ii) thereafter, as a return of capital to the extent of the recipient's basis in the shares, and (iii) thereafter, as gain from the sale or exchange of a capital asset.

*Foreign currency transactions*. The Fund's transactions in foreign currencies, foreign currency- denominated debt obligations and certain foreign currency options, futures contracts and forward contracts (and similar instruments) may give rise to ordinary income or loss to the extent such income or loss results from fluctuations in the value of the foreign currency concerned. This treatment could increase or decrease the Fund's ordinary income distributions to you, and may cause some or all of the Fund's previously distributed income to be classified as a return of capital. In certain cases, the Fund may make an election to treat such gain or loss as capital.

 *PFIC investments*. The Fund may invest in securities of foreign companies that may be classified under the Code as PFICs. In general, a foreign company is classified as a PFIC if at least one-half of its assets constitute investment-type assets or 75% or more of its gross income is investment-type income. When investing in PFIC securities, the Fund intends to mark-to-market these securities under certain provisions of the Code and recognize any unrealized gains as ordinary income at the end of the Fund's fiscal and excise tax years. Deductions for losses are allowable only to the extent of any current or previously recognized gains. These gains (reduced by allowable losses) are treated as ordinary

income that the Fund is required to distribute, even though it has not sold or received dividends from these securities. You should also be aware that the designation of a foreign security as a PFIC security will cause its income dividends to fall outside of the definition of qualified foreign corporation dividends. These dividends generally will not qualify for the reduced rate of taxation on qualified dividends when distributed to you by the Fund. Foreign companies are not required to identify themselves as PFICs. Due to various complexities in identifying PFICs, the Fund can give no assurances that it will be able to identify portfolio securities in foreign corporations that are PFICs in time for the Fund to make a mark-to-market election. If the Fund is unable to identify an investment as a PFIC and thus does not make a mark-to-market election, the Fund may be subject to U.S. federal income tax on a portion of any "excess distribution" or gain from the disposition of such shares even if such income is distributed as a taxable dividend by the Fund to its shareholders. Additional charges in the nature of interest may be imposed on the Fund in respect of deferred taxes arising from such distributions or gains.

*Investments in non-U.S. REITs*. While non-U.S. REITs often use complex acquisition structures that seek to minimize taxation in the source country, an investment by the Fund in a non-U.S. REIT may subject the Fund, directly or indirectly, to corporate taxes, withholding taxes, transfer taxes and other indirect taxes in the country in which the real estate acquired by the non-U.S. REIT is located. The Fund's pro rata share of any such taxes will reduce the Fund's return on its investment. The Fund's investment in a non-U.S. REIT may be considered an investment in a PFIC, as discussed above in "Tax Treatment of Portfolio Transactions ― PFIC investments." Additionally, foreign withholding taxes on distributions from the non-U.S. REIT may be reduced or eliminated under certain tax treaties, as discussed above in "Taxation of the Fund ― Foreign income tax." Also, the Fund in certain limited circumstances may be required to file an income tax return in the source country and pay tax on any gain realized from its investment in the non-U.S. REIT under rules similar to those in the United States which tax foreign persons on gain realized from dispositions of interests in U.S. real estate.

*Investments in U.S. REITs*. A U.S. REIT is not subject to federal income tax on the income and gains it distributes to shareholders. Dividends paid by a U.S. REIT, other than capital gain distributions, will be taxable as ordinary income up to the amount of the U.S. REIT's current and accumulated earnings and profits. Capital gain dividends paid by a U.S. REIT to the Fund will be treated as long-term capital gains by the Fund and, in turn, may be distributed by the Fund to its shareholders as a capital gain distribution. Because of certain noncash expenses, such as property depreciation, an equity U.S. REIT's cash flow may exceed its taxable income. The equity U.S. REIT, and in turn the Fund, may distribute this excess cash to shareholders in the form of a return of capital distribution. However, if a U.S. REIT is operated in a manner that fails to qualify as a REIT, an investment in the U.S. REIT would become subject to double taxation, meaning the taxable income of the U.S. REIT would be subject to federal income tax at the corporate income tax rate without any deduction for dividends paid to shareholders and the dividends would be taxable to shareholders as ordinary income (or possibly as qualified dividend income) to the extent of the U.S. REIT's current and accumulated earnings and profits. Also, see "Tax Treatment of Portfolio Transactions ― Investment in taxable mortgage pools (excess inclusion income)" and "Non-U.S. Investors ― Investments in U.S. Real Property" with respect to certain other tax aspects of investing in U.S. REITs.

 *Investment in taxable mortgage pools (excess inclusion income)*. Under a Notice issued by the IRS, the Code and Treasury regulations to be issued, a portion of the Fund's income from a U.S. REIT that is attributable to the REIT's residual interest in a real estate mortgage investment conduit ("REMIC") or equity interests in a "taxable mortgage pool" (referred to in the Code as an excess inclusion) will be subject to federal income tax in all events. The excess inclusion income of a regulated investment company, such as the Fund, will be allocated to shareholders of the regulated investment company in proportion to the dividends received by such shareholders, with the same consequences as if the shareholders held the related REMIC residual interest or, if applicable, taxable mortgage pool directly. In general, excess inclusion income allocated to shareholders (i) cannot be offset by net operating losses (subject to a limited exception for certain thrift institutions), (ii) will constitute unrelated business taxable income ("UBTI") to entities (including qualified pension plans, individual retirement accounts, 401(k) plans, Keogh plans or other tax-exempt entities) subject to tax on UBTI, thereby potentially requiring such an entity that is allocated excess inclusion income, and otherwise might not be required to file a tax return, to file a tax return and pay tax on such income, and (iii) in the case of a foreign stockholder, will not qualify for any reduction in U.S. federal withholding

tax. In addition, if at any time during any taxable year a "disqualified organization" (which generally includes certain cooperatives, governmental entities, and tax- exempt organizations not subject to UBTI) is a record holder of a share in a regulated investment company, then the regulated investment company will be subject to a tax equal to that portion of its excess inclusion income for the taxable year that is allocable to the disqualified organization, multiplied by the corporate income tax rate. The Notice imposes certain reporting requirements upon regulated investment companies that have excess inclusion income. There can be no assurance that the Fund will not allocate to shareholders excess inclusion income.

These rules are potentially applicable to the Fund with respect to any income it receives from the equity interests of certain mortgage pooling vehicles, either directly or, as is more likely, through an investment in a U.S. REIT. It is unlikely that these rules will apply to the Fund that has a non-REIT strategy.

*Investments in partnerships and QPTPs.* For purposes of the Income Requirement, income derived by the Fund from a partnership that is not a QPTP will be treated as qualifying income only to the extent such income is attributable to items of income of the partnership that would be qualifying income if realized directly by the Fund. While the rules are not entirely clear with respect to the Fund investing in a partnership outside a master-feeder structure, for purposes of testing whether the Fund satisfies the Asset Diversification Test, the Fund generally is treated as owning a pro rata share of the underlying assets of a partnership. See "Taxation of the Fund — Qualification as a regulated investment company." In contrast, different rules apply to a partnership that is a QPTP. A QPTP is a partnership (a) the interests in which are traded on an established securities market, (b) that is treated as a partnership for federal income tax purposes, and (c) that derives less than 90% of its income from sources that satisfy the Income Requirement (e.g., because it invests in commodities). All of the net income derived by the Fund from an interest in a QPTP will be treated as qualifying income, but the Fund may not invest more than 25% of its total assets in one or more QPTPs. However, there can be no assurance that a partnership classified as a QPTP in one year will qualify as a QPTP in the next year. Any such failure to annually qualify as a QPTP might, in turn, cause the Fund to fail to qualify as a regulated investment company. Although, in general, the passive loss rules of the Code do not apply to RICs, such rules do apply to the Fund with respect to items attributable to an interest in a QPTP. Fund investments in partnerships, including in QPTPs, may result in the Fund being subject to state, local or foreign income, franchise or withholding tax liabilities.

If an MLP is treated as a partnership for U.S. federal income tax purposes (whether or not a QPTP), all or portion of the dividends received by the Fund from the MLP likely will be treated as a return of capital for U.S. federal income tax purposes because of accelerated deductions available with respect to the activities of such MLPs. Further, because of these accelerated deductions, on the disposition of interests in such an MLP, the Fund likely will realize taxable income in excess of economic gain with respect to those MLP interests (or if the Fund does not dispose of the MLP, the Fund could realize taxable income in excess of cash flow with respect to the MLP in a later period), and the Fund must take such income into account in determining whether the Fund has satisfied its Distribution Requirement. The Fund may have to borrow or liquidate securities to satisfy its Distribution Requirement and to meet its redemption requests, even though investment considerations might otherwise make it undesirable for the Fund to sell securities or borrow money at such time. In addition, any gain recognized, either upon the sale of the Fund's MLP interest or sale by the MLP of property held by it, including in excess of economic gain thereon, treated as so-called "recapture income," will be treated as ordinary income. Therefore, to the extent the Fund invests in MLPs, Fund shareholders might receive greater amounts of distributions from the Fund taxable as ordinary income than they otherwise would in the absence of such MLP investments.

Although MLPs are generally expected to be treated as partnerships for U.S. federal income tax purposes, some MLPs may be treated as PFICs or "regular" corporations for U.S. federal income tax purposes. The treatment of particular MLPs for U.S. federal income tax purposes will affect the extent to which the Fund can invest in MLPs and will impact the amount, character, and timing of income recognized by the Fund.

Investments in commodities ― structured notes, corporate subsidiary and certain ETFs. Gains from the disposition of commodities, including precious metals, will neither be considered qualifying income for purposes of satisfying the Income Requirement nor qualifying assets for purposes of satisfying the Asset Diversification Test. See "Taxation

of the Fund — Qualification as a regulated investment company." Also, the IRS has issued a revenue ruling which holds that income derived from commodity- linked swaps is not qualifying income for purposes of the Income Requirement. In a subsequent revenue ruling, as well as in a number of follow-on private letter rulings (upon which only the Fund that received the private letter ruling may rely), the IRS provides that income from certain alternative investments which create commodity exposure, such as certain commodity-linked or structured notes or a corporate subsidiary (such as the Subsidiary) that invests in commodities, may be considered qualifying income under the Code. However, the portion of such ruling relating to the treatment of a corporation as a RIC that require a determination of whether a financial instrument or position, such as a commodity-linked or structured note, is a security under section 2(a)(36) of the 1940 Act was revoked because of changes in the IRS's position. (A financial instrument or position that constitutes a security under section 2(a)(36) of the 1940 Act generates qualifying income for a corporation taxed as a regulated investment company.) In addition, a RIC may gain exposure to commodities through investment in a QPTP, such as an exchange-traded fund or ETF that is classified as a partnership and which invests in commodities, or through investment in a wholly-owned subsidiary that is treated as a controlled foreign corporation for federal income tax purposes. Applicable regulations treat "Subpart F" income (defined in Section 951 of the Code to include passive income such as income from commodity-linked derivatives) as qualifying income, even if a foreign corporation, such as a Subsidiary, does not make a distribution of such income. If a distribution is made, such income will be treated as a dividend by the Fund to the extent that, under applicable provisions of the Code, there is a distribution out of the earnings and profits of the foreign corporation attributable to the distribution. The Fund anticipates that its respective Subsidiary will distribute the "Subpart F" income earned by such Subsidiary each year, which the Fund will treat as dividend income to the extent attributable to the earnings and profits of the foreign corporation and, therefore, as qualifying income to the Fund. Accordingly, the extent to which the Fund directly invests in commodities or commodity-linked derivatives may be limited by the Income Requirement and the Asset Diversification Test, which the Fund must continue to satisfy to maintain its status as a regulated investment company. The Fund also may be limited in its ability to sell its investments in commodities, commodity-linked derivatives, and certain ETFs or be forced to sell other investments to generate income due to the Income Requirement. If the Fund does not appropriately limit such investments or if such investments (or the income earned on such investments) were to be recharacterized for U.S. tax purposes, the Fund could fail to qualify as a regulated investment company. In lieu of potential disqualification, the Fund is permitted to pay a tax for certain failures to satisfy the Asset Diversification Test or Income Requirement, which, in general, are limited to those due to reasonable cause and not willful neglect.

 *Securities lending*. While securities are loaned out by the Fund, the Fund generally will receive from the borrower amounts equal to any dividends or interest paid on the borrowed securities. For federal income tax purposes, payments made "in lieu of" dividends are not considered dividend income. These distributions will neither qualify for the reduced rate of taxation for individuals on qualified dividends nor the 50% dividends-received deduction for corporations. Also, any foreign tax withheld on payments made "in lieu of" dividends or interest will not qualify for the pass-through of foreign tax credits to shareholders. Additionally, in the case of the Fund with a strategy of investing in tax-exempt securities, any payments made "in lieu of" tax-exempt interest will be considered taxable income to the Fund, and thus, to the investors, even though such interest may be tax-exempt when paid to the borrower.

*Investments in convertible securities*. Convertible debt is ordinarily treated as a "single property" consisting of a pure debt interest until conversion, after which the investment becomes an equity interest. If the security is issued at a premium (i.e., for cash in excess of the face amount payable on retirement), the creditor-holder may amortize the premium over the life of the bond. If the security is issued for cash at a price below its face amount, the creditor-holder must accrue original issue discount in income over the life of the debt. The creditor-holder's exercise of the conversion privilege is treated as a nontaxable event. Mandatorily convertible debt (e.g., an exchange-traded note or ETN issued in the form of an unsecured obligation that pays a return based on the performance of a specified market index, exchange currency, or commodity) is often, but not always, treated as a contract to buy or sell the reference property rather than debt. Similarly, convertible preferred stock with a mandatory conversion feature is ordinarily, but not always, treated as equity rather than debt. Dividends received generally are qualified dividend income and eligible for the corporate dividends-received deduction. In general, conversion of preferred stock for common stock of the same corporation is tax-free. Conversion of preferred stock for cash is a taxable redemption. Any redemption premium for preferred stock that is redeemable by the issuing company might be required to be amortized under original issue

discount principles. A change in the conversion ratio or conversion price of a convertible security on account of a dividend paid to the issuer's other shareholders may result in a deemed distribution of stock to the holders of the convertible security equal to the value of their increased interest in the equity of the issuer. Thus, an increase in the conversion ratio of a convertible security can be treated as a taxable distribution of stock to a holder of the convertible security (without a corresponding receipt of cash by the holder) before the holder has converted the security.

**Tax Certification and Backup Withholding**. Tax certification and backup withholding tax laws may require that you certify your tax information when you become an investor in the Fund. For U.S. citizens and resident aliens, this certification is made on IRS Form W-9. Under these laws, the Fund must withhold a portion of your taxable distributions and sales proceeds unless you:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;· provide your correct Social Security or taxpayer identification number,

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;· certify that this number is correct,

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;· certify that you are not subject to backup withholding, and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;· certify that you are a U.S. person (including a U.S. resident alien).

The Fund also must withhold if the IRS instructs it to do so. When withholding is required, the amount will be 24% of any distributions or proceeds paid. Backup withholding is not an additional tax. Any amounts withheld may be credited against the shareholder's U.S. federal income tax liability, provided the appropriate information is furnished to the IRS. Certain payees and payments are exempt from backup withholding and information reporting.

Non-U.S. investors have special U.S. tax certification requirements. See "Non-U.S. Investors – U.S. tax certification rules."

**Non-U.S. Investors.** Non-U.S. investors (shareholders who, as to the U.S., are nonresident alien individuals, foreign trusts or estates, foreign corporations, or foreign partnerships) may be subject to U.S. withholding and estate tax and are subject to special U.S. tax certification requirements. Non-U.S. investors should consult their tax advisors about the applicability of U.S. tax withholding and the use of the appropriate forms to certify their status.

*In general*. The U.S. imposes a flat 30% withholding tax (or a withholding tax at a lower treaty rate) on U.S. source dividends, including on income dividends paid to you by the Fund, subject to certain exemptions described below. However, notwithstanding such exemptions from U.S. withholding at the source, any dividends and distributions of income and capital gains, including the proceeds from the sale of your Fund shares, will be subject to backup withholding at a rate of 24% if you fail to properly certify that you are not a U.S. person.

*Capital gain dividends*. In general, capital gain dividends reported by the Fund to shareholders as paid from its net long-term capital gains, other than long-term capital gains realized on disposition of U.S. real property interests (see the discussion below), are not subject to U.S. withholding tax unless you are a nonresident alien individual present in the U.S. for a period or periods aggregating 183 days or more during the calendar year.

*Interest-related dividends and short-term capital gain dividends*. Generally, dividends reported by the Fund to shareholders as interest-related dividends and paid from its qualified net interest income from U.S. sources are not subject to U.S. withholding tax. "Qualified interest income" includes, in general, U.S. source (1) bank deposit interest, (2) short-term original discount, (3) interest (including original issue discount, market discount, or acquisition discount) on an obligation that is in registered form, unless it is earned on an obligation issued by a corporation or partnership in which the Fund is a 10-percent shareholder or is contingent interest, and (4) any interest-related dividend from another regulated investment company. Similarly, short-term capital gain dividends reported by the Fund to shareholders as paid from its net short-term capital gains, other than short-term capital gains realized on the disposition of certain U.S. real property interests (see the discussion below), are not subject to U.S. withholding tax unless you were a nonresident alien individual present in the U.S. for a period or periods aggregating 183 days or more during the calendar year. The Fund reserves the right to not report interest-related dividends or short-term capital gain dividends. Additionally, the Fund's reporting of interest-related dividends or short-term capital gain dividends may

not be passed through to shareholders by intermediaries who have assumed tax reporting responsibilities for this income in managed or omnibus accounts due to systems limitations or operational constraints.

*Net investment income from dividends on stock and foreign source interest income continue to be subject to withholding tax*. Ordinary dividends paid by the Fund to non-U.S. investors on the income earned on portfolio investments in (i) the stock of domestic and foreign corporations and (ii) the debt of foreign issuers continue to be subject to U.S. withholding tax.

*Income effectively connected with a U.S. trade or business*. If the income from the Fund is effectively connected with a U.S. trade or business carried on by a foreign shareholder, then ordinary income dividends, capital gain dividends and any gains realized upon the sale or redemption of shares of the Fund will be subject to U.S. federal income tax at the rates applicable to U.S. citizens or domestic corporations and require the filing of a nonresident U.S. income tax return.

*Investment in U.S. real property*. The Foreign Investment in Real Property Tax Act of 1980 ("FIRPTA") makes non-U.S. persons subject to U.S. tax on the disposition of a U.S. real property interest ("USRPI") as if he or she were a U.S. person. Such gain is sometimes referred to as FIRPTA gain. The Fund may invest in equity securities of corporations that invest in USRPI, including U.S. REITs, which may trigger FIRPTA gain to the Fund's non-U.S. shareholders.

The Code provides a look-through rule for distributions of FIRPTA gain when a RIC is classified as a qualified investment entity. A RIC will be classified as a qualified investment entity if, in general, 50% or more of the RIC's assets consist of interests in U.S. REITs and other U.S. real property holding corporations ("USRPHC"). If a RIC is a qualified investment entity and the non-U.S. shareholder owns more than 5% of a class of Fund shares at any time during the one-year period ending on the date of the FIRPTA distribution, the FIRPTA distribution to the non-U.S. shareholder is treated as gain from the disposition of a USRPI, causing the distribution to be subject to U.S. withholding tax at the applicable corporate income tax rate (unless reduced by future regulations), and requiring the non-U.S. shareholder to file a nonresident U.S. income tax return. In addition, even if the non-U.S. shareholder does not own more than 5% of a class of Fund shares, but the Fund is a qualified investment entity, the FIRPTA distribution will be taxable as ordinary dividends (rather than as a capital gain or short-term capital gain dividend) subject to withholding at 30% or lower treaty rate.

Because the Fund expects to invest less than 50% of its assets at all times, directly or indirectly, in U.S. real property interests, the Fund expects that neither gain on the sale or redemption of Fund shares nor Fund dividends and distributions would be subject to FIRPTA reporting and tax withholding.

*U.S. estate tax.* Transfers by gift of shares of the Fund by a foreign shareholder who is a nonresident alien individual will not be subject to U.S. federal gift tax. An individual who, at the time of death, is a non-U.S. shareholder will nevertheless be subject to U.S. federal estate tax with respect to Fund shares at the graduated rates applicable to U.S. citizens and residents, unless a treaty exemption applies. If a treaty exemption is available, a decedent's estate may nonetheless need to file a U.S. estate tax return to claim the exemption in order to obtain a U.S. federal transfer certificate. The transfer certificate will identify the property (i.e., Fund shares) as to which the U.S. federal estate tax lien has been released. In the absence of a treaty, there is a $13,000 statutory estate tax credit (equivalent to U.S. situs assets with a value of $60,000). For estates with U.S. situs assets of not more than $60,000, the Fund may accept, in lieu of a transfer certificate, an affidavit from an appropriate individual evidencing that decedent's U.S. situs assets are below this threshold amount.

*U.S. tax certification rules.* Special US tax certification requirements may apply to non-U.S. shareholders both to avoid U.S. backup withholding imposed at a rate of 24% and to obtain the benefits of any treaty between the U.S. and the shareholder's country of residence. In general, if you are a non-U.S. shareholder, you must provide a Form W-8 BEN (or other applicable Form W-8) to establish that you are not a U.S. person, to claim that you are the beneficial owner of the income and, if applicable, to claim a reduced rate of, or exemption from, withholding as a resident of a

country with which the U.S. has an income tax treaty. A Form W-8 BEN provided without a U.S. taxpayer identification number will remain in effect for a period beginning on the date signed and ending on the last day of the third succeeding calendar year unless an earlier change of circumstances makes the information on the form incorrect. Certain payees and payments are exempt from backup withholding.

The tax consequences to a non-U.S. shareholder entitled to claim the benefits of an applicable tax treaty may be different from those described herein. Non-US shareholders are urged to consult their own tax advisors with respect to the particular tax consequences to them of an investment in the Fund, including the applicability of foreign tax.

*Foreign Account Tax Compliance Act (FATCA).* Under FATCA, the Fund will be required to withhold a 30% tax on income dividends made by the Fund to certain foreign entities, referred to as foreign financial institutions ("FFI") or non-financial foreign entities ("NFFE"). After December 31, 2018, FATCA withholding also would have applied to certain capital gain distributions, return of capital distributions and the proceeds arising from the sale of Fund shares; however, based on proposed regulations issued by the IRS, which can be relied upon currently, such withholding is no longer required unless final regulations provide otherwise (which is not expected). The FATCA withholding tax generally can be avoided: (a) by an FFI, if it reports certain direct and indirect ownership of foreign financial accounts held by U.S. persons with the FFI and (b) by an NFFE, if it: (i) certifies that it has no substantial U.S. persons as owners or (ii) if it does have such owners, reporting information relating to them. The U.S. Treasury has negotiated intergovernmental agreements (IGA) with certain countries and is in various stages of negotiations with a number of other foreign countries with respect to one or more alternative approaches to implement FATCA.

An FFI can avoid FATCA withholding if it is deemed compliant or by becoming a "participating FFI," which requires the FFI to enter into a U.S. tax compliance agreement with the IRS under section 1471(b) of the Code (FFI agreement) under which it agrees to verify, report and disclose certain of its U.S. accountholders and meet certain other specified requirements. The FFI will either report the specified information about the U.S. accounts to the IRS, or, to the government of the FFI's country of residence (pursuant to the terms and conditions of applicable law and an applicable IGA entered into between the U.S. and the FFI's country of residence), which will, in turn, report the specified information to the IRS. An FFI that is resident in a country that has entered into an IGA with the U.S. to implement FATCA will be exempt from FATCA withholding provided that the FFI shareholder and the applicable foreign government comply with the terms of such agreement.

An NFFE that is the beneficial owner of a payment from the Fund can avoid the FATCA withholding tax generally by certifying that it does not have any substantial U.S. owners or by providing the name, address and taxpayer identification number of each substantial U.S. owner. The NFFE will report the information to the Fund or other applicable withholding agent, which will, in turn, report the information to the IRS.

Such foreign shareholders also may fall into certain exempt, excepted or deemed compliant categories as established by U.S. Treasury regulations, IGAs, and other guidance regarding FATCA. An FFI or NFFE that invests in the Fund will need to provide the Fund with documentation properly certifying the entity's status under FATCA in order to avoid FATCA withholding. Non-U.S. investors should consult their own tax advisors regarding the impact of these requirements on their investment in the Fund. The requirements imposed by FATCA are different from, and in addition to, the U.S. tax certification rules to avoid backup withholding described above. Shareholders are urged to consult their tax advisors regarding the application of these requirements to their own situation.

*U.S. estate tax*. Transfers by gift of shares of the Fund by a foreign shareholder who is a nonresident alien individual will not be subject to U.S. federal gift tax. An individual who, at the time of death, is a foreign shareholder will nevertheless be subject to U.S. federal estate tax with respect to shares at the graduated rates applicable to U.S. citizens and residents, unless a treaty exemption applies. If a treaty exemption is available, a decedent's estate may nonetheless need to file a U.S. estate tax return to claim the exemption in order to obtain a U.S. federal transfer certificate. The transfer certificate will identify the property (i.e., Fund shares) as to which the U.S. federal estate tax lien has been released. In the absence of a treaty, there is a $13,000 statutory estate tax credit (equivalent to an estate with assets of $60,000).

**Local Tax Considerations**. Rules of state and local taxation of ordinary income, qualified dividend income and capital gain dividends may differ from the rules for U.S. federal income taxation described above. Distributions may also be subject to additional state, local and foreign taxes depending on each shareholder's particular situation.

**PERFORMANCE INFORMATION**

From time to time the Trust may advertise the performance of one or more of the Fund. All data is based on past performance and is not intended to indicate future results. Performance of Institutional Shares, as compared to Class A Shares or Class C Shares, will normally be higher because Class A Shares and Class C Shares are subject to distribution (12b-1) fees.

Generally, the Fund will advertise average annual total returns.

In accordance with SEC guidelines, the average annual total return for each class of Shares is calculated according to the following formula: where p = a hypothetical initial of $1,000; n = number of years; and ERV = ending redeemable value of the hypothetical $1,000 investment after the investment period.

P(1 + T)<sup>n</sup> = ERV

If the Fund discloses its yield, in accordance with SEC guidelines, the yield for each class of Shares of the Fund is computed by dividing the net investment income per Share earned during the period by the maximum offering price per Share on the last day of the period, according to the following formula:

a - b

Yield = 2[(— +1)<sup>6</sup> - 1]

cd

Where a = dividends and interest earned during the period; b = expenses accrued for the period (net of reimbursements); c = the average daily number of shares outstanding during the period that were entitled to receive dividends; and d = the maximum offering price per share on the last day of the period.

If the Fund discloses its tax-equivalent yield, in accordance with SEC guidelines, such yield for each class of the Fund is computed by dividing the portion of the yield that is tax-exempt by 1 minus a stated income tax rate and adding the quotient to that portion, if any, of the yield that is not tax-exempt.

**FINANCIAL STATEMENTS** 

The audited financial statements of the Fund and the independent registered public accounting firm's report appearing in the [Financial Statements](https://www.sec.gov/ix?doc=/Archives/edgar/data/810695/000158064225001637/rational-ncsr.htm) for the fiscal year ended December 31, 2024, and the unaudited financial statements in the Fund's Semi-Annual Report for the six month period ended June 30, 2025 are incorporated herein by reference. You can obtain the Financial Statements without charge by calling the Fund at 1-800-253-0412.

 **APPENDIX A**

**INVESTMENT RATINGS**

**A.M. BEST** 

**LONG-TERM DEBT RATINGS**

**Investment Grade**

**Aaa:** Exceptional

**aa:** Very Strong

**a:** Strong

**bbb:** Adequate

**Non-Investment Grade**

**Bb:** Speculative

**b:** Very Speculative

**ccc**, **cc**, **c:** Extremely Speculative

**d:** In Default

**SHORT-TERM DEBT RATINGS**

**Investment Grade** 

**AMB-1+**: Strongest

**AMB-1**: Outstanding

**AMB-2**: Satisfactory

**AMB-3:** Adequate

**Non-Investment Grade**

**AMB-4:** Speculative

**D**: In Default

**FITCH**

**LONG-TERM DEBT RATINGS**

**Investment grade**

**AAA**: the best quality companies, reliable and stable

**AA**: quality companies, a bit higher risk than AAA

**A**: economic situation can affect finance

**BBB**: medium class companies, which are satisfactory at the moment

**Non-investment grade**

**BB**: more prone to changes in the economy

**B**: financial situation varies noticeably

**CCC**: currently vulnerable and dependent on favorable economic conditions to meet its commitments

**CC**: highly vulnerable, very speculative bonds

**C**: highly vulnerable, perhaps in bankruptcy or in arrears but still continuing to pay out on obligations

**D**: has defaulted on obligations and Fitch believes that it will generally default on most or all obligations

**NR**: not publicly rated

**SHORT-TERM DEBT RATINGS**

Fitch's short-term ratings indicate the potential level of default within a 12-month period.

**F1+** : best quality grade, indicating exceptionally strong capacity of obligor to meet its financial commitment

**F1**: best quality grade, indicating strong capacity of obligor to meet its financial commitment

**F2**: good quality grade with satisfactory capacity of obligor to meet its financial commitment

**F3**: fair quality grade with adequate capacity of obligor to meet its financial commitment but near-term adverse conditions could impact the obligor's commitments

**B**: of speculative nature and obligor has minimal capacity to meet its commitment and vulnerability to short term adverse changes in financial and economic conditions

**C**: possibility of default is high and the financial commitment of the obligor are dependent upon sustained, favorable business and economic conditions

**D**: the obligor is in default as it has failed on its financial commitments.

Fitch also uses intermediate +/- modifiers for each category between AA and CCC (e.g., AA+, AA, AA-, A+, A, A-, BBB+, BBB, BBB-, etc.).

**MOODY'S**

**GLOBAL LONG-TERM RATING SCALE**

**Aaa:** Obligations rated Aaa are judged to be of the highest quality, subject to the lowest level of credit risk.

**Aa:** Obligations rated Aa are judged to be of high quality and are subject to very low credit risk.

**A:** Obligations rated A are judged to be upper-medium grade and are subject to low credit risk.

**Baa:** Obligations rated Baa are judged to be medium-grade and subject to moderate credit risk and as such may possess certain speculative characteristics.

**Ba:** Obligations rated Ba are judged to be speculative and are subject to substantial credit risk.

**B:** Obligations rated B are considered speculative and are subject to high credit risk.

**Caa:** Obligations rated Caa are judged to be speculative of poor standing and are subject to very high credit risk.

**Ca:** Obligations rated Ca are highly speculative and are likely in, or very near, default, with some prospect of recovery of principal and interest.

**C:** Obligations rated C are the lowest rated and are typically in default, with little prospect for recovery of principal or interest.

Moody's appends numerical modifiers 1, 2, and 3 to each generic rating classification from Aa through Caa. The modifier 1 indicates that the obligation ranks in the higher end of its generic rating category; the modifier 2 indicates a mid-range ranking; and the modifier 3 indicates a ranking in the lower end of that generic rating category. Additionally, a "(hyb)" indicator is appended to all ratings of hybrid securities issued by banks, insurers, finance companies, and securities firms.

Moody's differentiates structured finance ratings from fundamental ratings (i.e., ratings on nonfinancial corporate, financial institution, and public sector entities) on the global long-term scale by adding (sf) to all structured finance ratings. The (sf) indicator was introduced on August 11, 2010 and explained in a special comment entitled, "Moody's Structured Finance Rating Scale." The addition of (sf) to structured finance ratings should eliminate any presumption that such ratings and fundamental ratings at the same letter grade level will behave the same. The (sf) indicator for structured finance security ratings indicates that otherwise similarly rated structured finance and fundamental securities may have different risk characteristics.

**GLOBAL SHORT-TERM RATING SCALE**

**P-1 Issuers (or supporting institutions) rated Prime-1:** have a superior ability to repay short-term debt obligations.

**P-2 Issuers (or supporting institutions) rated Prime-2:** have a strong ability to repay short-term debt obligations.

**P-3 Issuers (or supporting institutions) rated Prime-3:** have an acceptable ability to repay short-term obligations.

**NP Issuers (or supporting institutions) rated Not Prime:** do not fall within any of the Prime rating categories.

**US MUNICIPAL SHORT-TERM DEBT OBLIGATION RATINGS**

**MIG 1**: This designation denotes superior credit quality. Excellent protection is afforded by established cash flows, highly reliable liquidity support, or demonstrated broad-based access to the market for refinancing.

**MIG 2:** This designation denotes strong credit quality. Margins of protection are ample, although not as large as in the preceding group.

**MIG 3**: This designation denotes acceptable credit quality. Liquidity and cash-flow protection may be narrow, and market access for refinancing is likely to be less well-established. SG This designation denotes speculative-grade credit quality. Debt instruments in this category may lack sufficient margins of protection.

**STANDARD AND POORS** 

**AAA:** An obligation rated 'AAA' has the highest rating assigned by Standard & Poor's. The obligor's capacity to meet its financial commitment on the obligation is extremely strong.

**AA:** An obligation rated 'AA' differs from the highest-rated obligations only to a small degree. The obligor's capacity to meet its financial commitment on the obligation is very strong.

**A:** An obligation rated 'A' is somewhat more susceptible to the adverse effects of changes in circumstances and economic conditions than obligations in higher-rated categories. However, the obligor's capacity to meet its financial commitment on the obligation is still strong.

**BBB:** An obligation rated 'BBB' exhibits adequate protection parameters. However, adverse economic conditions or changing circumstances are more likely to lead to a weakened capacity of the obligor to meet its financial commitment on the obligation.

**BB; B; CCC;CC; and C**

Obligations rated 'BB', 'B', 'CCC', 'CC', and 'C' are regarded as having significant speculative characteristics. 'BB' indicates the least degree of speculation and 'C' the highest. While such obligations will likely have some quality and protective characteristics, these may be outweighed by large uncertainties or major exposures to adverse conditions.

**BB:** An obligation rated 'BB' is less vulnerable to nonpayment than other speculative issues. However, it faces major ongoing uncertainties or exposure to adverse business, financial, or economic conditions which could lead to the obligor's inadequate capacity to meet its financial commitment on the obligation.

**B:** An obligation rated 'B' is more vulnerable to nonpayment than obligations rated 'BB', but the obligor currently has the capacity to meet its financial commitment on the obligation. Adverse business, financial, or economic conditions will likely impair the obligor's capacity or willingness to meet its financial commitment on the obligation.

**CCC:** An obligation rated 'CCC' is currently vulnerable to nonpayment, and is dependent upon favorable business, financial, and economic conditions for the obligor to meet its financial commitment on the obligation. In the event of adverse business, financial, or economic conditions, the obligor is not likely to have the capacity to meet its financial commitment on the obligation.

**CC** An obligation rated 'CC' is currently highly vulnerable to nonpayment.

**C:** A 'C' rating is assigned to obligations that are currently highly vulnerable to nonpayment, obligations that have payment arrearages allowed by the terms of the documents, or obligations of an issuer that is the subject of a bankruptcy petition or similar action which have not experienced a payment default. Among others, the 'C' rating may be assigned to subordinated debt, preferred stock or other obligations on which cash payments have been suspended in accordance with the instrument's terms or when preferred stock is the subject of a distressed exchange offer, whereby some or all of the issue is either repurchased for an amount of cash or replaced by other instruments having a total value that is less than par.

**D:** An obligation rated 'D' is in payment default. The 'D' rating category is used when payments on an obligation are not made on the date due, unless Standard & Poor's believes that such payments will be made within five business days, irrespective of any grace period. The 'D' rating also will be used upon the filing of a bankruptcy petition or the taking of similar action if payments on an obligation are jeopardized. An obligation's rating is lowered to 'D' upon completion of a distressed exchange offer, whereby some or all of the issue is either repurchased for an amount of cash or replaced by other instruments having a total value that is less than par.

**NR:** This indicates that no rating has been requested, that there is insufficient information on which to base a rating, or that Standard & Poor's does not rate a particular obligation as a matter of policy.

\*The ratings from 'AA' to 'CCC' may be modified by the addition of a plus (+) or minus (-) sign to show relative standing within the major rating categories.

**APPENDIX B** 

**RATIONAL ADVISORS, INC.**

**PROXY VOTING POLICIES AND PROCEDURES**

Pursuant to the recent adoption by the Securities and Exchange Commission (the "Commission") of Rule 206(4)-6 (17 CFR 275.206(4)-6) and amendments to Rule 204-2 (17 CFR 275.204-2) under the Investment Advisors Act of 1940 (the "Act"), it is a fraudulent, deceptive, or manipulative act, practice or course of business, within the meaning of Section 206(4) of the Act, for an investment advisor to exercise voting authority with respect to client securities, unless (i) the advisor has adopted and implemented written policies and procedures that are reasonably designed to ensure that the advisor votes proxies in the best interests of its clients, (ii) the advisor describes its proxy voting procedures to its clients and provides copies on request, and (iii) the advisor discloses to clients how they may obtain information on how the advisor voted their proxies.

Day-to-day administration of proxy voting may be provided internally or by a third-party service provider, depending on client type, subject to the ultimate oversight of the Advisor. The Advisor shall supervise the relationships with its proxy voting services, ISS. ISS apprises the Advisor of shareholder meeting dates, and casts the actual proxy votes. ISS also provides research on proxy proposals and voting recommendations. ISS serves as the Advisor's proxy voting record keepers and generate reports on how proxies were voted. The Advisor periodically reviews communications from ISS to determine whether ISS voted the correct amount of proxies, whether the votes were cast in a timely manner, and whether the vote was in accordance with the Policies or the Advisor's specific instructions.

In order to fulfill its responsibilities under the Act, Rational Advisors, Inc. (hereinafter "we" or "our") has adopted the following policies and procedures for proxy voting with regard to companies in investment portfolios of our clients.

**<u>KEY OBJECTIVES</u>**

The key objectives of these policies and procedures recognize that a company's management is entrusted with the day-to-day operations and longer term strategic planning of the company, subject to the oversight of the company's board of directors. While "ordinary business matters" are primarily the responsibility of management and should be approved solely by the corporation's board of directors, these objectives also recognize that the company's shareholders must have final say over how management and directors are performing, and how shareholders' rights and ownership interests are handled, especially when matters could have substantial economic implications to the shareholders.

Therefore, we will pay particular attention to the following matters in exercising our proxy voting responsibilities as a fiduciary for our clients:

*Accountability*. Each company should have effective means in place to hold those entrusted with running a company's business accountable for their actions. Management of a company should be accountable to its board of directors and the board should be accountable to shareholders.

*Alignment of Management and Shareholder Interests*. Each company should endeavor to align the interests of management and the board of directors with the interests of the company's shareholders. For example, we

generally believe that compensation should be designed to reward management for doing a good job of creating value for the shareholders of the company.

*Transparency*. Promotion of timely disclosure of important information about a company's business operations and financial performance enables investors to evaluate the performance of a company and to make informed decisions about the purchase and sale of a company's securities.

*Climate Change:*

**<u>Say on Climate (SoC) Management Proposals</u>**: Vote case-by-case on management proposals that request shareholders to approve the company's climate transition action plan, taking into account the completeness and rigor of the plan. Information that will be considered where available includes the following:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;· The extent to which the company's climate related disclosures are in line with TCFD recommendations
and meet other market standards;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;· Disclosure of its operational and supply chain GHG emissions (Scopes 1, 2, and 3);

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;· The completeness and rigor of company's short-, medium-, and long-term targets for reducing operational
and supply chain GHG emissions (Scopes 1, 2, and 3 if relevant);

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;· Whether the company has sought and received third-party approval that its targets are science-based;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;· Whether the company has made a commitment to be "net zero" for operational and supply chain
emissions (Scopes 1, 2, and 3) by 2050;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;· Whether the company discloses a commitment to report on the implementation of its plan in subsequent
years;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;· Whether the company's climate data has received third-party assurance;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;· Disclosure of how the company's lobbying activities and its capital expenditures align with company
strategy;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;· Whether there are specific industry decarbonization challenges; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;· The company's related commitment, disclosure, and performance compared to its industry peers.

**<u>Say on Climate (SoC) Shareholder Proposals</u>**: Vote case-by-case on shareholder proposals that request the company to disclose a report providing its GHG emissions levels and reduction targets and/or its upcoming/approved climate transition action plan and provide shareholders the opportunity to express approval or disapproval of its GHG emissions reduction plan. taking into account information such as the following:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;· The completeness and rigor of the company's climate-related disclosure;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;· The company's actual GHG emissions performance;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;· Whether the company has been the subject of recent, significant violations, fines, litigation, or controversy
related to its GHG emissions; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;· Whether the proposal's request is unduly burdensome (scope or timeframe) or overly prescriptive.

**<u>Climate Change/Greenhouse Gas (GHG) Emissions:</u>** Generally vote for resolutions requesting that a company disclose information on the financial, physical, or regulatory risks it faces related to climate change on its operations and investments or on how the company identifies, measures, and manages such risks, considering:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;· Whether the company already provides current, publicly-available information on the impact that climate
change may have on the company as well as associated company policies and procedures to address related risks and/or opportunities; ▪

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;· The company's level of disclosure compared to industry peers; and ▪

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;· Whether there are significant controversies, fines, penalties, or litigation associated with the company's
climate change-related performance.

Generally vote for proposals requesting a report on greenhouse gas (GHG) emissions from company operations and/or products and operations, unless:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;· The company already discloses current, publicly-available information on the impacts that GHG emissions
may have on the company as well as associated company policies and procedures to address related risks and/or opportunities; ▪ The
company's level of disclosure is comparable to that of industry peers; and ▪

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;· There are no significant, controversies, fines, penalties, or litigation associated with the company's
GHG emissions.

Vote case-by-case on proposals that call for the adoption of GHG reduction goals from products and operations, taking into account:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;· Whether the company provides disclosure of year-over-year GHG emissions performance data;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;· Whether company disclosure lags behind industry peers;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;· The company's actual GHG emissions performance

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;· The company's current GHG emission policies, oversight mechanisms, and related initiatives; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;· Whether the company has been the subject of recent, significant violations, fines, litigation, or controversy
related to GHG emissions.

**<u>Energy Efficiency:</u>** Generally vote for proposals requesting that a company report on its energy efficiency policies, unless:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;· The company complies with applicable energy efficiency regulations and laws, and discloses its participation
in energy efficiency policies and programs, including disclosure of benchmark data, targets, and performance measures; or

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;· The proponent requests adoption of specific energy efficiency goals within specific timelines.

**<u>Renewable Energy:</u>** Generally vote for requests for reports on the feasibility of developing renewable energy resources unless the report would be duplicative of existing disclosure or irrelevant to the company's line of business.

Generally vote against proposals requesting that the company invest in renewable energy resources. Such decisions are best left to management's evaluation of the feasibility and financial impact that such programs may have on the company.

Generally vote against proposals that call for the adoption of renewable energy goals, taking into account:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;· The scope and structure of the proposal;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;· The company's current level of disclosure on renewable energy use and GHG
emissions; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;· The company's disclosure of policies, practices, and oversight implemented
to manage GHG emissions and mitigate climate change risks.

**<u>DECISION METHODS</u>**

No set of proxy voting guidelines can anticipate all situations that may arise. In special cases, we may seek insight from our managers and analysts on how a particular proxy proposal may impact the financial prospects of a company, and vote accordingly.

We believe that we invest in companies with strong management. Therefore we will tend to vote proxies consistent with management's recommendations. However, we will vote contrary to management's recommendations if we believe those recommendations are not consistent with increasing shareholder value.

**<u>SUMMARY OF PROXY VOTING GUIDELINES</u>**

**Election of the Board of Directors**

We believe that good corporate governance generally starts with a board composed primarily of independent directors, unfettered by significant ties to management, all of whose members are elected annually. We also believe that turnover in board composition promotes independent board action, fresh approaches to governance, and generally has a positive impact on shareholder value. We will generally vote in favor of non-incumbent independent directors.

The election of a company's board of directors is one of the most fundamental rights held by shareholders. Because a classified board structure prevents shareholders from electing a full slate of directors annually, we will generally support efforts to declassify boards or other measures that permit shareholders to remove a majority of directors at any time, and will generally oppose efforts to adopt classified board structures.

**Approval of Independent Auditors**

We believe that the relationship between a company and its auditors should be limited primarily to the audit engagement, although it may include certain closely related activities that do not raise an appearance of impaired independence.

We will evaluate on a case-by-case basis instances in which the audit firm has a substantial non-audit relationship with a company to determine whether we believe independence has been, or could be, compromised.

**Equity-based compensation plans**

We believe that appropriately designed equity-based compensation plans, approved by shareholders, can be an effective way to align the interests of shareholders and the interests of directors, management, and employees by providing incentives to increase shareholder value. Conversely, we are opposed to plans that substantially dilute ownership interests in the company, provide participants with excessive awards, or have inherently objectionable structural features.

We will generally support measures intended to increase stock ownership by executives and the use of employee stock purchase plans to increase company stock ownership by employees. These may include:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1. Requiring senior executives to hold stock in a company.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2. Requiring stock acquired through option exercise to be held for a certain period of time.

These are guidelines, and we consider other factors, such as the nature of the industry and size of the company, when assessing a plan's impact on ownership interests.

**Corporate Structure** 

We view the exercise of shareholders' rights, including the rights to act by written consent, to call special meetings and to remove directors, to be fundamental to good corporate governance.

Because classes of common stock with unequal voting rights limit the rights of certain shareholders, we generally believe that shareholders should have voting power equal to their equity interest in the company and should be able to approve or reject changes to a company's by-laws by a simple majority vote.

We will generally support the ability of shareholders to cumulate their votes for the election of directors.

![(COVER PAGE)](af001_v1.jpg)

**TABLE OF CONTENTS**

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| | | |
|:---|:---|:---|
| Coverage | Coverage | 9 |
| **1.** | Board of Directors | 10 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Voting on Director Nominees in Uncontested Elections | &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Voting on Director Nominees in Uncontested Elections | 10 |
|  | Independence | 10 |
|  | &nbsp;&nbsp;&nbsp;ISS Classification of Directors – U.S. | 11 |
|  | Composition | 13 |
|  | &nbsp;&nbsp;&nbsp;Attendance | 13 |
|  | &nbsp;&nbsp;&nbsp;Overboarded Directors | 13 |
|  | &nbsp;&nbsp;&nbsp;Gender Diversity | 13 |
|  | &nbsp;&nbsp;&nbsp;Racial and/or Ethnic Diversity | 13 |
|  | Responsiveness | 14 |
|  | Accountability | 14 |
|  | &nbsp;&nbsp;&nbsp;Poison Pills | 14 |
|  | &nbsp;&nbsp;&nbsp;Unequal Voting Rights | 15 |
|  | &nbsp;&nbsp;&nbsp;Classified Board Structure | 15 |
|  | &nbsp;&nbsp;&nbsp;Removal of Shareholder Discretion on Classified Boards | 15 |
|  | &nbsp;&nbsp;&nbsp;Problematic Governance Structure | 15 |
|  | &nbsp;&nbsp;&nbsp;Unilateral Bylaw/Charter Amendments | 16 |
|  | &nbsp;&nbsp;&nbsp;Restricting Binding Shareholder Proposals | 16 |
|  | &nbsp;&nbsp;&nbsp;Director Performance Evaluation | 16 |
|  | &nbsp;&nbsp;&nbsp;Management Proposals to Ratify Existing Charter or Bylaw Provisions | 17 |
|  | &nbsp;&nbsp;&nbsp;Problematic Audit-Related Practices | 17 |
|  | &nbsp;&nbsp;&nbsp;Problematic Compensation Practices | 17 |
|  | &nbsp;&nbsp;&nbsp;Problematic Pledging of Company Stock | 18 |
|  | &nbsp;&nbsp;&nbsp;Climate Accountability | 18 |
|  | &nbsp;&nbsp;&nbsp;Governance Failures | 18 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Voting on Director Nominees in Contested Elections | &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Voting on Director Nominees in Contested Elections | 19 |
|  | Vote-No Campaigns | 19 |
|  | Proxy Contests/Proxy Access | 19 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Other Board-Related Proposals | &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Other Board-Related Proposals | 19 |
|  | Adopt Anti-Hedging/Pledging/Speculative Investments Policy | 19 |
|  | Board Refreshment | 19 |
|  | &nbsp;&nbsp;&nbsp;Term/Tenure Limits | 20 |
|  | &nbsp;&nbsp;&nbsp;Age Limits | 20 |
|  | Board Size | 20 |
|  | Classification/Declassification of the Board | 20 |
|  | CEO Succession Planning | 20 |

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| | | |
|:---|:---|:---|
|  | Cumulative Voting | 20.0 |
|  | Director and Officer Indemnification, Liability Protection, and Exculpation | 21.0 |
|  | Establish/Amend Nominee Qualifications | 21.0 |
|  | Establish Other Board Committee Proposals | 22.0 |
|  | Filling Vacancies/Removal of Directors | 22.0 |
|  | Independent Board Chair | 22.0 |
|  | Majority of Independent Directors/Establishment of Independent Committees | 23.0 |
|  | Majority Vote Standard for the Election of Directors | 23.0 |
|  | Proxy Access | 23.0 |
|  | Require More Nominees than Open Seats | 23.0 |
|  | Shareholder Engagement Policy (Shareholder Advisory Committee) | 24.0 |
| **2.** | Audit-Related | 25.0 |
|  | Auditor Indemnification and Limitation of Liability | 25.0 |
|  | Auditor Ratification | 25.0 |
|  | Shareholder Proposals Limiting Non-Audit Services | 25.0 |
|  | Shareholder Proposals on Audit Firm Rotation | 26.0 |
| **3.** | Shareholder Rights & Defenses | 27.0 |
|  | Advance Notice Requirements for Shareholder Proposals/Nominations | 27.0 |
|  | Amend Bylaws without Shareholder Consent | 27.0 |
|  | Control Share Acquisition Provisions | 27.0 |
|  | Control Share Cash-Out Provisions | 27.0 |
|  | Disgorgement Provisions | 28.0 |
|  | Fair Price Provisions | 28.0 |
|  | Freeze-Out Provisions | 28.0 |
|  | Greenmail | 28.0 |
|  | Shareholder Litigation Rights | 28.0 |
|  | &nbsp;&nbsp;&nbsp;Federal Forum Selection Provisions | 28.0 |
|  | &nbsp;&nbsp;&nbsp;Exclusive Forum Provisions for State Law Matters | 29.0 |
|  | &nbsp;&nbsp;&nbsp;Fee shifting | 29.0 |
|  | Net Operating Loss (NOL) Protective Amendments | 30.0 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Poison Pills (Shareholder Rights Plans) | &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Poison Pills (Shareholder Rights Plans) | 30.0 |
|  | Shareholder Proposals to Put Pill to a Vote and/or Adopt a Pill Policy | 30.0 |
|  | Management Proposals to Ratify a Poison Pill | 30.0 |
|  | Management Proposals to Ratify a Pill to Preserve Net Operating Losses (NOLs) | 31.0 |
|  | Proxy Voting Disclosure, Confidentiality, and Tabulation | 31.0 |
|  | Ratification Proposals: Management Proposals to Ratify Existing Charter or Bylaw Provisions | 31.0 |
|  | Reimbursing Proxy Solicitation Expenses | 32.0 |
|  | Reincorporation Proposals | 32.0 |
|  | Shareholder Ability to Act by Written Consent | 32.0 |
|  | Shareholder Ability to Call Special Meetings | 33.0 |
|  | Stakeholder Provisions | 33.0 |

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| | | |
|:---|:---|:---|
|  | State Antitakeover Statutes | 33.0 |
|  | Supermajority Vote Requirements | 33.0 |
|  | Virtual Shareholder Meetings | 34.0 |
| **4.** | Capital/Restructuring | 35.0 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Capital | &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Capital | 35.0 |
|  | Adjustments to Par Value of Common Stock | 35.0 |
|  | Common Stock Authorization | 35.0 |
|  | &nbsp;&nbsp;&nbsp;General Authorization Requests | 35.0 |
|  | &nbsp;&nbsp;&nbsp;Specific Authorization Requests | 36.0 |
|  | Dual Class Structure | 36.0 |
|  | Issue Stock for Use with Rights Plan | 36.0 |
|  | Preemptive Rights | 36.0 |
|  | Preferred Stock Authorization | 36.0 |
|  | &nbsp;&nbsp;&nbsp;General Authorization Requests | 36.0 |
|  | Recapitalization Plans | 38.0 |
|  | Reverse Stock Splits | 38.0 |
|  | Share Issuance Mandates at U.S. Domestic Issuers Incorporated Outside the U.S. | 38.0 |
|  | Share Repurchase Programs | 39.0 |
|  | Share Repurchase Programs Shareholder Proposals | 39.0 |
|  | Stock Distributions: Splits and Dividends | 39.0 |
|  | Tracking Stock | 39.0 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Restructuring | &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Restructuring | 39.0 |
|  | Appraisal Rights | 39.0 |
|  | Asset Purchases | 40.0 |
|  | Asset Sales | 40.0 |
|  | Bundled Proposals | 40.0 |
|  | Conversion of Securities | 40.0 |
|  | Corporate Reorganization/Debt Restructuring/Prepackaged Bankruptcy Plans/Reverse Leveraged Buyouts/Wrap Plans | 40.0 |
|  | Formation of Holding Company | 41.0 |
|  | Going Private and Going Dark Transactions (LBOs and Minority Squeeze-outs) | 41.0 |
|  | Joint Ventures | 42.0 |
|  | Liquidations | 42.0 |
|  | Mergers and Acquisitions | 42.0 |
|  | Private Placements/Warrants/Convertible Debentures | 43.0 |
|  | Reorganization/Restructuring Plan (Bankruptcy) | 44.0 |
|  | Special Purpose Acquisition Corporations (SPACs) | 44.0 |
|  | Special Purpose Acquisition Corporations (SPACs) - Proposals for Extensions | 45.0 |
|  | Spin-offs | 45.0 |
|  | Value Maximization Shareholder Proposals | 45.0 |

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| | | |
|:---|:---|:---|
| **5.** | Compensation | 46.0 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Executive Pay Evaluation | &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Executive Pay Evaluation | 46.0 |
|  | Advisory Votes on Executive Compensation—Management Proposals (Say-on-Pay) | 46.0 |
|  | &nbsp;&nbsp;&nbsp;Pay-for-Performance Evaluation | 47.0 |
|  | &nbsp;&nbsp;&nbsp;Problematic Pay Practices | 48.0 |
|  | &nbsp;&nbsp;&nbsp;Compensation Committee Communications and Responsiveness | 49.0 |
|  | Frequency of Advisory Vote on Executive Compensation ("Say When on Pay") | 49.0 |
|  | Voting on Golden Parachutes in an Acquisition, Merger, Consolidation, or Proposed Sale | 49.0 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Equity-Based and Other Incentive Plans | &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Equity-Based and Other Incentive Plans | 50.0 |
|  | &nbsp;&nbsp;&nbsp;Shareholder Value Transfer (SVT) | 51.0 |
|  | &nbsp;&nbsp;&nbsp;Three-Year Value-Adjusted Burn Rate | 51.0 |
|  | Egregious Factors | 51.0 |
|  | &nbsp;&nbsp;&nbsp;Liberal Change in Control Definition | 51.0 |
|  | &nbsp;&nbsp;&nbsp;Repricing Provisions | 52.0 |
|  | &nbsp;&nbsp;&nbsp;Problematic Pay Practices or Significant Pay-for-Performance Disconnect | 52.0 |
|  | Amending Cash and Equity Plans (including Approval for Tax Deductibility (162(m)) | 52.0 |
|  | Specific Treatment of Certain Award Types in Equity Plan Evaluations | 53.0 |
|  | &nbsp;&nbsp;&nbsp;Dividend Equivalent Rights | 53.0 |
|  | &nbsp;&nbsp;&nbsp;Operating Partnership (OP) Units in Equity Plan Analysis of Real Estate Investment Trusts (REITs) | 53.0 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Other Compensation Plans | &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Other Compensation Plans | 53.0 |
|  | 401(k) Employee Benefit Plans | 53.0 |
|  | Employee Stock Ownership Plans (ESOPs) | 54.0 |
|  | Employee Stock Purchase Plans—Qualified Plans | 54.0 |
|  | Employee Stock Purchase Plans—Non-Qualified Plans | 54.0 |
|  | Option Exchange Programs/Repricing Options | 54.0 |
|  | Stock Plans in Lieu of Cash | 55.0 |
|  | Transfer Stock Option (TSO) Programs | 55.0 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Director Compensation | &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Director Compensation | 56.0 |
|  | Shareholder Ratification of Director Pay Programs | 56.0 |
|  | Equity Plans for Non-Employee Directors | 56.0 |
|  | Non-Employee Director Retirement Plans | 57.0 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Shareholder Proposals on Compensation | &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Shareholder Proposals on Compensation | 57.0 |
|  | Bonus Banking/Bonus Banking "Plus" | 57.0 |
|  | Compensation Consultants—Disclosure of Board or Company's Utilization | 57.0 |
|  | Disclosure/Setting Levels or Types of Compensation for Executives and Directors | 57.0 |
|  | Golden Coffins/Executive Death Benefits | 58.0 |
|  | Hold Equity Past Retirement or for a Significant Period of Time | 58.0 |
|  | Pay Disparity | 58.0 |
|  | Pay for Performance/Performance-Based Awards | 58.0 |

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| | | |
|:---|:---|:---|
|  | Pay for Superior Performance | 59.0 |
|  | Pre-Arranged Trading Plans (10b5-1 Plans) | 59.0 |
|  | Prohibit Outside CEOs from Serving on Compensation Committees | 60.0 |
|  | Recoupment of Incentive or Stock Compensation in Specified Circumstances | 60.0 |
|  | Severance Agreements for Executives/Golden Parachutes | 60.0 |
|  | Share Buyback Impact on Incentive Program Metrics | 61.0 |
|  | Supplemental Executive Retirement Plans (SERPs) | 61.0 |
|  | Tax Gross-Up Proposals | 61.0 |
|  | Termination of Employment Prior to Severance Payment/Eliminating Accelerated Vesting of Unvested Equity | 61.0 |
| **6.** | Routine/Miscellaneous | 62.0 |
|  | Adjourn Meeting | 62.0 |
|  | Amend Quorum Requirements | 62.0 |
|  | Amend Minor Bylaws | 62.0 |
|  | Change Company Name | 62.0 |
|  | Change Date, Time, or Location of Annual Meeting | 62.0 |
|  | Other Business | 63.0 |
| **7.** | Social and Environmental Issues | 64.0 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Global Approach – E&S Shareholder Proposals | &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Global Approach – E&S Shareholder Proposals | 64.0 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Endorsement of Principles | &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Endorsement of Principles | 64.0 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Animal Welfare | &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Animal Welfare | 64.0 |
|  | Animal Welfare Policies | 64.0 |
|  | Animal Testing | 65.0 |
|  | Animal Slaughter | 65.0 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Consumer Issues | &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Consumer Issues | 65.0 |
|  | Genetically Modified Ingredients | 65.0 |
|  | Reports on Potentially Controversial Business/Financial Practices | 65.0 |
|  | Pharmaceutical Pricing, Access to Medicines, and Prescription Drug Reimportation | 66.0 |
|  | Product Safety and Toxic/Hazardous Materials | 66.0 |
|  | Tobacco-Related Proposals | 67.0 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Climate Change | &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Climate Change | 67.0 |
|  | Say on Climate (SoC) Management Proposals | 67.0 |
|  | Say on Climate (SoC) Shareholder Proposals | 68.0 |
|  | Climate Change/Greenhouse Gas (GHG) Emissions | 68.0 |
|  | Energy Efficiency | 69.0 |
|  | Renewable Energy | 69.0 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Diversity | &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Diversity | 69.0 |
|  | Board Diversity | 69.0 |
|  | Equality of Opportunity | 70.0 |
|  | Gender Identity, Sexual Orientation, and Domestic Partner Benefits | 70.0 |
|  | Gender, Race/Ethnicity Pay Gap | 70.0 |
|  | Racial Equity and/or Civil Rights Audit Guidelines | 70.0 |

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| | | |
|:---|:---|:---|
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Environment and Sustainability | &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Environment and Sustainability | 71.0 |
|  | Facility and Workplace Safety | 71.0 |
|  | General Environmental Proposals and Community Impact Assessments | 71.0 |
|  | Hydraulic Fracturing | 71.0 |
|  | Operations in Protected Areas | 72.0 |
|  | Recycling | 72.0 |
|  | Sustainability Reporting | 72.0 |
|  | Water Issues | 72.0 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;General Corporate Issues | &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;General Corporate Issues | 73.0 |
|  | Charitable Contributions | 73.0 |
|  | Data Security, Privacy, and Internet Issues | 73.0 |
|  | ESG Compensation-Related Proposals | 73.0 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Human Rights, Human Capital Management, and International Operations | &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Human Rights, Human Capital Management, and International Operations | 73.0 |
|  | Human Rights Proposals | 73.0 |
|  | Mandatory Arbitration | 74.0 |
|  | Operations in High-Risk Markets | 74.0 |
|  | Outsourcing/Offshoring | 75.0 |
|  | Sexual Harassment | 75.0 |
|  | Weapons and Military Sales | 75.0 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Political Activities | &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Political Activities | 75.0 |
|  | Lobbying | 75.0 |
|  | Political Contributions | 76.0 |
|  | Political Expenditures and Lobbying Congruency | 76.0 |
|  | Political Ties | 76.0 |
| **8.** | Mutual Fund Proxies | 78.0 |
|  | Election of Directors | 78.0 |
|  | Closed End Funds- Unilateral Opt-In to Control Share Acquisition Statutes | 78.0 |
|  | Converting Closed-end Fund to Open-end Fund | 78.0 |
|  | Proxy Contests | 78.0 |
|  | Investment Advisory Agreements | 78.0 |
|  | Approving New Classes or Series of Shares | 79.0 |
|  | Preferred Stock Proposals | 79.0 |
|  | 1940 Act Policies | 79.0 |
|  | Changing the Fundamental Restriction to a Nonfundamental Restriction | 79.0 |
|  | Change Fundamental Investment Objective to Nonfundamental | 79.0 |
|  | Name Change Proposals | 79.0 |
|  | Change in Fund's Subclassification | 80.0 |
|  | Business Development Companies—Authorization to Sell Shares of Common Stock at a Price below Net Asset Value | 80.0 |
|  | Disposition of Assets/Termination/Liquidation | 80.0 |

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| | |
|:---|:---|
| Changes to the Charter Document | 80 |
| Changing the Domicile of the Fund | 81 |
| Authorizing the Board to Hire and Terminate Subadvisers Without Shareholder Approval | 81 |
| Distribution Agreements | 81 |
| Master-Feeder Structure | 81 |
| Mergers | 81 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Shareholder Proposals for Mutual Funds | 81 |
| Establish Director Ownership Requirement | 81 |
| Reimburse Shareholder for Expenses Incurred | 82 |
| Terminate the Investment Advisor | 82 |

---

<u>W W W. I S S G O V E R N A N C E. COM</u> 8 of 82

Coverage

The U.S. research team provides proxy analyses and voting recommendations for the common shareholder meetings of U.S. - incorporated companies that are publicly-traded on U.S. exchanges, as well as certain OTC companies, if they are held in our institutional investor clients' portfolios. Coverage generally includes corporate actions for common equity holders, such as written consents and bankruptcies. ISS' U.S. coverage includes investment companies (including open-end funds, closed-end funds, exchange-traded funds, and unit investment trusts), limited partnerships ("LPs"), master limited partnerships ("MLPs"), limited liability companies ("LLCs"), and business development companies. ISS reviews its universe of coverage on an annual basis, and the coverage is subject to change based on client need and industry trends.

<u>Foreign-incorporated companies</u>

In addition to U.S.- incorporated, U.S.- listed companies, ISS' U.S. policies are applied to certain foreign- incorporated company analyses. Like the SEC, ISS distinguishes two types of companies that list but are not incorporated in the U.S.:

■ U.S.
Domestic Issuers – which have a majority of outstanding shares held in the U.S. and meet other criteria, as determined by the SEC,
and are subject to the same disclosure and listing standards as U.S. incorporated companies (e.g. they are required to file DEF14A proxy
statements) – are generally covered under standard U.S. policy guidelines.

■ <u>Foreign Private Issuers</u> (FPIs) – which are allowed
to take exemptions from most disclosure requirements (e.g., they are allowed to file 6-K for their proxy materials) and U.S. listing
standards – are generally covered under a combination of policy guidelines:

&nbsp;&nbsp;&nbsp;&nbsp;■ FPI
Guidelines (see the <u>Americas Regional Proxy Voting Guidelines</u>) ,
may apply to companies incorporated in governance havens, and apply certain minimum independence and disclosure standards in the evaluation
of key proxy ballot items, such as the election of directors; and/or

&nbsp;&nbsp;&nbsp;&nbsp;■ Guidelines
for the market that is responsible for, or most relevant to, the item on the ballot.

U.S. incorporated companies listed only on non-U.S. exchanges are generally covered under the ISS guidelines for the market on which they are traded.

An FPI is generally covered under ISS' approach to FPIs outlined above, even if such FPI voluntarily files a proxy statement and/or other filing normally required of a U.S. Domestic Issuer, so long as the company retains its FPI status.

In all cases – including with respect to other companies with cross-market features that may lead to ballot items related to multiple markets – items that are on the ballot solely due to the requirements of another market (listing, incorporation, or national code) may be evaluated under the policy of the relevant market, regardless of the "assigned" primary market coverage.

<u>W W W. I S S G O V E R N A N C E. COM</u> 9 of 82

**1.** Board
 of Directors

**Voting on Director Nominees in Uncontested Elections**

Four fundamental principles apply when determining votes on director nominees:

**Independence**: Boards should be sufficiently independent from management (and significant shareholders) to ensure that they are able and motivated to effectively supervise management's performance for the benefit of all shareholders, including in setting and monitoring the execution of corporate strategy, with appropriate use of shareholder capital, and in setting and monitoring executive compensation programs that support that strategy. The chair of the board should ideally be an independent director, and all boards should have an independent leadership position or a similar role in order to help provide appropriate counterbalance to executive management, as well as having sufficiently independent committees that focus on key governance concerns such as audit, compensation, and nomination of directors.

**Composition**: Companies should ensure that directors add value to the board through their specific skills and expertise and by having sufficient time and commitment to serve effectively. Boards should be of a size appropriate to accommodate diversity, expertise, and independence, while ensuring active and collaborative participation by all members. Boards should be sufficiently diverse to ensure consideration of a wide range of perspectives.

**Responsiveness**: Directors should respond to investor input, such as that expressed through significant opposition to management proposals, significant support for shareholder proposals (whether binding or non-binding), and tender offers where a majority of shares are tendered.

**Accountability**: Boards should be sufficiently accountable to shareholders, including through transparency of the company's governance practices and regular board elections, by the provision of sufficient information for shareholders to be able to assess directors and board composition, and through the ability of shareholders to remove directors.

**General Recommendation:** Generally vote for director nominees, except under the following circumstances (with new nominees**<sup>1</sup>** considered on case-by-case basis):

Independence

Vote against**<sup>2</sup>** or withhold from non-independent directors (Executive Directors and Non-Independent Non- Executive Directors per <u>ISS' Classification of Directors</u>) when:

■ Independent
directors comprise 50 percent or less of the board;

■ The
non-independent director serves on the audit, compensation, or nominating committee;

■ The
company lacks an audit, compensation, or nominating committee so that the full board functions as that committee; or

■ The
company lacks a formal nominating committee, even if the board attests that the independent directors fulfill the functions of such a
committee.

**<sup>1</sup>** A "new nominee" is a director who is being presented for election by shareholders for the first time. Recommendations on new nominees who have served for less than one year are made on a case-by-case basis depending on the timing of their appointment and the problematic governance issue in question.

**<sup>2</sup>** In general, companies with a plurality vote standard use "Withhold" as the contrary vote option in director elections; companies with a majority vote standard use "Against". However, it will vary by company and the proxy must be checked to determine the valid contrary vote option for the particular company.

<u>W W W. I S S G O V E R N A N C E. COM</u> 10 of 82

**ISS Classification of Directors – U.S.**

&nbsp;&nbsp;&nbsp;&nbsp;

1. <u>Executive Director</u> 

&nbsp;&nbsp;&nbsp;&nbsp;1.1. Current
officer  ***<sup>1</sup>*** of the company or one of its affiliates  ***<sup>2</sup>.*** 

2. <u>Non-Independent Non-Executive Director</u> 

<u>Board Identification</u>

&nbsp;&nbsp;&nbsp;&nbsp;2.1. Director
identified as not independent by the board. <u>Controlling/Significant Shareholder</u> 

&nbsp;&nbsp;&nbsp;&nbsp;2.2. Beneficial
owner of more than 50 percent of the company 's
voting power (this may be aggregated if voting power is distributed among more than one member of a group).

<u>Current Employment at Company or Related Company</u>

&nbsp;&nbsp;&nbsp;&nbsp;2.3. Non-officer
employee of the firm (including employee representatives).

&nbsp;&nbsp;&nbsp;&nbsp;2.4. Officer  ***<sup>1</sup>*** ,
former officer, or general or limited partner of a joint venture or partnership with the company.

<u>Former Employment</u>

&nbsp;&nbsp;&nbsp;&nbsp;2.5. Former
CEO of the company.  ***<sup>3, 4</sup>*** 

&nbsp;&nbsp;&nbsp;&nbsp;2.6. Former
non-CEO officer  ***<sup>1</sup>*** of the company or an affiliate  ***<sup>2</sup>*** within the past five years.

&nbsp;&nbsp;&nbsp;&nbsp;2.7. Former
officer  ***<sup>1</sup>*** of an acquired company within the past five years.  ***<sup>4</sup>*** 

&nbsp;&nbsp;&nbsp;&nbsp;2.8. Officer  ***<sup>1</sup>*** of a former parent or predecessor firm at the time the company was sold or split off within the past five years.

&nbsp;&nbsp;&nbsp;&nbsp;2.9. Former
interim officer if the service was longer than 18 months. If the service was between 12 and 18 months an assessment of the interim officer's
employment agreement will be made.  ***<sup>5</sup>*** 

<u>Family Members</u>

&nbsp;&nbsp;&nbsp;&nbsp;2.10. Immediate
family member  ***<sup>6</sup>*** of a current or former officer  ***<sup>1</sup>*** of the company or its affiliates  ***<sup>2</sup>*** within the last five years.

&nbsp;&nbsp;&nbsp;&nbsp;2.11. Immediate
family member  ***<sup>6</sup>*** of a current employee of company or its affiliates  ***<sup>2</sup>*** where additional
factors raise concern (which may include, but are not limited to, the following: a director related to numerous employees; the company
or its affiliates employ relatives of numerous board members; or a non- Section 16 officer in a key strategic role).

<u>Professional, Transactional, and Charitable Relationships</u>

&nbsp;&nbsp;&nbsp;&nbsp;2.12. Director
who (or whose immediate family member  ***<sup>6</sup>***) currently provides professional services  ***<sup>7</sup>*** in
excess of $10,000 per year to: the company, an affiliate  ***<sup>2</sup>*** , or an individual officer of the company or an affiliate;
or who is (or whose immediate family member  ***<sup>6</sup>*** is) a partner, employee, or controlling shareholder of an organization
which provides the services.

&nbsp;&nbsp;&nbsp;&nbsp;2.13. Director
who (or whose immediate family member  ***<sup>6</sup>***) currently has any material transactional relationship  ***<sup>8</sup>*** with the company or its affiliates  ***<sup>2</sup>*** ; or who is (or whose immediate family member  ***<sup>6</sup>*** is)
a partner in, or a controlling shareholder or an executive officer of, an organization which has the material transactional relationship  ***<sup>8</sup>*** (excluding investments in the company through a private placement).

&nbsp;&nbsp;&nbsp;&nbsp;2.14. Director
who (or whose immediate family member  ***<sup>6</sup>*)** is a trustee, director, or employee of a charitable or non-profit organization
that receives material grants or endowments  ***<sup>8</sup>*** from the company or its affiliates  ***<sup>2</sup>*** .

<u>Other Relationships</u>

&nbsp;&nbsp;&nbsp;&nbsp;2.15. Party
to a voting agreement  ***<sup>9</sup>*** to vote in line with management on proposals being brought to shareholder vote.

&nbsp;&nbsp;&nbsp;&nbsp;2.16. Has
(or an immediate family member  ***<sup>6</sup>*** has) an interlocking relationship as defined by the SEC involving members of
the board of directors or its Compensation Committee.  ***<sup>10</sup>*** 

&nbsp;&nbsp;&nbsp;&nbsp;2.17. Founder  ***<sup>11</sup>*** of the company but not currently an employee.

&nbsp;&nbsp;&nbsp;&nbsp;2.18. Director
with pay comparable to Named Executive Officers.

&nbsp;&nbsp;&nbsp;&nbsp;2.19. Any
material  ***<sup>12</sup>*** relationship with the company.

3. <u>Independent Director</u> 

&nbsp;&nbsp;&nbsp;&nbsp;3.1. No
material  ***<sup>12</sup>*** connection to the company other than a board seat.

<u>W W W. I S S G O V E R N A N C E. COM</u> 11 of 82

<u>Footnotes:</u>

*1.* The
definition of officer will generally follow that of a "Section
16 officer" (officers subject to Section 16 of the Securities and Exchange Act of 1934) and includes the chief executive,
operating, financial, legal, technology, and accounting officers of a company (including the president, treasurer, secretary, controller,
or any vice president in charge of a principal business unit, division, or policy function). Current interim officers are included in
this category. For private companies, the equivalent positions are applicable. A non-employee director serving as an officer due to statutory
requirements (e.g. corporate secretary) will generally be classified as a Non-Independent Non-Executive Director under "Any
material relationship with the company." However, if the company provides explicit disclosure that the director is not receiving
additional compensation exceeding $10,000 per year for serving in that capacity, then the director will be classified as an Independent
Director.

*2.* "Affiliate"
includes a subsidiary, sibling company, or parent company. ISS uses 50 percent control ownership by the parent company as the standard
for applying its affiliate designation. The manager/advisor of an externally managed issuer (EMI) is considered an affiliate.

*3.* Includes
any former CEO of the company prior to the company 's
initial public offering (IPO).

*4.* When
there is a former CEO of a special purpose acquisition company (SPAC) serving on the board of an acquired company, ISS will generally
classify such directors as independent unless determined otherwise taking into account the following factors: the applicable listing
standards determination of such director 's
independence; any operating ties to the firm; and the existence of any other conflicting relationships or related party transactions.

*5.* ISS
will look at the terms of the interim officer 's
employment contract to determine if it contains severance pay, long-term health and pension benefits, or other such standard provisions
typically contained in contracts of permanent, non-temporary CEOs. ISS will also consider if a formal search process was under way for
a full-time officer at the time.

*6.* "Immediate
family member" follows the SEC's definition of such and covers spouses, parents, children, step-parents, step-
children, siblings, in-laws, and any person (other than a tenant or employee) sharing the household of any director, nominee for director,
executive officer, or significant shareholder of the company.

*7.* Professional
services can be characterized as advisory in nature, generally involve access to sensitive company information or to strategic decision-making,
and typically have a commission- or fee-based payment structure. Professional services generally include but are not limited to the following:
investment banking/financial advisory services, commercial banking (beyond deposit services), investment services, insurance services,
accounting/audit services, consulting services, marketing services, legal services, property management services, realtor services, lobbying
services, executive search services, and IT consulting services. The following would generally be considered transactional relationships
and not professional services: deposit services, IT tech support services, educational services, and construction services. The case
of participation in a banking syndicate by a non-lead bank should be considered a transactional (and hence subject to the associated
materiality test) rather than a professional relationship. "Of Counsel" relationships are only considered immaterial if the
individual does not receive any form of compensation (in excess of $10,000 per year) from, or is a retired partner of, the firm providing
the professional service. The case of a company providing a professional service to one of its directors or to an entity with which one
of its directors is affiliated, will be considered a transactional rather than a professional relationship. Insurance services and marketing
services are assumed to be professional services unless the company explains why such services are not advisory.

*8.* A
material transactional relationship, including grants to non-profit organizations, exists if the company makes annual payments to, or
receives annual payments from, another entity, exceeding the greater of: $200,000 or 5 percent of the recipient's gross revenues,
for a company that follows NASDAQ listing standards; or the greater of $1,000,000 or 2 percent of the recipient's gross revenues,
for a company that follows NYSE listing standards. For a company that follows neither of the preceding standards, ISS will apply the
NASDAQ-based materiality test. (The recipient is the party receiving the financial proceeds from the transaction).

*9.* Dissident
directors who are parties to a voting agreement pursuant to a settlement or similar arrangement may be classified as Independent Directors
if an analysis of the following factors indicates that the voting agreement does not compromise their alignment with all shareholders '
interests: the terms of the agreement; the duration of the standstill provision in the agreement; the limitations and requirements
of actions that are agreed upon; if the dissident director nominee(s) is subject to the standstill; and if there any conflicting relationships
or related party transactions.

*10.* Interlocks
include: executive officers serving as directors on each other 's
compensation or similar committees (or, in the absence of such a committee, on the board); or executive officers sitting on each other's
boards and at least one serves on the other's compensation or similar committees (or, in the absence of such a committee,
on the board).

*11.* The
operating involvement of the founder with the company will be considered; if the founder was never employed by the company, ISS may deem
him or her an Independent Director.

<u>W W W. I S S G O V E R N A N C E. COM</u> 12 of 82

&nbsp;&nbsp;&nbsp;&nbsp;

*12.* For
purposes of ISS's director independence classification, "material" will be defined as a standard of relationship (financial,
personal, or otherwise) that a reasonable person might conclude could potentially influence one's objectivity in the boardroom
in a manner that would have a meaningful impact on an individual's ability to satisfy requisite fiduciary standards on behalf of
shareholders.

Composition

**Attendance at Board and Committee Meetings:** Generally vote against or withhold from directors (except nominees who served only part of the fiscal year**<sup>3</sup>**) who attend less than 75 percent of the aggregate of their board and committee meetings for the period for which they served, unless an acceptable reason for absences is disclosed in the proxy or another SEC filing. Acceptable reasons for director absences are generally limited to the following:

■ Medical
issues/illness;

■ Family
emergencies; and

■ Missing
only one meeting (when the total of all meetings is three or fewer).

In cases of chronic poor attendance without reasonable justification, in addition to voting against the director(s) with poor attendance, generally vote against or withhold from appropriate members of the nominating/governance committees or the full board.

If the proxy disclosure is unclear and insufficient to determine whether a director attended at least 75 percent of the aggregate of his/her board and committee meetings during his/her period of service, vote against or withhold from the director(s) in question.

**Overboarded Directors:** Generally vote against or withhold from individual directors who:

■ Sit
on more than five public company boards; or

■ Are
CEOs of public companies who sit on the boards of more than two public companies besides their own— withhold only at their outside
boards **<sup>4</sup>**.

**Gender Diversity** **:** Generally vote against or withhold from the chair of the nominating committee (or other directors on a case-by-case basis) at companies where there are no women on the company's board. An exception will be made if there was at least one woman on the board at the preceding annual meeting and the board makes a firm commitment to return to a gender-diverse status within a year.

**Racial and/or Ethnic Diversity** **:** For companies in the Russell 3000 or S&P 1500 indices, generally vote against or withhold from the chair of the nominating committee (or other directors on a case-by-case basis) where the board has no apparent racially or ethnically diverse members**<sup>5</sup>**. An exception will be made if there was racial and/or ethnic diversity on the board at the preceding annual meeting and the board makes a firm commitment to appoint at least one racial and/or ethnic diverse member within a year.

**<sup>3</sup>** Nominees who served for only part of the fiscal year are generally exempted from the attendance policy.

**<sup>4</sup>** Although all of a CEO's subsidiary boards with publicly-traded common stock will be counted as separate boards, ISS will not recommend a withhold vote for the CEO of a parent company board or any of the controlled (>50 percent ownership) subsidiaries of that parent but may do so at subsidiaries that are less than 50 percent controlled and boards outside the parent/subsidiary relationships.

**<sup>5</sup>** Aggregate diversity statistics provided by the board will only be considered if specific to racial and/or ethnic diversity.

<u>W W W. I S S G O V E R N A N C E. COM</u> 13 of 82

Responsiveness

Vote case-by-case on individual directors, committee members, or the entire board of directors as appropriate if:

■ The
board failed to act on a shareholder proposal that received the support of a majority of the shares cast in the previous year or failed
to act on a management proposal seeking to ratify an existing charter/bylaw provision that received opposition of a majority of the shares
cast in the previous year. Factors that will be considered are:

&nbsp;&nbsp;&nbsp;&nbsp;■ Disclosed
outreach efforts by the board to shareholders in the wake of the vote;

&nbsp;&nbsp;&nbsp;&nbsp;■ Rationale
provided in the proxy statement for the level of implementation;

&nbsp;&nbsp;&nbsp;&nbsp;■ The
subject matter of the proposal;

&nbsp;&nbsp;&nbsp;&nbsp;■ The
level of support for and opposition to the resolution in past meetings;

&nbsp;&nbsp;&nbsp;&nbsp;■ Actions
taken by the board in response to the majority vote and its engagement with shareholders;

&nbsp;&nbsp;&nbsp;&nbsp;■ The
continuation of the underlying issue as a voting item on the ballot (as either shareholder or management proposals); and

&nbsp;&nbsp;&nbsp;&nbsp;■ Other
factors as appropriate.

■ The
board failed to act on takeover offers where the majority of shares are tendered;

■ At
the previous board election, any director received more than 50 percent withhold/against votes of the shares cast and the company has
failed to address the issue(s) that caused the high withhold/against vote.

Vote case-by-case on Compensation Committee members (or, in exceptional cases, the full board) and the Say on Pay proposal if:

■ The
company 's previous say-on-pay received
the support of less than 70 percent of votes cast. Factors that will be considered are:

&nbsp;&nbsp;&nbsp;&nbsp;■ The
company 's response, including:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;■ Disclosure
of engagement efforts with major institutional investors, including the frequency and timing of engagements and the company participants
(including whether independent directors participated);

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;■ Disclosure
of the specific concerns voiced by dissenting shareholders that led to the say-on-pay opposition;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;■ Disclosure
of specific and meaningful actions taken to address shareholders '
concerns;

&nbsp;&nbsp;&nbsp;&nbsp;■ Other
recent compensation actions taken by the company;

&nbsp;&nbsp;&nbsp;&nbsp;■ Whether
the issues raised are recurring or isolated;

&nbsp;&nbsp;&nbsp;&nbsp;■ The
company 's ownership structure; and

&nbsp;&nbsp;&nbsp;&nbsp;■ Whether
the support level was less than 50 percent, which would warrant the highest degree of responsiveness.

■ The
 board implements an advisory vote on executive compensation on a less frequent basis than
 the frequency that received the plurality of votes cast.

Accountability

***Problematic Takeover Defenses, Capital Structure, and Governance Structure***

**Poison Pills:** Generally vote against or withhold from all nominees (except new nominees**<sup>1</sup>**, who should be considered case-by-case) if:

■ The
company has a poison pill with a deadhand or slowhand feature **<sup>6</sup>**;

**<sup>6</sup>** If a short-term pill with a deadhand or slowhand feature is enacted but expires before the next shareholder vote, ISS will generally still recommend withhold/against nominees at the next shareholder meeting following its adoption.

<u>W W W. I S S G O V E R N A N C E. COM</u> 14 of 82

■ The
board makes a material adverse modification to an existing pill, including, but not limited to, extension, renewal, or lowering the trigger,
without shareholder approval; or

■ The
company has a long-term poison pill (with a term of over one year) that was not approved by the public shareholders **<sup>7</sup>**.

Vote case-by-case on nominees if the board adopts an initial short-term pill**<sup>6</sup>** (with a term of one year or less) without shareholder approval, taking into consideration:

■ The
disclosed rationale for the adoption;

■ The
trigger;

■ The
company 's market capitalization (including
absolute level and sudden changes);

■ A
commitment to put any renewal to a shareholder vote; and

■ Other
factors as relevant.

**Unequal Voting Rights**: Generally vote withhold or against directors individually, committee members, or the entire board (except new nominees**<sup>1</sup>**, who should be considered case-by-case), if the company employs a common stock structure with unequal voting rights**<sup>8</sup>**.

Exceptions to this policy will generally be limited to:

■ Newly-public
companies **<sup>9</sup>** with a sunset provision of no more than seven years from the date of going public;

■ Limited
Partnerships and the Operating Partnership (OP) unit structure of REITs;

■ Situations
where the super-voting shares represent less than 5% of total voting power and therefore considered to be *de minimis*; or

■ The
company provides sufficient protections for minority shareholders, such as allowing minority shareholders a regular binding vote on whether
the capital structure should be maintained.

**Classified Board Structure:** The board is classified, and a continuing director responsible for a problematic governance issue at the board/committee level that would warrant a withhold/against vote recommendation is not up for election. All appropriate nominees (except new) may be held accountable.

**Removal of Shareholder Discretion on Classified Boards**: The company has opted into, or failed to opt out of, state laws requiring a classified board structure.

**Problematic Governance Structure**: For companies that hold or held their first annual meeting**<sup>9</sup>** of public shareholders after Feb. 1, 2015, generally vote against or withhold from directors individually, committee members, or the entire board (except new nominees**<sup>1</sup>**, who should be considered case-by-case) if, prior to or in connection with the company's public offering, the company or its board adopted the following bylaw or charter provisions that are considered to be materially adverse to shareholder rights:

■ Supermajority
vote requirements to amend the bylaws or charter;

■ A
classified board structure; or

■ Other
egregious provisions.

**<sup>7</sup>** Approval prior to, or in connection, with a company's becoming publicly-traded, or in connection with a de-SPAC transaction, is insufficient.

**<sup>8</sup>** This generally includes classes of common stock that have additional votes per share than other shares; classes of shares that are not entitled to vote on all the same ballot items or nominees; or stock with time-phased voting rights ("loyalty shares").

**<sup>9</sup>** Includes companies that emerge from bankruptcy, SPAC transactions, spin-offs, direct listings, and those who complete a traditional initial public offering.

<u>W W W. I S S G O V E R N A N C E. COM</u> 15 of 82

A provision which specifies that the problematic structure(s) will be sunset within seven years of the date of going public will be considered a mitigating factor.

Unless the adverse provision is reversed or removed, vote case-by-case on director nominees in subsequent years.

**Unilateral Bylaw/Charter Amendments** **:** Generally vote against or withhold from directors individually, committee members, or the entire board (except new nominees**<sup>1</sup>**, who should be considered case-by-case) if the board amends the company's bylaws or charter without shareholder approval in a manner that materially diminishes shareholders' rights or that could adversely impact shareholders, considering the following factors:

■ The
board 's rationale for adopting the bylaw/charter
amendment without shareholder ratification;

■ Disclosure
by the company of any significant engagement with shareholders regarding the amendment;

■ The
level of impairment of shareholders ' rights
caused by the board's unilateral amendment to the bylaws/charter;

■ The
board 's track record with regard to unilateral
board action on bylaw/charter amendments or other entrenchment provisions;

■ The
company 's ownership structure;

■ The
company 's existing governance provisions;

■ The
timing of the board 's amendment to the
bylaws/charter in connection with a significant business development; and

■ Other
factors, as deemed appropriate, that may be relevant to determine the impact of the amendment on shareholders.

Unless the adverse amendment is reversed or submitted to a binding shareholder vote, in subsequent years vote case-by-case on director nominees. Generally vote against (except new nominees**<sup>1</sup>**, who should be considered case-by-case) if the directors:

■ Classified
the board;

■ Adopted
supermajority vote requirements to amend the bylaws or charter;

■ Eliminated
shareholders ' ability to amend bylaws;

■ Adopted
a <u>fee-shifting provision</u>; or

■ Adopted
another provision deemed egregious.

**Restricting Binding Shareholder Proposals** **:** Generally vote against or withhold from the members of the governance committee if:

■ The
company 's governing documents impose undue
restrictions on shareholders' ability to amend the bylaws. Such restrictions include but are not limited to: outright prohibition
on the submission of binding shareholder proposals or share ownership requirements, subject matter restrictions, or time holding requirements
in excess of SEC Rule 14a-8. Vote against or withhold on an ongoing basis.

Submission of management proposals to approve or ratify requirements in excess of SEC Rule 14a-8 for the submission of binding bylaw amendments will generally be viewed as an insufficient restoration of shareholders' rights. Generally continue to vote against or withhold on an ongoing basis until shareholders are provided with an unfettered ability to amend the bylaws or a proposal providing for such unfettered right is submitted for shareholder approval.

**Director Performance Evaluation** **:** The board lacks mechanisms to promote accountability and oversight, coupled with sustained poor performance relative to peers. Sustained poor performance is measured by one-, three-, and five-year total shareholder returns in the bottom half of a company's four-digit GICS industry group (Russell 3000 companies only). Take into consideration the company's operational metrics and other factors as warranted. Problematic provisions include but are not limited to:

■ A
classified board structure;

<u>W W W. I S S G O V E R N A N C E. COM</u> 16 of 82

■ A
supermajority vote requirement;

■ Either
a plurality vote standard in uncontested director elections, or a majority vote standard in contested elections;

■ The
inability of shareholders to call special meetings;

■ The
inability of shareholders to act by written consent;

■ A
multi-class capital structure; and/or

■ A
non-shareholder-approved poison pill.

**Management Proposals to Ratify Existing Charter or Bylaw Provisions** **:** Vote against/withhold from individual directors, members of the governance committee, or the full board, where boards ask shareholders to ratify existing charter or bylaw provisions considering the following factors:

■ The
presence of a shareholder proposal addressing the same issue on the same ballot;

■ The
board 's rationale for seeking ratification;

■ Disclosure
of actions to be taken by the board should the ratification proposal fail;

■ Disclosure
of shareholder engagement regarding the board 's
ratification request;

■ The
level of impairment to shareholders ' rights
caused by the existing provision;

■ The
history of management and shareholder proposals on the provision at the company 's
past meetings;

■ Whether
the current provision was adopted in response to the shareholder proposal;

■ The
company 's ownership structure; and

■ Previous
use of ratification proposals to exclude shareholder proposals.

<u>Problematic Audit-Related Practices</u>

Generally vote against or withhold from the members of the Audit Committee if:

■ The
non-audit fees paid to the auditor are <u>excessive</u>;

■ The
company receives an adverse opinion on the company 's
financial statements from its auditor; or

■ There
is persuasive evidence that the Audit Committee entered into an inappropriate indemnification agreement with its auditor that limits
the ability of the company, or its shareholders, to pursue legitimate legal recourse against the audit firm.

Vote case-by-case on members of the Audit Committee and potentially the full board if:

■ Poor
accounting practices are identified that rise to a level of serious concern, such as: fraud; misapplication of GAAP; and material weaknesses
identified in Section 404 disclosures. Examine the severity, breadth, chronological sequence, and duration, as well as the company 's
efforts at remediation or corrective actions, in determining whether withhold/against votes are warranted.

<u>Problematic Compensation Practices</u>

In the absence of an Advisory Vote on Executive Compensation (Say on Pay) ballot item or in egregious situations, vote against or withhold from the members of the Compensation Committee and potentially the full board if:

■ There
is an unmitigated misalignment between CEO pay and company performance (<u>pay for performance</u>);

■ The
company maintains significant <u>problematic pay practices</u>; or

■ The
board exhibits a significant level of <u>poor communication and responsiveness</u> to shareholders.

Generally vote against or withhold from the Compensation Committee chair, other committee members, or potentially the full board if:

■ The
company fails to include a Say on Pay ballot item when required under SEC provisions, or under the company's declared frequency
of say on pay; or

■ The
company fails to include a Frequency of Say on Pay ballot item when required under SEC provisions.

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Generally vote against members of the board committee responsible for approving/setting non-employee director compensation if there is a pattern (i.e. two or more years) of awarding excessive non-employee director compensation without disclosing a compelling rationale or other mitigating factors.

**Problematic Pledging of Company Stock**: Vote against the members of the committee that oversees risks related to pledging, or the full board, where a significant level of pledged company stock by executives or directors raises concerns. The following factors will be considered:

■ The
presence of an anti-pledging policy, disclosed in the proxy statement, that prohibits future pledging activity;

■ The
magnitude of aggregate pledged shares in terms of total common shares outstanding, market value, and trading volume;

■ Disclosure
of progress or lack thereof in reducing the magnitude of aggregate pledged shares over time;

■ Disclosure
in the proxy statement that shares subject to stock ownership and holding requirements do not include pledged company stock; and

■ Any
other relevant factors.

<u>Climate Accountability</u>

For companies that are significant greenhouse gas (GHG) emitters, through their operations or value chain**<sup>10</sup>**, generally vote against or withhold from the incumbent chair of the responsible committee (or other directors on a case-by-case basis) in cases where ISS determines that the company is not taking the minimum steps needed to understand, assess, and mitigate risks related to climate change to the company and the larger economy.

Minimum steps to understand and mitigate those risks are considered to be the following. Both minimum criteria will be required to be in alignment with the policy:

■ Detailed
disclosure of climate-related risks, such as according to the framework established by the Task Force on Climate-related Financial Disclosures
(TCFD), including:

&nbsp;&nbsp;&nbsp;&nbsp;■ Board
governance measures;

&nbsp;&nbsp;&nbsp;&nbsp;■ Corporate
strategy;

&nbsp;&nbsp;&nbsp;&nbsp;■ Risk
management analyses; and

&nbsp;&nbsp;&nbsp;&nbsp;■ Metrics
and targets.

■ Appropriate
GHG emissions reduction targets.

At this time, "appropriate GHG emissions reductions targets" will be medium-term GHG reduction targets or Net Zero-by-2050 GHG reduction targets for a company's operations (Scope 1) and electricity use (Scope 2). Targets should cover the vast majority of the company's direct emissions.

<u>Governance Failures</u>

Under extraordinary circumstances, vote against or withhold from directors individually, committee members, or the entire board, due to:

■ Material
failures of governance, stewardship, risk oversight **<sup>11</sup>**, or fiduciary responsibilities at the company;

■ Failure
to replace management as appropriate; or

**<sup>10</sup>** Companies defined as "significant GHG emitters" will be those on the current Climate Action 100+ Focus Group list.

**<sup>11</sup>** Examples of failure of risk oversight include but are not limited to: bribery; large or serial fines or sanctions from regulatory bodies; demonstrably poor risk oversight of environmental and social issues, including climate change; significant adverse legal judgments or settlement; or hedging of company stock.

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■ Egregious
actions related to a director 's service
on other boards that raise substantial doubt about his or her ability to effectively oversee management and serve the best interests
of shareholders at any company.

**Voting on Director Nominees in Contested Elections**

Vote-No Campaigns

**General Recommendation:** In cases where companies are targeted in connection with public "vote-no" campaigns, evaluate director nominees under the existing governance policies for voting on director nominees in uncontested elections. Take into consideration the arguments submitted by shareholders and other publicly available information.

Proxy Contests/Proxy Access

**General Recommendation:** Vote case-by-case on the election of directors in contested elections, considering the following factors:

■ Long-term
financial performance of the company relative to its industry;

■ Management 's
track record;

■ Background
to the contested election;

■ Nominee
qualifications and any compensatory arrangements;

■ Strategic
plan of dissident slate and quality of the critique against management;

■ Likelihood
that the proposed goals and objectives can be achieved (both slates); and

■ Stock
ownership positions.

In the case of candidates nominated pursuant to proxy access, vote case-by-case considering any applicable factors listed above or additional factors which may be relevant, including those that are specific to the company, to the nominee(s) and/or to the nature of the election (such as whether there are more candidates than board seats).

**Other Board-Related Proposals**

Adopt Anti-Hedging/Pledging/Speculative Investments Policy

**General Recommendation:** Generally vote for proposals seeking a policy that prohibits named executive officers from engaging in derivative or speculative transactions involving company stock, including hedging, holding stock in a margin account, or pledging stock as collateral for a loan. However, the company's existing policies regarding responsible use of company stock will be considered.

Board Refreshment

Board refreshment is best implemented through an ongoing program of individual director evaluations, conducted annually, to ensure the evolving needs of the board are met and to bring in fresh perspectives, skills, and diversity as needed.

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**Term/Tenure Limits**

**General Recommendation:** Vote case-by-case on management proposals regarding director term/tenure limits, considering:

■ The
rationale provided for adoption of the term/tenure limit;

■ The
robustness of the company 's board evaluation
process;

■ Whether
the limit is of sufficient length to allow for a broad range of director tenures;

■ Whether
the limit would disadvantage independent directors compared to non-independent directors; and

■ Whether
the board will impose the limit evenly, and not have the ability to waive it in a discriminatory manner.

Vote case-by-case on shareholder proposals asking for the company to adopt director term/tenure limits, considering:

■ The
scope of the shareholder proposal; and

■ Evidence
of problematic issues at the company combined with, or exacerbated by, a lack of board refreshment.

**Age Limits**

**General Recommendation:** Generally vote against management and shareholder proposals to limit the tenure of independent directors through mandatory retirement ages. Vote for proposals to remove mandatory age limits.

Board Size

**General Recommendation:** Vote for proposals seeking to fix the board size or designate a range for the board size.

Vote against proposals that give management the ability to alter the size of the board outside of a specified range without shareholder approval.

Classification/Declassification of the Board

**General Recommendation:** Vote against proposals to classify (stagger) the board. Vote for proposals to repeal classified boards and to elect all directors annually.

CEO Succession Planning

**General Recommendation:** Generally vote for proposals seeking disclosure on a CEO succession planning policy, considering, at a minimum, the following factors:

■ The
reasonableness/scope of the request; and

■ The
company 's existing disclosure on its current
CEO succession planning process.

Cumulative Voting

**General Recommendation:** Generally vote against management proposals to eliminate cumulate voting, and for shareholder proposals to restore or provide for cumulative voting, unless:

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■ The
company has proxy access **<sup>12</sup>**, thereby allowing shareholders to nominate directors to the company 's
ballot; and

■ The
company has adopted a majority vote standard, with a carve-out for plurality voting in situations where there are more nominees than
seats, and a director resignation policy to address failed elections.

Vote for proposals for cumulative voting at controlled companies (insider voting power > 50%).

Director and Officer Indemnification, Liability Protection, and Exculpation

**General Recommendation:** Vote case-by-case on proposals on director and officer indemnification, liability protection, and exculpation**<sup>13</sup>**.

Consider the stated rationale for the proposed change. Also consider, among other factors, the extent to which the proposal would:

■ Eliminate
directors ' and officers' liability
for monetary damages for violating the duty of care.

■ Eliminate
directors ' and officers' liability
for monetary damages for violating the duty of loyalty.

■ Expand
coverage beyond just legal expenses to liability for acts that are more serious violations of fiduciary obligation than mere carelessness.

■ Expand
the scope of indemnification to provide for mandatory indemnification of company officials in connection with acts that previously the
company was permitted to provide indemnification for, at the discretion of the company 's
board (*i.e.*, "permissive indemnification"), but that previously the company was not required to indemnify.

Vote for those proposals providing such expanded coverage in cases when a director's or officer's legal defense was unsuccessful if both of the following apply:

■ If
the individual was found to have acted in good faith and in a manner that the individual reasonably believed was in the best interests
of the company; and

If only the individual's legal expenses would be covered.

Establish/Amend Nominee Qualifications

**General Recommendation:** Vote case-by-case on proposals that establish or amend director qualifications. Votes should be based on the reasonableness of the criteria and the degree to which they may preclude dissident nominees from joining the board.

Vote case-by-case on shareholder resolutions seeking a director nominee who possesses a particular subject matter expertise, considering:

■ The
company 's board committee structure, existing
subject matter expertise, and board nomination provisions relative to that of its peers;

**<sup>12</sup>** A proxy access right that meets the <u>recommended guidelines.</u>

**<sup>13</sup>** **Indemnification**: the condition of being secured against loss or damage.

**Limited liability**: a person's financial liability is limited to a fixed sum, or personal financial assets are not at risk if the individual loses a lawsuit that results in financial award/damages to the plaintiff.

**Exculpation**: to eliminate or limit the personal liability of a director or officer to the corporation or its shareholders for monetary damages for breach of fiduciary duty as a director or officer.

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■ The
company 's existing board and management
oversight mechanisms regarding the issue for which board oversight is sought;

■ The
company 's disclosure and performance relating
to the issue for which board oversight is sought and any significant related controversies; and

■ The
scope and structure of the proposal.

Establish Other Board Committee Proposals

**General Recommendation:** Generally vote against shareholder proposals to establish a new board committee, as such proposals seek a specific oversight mechanism/structure that potentially limits a company's flexibility to determine an appropriate oversight mechanism for itself. However, the following factors will be considered:

■ Existing
oversight mechanisms (including current committee structure) regarding the issue for which board oversight is sought;

■ Level
of disclosure regarding the issue for which board oversight is sought;

■ Company
performance related to the issue for which board oversight is sought;

■ Board
committee structure compared to that of other companies in its industry sector; and

■ The
scope and structure of the proposal.

Filling Vacancies/Removal of Directors

**General Recommendation:** Vote against proposals that provide that directors may be removed only for cause.

Vote for proposals to restore shareholders' ability to remove directors with or without cause.

Vote against proposals that provide that only continuing directors may elect replacements to fill board vacancies. Vote for proposals that permit shareholders to elect directors to fill board vacancies.

Independent Board Chair

**General Recommendation:** Generally vote for shareholder proposals requiring that the board chair position be filled by an independent director, taking into consideration the following:

■ The
scope and rationale of the proposal;

■ The
company 's current board leadership structure;

■ The
company 's governance structure and practices;

■ Company
performance; and

■ Any
other relevant factors that may be applicable.

The following factors will increase the likelihood of a "for" recommendation:

■ A
majority non-independent board and/or the presence of non-independent directors on key board committees;

■ A
weak or poorly-defined lead independent director role that fails to serve as an appropriate counterbalance to a combined CEO/chair role;

■ The
presence of an executive or non-independent chair in addition to the CEO, a recent recombination of the role of CEO and chair, and/or
departure from a structure with an independent chair;

■ Evidence
that the board has failed to oversee and address material risks facing the company;

■ A
material governance failure, particularly if the board has failed to adequately respond to shareholder concerns or if the board has materially
diminished shareholder rights; or

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■ Evidence
that the board has failed to intervene when management 's
interests are contrary to shareholders' interests.

Majority of Independent Directors/Establishment of Independent Committees

**General Recommendation:** Vote for shareholder proposals asking that a majority or more of directors be independent unless the board composition already meets the proposed threshold by ISS' definition of Independent Director (See <u>ISS' Classification of Directors</u>.)

Vote for shareholder proposals asking that board audit, compensation, and/or nominating committees be composed exclusively of independent directors unless they currently meet that standard.

Majority Vote Standard for the Election of Directors

**General Recommendation:** Generally vote for management proposals to adopt a majority of votes cast standard for directors in uncontested elections. Vote against if no carve-out for a plurality vote standard in contested elections is included.

Generally vote for precatory and binding shareholder resolutions requesting that the board change the company's bylaws to stipulate that directors need to be elected with an affirmative majority of votes cast, provided it does not conflict with the state law where the company is incorporated. Binding resolutions need to allow for a carve- out for a plurality vote standard when there are more nominees than board seats.

Companies are strongly encouraged to also adopt a post-election policy (also known as a director resignation policy) that will provide guidelines so that the company will promptly address the situation of a holdover director.

Proxy Access

**General Recommendation:** Generally vote for management and shareholder proposals for proxy access with the following provisions:

■ **Ownership threshold:** maximum requirement not more than three percent (3%) of the voting power;

■ **Ownership duration:** maximum requirement not longer than three (3) years of continuous ownership for each member of the nominating group;

■ **Aggregation:** minimal or no limits on the number of shareholders permitted to form a nominating group;

■ **Cap:** cap on nominees of generally twenty-five percent (25%) of the board.

Review for reasonableness any other restrictions on the right of proxy access. Generally vote against proposals that are more restrictive than these guidelines.

Require More Nominees than Open Seats

**General Recommendation:** Vote against shareholder proposals that would require a company to nominate more candidates than the number of open board seats.

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Shareholder Engagement Policy (Shareholder Advisory Committee)

**General Recommendation:** Generally vote for shareholder proposals requesting that the board establish an internal mechanism/process, which may include a committee, in order to improve communications between directors and shareholders, unless the company has the following features, as appropriate:

■ Established
a communication structure that goes beyond the exchange requirements to facilitate the exchange of information between shareholders and
members of the board;

■ Effectively
disclosed information with respect to this structure to its shareholders;

■ Company
has not ignored majority-supported shareholder proposals, or a majority withhold vote on a director nominee; and

■ The
company has an independent chair or a lead director, according to <u>ISS' definition</u>. This
individual must be made available for periodic consultation and direct communication with major shareholders.

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**2.** Audit-Related

Auditor Indemnification and Limitation of Liability

**General Recommendation:** Vote case-by-case on the issue of auditor indemnification and limitation of liability. Factors to be assessed include, but are not limited to:

■ The
terms of the auditor agreement—the degree to which these agreements impact shareholders '
rights;

■ The
motivation and rationale for establishing the agreements;

■ The
quality of the company 's disclosure; and

■ The
company 's historical practices in the audit
area.

Vote against or withhold from members of an audit committee in situations where there is persuasive evidence that the audit committee entered into an inappropriate indemnification agreement with its auditor that limits the ability of the company, or its shareholders, to pursue legitimate legal recourse against the audit firm.

Auditor Ratification

**General Recommendation:** Vote for proposals to ratify auditors unless any of the following apply:

■ An
auditor has a financial interest in or association with the company, and is therefore not independent;

■ There
is reason to believe that the independent auditor has rendered an opinion that is neither accurate nor indicative of the company's
financial position;

■ Poor
accounting practices are identified that rise to a serious level of concern, such as fraud or misapplication of GAAP; or

■ Fees
for non-audit services ("Other"
fees) are excessive.

Non-audit fees are excessive if:

■ Non-audit
("other") fees > audit
fees + audit-related fees + tax compliance/preparation fees

Tax compliance and preparation include the preparation of original and amended tax returns and refund claims, and tax payment planning. All other services in the tax category, such as tax advice, planning, or consulting, should be added to "Other" fees. If the breakout of tax fees cannot be determined, add all tax fees to "Other" fees.

In circumstances where "Other" fees include fees related to significant one-time capital structure events (such as initial public offerings, bankruptcy emergence, and spin-offs) and the company makes public disclosure of the amount and nature of those fees that are an exception to the standard "non-audit fee" category, then such fees may be excluded from the non-audit fees considered in determining the ratio of non-audit to audit/audit-related fees/tax compliance and preparation for purposes of determining whether non-audit fees are excessive.

Shareholder Proposals Limiting Non-Audit Services

**General Recommendation:** Vote case-by-case on shareholder proposals asking companies to prohibit or limit their auditors from engaging in non-audit services.

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Shareholder Proposals on Audit Firm Rotation

**General Recommendation:** Vote case-by-case on shareholder proposals asking for audit firm rotation, taking into account:

■ The
tenure of the audit firm;

■ The
length of rotation specified in the proposal;

■ Any
significant audit-related issues at the company;

■ The
number of Audit Committee meetings held each year;

■ The
number of financial experts serving on the committee; and

■ Whether
the company has a periodic renewal process where the auditor is evaluated for both audit quality and competitive price.

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**3.** Shareholder
 Rights & Defenses

Advance Notice Requirements for Shareholder Proposals/Nominations

**General Recommendation:** Vote case-by-case on advance notice proposals, giving support to those proposals which allow shareholders to submit proposals/nominations as close to the meeting date as reasonably possible and within the broadest window possible, recognizing the need to allow sufficient notice for company, regulatory, and shareholder review.

To be reasonable, the company's deadline for shareholder notice of a proposal/nominations must be no earlier than 120 days prior to the anniversary of the previous year's meeting and have a submittal window of no shorter than 30 days from the beginning of the notice period (also known as a 90-120-day window). The submittal window is the period under which shareholders must file their proposals/nominations prior to the deadline.

In general, support additional efforts by companies to ensure full disclosure in regard to a proponent's economic and voting position in the company so long as the informational requirements are reasonable and aimed at providing shareholders with the necessary information to review such proposals.

Amend Bylaws without Shareholder Consent

**General Recommendation:** Vote against proposals giving the board exclusive authority to amend the bylaws.

Vote case-by-case on proposals giving the board the ability to amend the bylaws in addition to shareholders, taking into account the following:

■ Any
impediments to shareholders ' ability to
amend the bylaws (i.e. supermajority voting requirements);

■ The
company 's ownership structure and historical
voting turnout;

■ Whether
the board could amend bylaws adopted by shareholders; and

■ Whether
shareholders would retain the ability to ratify any board-initiated amendments.

Control Share Acquisition Provisions

**General Recommendation:** Vote for proposals to opt out of control share acquisition statutes unless doing so would enable the completion of a takeover that would be detrimental to shareholders.

Vote against proposals to amend the charter to include control share acquisition provisions. Vote for proposals to restore voting rights to the control shares.

Control share acquisition statutes function by denying shares their voting rights when they contribute to ownership in excess of certain thresholds. Voting rights for those shares exceeding ownership limits may only be restored by approval of either a majority or supermajority of disinterested shares. Thus, control share acquisition statutes effectively require a hostile bidder to put its offer to a shareholder vote or risk voting disenfranchisement if the bidder continues buying up a large block of shares.

Control Share Cash-Out Provisions

**General Recommendation:** Vote for proposals to opt out of control share cash-out statutes.

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Control share cash-out statutes give dissident shareholders the right to "cash-out" of their position in a company at the expense of the shareholder who has taken a control position. In other words, when an investor crosses a preset threshold level, remaining shareholders are given the right to sell their shares to the acquirer, who must buy them at the highest acquiring price.

Disgorgement Provisions

**General Recommendation:** Vote for proposals to opt out of state disgorgement provisions.

Disgorgement provisions require an acquirer or potential acquirer of more than a certain percentage of a company's stock to disgorge, or pay back, to the company any profits realized from the sale of that company's stock purchased 24 months before achieving control status. All sales of company stock by the acquirer occurring within a certain period of time (between 18 months and 24 months) prior to the investor's gaining control status are subject to these recapture-of-profits provisions.

Fair Price Provisions

**General Recommendation:** Vote case-by-case on proposals to adopt fair price provisions (provisions that stipulate that an acquirer must pay the same price to acquire all shares as it paid to acquire the control shares), evaluating factors such as the vote required to approve the proposed acquisition, the vote required to repeal the fair price provision, and the mechanism for determining the fair price.

Generally vote against fair price provisions with shareholder vote requirements greater than a majority of disinterested shares.

Freeze-Out Provisions

**General Recommendation:** Vote for proposals to opt out of state freeze-out provisions. Freeze-out provisions force an investor who surpasses a certain ownership threshold in a company to wait a specified period of time before gaining control of the company.

Greenmail

**General Recommendation:** Vote for proposals to adopt anti-greenmail charter or bylaw amendments or otherwise restrict a company's ability to make greenmail payments.

Vote case-by-case on anti-greenmail proposals when they are bundled with other charter or bylaw amendments.

Greenmail payments are targeted share repurchases by management of company stock from individuals or groups seeking control of the company. Since only the hostile party receives payment, usually at a substantial premium over the market value of its shares, the practice discriminates against all other shareholders.

Shareholder Litigation Rights

**Federal Forum Selection Provisions**

Federal forum selection provisions require that U.S. federal courts be the sole forum for shareholders to litigate claims arising under federal securities law.

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**General Recommendation:** Generally vote for federal forum selection provisions in the charter or bylaws that specify "the district courts of the United States" as the exclusive forum for federal securities law matters, in the absence of serious concerns about corporate governance or board responsiveness to shareholders.

Vote against provisions that restrict the forum to a particular federal district court; unilateral adoption (without a shareholder vote) of such a provision will generally be considered a one-time failure under the <u>Unilateral Bylaw/Charter Amendments</u> policy.

**Exclusive Forum Provisions for State Law Matters**

Exclusive forum provisions in the charter or bylaws restrict shareholders' ability to bring derivative lawsuits against the company, for claims arising out of state corporate law, to the courts of a particular state (generally the state of incorporation).

**General Recommendation:** Generally vote for charter or bylaw provisions that specify courts located within the state of Delaware as the exclusive forum for corporate law matters for Delaware corporations, in the absence of serious concerns about corporate governance or board responsiveness to shareholders.

For states other than Delaware, vote case-by-case on exclusive forum provisions, taking into consideration:

■ The
company 's stated rationale for adopting
such a provision;

■ Disclosure
of past harm from duplicative shareholder lawsuits in more than one forum;

■ The
breadth of application of the charter or bylaw provision, including the types of lawsuits to which it would apply and the definition
of key terms; and

■ Governance
features such as shareholders ' ability
to repeal the provision at a later date (including the vote standard applied when shareholders attempt to amend the charter or bylaws)
and their ability to hold directors accountable through annual director elections and a majority vote standard in uncontested elections.

Generally vote against provisions that specify a state other than the state of incorporation as the exclusive forum for corporate law matters, or that specify a particular local court within the state; unilateral adoption of such a provision will generally be considered a one-time failure under the <u>Unilateral Bylaw/Charter Amendments</u> policy.

**Fee shifting**

Fee-shifting provisions in the charter or bylaws require that a shareholder who sues a company unsuccessfully pay all litigation expenses of the defendant corporation and its directors and officers.

**General Recommendation:** Generally vote against provisions that mandate fee-shifting whenever plaintiffs are not completely successful on the merits (i.e., including cases where the plaintiffs are partially successful).

Unilateral adoption of a fee-shifting provision will generally be considered an ongoing failure under the <u>Unilateral Bylaw/Charter Amendments</u> policy.

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Net Operating Loss (NOL) Protective Amendments

**General Recommendation:** Vote against proposals to adopt a protective amendment for the stated purpose of protecting a company's net operating losses (NOL) if the effective term of the protective amendment would exceed the shorter of three years and the exhaustion of the NOL.

Vote case-by-case, considering the following factors, for management proposals to adopt an NOL protective amendment that would remain in effect for the shorter of three years (or less) and the exhaustion of the NOL:

■ The
ownership threshold (NOL protective amendments generally prohibit stock ownership transfers that would result in a new 5-percent holder
or increase the stock ownership percentage of an existing 5-percent holder);

■ The
value of the NOLs;

■ Shareholder
protection mechanisms (sunset provision or commitment to cause expiration of the protective amendment upon exhaustion or expiration of
the NOL);

■ The
company 's existing governance structure
including: board independence, existing takeover defenses, track record of responsiveness to shareholders, and any other problematic
governance concerns; and

■ Any
other factors that may be applicable.

**Poison Pills (Shareholder Rights Plans)**

Shareholder Proposals to Put Pill to a Vote and/or Adopt a Pill Policy

**General Recommendation:** Vote for shareholder proposals requesting that the company submit its poison pill to a shareholder vote or redeem it unless the company has: (1) A shareholder-approved poison pill in place; or (2) The company has adopted a policy concerning the adoption of a pill in the future specifying that the board will only adopt a shareholder rights plan if either:

■ Shareholders
have approved the adoption of the plan; or

■ The
board, in its exercise of its fiduciary responsibilities, determines that it is in the best interest of shareholders under the circumstances
to adopt a pill without the delay in adoption that would result from seeking stockholder approval (i.e., the "fiduciary out" provision). A poison pill adopted under this fiduciary out will be put to a shareholder ratification
vote within 12 months of adoption or expire. If the pill is not approved by a majority of the votes cast on this issue, the plan will
immediately terminate.

If the shareholder proposal calls for a time period of less than 12 months for shareholder ratification after adoption, vote for the proposal, but add the caveat that a vote within 12 months would be considered sufficient implementation.

Management Proposals to Ratify a Poison Pill

**General Recommendation:** Vote case-by-case on management proposals on poison pill ratification, focusing on the features of the shareholder rights plan. Rights plans should contain the following attributes:

■ No
lower than a 20 percent trigger, flip-in or flip-over;

■ A
term of no more than three years;

■ No
deadhand, slowhand, no-hand, or similar feature that limits the ability of a future board to redeem the pill;

■ Shareholder
redemption feature (qualifying offer clause); if the board refuses to redeem the pill 90 days after a qualifying offer is announced,
10 percent of the shares may call a special meeting or seek a written consent to vote on rescinding the pill.

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In addition, the rationale for adopting the pill should be thoroughly explained by the company. In examining the request for the pill, take into consideration the company's existing governance structure, including: board independence, existing takeover defenses, and any problematic governance concerns.

Management Proposals to Ratify a Pill to Preserve Net Operating Losses (NOLs)

**General Recommendation:** Vote against proposals to adopt a poison pill for the stated purpose of protecting a company's net operating losses (NOL) if the term of the pill would exceed the shorter of three years and the exhaustion of the NOL.

Vote case-by-case on management proposals for poison pill ratification, considering the following factors, if the term of the pill would be the shorter of three years (or less) and the exhaustion of the NOL:

■ The
ownership threshold to transfer (NOL pills generally have a trigger slightly below 5 percent);

■ The
 value of the NOLs;

■ Shareholder
 protection mechanisms (sunset provision, or commitment to cause expiration of the pill upon
 exhaustion or expiration of NOLs);

■ The
 company 's
 existing governance structure, including: board independence, existing takeover defenses,
 track record of responsiveness to shareholders, and any other problematic governance concerns;
 and

■ Any
 other factors that may be applicable.

Proxy Voting Disclosure, Confidentiality, and Tabulation

**General Recommendation:** Vote case-by-case on proposals regarding proxy voting mechanics, taking into consideration whether implementation of the proposal is likely to enhance or protect shareholder rights. Specific issues covered under the policy include, but are not limited to, confidential voting of individual proxies and ballots, confidentiality of running vote tallies, and the treatment of abstentions and/or broker non-votes in the company's vote-counting methodology.

While a variety of factors may be considered in each analysis, the guiding principles are: transparency, consistency, and fairness in the proxy voting process. The factors considered, as applicable to the proposal, may include:

■ The
 scope and structure of the proposal;

■ The
 company 's
 stated confidential voting policy (or other relevant policies) and whether it ensures a "level
 playing field" by providing shareholder proponents with equal access to vote
 information prior to the annual meeting;

■ The
 company 's
 vote standard for management and shareholder proposals and whether it ensures consistency
 and fairness in the proxy voting process and maintains the integrity of vote results;

■ Whether
 the company 's
 disclosure regarding its vote counting method and other relevant voting policies with respect
 to management and shareholder proposals are consistent and clear;

■ Any
 recent controversies or concerns related to the company 's
 proxy voting mechanics;

■ Any
 unintended consequences resulting from implementation of the proposal; and

■ Any
 other factors that may be relevant.

Ratification Proposals: Management Proposals to Ratify Existing Charter or Bylaw Provisions

**General Recommendation:** Generally vote against management proposals to ratify provisions of the company's existing charter or bylaws, unless these governance provisions align with best practice.

<u>W W W. I S S G O V E R N A N C E. COM</u> 31 of 82

In addition, voting against/withhold from individual directors, members of the governance committee, or the full board may be warranted, considering:

■ The
presence of a shareholder proposal addressing the same issue on the same ballot;

■ The
board 's rationale for seeking ratification;

■ Disclosure
of actions to be taken by the board should the ratification proposal fail;

■ Disclosure
of shareholder engagement regarding the board 's
ratification request;

■ The
level of impairment to shareholders ' rights
caused by the existing provision;

■ The
history of management and shareholder proposals on the provision at the company 's
past meetings;

■ Whether
the current provision was adopted in response to the shareholder proposal;

■ The
company 's ownership structure; and

■ Previous
use of ratification proposals to exclude shareholder proposals.

Reimbursing Proxy Solicitation Expenses

**General Recommendation:** Vote case-by-case on proposals to reimburse proxy solicitation expenses.

When voting in conjunction with support of a dissident slate, vote for the reimbursement of all appropriate proxy solicitation expenses associated with the election.

Generally vote for shareholder proposals calling for the reimbursement of reasonable costs incurred in connection with nominating one or more candidates in a contested election where the following apply:

■ The
election of fewer than 50 percent of the directors to be elected is contested in the election;

■ One
or more of the dissident 's candidates is
elected;

■ Shareholders
are not permitted to cumulate their votes for directors; and

■ The
election occurred, and the expenses were incurred, after the adoption of this bylaw.

Reincorporation Proposals

**General Recommendation:** Management or shareholder proposals to change a company's state of incorporation should be evaluated case-by-case, giving consideration to both financial and corporate governance concerns including the following:

■ Reasons
for reincorporation;

■ Comparison
of company 's governance practices and provisions
prior to and following the reincorporation; and

■ Comparison
of corporation laws of original state and destination state.

Vote for reincorporation when the economic factors outweigh any neutral or negative governance changes.

Shareholder Ability to Act by Written Consent

**General Recommendation:** Generally vote against management and shareholder proposals to restrict or prohibit shareholders' ability to act by written consent.

Generally vote for management and shareholder proposals that provide shareholders with the ability to act by written consent, taking into account the following factors:

■ Shareholders '
current right to act by written consent;

■ The
consent threshold;

■ The
inclusion of exclusionary or prohibitive language;

<u>W W W. I S S G O V E R N A N C E. COM</u> 32 of 82

■ Investor
ownership structure; and

■ Shareholder
support of, and management 's response to,
previous shareholder proposals.

Vote case-by-case on shareholder proposals if, in addition to the considerations above, the company has the following governance and antitakeover provisions:

■ An
unfettered **<sup>14</sup>** right for shareholders to call special meetings at a 10 percent threshold;

■ A
majority vote standard in uncontested director elections;

■ No
non-shareholder-approved pill; and

■ An
annually elected board.

Shareholder Ability to Call Special Meetings

**General Recommendation:** Vote against management or shareholder proposals to restrict or prohibit shareholders' ability to call special meetings.

Generally vote for management or shareholder proposals that provide shareholders with the ability to call special meetings taking into account the following factors:

■ Shareholders '
current right to call special meetings;

■ Minimum
ownership threshold necessary to call special meetings (10 percent preferred);

■ The
inclusion of exclusionary or prohibitive language;

■ Investor
ownership structure; and

■ Shareholder
support of, and management 's response to,
previous shareholder proposals.

Stakeholder Provisions

**General Recommendation:** Vote against proposals that ask the board to consider non-shareholder constituencies or other non-financial effects when evaluating a merger or business combination.

State Antitakeover Statutes

**General Recommendation:** Vote case-by-case on proposals to opt in or out of state takeover statutes (including fair price provisions, stakeholder laws, poison pill endorsements, severance pay and labor contract provisions, and anti-greenmail provisions).

Supermajority Vote Requirements

**General Recommendation:** Vote against proposals to require a supermajority shareholder vote.

Vote for management or shareholder proposals to reduce supermajority vote requirements. However, for companies with shareholder(s) who have significant ownership levels, vote case-by-case, taking into account:

■ Ownership
structure;

■ Quorum
requirements; and

■ Vote
requirements.

**<sup>14</sup>** "Unfettered" means no restrictions on agenda items, no restrictions on the number of shareholders who can group together to reach the 10 percent threshold, and only reasonable limits on when a meeting can be called: no greater than 30 days after the last annual meeting and no greater than 90 prior to the next annual meeting.

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Virtual Shareholder Meetings

**General Recommendation:** Generally vote for management proposals allowing for the convening of shareholder meetings by electronic means, so long as they do not preclude in-person meetings. Companies are encouraged to disclose the circumstances under which virtual-only**<sup>15</sup>** meetings would be held, and to allow for comparable rights and opportunities for shareholders to participate electronically as they would have during an in-person meeting.

Vote case-by-case on shareholder proposals concerning virtual-only meetings, considering:

■ Scope
and rationale of the proposal; and

■ Concerns
identified with the company 's prior meeting
practices.

**<sup>15</sup>** Virtual-only shareholder meeting" refers to a meeting of shareholders that is held exclusively using technology without a corresponding in-person meeting.

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**4.** Capital/Restructuring

**Capital**

Adjustments to Par Value of Common Stock

**General Recommendation:** Vote for management proposals to reduce the par value of common stock unless the action is being taken to facilitate an anti-takeover device or some other negative corporate governance action.

Vote for management proposals to eliminate par value.

Common Stock Authorization

**General Authorization Requests**

**General Recommendation:** Vote case-by-case on proposals to increase the number of authorized shares of common stock that are to be used for general corporate purposes:

■ If
share usage (outstanding plus reserved) is less than 50% of the current authorized shares, vote for an increase of up to **50** % of
current authorized shares.

■ If
share usage is 50% to 100% of the current authorized, vote for an increase of up to **100** % of current authorized shares.

■ If
share usage is greater than current authorized shares, vote for an increase of up to the current share usage.

■ In
the case of a stock split, the allowable increase is calculated (per above) based on the post-split adjusted authorization.

Generally vote against proposed increases, even if within the above ratios, if the proposal or the company's prior or ongoing use of authorized shares is problematic, including, but not limited to:

■ The
proposal seeks to increase the number of authorized shares of the class of common stock that has superior voting rights to other share
classes;

■ On
the same ballot is a proposal for a reverse split for which support is warranted despite the fact that it would result in an excessive
increase in the share authorization;

■ The
company has a non-shareholder approved poison pill (including an NOL pill); or

■ The
company has previous sizeable placements (within the past 3 years) of stock with insiders at prices substantially below market value,
or with problematic voting rights, without shareholder approval.

However, generally vote for proposed increases beyond the above ratios or problematic situations when there is disclosure of specific and severe risks to shareholders of not approving the request, such as:

■ In,
or subsequent to, the company 's most recent
10-K filing, the company discloses that there is substantial doubt about its ability to continue as a going concern;

■ The
company states that there is a risk of imminent bankruptcy or imminent liquidation if shareholders do not approve the increase in authorized
capital; or

■ A
government body has in the past year required the company to increase its capital ratios.

For companies incorporated in states that allow increases in authorized capital without shareholder approval, generally vote withhold or against all nominees if a unilateral capital authorization increase does not conform to the above policies.

<u>W W W. I S S G O V E R N A N C E. COM</u> 35 of 82

**Specific Authorization Requests**

**General Recommendation:** Generally vote for proposals to increase the number of authorized common shares where the primary purpose of the increase is to issue shares in connection with transaction(s) (such as acquisitions, SPAC transactions, private placements, or similar transactions) on the same ballot, or disclosed in the proxy statement, that warrant support. For such transactions, the allowable increase will be the greater of:

■ twice
the amount needed to support the transactions on the ballot, and

■ the
allowable increase as calculated for general issuances above.

Dual Class Structure

**General Recommendation:** Generally vote against proposals to create a new class of common stock unless:

■ The
company discloses a compelling rationale for the dual-class capital structure, such as:

■ The
company 's auditor has concluded that there
is substantial doubt about the company's ability to continue as a going concern; or

■ The
new class of shares will be transitory;

■ The
new class is intended for financing purposes with minimal or no dilution to current shareholders in both the short term and long term;
and

■ The
new class is not designed to preserve or increase the voting power of an insider or significant shareholder.

Issue Stock for Use with Rights Plan

**General Recommendation:** Vote against proposals that increase authorized common stock for the explicit purpose of implementing a non-shareholder-approved shareholder rights plan (poison pill).

Preemptive Rights

**General Recommendation:** Vote case-by-case on shareholder proposals that seek preemptive rights, taking into consideration:

■ The
 size of the company;

■ The
 shareholder base; and

■ The
 liquidity of the stock.

Preferred Stock Authorization

**General Authorization Requests**

**General Recommendation:** Vote case-by-case on proposals to increase the number of authorized shares of preferred stock that are to be used for general corporate purposes:

■ If
 share usage (outstanding plus reserved) is less than 50% of the current authorized shares,
 vote for an increase of up to **50** % of current authorized shares.

■ If
 share usage is 50% to 100% of the current authorized, vote for an increase of up to **100** %
 of current authorized shares.

■ If
 share usage is greater than current authorized shares, vote for an increase of up to the
 current share usage.

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■ In
 the case of a stock split, the allowable increase is calculated (per above) based on the
 post-split adjusted authorization.

■ If
 no preferred shares are currently issued and outstanding, vote against the request, unless
 the company discloses a specific use for the shares.

Generally vote against proposed increases, even if within the above ratios, if the proposal or the company's prior or ongoing use of authorized shares is problematic, including, but not limited to:

■ If
 the shares requested are blank check preferred shares that can be used for antitakeover purposes; **<sup>16</sup>** 

■ The
 company seeks to increase a class of non-convertible preferred shares entitled to more than
 one vote per share on matters that do not solely affect the rights of preferred stockholders "supervoting
 shares");

■ The
 company seeks to increase a class of convertible preferred shares entitled to a number of
 votes greater than the number of common shares into which they are convertible ("supervoting
 shares") on matters that do not solely affect the rights of preferred stockholders;

■ The
 stated intent of the increase in the general authorization is to allow the company to increase
 an existing designated class of supervoting preferred shares;

■ On
 the same ballot is a proposal for a reverse split for which support is warranted despite
 the fact that it would result in an excessive increase in the share authorization;

■ The
 company has a non-shareholder approved poison pill (including an NOL pill); or

■ The
 company has previous sizeable placements (within the past 3 years) of stock with insiders
 at prices substantially below market value, or with problematic voting rights, without shareholder
 approval.

However, generally vote for proposed increases beyond the above ratios or problematic situations when there is disclosure of specific and severe risks to shareholders of not approving the request, such as:

■ In,
 or subsequent to, the company 's
 most recent 10-K filing, the company discloses that there is substantial doubt about its
 ability to continue as a going concern;

■ The
 company states that there is a risk of imminent bankruptcy or imminent liquidation if shareholders
 do not approve the increase in authorized capital; or

■ A
 government body has in the past year required the company to increase its capital ratios.

For companies incorporated in states that allow increases in authorized capital without shareholder approval, generally vote withhold or against all nominees if a unilateral capital authorization increase does not conform to the above policies.

**<u>Specific Authorization Requests</u>**

**General Recommendation:** Generally vote for proposals to increase the number of authorized preferred shares where the primary purpose of the increase is to issue shares in connection with transaction(s) (such as acquisitions, SPAC transactions, private placements, or similar transactions) on the same ballot, or disclosed in the proxy statement, that warrant support. For such transactions, the allowable increase will be the greater of:

■ twice
 the amount needed to support the transactions on the ballot, and

■ the
 allowable increase as calculated for general issuances above.

**<sup>16</sup>** To be acceptable, appropriate disclosure would be needed that the shares are "declawed": i.e., representation by the board that it will not, without prior stockholder approval, issue or use the preferred stock for any defensive or anti-takeover purpose or for the purpose of implementing any stockholder rights plan.

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Recapitalization Plans

**General Recommendation:** Vote case-by-case on recapitalizations (reclassifications of securities), taking into account the following:

■ More
 simplified capital structure;

■ Enhanced
 liquidity;

■ Fairness
 of conversion terms;

■ Impact
 on voting power and dividends;

■ Reasons
 for the reclassification;

■ Conflicts
 of interest; and

■ Other
 alternatives considered.

Reverse Stock Splits

**General Recommendation:** Vote for management proposals to implement a reverse stock split if:

■ The
 number of authorized shares will be proportionately reduced; or

■ The
 effective increase in authorized shares is equal to or less than the allowable increase calculated
 in accordance with ISS ' <u>Common Stock Authorization</u> policy.

Vote case-by-case on proposals that do not meet either of the above conditions, taking into consideration the following factors:

■ Stock
 exchange notification to the company of a potential delisting;

■ Disclosure
 of substantial doubt about the company 's
 ability to continue as a going concern without additional financing;

■ The
 company 's
 rationale; or

■ Other
 factors as applicable.

Share Issuance Mandates at U.S. Domestic Issuers Incorporated Outside the **U.S.**

**General Recommendation:** For U.S. domestic issuers incorporated outside the U.S. and listed <u>solely</u> on a U.S. exchange, generally vote for resolutions to authorize the issuance of common shares up to 20 percent of currently issued common share capital, where not tied to a specific transaction or financing proposal.

For pre-revenue or other early-stage companies that are heavily reliant on periodic equity financing, generally vote for resolutions to authorize the issuance of common shares up to 50 percent of currently issued common share capital. The burden of proof will be on the company to establish that it has a need for the higher limit.

Renewal of such mandates should be sought at each year's annual meeting.

Vote case-by-case on share issuances for a specific transaction or financing proposal.

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Share Repurchase Programs

**General Recommendation:** For U.S.-incorporated companies, and foreign-incorporated U.S. Domestic Issuers that are traded solely on U.S. exchanges, vote for management proposals to institute open-market share repurchase plans in which all shareholders may participate on equal terms, or to grant the board authority to conduct open- market repurchases, in the absence of company-specific concerns regarding:

■ Greenmail;

■ The
 use of buybacks to inappropriately manipulate incentive compensation metrics;

■ Threats
 to the company 's
 long-term viability; or

■ Other
 company-specific factors as warranted.

Vote case-by-case on proposals to repurchase shares directly from specified shareholders, balancing the stated rationale against the possibility for the repurchase authority to be misused, such as to repurchase shares from insiders at a premium to market price.

Share Repurchase Programs Shareholder Proposals

**General Recommendation:** Generally vote against shareholder proposals prohibiting executives from selling shares of company stock during periods in which the company has announced that it may or will be repurchasing shares of its stock. Vote for the proposal when there is a pattern of abuse by executives exercising options or selling shares during periods of share buybacks.

Stock Distributions: Splits and Dividends

**General Recommendation:** Generally vote for management proposals to increase the common share authorization for stock split or stock dividend, provided that the effective increase in authorized shares is equal to or is less than the allowable increase calculated in accordance with ISS' Common Stock Authorization policy.

Tracking Stock

**General Recommendation:** Vote case-by-case on the creation of tracking stock, weighing the strategic value of the transaction against such factors as:

■ Adverse
 governance changes;

■ Excessive
 increases in authorized capital stock;

■ Unfair
 method of distribution;

■ Diminution
 of voting rights;

■ Adverse
 conversion features;

■ Negative
 impact on stock option plans; and

■ Alternatives
 such as spin-off.

**Restructuring**

Appraisal Rights

**General Recommendation:** Vote for proposals to restore or provide shareholders with rights of appraisal.

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Asset Purchases

**General Recommendation:** Vote case-by-case on asset purchase proposals, considering the following factors:

■ Purchase
 price;

■ Fairness
 opinion;

■ Financial
 and strategic benefits;

■ How
 the deal was negotiated;

■ Conflicts
 of interest;

■ Other
 alternatives for the business;

■ Non-completion
 risk.

Asset Sales

**General Recommendation:** Vote case-by-case on asset sales, considering the following factors:

■ Impact
 on the balance sheet/working capital;

■ Potential
 elimination of diseconomies;

■ Anticipated
 financial and operating benefits;

■ Anticipated
 use of funds;

■ Value
 received for the asset;

■ Fairness
 opinion;

■ How
 the deal was negotiated;

■ Conflicts
 of interest.

Bundled Proposals

**General Recommendation:** Vote case-by-case on bundled or "conditional" proxy proposals. In the case of items that are conditioned upon each other, examine the benefits and costs of the packaged items. In instances when the joint effect of the conditioned items is not in shareholders' best interests, vote against the proposals. If the combined effect is positive, support such proposals.

Conversion of Securities

**General Recommendation:** Vote case-by-case on proposals regarding conversion of securities. When evaluating these proposals, the investor should review the dilution to existing shareholders, the conversion price relative to market value, financial issues, control issues, termination penalties, and conflicts of interest.

Vote for the conversion if it is expected that the company will be subject to onerous penalties or will be forced to file for bankruptcy if the transaction is not approved.

Corporate Reorganization/Debt Restructuring/Prepackaged Bankruptcy Plans/Reverse Leveraged Buyouts/Wrap Plans

**General Recommendation:** Vote case-by-case on proposals to increase common and/or preferred shares and to issue shares as part of a debt restructuring plan, after evaluating:

■ Dilution
 to existing shareholders '
 positions;

■ Terms
 of the offer - discount/premium in purchase price to investor, including any fairness opinion;
 termination penalties; exit strategy;

<u>W W W. I S S G O V E R N A N C E. COM</u> 40 of 82

■ Financial
 issues - company 's
 financial situation; degree of need for capital; use of proceeds; effect of the financing
 on the company's cost of capital;

■ Management 's
 efforts to pursue other alternatives;

■ Control
 issues - change in management; change in control, guaranteed board and committee seats; standstill
 provisions; voting agreements; veto power over certain corporate actions; and

■ Conflict
 of interest - arm 's
 length transaction, managerial incentives.

Vote for the debt restructuring if it is expected that the company will file for bankruptcy if the transaction is not approved.

Formation of Holding Company

**General Recommendation:** Vote case-by-case on proposals regarding the formation of a holding company, taking into consideration the following:

■ The
 reasons for the change;

■ Any
 financial or tax benefits;

■ Regulatory
 benefits;

■ Increases
 in capital structure; and

■ Changes
 to the articles of incorporation or bylaws of the company.

Absent compelling financial reasons to recommend for the transaction, vote against the formation of a holding company if the transaction would include either of the following:

■ Increases
 in common or preferred stock in excess of the allowable maximum (see discussion under "Capital");

or

■ Adverse
 changes in shareholder rights.

Going Private and Going Dark Transactions (LBOs and Minority Squeeze- outs)

**General Recommendation:** Vote case-by-case on going private transactions, taking into account the following:

■ Offer
 price/premium;

■ Fairness
 opinion;

■ How
 the deal was negotiated;

■ Conflicts
 of interest;

■ Other
 alternatives/offers considered; and

■ Non-completion
 risk.

Vote case-by-case on going dark transactions, determining whether the transaction enhances shareholder value by taking into consideration:

■ Whether
 the company has attained benefits from being publicly-traded (examination of trading volume,
 liquidity, and market research of the stock);

■ Balanced
 interests of continuing vs. cashed-out shareholders, taking into account the following:

■ Are
 all shareholders able to participate in the transaction?

■ Will
 there be a liquid market for remaining shareholders following the transaction?

■ Does
 the company have strong corporate governance?

■ Will
 insiders reap the gains of control following the proposed transaction?

■ Does
 the state of incorporation have laws requiring continued reporting that may benefit shareholders?

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Joint Ventures

**General Recommendation:** Vote case-by-case on proposals to form joint ventures, taking into account the following:

■ Percentage
 of assets/business contributed;

■ Percentage
 ownership;

■ Financial
 and strategic benefits;

■ Governance
 structure;

■ Conflicts
 of interest;

■ Other
 alternatives; and

■ Non-completion
 risk.

Liquidations

**General Recommendation:** Vote case-by-case on liquidations, taking into account the following:

■ Management 's
 efforts to pursue other alternatives;

■ Appraisal
 value of assets; and

■ The
 compensation plan for executives managing the liquidation.

Vote for the liquidation if the company will file for bankruptcy if the proposal is not approved.

Mergers and Acquisitions

**General Recommendation:** Vote case-by-case on mergers and acquisitions. Review and evaluate the merits and drawbacks of the proposed transaction, balancing various and sometimes countervailing factors including:

■ *Valuation* - Is the value to be received by the target shareholders (or paid by the acquirer) reasonable?
 While the fairness opinion may provide an initial starting point for assessing valuation
 reasonableness, emphasis is placed on the offer premium, market reaction, and strategic rationale.

■ *Market reaction* - How has the market responded to the proposed deal? A negative market reaction
 should cause closer scrutiny of a deal.

■ *Strategic rationale* - Does the deal make sense strategically? From where is the value derived?
 Cost and revenue synergies should not be overly aggressive or optimistic, but reasonably
 achievable. Management should also have a favorable track record of successful integration
 of historical acquisitions.

■ *Negotiations and process* - Were the terms of the transaction negotiated at arm 's-length?
 Was the process fair and equitable? A fair process helps to ensure the best price for shareholders.
 Significant negotiation "wins" can also signify the deal makers'
 competency. The comprehensiveness of the sales process (e.g., full auction, partial auction,
 no auction) can also affect shareholder value.

■ *Conflicts of interest* - Are insiders benefiting from the transaction disproportionately and inappropriately
 as compared to non-insider shareholders? As the result of potential conflicts, the directors
 and officers of the company may be more likely to vote to approve a merger than if they did
 not hold these interests. Consider whether these interests may have influenced these directors
 and officers to support or recommend the merger. The CIC figure presented in the "ISS Transaction Summary" section of this report is an aggregate figure
 that can in certain cases be a misleading indicator of the true value transfer from shareholders
 to insiders. Where such figure appears to be excessive, analyze the underlying assumptions
 to determine whether a potential conflict exists.

■ *Governance* - Will the combined company have a better or worse governance profile than the current
 governance profiles of the respective parties to the transaction? If the governance profile
 is to change for the

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worse, the burden is on the company to prove that other issues (such as valuation) outweigh any deterioration in governance.

Private Placements/Warrants/Convertible Debentures

**General Recommendation:** Vote case-by-case on proposals regarding private placements, warrants, and convertible debentures taking into consideration:

■ Dilution
 to existing shareholders '
 position: The amount and timing of shareholder ownership dilution should be weighed against
 the needs and proposed shareholder benefits of the capital infusion. Although newly issued
 common stock, absent preemptive rights, is typically dilutive to existing shareholders, share
 price appreciation is often the necessary event to trigger the exercise of "out
 of the money" warrants and convertible debt. In these instances from a value
 standpoint, the negative impact of dilution is mitigated by the increase in the company's
 stock price that must occur to trigger the dilutive event.

■ Terms
 of the offer (discount/premium in purchase price to investor, including any fairness opinion,
 conversion features, termination penalties, exit strategy):

&nbsp;&nbsp;&nbsp;&nbsp;■ The
 terms of the offer should be weighed against the alternatives of the company and in light
 of company 's
 financial condition. Ideally, the conversion price for convertible debt and the exercise
 price for warrants should be at a premium to the then prevailing stock price at the time
 of private placement.

&nbsp;&nbsp;&nbsp;&nbsp;■ When
 evaluating the magnitude of a private placement discount or premium, consider factors that
 influence the discount or premium, such as, liquidity, due diligence costs, control and monitoring
 costs, capital scarcity, information asymmetry, and anticipation of future performance.

■ Financial
 issues:

&nbsp;&nbsp;&nbsp;&nbsp;■ The
 company 's
 financial condition;

&nbsp;&nbsp;&nbsp;&nbsp;■ Degree
 of need for capital;

&nbsp;&nbsp;&nbsp;&nbsp;■ Use
 of proceeds;

&nbsp;&nbsp;&nbsp;&nbsp;■ Effect
 of the financing on the company 's
 cost of capital;

&nbsp;&nbsp;&nbsp;&nbsp;■ Current
 and proposed cash burn rate;

&nbsp;&nbsp;&nbsp;&nbsp;■ Going
 concern viability and the state of the capital and credit markets.

■ Management 's
 efforts to pursue alternatives and whether the company engaged in a process to evaluate alternatives:
 A fair, unconstrained process helps to ensure the best price for shareholders. Financing
 alternatives can include joint ventures, partnership, merger, or sale of part or all of the
 company.

■ Control
 issues:

&nbsp;&nbsp;&nbsp;&nbsp;■ Change
 in management;

&nbsp;&nbsp;&nbsp;&nbsp;■ Change
 in control;

&nbsp;&nbsp;&nbsp;&nbsp;■ Guaranteed
 board and committee seats;

&nbsp;&nbsp;&nbsp;&nbsp;■ Standstill
 provisions;

&nbsp;&nbsp;&nbsp;&nbsp;■ Voting
 agreements;

&nbsp;&nbsp;&nbsp;&nbsp;■ Veto
 power over certain corporate actions; and

&nbsp;&nbsp;&nbsp;&nbsp;■ Minority
 versus majority ownership and corresponding minority discount or majority control premium.

■ Conflicts
 of interest:

&nbsp;&nbsp;&nbsp;&nbsp;■ Conflicts
 of interest should be viewed from the perspective of the company and the investor.

&nbsp;&nbsp;&nbsp;&nbsp;■ Were
 the terms of the transaction negotiated at arm 's
 length? Are managerial incentives aligned with shareholder interests?

■ Market
 reaction:

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&nbsp;&nbsp;&nbsp;&nbsp;■ The
 market 's
 response to the proposed deal. A negative market reaction is a cause for concern. Market
 reaction may be addressed by analyzing the one-day impact on the unaffected stock price.

Vote for the private placement, or for the issuance of warrants and/or convertible debentures in a private placement, if it is expected that the company will file for bankruptcy if the transaction is not approved.

Reorganization/Restructuring Plan (Bankruptcy)

**General Recommendation:** Vote case-by-case on proposals to common shareholders on bankruptcy plans of reorganization, considering the following factors including, but not limited to:

■ Estimated
 value and financial prospects of the reorganized company;

■ Percentage
 ownership of current shareholders in the reorganized company;

■ Whether
 shareholders are adequately represented in the reorganization process (particularly through
 the existence of an Official Equity Committee);

■ The
 cause(s) of the bankruptcy filing, and the extent to which the plan of reorganization addresses
 the cause(s);

■ Existence
 of a superior alternative to the plan of reorganization; and

■ Governance
 of the reorganized company.

Special Purpose Acquisition Corporations (SPACs)

**General Recommendation:** Vote case-by-case on SPAC mergers and acquisitions taking into account the following:

■ *Valuation* - Is the value being paid by the SPAC reasonable? SPACs generally lack an independent
 fairness opinion and the financials on the target may be limited. Compare the conversion
 price with the intrinsic value of the target company provided in the fairness opinion. Also,
 evaluate the proportionate value of the combined entity attributable to the SPAC IPO shareholders
 versus the pre-merger value of SPAC. Additionally, a private company discount may be applied
 to the target if it is a private entity.

■ *Market reaction* - How has the market responded to the proposed deal? A negative market reaction
 may be a cause for concern. Market reaction may be addressed by analyzing the one-day impact
 on the unaffected stock price.

■ *Deal timing* - A main driver for most transactions is that the SPAC charter typically requires
 the deal to be complete within 18 to 24 months, or the SPAC is to be liquidated. Evaluate
 the valuation, market reaction, and potential conflicts of interest for deals that are announced
 close to the liquidation date.

■ *Negotiations and process* - What was the process undertaken to identify potential target companies
 within specified industry or location specified in charter? Consider the background of the
 sponsors.

■ *Conflicts of interest* - How are sponsors benefiting from the transaction compared to IPO shareholders?
 Potential conflicts could arise if a fairness opinion is issued by the insiders to qualify
 the deal rather than a third party or if management is encouraged to pay a higher price for
 the target because of an 80 percent rule (the charter requires that the fair market value
 of the target is at least equal to 80 percent of net assets of the SPAC). Also, there may
 be sense of urgency by the management team of the SPAC to close the deal since its charter
 typically requires a transaction to be completed within the 18-24-month timeframe.

■ *Voting agreements* - Are the sponsors entering into enter into any voting agreements/tender offers
 with shareholders who are likely to vote against the proposed merger or exercise conversion
 rights?

■ *Governance* - What is the impact of having the SPAC CEO or founder on key committees following the
 proposed merger?

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Special Purpose Acquisition Corporations (SPACs) - Proposals for Extensions

**General Recommendation:** Vote case-by-case on SPAC extension proposals taking into account the length of the requested extension, the status of any pending transaction(s) or progression of the acquisition process, any added incentive for non-redeeming shareholders, and any prior extension requests.

■ *Length of request*: Typically, extension requests range from two to six months, depending on
 the progression of the SPAC 's
 acquistion process.

■ *Pending transaction(s)* or *progression of the acquisition process:* Sometimes an intial
 business combination was already put to a shareholder vote, but, for varying reasons, the
 transaction could not be consummated by the termination date and the SPAC is requesting an
 extension. Other times, the SPAC has entered into a definitive transaction agreement, but
 needs additional time to consummate or hold the shareholder meeting.

■ *Added incentive for non-redeeming shareholders*: Sometimes the SPAC sponsor (or other insiders)
 will contribute, typically as a loan to the company, additional funds that will be added
 to the redemption value of each public share as long as such shares are not redeemed in connection
 with the extension request. The purpose of the "equity
 kicker" is to incentivize shareholders to hold their shares through the end
 of the requested extension or until the time the transaction is put to a shareholder vote,
 rather than electing redeemption at the extension proposal meeting.

■ *Prior extension requests*: Some SPACs request additional time beyond the extension period sought
 in prior extension requests.

Spin-offs

**General Recommendation:** Vote case-by-case on spin-offs, considering:

■ Tax
 and regulatory advantages;

■ Planned
 use of the sale proceeds;

■ Valuation
 of spinoff;

■ Fairness
 opinion;

■ Benefits
 to the parent company;

■ Conflicts
 of interest;

■ Managerial
 incentives;

■ Corporate
 governance changes;

■ Changes
 in the capital structure.

Value Maximization Shareholder Proposals

**General Recommendation:** Vote case-by-case on shareholder proposals seeking to maximize shareholder value by:

■ Hiring
 a financial advisor to explore strategic alternatives;

■ Selling
 the company; or

■ Liquidating
 the company and distributing the proceeds to shareholders.

These proposals should be evaluated based on the following factors:

■ Prolonged
 poor performance with no turnaround in sight;

■ Signs
 of entrenched board and management (such as the adoption of takeover defenses);

■ Strategic
 plan in place for improving value;

■ Likelihood
 of receiving reasonable value in a sale or dissolution; and

■ The
 company actively exploring its strategic options, including retaining a financial advisor.

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**5.** Compensation

**Executive Pay Evaluation**

Underlying all evaluations are five global principles that most investors expect corporations to adhere to in designing and administering executive and director compensation programs:

1. Maintain
 appropriate pay-for-performance alignment, with emphasis on long-term shareholder value:
 This principle encompasses overall executive pay practices, which must be designed to attract,
 retain, and appropriately motivate the key employees who drive shareholder value creation
 over the long term. It will take into consideration, among other factors, the link between
 pay and performance; the mix between fixed and variable pay; performance goals; and equity-based
 plan costs;

2. Avoid
arrangements that risk "pay for failure":
This principle addresses the appropriateness of long or indefinite contracts, excessive severance packages, and guaranteed compensation;

3. Maintain
 an independent and effective compensation committee: This principle promotes oversight of
 executive pay programs by directors with appropriate skills, knowledge, experience, and a
 sound process for compensation decision-making (*e.g.*, including access to independent
 expertise and advice when needed);

4. Provide
 shareholders with clear, comprehensive compensation disclosures: This principle underscores
 the importance of informative and timely disclosures that enable shareholders to evaluate
 executive pay practices fully and fairly;

5. Avoid
 inappropriate pay to non-executive directors: This principle recognizes the interests of
 shareholders in ensuring that compensation to outside directors is reasonable and does not
 compromise their independence and ability to make appropriate judgments in overseeing managers '
 pay and performance. At the market level, it may incorporate a variety of generally accepted
 best practices.

Advisory Votes on Executive Compensation—Management Proposals (Say- on-Pay)

**General Recommendation:** Vote case-by-case on ballot items related to executive pay and practices, as well as certain aspects of outside director compensation.

Vote against Advisory Votes on Executive Compensation (Say-on-Pay or "SOP") if:

■ There
 is an unmitigated misalignment between CEO pay and company performance (<u>pay for performance</u>);

■ The
 company maintains significant <u>problematic pay practices</u>;

■ The
 board exhibits a significant level of <u>poor communication and responsiveness</u> to shareholders.

Vote against or withhold from the members of the Compensation Committee and potentially the full board if:

■ There
 is no SOP on the ballot, and an against vote on an SOP would otherwise be warranted due to
 pay-for- performance misalignment, problematic pay practices, or the lack of adequate responsiveness
 on compensation issues raised previously, or a combination thereof;

■ The
 board fails to respond adequately to a previous SOP proposal that received less than 70 percent
 support of votes cast;

■ The
 company has recently practiced or approved problematic pay practices, such as option repricing
 or option backdating; or

■ The
 situation is egregious.

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Primary Evaluation Factors for Executive Pay

**Pay-for-Performance Evaluation**

ISS annually conducts a pay-for-performance analysis to identify strong or satisfactory alignment between pay and performance over a sustained period. With respect to companies in the S&P1500, Russell 3000, or Russell 3000E Indices**<sup>17</sup>**, this analysis considers the following:

1. Peer
 Group **<sup>18</sup>** Alignment:

■ The
 degree of alignment between the company 's
 annualized TSR rank and the CEO's annualized total pay rank within a peer group,
 each measured over a three-year period.

■ The
 rankings of CEO total pay and company financial performance within a peer group, each measured
 over a three-year period.

■ The
 multiple of the CEO 's
 total pay relative to the peer group median in the most recent fiscal year.

2. Absolute
Alignment **<sup>19</sup>** – the absolute alignment between the trend in CEO pay and company TSR over the prior five fiscal
years – i.e., the difference between the trend in annual pay changes and the trend in annualized TSR during the period.

If the above analysis demonstrates significant unsatisfactory long-term pay-for-performance alignment or, in the case of companies outside the Russell indices, a misalignment between pay and performance is otherwise suggested, our analysis may include any of the following qualitative factors, as relevant to an evaluation of how various pay elements may work to encourage or to undermine long-term value creation and alignment with shareholder interests:

■ The
 ratio of performance- to time-based incentive awards;

■ The
 overall ratio of performance-based compensation to fixed or discretionary pay;

■ The
 rigor of performance goals;

■ The
 complexity and risks around pay program design;

■ The
 transparency and clarity of disclosure;

■ The
 company 's
 peer group benchmarking practices;

■ Financial/operational
 results, both absolute and relative to peers;

■ Special
 circumstances related to, for example, a new CEO in the prior FY or anomalous equity grant
 practices (e.g., bi-annual awards);

■ Realizable
 pay **<sup>20</sup>** compared to grant pay; and

■ Any
 other factors deemed relevant.

**<sup>17</sup>** The <u>Russell 3000E</u> Index includes approximately 4,000 of the largest U.S. equity securities.

**<sup>18</sup>** The revised peer group is generally comprised of 14-24 companies that are selected using market cap, revenue (or assets for certain financial firms), GICS industry group, and company's selected peers' GICS industry group, with size constraints, via a process designed to select peers that are comparable to the subject company in terms of revenue/assets and industry, and also within a market-cap bucket that is reflective of the company's market cap. For Oil, Gas & Consumable Fuels companies, market cap is the only size determinant.

**<sup>19</sup>** Only Russell 3000 Index companies are subject to the Absolute Alignment analysis.

**<sup>20</sup>** ISS research reports include realizable pay for S&P1500 companies.

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**Problematic Pay Practices**

Problematic pay elements are generally evaluated case-by-case considering the context of a company's overall pay program and demonstrated pay-for-performance philosophy. The focus is on executive compensation practices that contravene the global pay principles, including:

■ Problematic
 practices related to non-performance-based compensation elements;

■ Incentives
 that may motivate excessive risk-taking or present a windfall risk; and

■ Pay
 decisions that circumvent pay-for-performance, such as options backdating or waiving performance
 requirements.

The list of examples below highlights certain problematic practices that carry significant weight in this overall consideration and may result in adverse vote recommendations:

■ Repricing
 or replacing of underwater stock options/SARs without prior shareholder approval (including
 cash buyouts and voluntary surrender of underwater options);

■ Extraordinary
 perquisites or tax gross-ups;

■ New
 or materially amended agreements that provide for:

&nbsp;&nbsp;&nbsp;&nbsp;■ Excessive
 termination or CIC severance payments (generally exceeding 3 times base salary and average/target/most
 recent bonus);

&nbsp;&nbsp;&nbsp;&nbsp;■ CIC
 severance payments without involuntary job loss or substantial diminution of duties ("single"
 or "modified single" triggers) or in connection with a problematic
 Good Reason definition;

&nbsp;&nbsp;&nbsp;&nbsp;■ CIC
 excise tax gross-up entitlements (including "modified" gross-ups);

&nbsp;&nbsp;&nbsp;&nbsp;■ Multi-year
 guaranteed awards that are not at risk due to rigorous performance conditions;

■ Liberal
 CIC definition combined with any single-trigger CIC benefits;

■ Insufficient
 executive compensation disclosure by externally-managed issuers (EMIs) such that a reasonable
 assessment of pay programs and practices applicable to the EMI 's
 executives is not possible;

■ Severance
 payments made when the termination is not clearly disclosed as involuntary (for example,
 a termination without cause or resignation for good reason);

■ Any
 other provision or practice deemed to be egregious and present a significant risk to investors.

The above examples are not an exhaustive list. Please refer to ISS' <u>U.S. Compensation Policies FAQ</u> document for additional detail on specific pay practices that have been identified as problematic and may lead to negative vote recommendations.

<u>Options Backdating</u>

The following factors should be examined case-by-case to allow for distinctions to be made between "sloppy" plan administration versus deliberate action or fraud:

■ Reason
 and motive for the options backdating issue, such as inadvertent vs. deliberate grant date
 changes;

■ Duration
 of options backdating;

■ Size
 of restatement due to options backdating;

■ Corrective
 actions taken by the board or compensation committee, such as canceling or re-pricing backdated
 options, the recouping of option gains on backdated grants; and

■ Adoption
 of a grant policy that prohibits backdating and creates a fixed grant schedule or window
 period for equity grants in the future.

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**Compensation Committee Communications and Responsiveness**

Consider the following factors case-by-case when evaluating ballot items related to executive pay on the board's responsiveness to investor input and engagement on compensation issues:

■ Failure
 to respond to majority-supported shareholder proposals on executive pay topics; or

■ Failure
 to adequately respond to the company 's
 previous say-on-pay proposal that received the support of less than 70 percent of votes cast,
 taking into account:

&nbsp;&nbsp;&nbsp;&nbsp;■ Disclosure
 of engagement efforts with major institutional investors, including the frequency and timing
 of engagements and the company participants (including whether independent directors participated);

&nbsp;&nbsp;&nbsp;&nbsp;■ Disclosure
 of the specific concerns voiced by dissenting shareholders that led to the say-on-pay opposition;

&nbsp;&nbsp;&nbsp;&nbsp;■ Disclosure
 of specific and meaningful actions taken to address shareholders '
 concerns;

&nbsp;&nbsp;&nbsp;&nbsp;■ Other
 recent compensation actions taken by the company;

&nbsp;&nbsp;&nbsp;&nbsp;■ Whether
 the issues raised are recurring or isolated;

&nbsp;&nbsp;&nbsp;&nbsp;■ The
 company 's
 ownership structure; and

&nbsp;&nbsp;&nbsp;&nbsp;■ Whether
 the support level was less than 50 percent, which would warrant the highest degree of responsiveness.

Frequency of Advisory Vote on Executive Compensation ("Say When on Pay")

**General Recommendation:** Vote for annual advisory votes on compensation, which provide the most consistent and clear communication channel for shareholder concerns about companies' executive pay programs.

Voting on Golden Parachutes in an Acquisition, Merger, Consolidation, or Proposed Sale

**General Recommendation:** Vote case-by-case on say on Golden Parachute proposals, including consideration of existing change-in-control arrangements maintained with named executive officers but also considering new or extended arrangements.

Features that may result in an "against" recommendation include one or more of the following, depending on the number, magnitude, and/or timing of issue(s):

■ Single-
 or modified-single-trigger cash severance;

■ Single-trigger
 acceleration of unvested equity awards;

■ Full
 acceleration of equity awards granted shortly before the change in control;

■ Acceleration
 of performance awards above the target level of performance without compelling rationale;

■ Excessive
 cash severance (generally >3x base salary and bonus);

■ Excise
 tax gross-ups triggered and payable;

■ Excessive
 golden parachute payments (on an absolute basis or as a percentage of transaction equity
 value); or

■ Recent
amendments that incorporate any problematic features (such as those above) or recent actions (such as extraordinary equity grants) that
may make packages so attractive as to influence merger agreements that may not be in the best interests of shareholders; or

■ The
 company 's
 assertion that a proposed transaction is conditioned on shareholder approval of the golden
 parachute advisory vote.

Recent amendment(s) that incorporate problematic features will tend to carry more weight on the overall analysis. However, the presence of multiple legacy problematic features will also be closely scrutinized.

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In cases where the golden parachute vote is incorporated into a company's advisory vote on compensation (management say-on-pay), ISS will evaluate the say-on-pay proposal in accordance with these guidelines, which may give higher weight to that component of the overall evaluation.

**Equity-Based and Other Incentive Plans**

Please refer to ISS' <u>U.S. Equity Compensation Plans FAQ</u> document for additional details on the Equity Plan Scorecard policy.

**General Recommendation:** Vote case-by-case on certain equity-based compensation plans**<sup>21</sup>** depending on a combination of certain plan features and equity grant practices, where positive factors may counterbalance negative factors, and vice versa, as evaluated using an "Equity Plan Scorecard" (EPSC) approach with three pillars:

■ **Plan Cost:** The total estimated cost of the company 's
 equity plans relative to industry/market cap peers, measured by the company's
 estimated Shareholder Value Transfer (SVT) in relation to peers and considering both:

&nbsp;&nbsp;&nbsp;&nbsp;■ SVT
 based on new shares requested plus shares remaining for future grants, plus outstanding unvested/unexercised
 grants; and

&nbsp;&nbsp;&nbsp;&nbsp;■ SVT
 based only on new shares requested plus shares remaining for future grants.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;■ <u>Plan Features:</u> 

&nbsp;&nbsp;&nbsp;&nbsp;■ Quality
 of disclosure around vesting upon a change in control (CIC);

&nbsp;&nbsp;&nbsp;&nbsp;■ Discretionary
 vesting authority;

&nbsp;&nbsp;&nbsp;&nbsp;■ Liberal
 share recycling on various award types;

&nbsp;&nbsp;&nbsp;&nbsp;■ Lack
 of minimum vesting period for grants made under the plan;

&nbsp;&nbsp;&nbsp;&nbsp;■ Dividends
 payable prior to award vesting.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;■ <u>Grant Practices:</u> 

&nbsp;&nbsp;&nbsp;&nbsp;■ The
 company 's
 three-year burn rate relative to its industry/market cap peers;

&nbsp;&nbsp;&nbsp;&nbsp;■ Vesting
 requirements in CEO 's
 recent equity grants (3-year look-back);

&nbsp;&nbsp;&nbsp;&nbsp;■ The
 estimated duration of the plan (based on the sum of shares remaining available and the new
 shares requested, divided by the average annual shares granted in the prior three years);

&nbsp;&nbsp;&nbsp;&nbsp;■ The
 proportion of the CEO 's
 most recent equity grants/awards subject to performance conditions;

&nbsp;&nbsp;&nbsp;&nbsp;■ Whether
 the company maintains a sufficient claw-back policy;

&nbsp;&nbsp;&nbsp;&nbsp;■ Whether
 the company maintains sufficient post-exercise/vesting share-holding requirements.

Generally vote against the plan proposal if the combination of above factors indicates that the plan is not, overall, in shareholders' interests, or if any of the following egregious factors ("overriding factors") apply:

■ Awards
 may vest in connection with a liberal change-of-control definition;

■ The
 plan would permit repricing or cash buyout of underwater options without shareholder approval
 (either by expressly permitting it – for NYSE and Nasdaq listed companies – or
 by not prohibiting it when the company has a history of repricing – for non-listed
 companies);

■ The
 plan is a vehicle for problematic pay practices or a significant pay-for-performance disconnect
 under certain circumstances;

■ The
 plan is excessively dilutive to shareholders '
 holdings;

■ The
 plan contains an evergreen (automatic share replenishment) feature; or

---

| | |
|:---|:---|
| **21** | Proposals evaluated under the EPSC policy generally include those to approve or amend (1) stock option plans for employees and/or employees and directors, (2) restricted stock plans for employees and/or employees and directors, and (3) omnibus stock incentive plans for employees and/or employees and directors; amended plans will be further evaluated case-by-case. |

---

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■ Any
 other plan features are determined to have a significant negative impact on shareholder interests.

**Further Information on certain EPSC Factors:**

**Shareholder Value Transfer (SVT)**

The cost of the equity plans is expressed as Shareholder Value Transfer (SVT), which is measured using a binomial option pricing model that assesses the amount of shareholders' equity flowing out of the company to employees and directors. SVT is expressed as both a dollar amount and as a percentage of market value, and includes the new shares proposed, shares available under existing plans, and shares granted but unexercised (using two measures, in the case of plans subject to the Equity Plan Scorecard evaluation, as noted above). All award types are valued.

For omnibus plans, unless limitations are placed on the most expensive types of awards (for example, full-value awards), the assumption is made that all awards to be granted will be the most expensive types.

For proposals that are not subject to the Equity Plan Scorecard evaluation, Shareholder Value Transfer is reasonable if it falls below a company-specific benchmark. The benchmark is determined as follows: The top quartile performers in each industry group (using the Global Industry Classification Standard: GICS) are identified. Benchmark SVT levels for each industry are established based on these top performers' historic SVT. Regression analyses are run on each industry group to identify the variables most strongly correlated to SVT. The benchmark industry SVT level is then adjusted upwards or downwards for the specific company by plugging the company- specific performance measures, size, and cash compensation into the industry cap equations to arrive at the company's benchmark.**<sup>22</sup>**

**Three-Year Value-Adjusted Burn Rate**

A "Value-Adjusted Burn Rate" is used for stock plan evaluations. Value-Adjusted Burn Rate benchmarks are calculated as the greater of: (1) an industry-specific threshold based on three-year burn rates within the company's GICS group segmented by S&P 500, Russell 3000 index (less the S&P 500) and non-Russell 3000 index; and (2) a *de minimis* threshold established separately for each of the S&P 500, the Russell 3000 index less the S&P 500, and the non-Russell 3000 index. Year-over-year burn-rate benchmark changes will be limited to a predetermined range above or below the prior year's burn-rate benchmark.

The Value-Adjusted Burn Rate is calculated as follows:

Value-Adjusted Burn Rate = ((# of options \* option's dollar value using a Black-Scholes model) + (# of full-value awards \* stock price)) / (Weighted average common shares \* stock price).

Egregious Factors

**Liberal Change in Control Definition**

Generally vote against equity plans if the plan has a liberal definition of change in control and the equity awards could vest upon such liberal definition of change in control, even though an actual change in control may not occur. Examples of such a definition include, but are not limited to, announcement or commencement of a tender

**<sup>22</sup>** For plans evaluated under the Equity Plan Scorecard policy, the company's SVT benchmark is considered along with other factors.

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offer, provisions for acceleration upon a "potential" takeover, shareholder approval of a merger or other transactions, or similar language.

**Repricing Provisions**

Vote against plans that expressly permit the repricing or exchange of underwater stock options/stock appreciate rights (SARs) without prior shareholder approval. "Repricing" typically includes the ability to do any of the following:

■ Amend
 the terms of outstanding options or SARs to reduce the exercise price of such outstanding
 options or SARs;

■ Cancel
 outstanding options or SARs in exchange for options or SARs with an exercise price that is
 less than the exercise price of the original options or SARs;

■ Cancel
 underwater options in exchange for stock awards; or

■ Provide
 cash buyouts of underwater options.

While the above cover most types of repricing, ISS may view other provisions as akin to repricing depending on the facts and circumstances.

Also, vote against or withhold from members of the Compensation Committee who approved repricing (as defined above or otherwise determined by ISS), without prior shareholder approval, even if such repricings are allowed in their equity plan.

Vote against plans that do not expressly prohibit repricing or cash buyout of underwater options without shareholder approval if the company has a history of repricing/buyouts without shareholder approval, and the applicable listing standards would not preclude them from doing so.

**Problematic Pay Practices or Significant Pay-for-Performance Disconnect**

If the equity plan on the ballot is a vehicle for <u>problematic pay practices</u>, vote against the plan.

ISS may recommend a vote against the equity plan if the plan is determined to be a vehicle for pay-for- performance misalignment. Considerations in voting against the equity plan may include, but are not limited to:

■ Severity
 of the pay-for-performance misalignment;

■ Whether
 problematic equity grant practices are driving the misalignment; and/or

■ Whether
 equity plan awards have been heavily concentrated to the CEO and/or the other NEOs.

Amending Cash and Equity Plans (including Approval for Tax Deductibility (162(m))

**General Recommendation:** Vote case-by-case on amendments to cash and equity incentive plans.

Generally vote for proposals to amend executive cash, stock, or cash and stock incentive plans if the proposal:

■ Addresses
 administrative features only; or

■ Seeks
 approval for Section 162(m) purposes <u>only</u>, and the plan administering committee consists
 entirely of independent directors, per ISS' Classification
 of Directors . Note that if the company is presenting the plan to shareholders for
 the first time for any reason (including after the company 's
 initial public offering), or if the proposal is bundled with other material plan amendments,
 then the recommendation will be case-by-case (see below).

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Vote against proposals to amend executive cash, stock, or cash and stock incentive plans if the proposal:

■ Seeks
 approval for Section 162(m) purposes only, and the plan administering committee does not
 consist entirely of independent directors, per <u>ISS' Classification of Directors</u>.

Vote case-by-case on all other proposals to amend <u>cash</u> incentive plans. This includes plans presented to shareholders for the first time after the company's IPO and/or proposals that bundle material amendment(s) other than those for Section 162(m) purposes.

Vote case-by-case on all other proposals to amend <u>equity</u> incentive plans, considering the following:

■ If
 the proposal requests additional shares and/or the amendments include a term extension or
 addition of full value awards as an award type, the recommendation will be based on the Equity
 Plan Scorecard evaluation as well as an analysis of the overall impact of the amendments.

■ If
 the plan is being presented to shareholders for the first time (including after the company 's
 IPO), whether or not additional shares are being requested, the recommendation will be based
 on the Equity Plan Scorecard evaluation as well as an analysis of the overall impact of any
 amendments.

■ If
 there is no request for additional shares and the amendments do not include a term extension
 or addition of full value awards as an award type, then the recommendation will be based
 entirely on an analysis of the overall impact of the amendments, and the EPSC evaluation
 will be shown only for informational purposes.

In the first two case-by-case evaluation scenarios, the EPSC evaluation/score is the more heavily weighted consideration.

Specific Treatment of Certain Award Types in Equity Plan Evaluations

**Dividend Equivalent Rights**

Options that have Dividend Equivalent Rights (DERs) associated with them will have a higher calculated award value than those without DERs under the binomial model, based on the value of these dividend streams. The higher value will be applied to new shares, shares available under existing plans, and shares awarded but not exercised per the plan specifications. DERS transfer more shareholder equity to employees and non-employee directors and this cost should be captured.

**Operating Partnership (OP) Units in Equity Plan Analysis of Real Estate Investment Trusts (REITs)**

For Real Estate Investment Trusts (REITS), include the common shares issuable upon conversion of outstanding Operating Partnership (OP) units in the share count for the purposes of determining: (1) market capitalization in the Shareholder Value Transfer (SVT) analysis and (2) shares outstanding in the burn rate analysis.

**Other Compensation Plans**

401(k) Employee Benefit Plans

**General Recommendation:** Vote for proposals to implement a 401(k) savings plan for employees.

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Employee Stock Ownership Plans (ESOPs)

**General Recommendation:** Vote for proposals to implement an ESOP or increase authorized shares for existing ESOPs, unless the number of shares allocated to the ESOP is excessive (more than five percent of outstanding shares).

Employee Stock Purchase Plans—Qualified Plans

**General Recommendation:** Vote case-by-case on qualified employee stock purchase plans. Vote for employee stock purchase plans where all of the following apply:

■ Purchase
 price is at least 85 percent of fair market value;

■ Offering
 period is 27 months or less; and

■ The
 number of shares allocated to the plan is 10 percent or less of the outstanding shares.

Vote against qualified employee stock purchase plans where when the plan features do not meet all of the above criteria.

Employee Stock Purchase Plans—Non-Qualified Plans

**General Recommendation:** Vote case-by-case on nonqualified employee stock purchase plans. Vote for nonqualified employee stock purchase plans with all the following features:

■ Broad-based
 participation;

■ Limits
 on employee contribution, which may be a fixed dollar amount or expressed as a percent of
 base salary;

■ Company
matching contribution up to 25 percent of employee 's
contribution, which is effectively a discount of 20 percent from market value; and

■ No
 discount on the stock price on the date of purchase when there is a company matching contribution.

Vote against nonqualified employee stock purchase plans when the plan features do not meet all of the above criteria. If the matching contribution or effective discount exceeds the above, ISS may evaluate the SVT cost of the plan as part of the assessment.

Option Exchange Programs/Repricing Options

**General Recommendation:** Vote case-by-case on management proposals seeking approval to exchange/reprice options taking into consideration:

■ Historic
 trading patterns--the stock price should not be so volatile that the options are likely to
 be back "in- the-money" over the near term;

■ Rationale
 for the re-pricing--was the stock price decline beyond management 's
 control?;

■ Is
 this a value-for-value exchange?;

■ Are
 surrendered stock options added back to the plan reserve?;

■ Timing--repricing
 should occur at least one year out from any precipitous drop in company 's
 stock price;

■ Option
 vesting--does the new option vest immediately or is there a black-out period?;

■ Term
 of the option--the term should remain the same as that of the replaced option;

■ Exercise
 price--should be set at fair market or a premium to market;

■ Participants--executive
 officers and directors must be excluded.

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If the surrendered options are added back to the equity plans for re-issuance, then also take into consideration the company's total cost of equity plans and its three-year average burn rate.

In addition to the above considerations, evaluate the intent, rationale, and timing of the repricing proposal. The proposal should clearly articulate why the board is choosing to conduct an exchange program at this point in time. Repricing underwater options after a recent precipitous drop in the company's stock price demonstrates poor timing and warrants additional scrutiny. Also, consider the terms of the surrendered options, such as the grant date, exercise price and vesting schedule. Grant dates of surrendered options should be far enough back (two to three years) so as not to suggest that repricings are being done to take advantage of short-term downward price movements. Similarly, the exercise price of surrendered options should be above the 52-week high for the stock price.

Vote for shareholder proposals to put option repricings to a shareholder vote.

Stock Plans in Lieu of Cash

**General Recommendation:** Vote case-by-case on plans that provide participants with the option of taking all or a portion of their cash compensation in the form of stock.

Vote for non-employee director-only equity plans that provide a dollar-for-dollar cash-for-stock exchange.

Vote case-by-case on plans which do not provide a dollar-for-dollar cash for stock exchange. In cases where the exchange is not dollar-for-dollar, the request for new or additional shares for such equity program will be considered using the binomial option pricing model. In an effort to capture the total cost of total compensation, ISS will not make any adjustments to carve out the in-lieu-of cash compensation.

Transfer Stock Option (TSO) Programs

**General Recommendation:** One-time Transfers: Vote against or withhold from compensation committee members if they fail to submit one-time transfers to shareholders for approval.

Vote case-by-case on one-time transfers. Vote for if:

■ Executive
 officers and non-employee directors are excluded from participating;

■ Stock
 options are purchased by third-party financial institutions at a discount to their fair value
 using option pricing models such as Black-Scholes or a Binomial Option Valuation or other
 appropriate financial models; and

■ There
 is a two-year minimum holding period for sale proceeds (cash or stock) for all participants.

Additionally, management should provide a clear explanation of why options are being transferred to a third-party institution and whether the events leading up to a decline in stock price were beyond management's control. A review of the company's historic stock price volatility should indicate if the options are likely to be back "in-the- money" over the near term.

Ongoing TSO program: Vote against equity plan proposals if the details of ongoing TSO programs are not provided to shareholders. Since TSOs will be one of the award types under a stock plan, the ongoing TSO program, structure, and mechanics must be disclosed to shareholders. The specific criteria to be considered in evaluating these proposals include, but not limited, to the following:

■ Eligibility;

■ Vesting;

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■ Bid-price;

■ Term
 of options;

■ Cost
 of the program and impact of the TSOs on company 's
 total option expense; and

■ Option
 repricing policy.

Amendments to existing plans that allow for introduction of transferability of stock options should make clear that only options granted post-amendment shall be transferable.

**Director Compensation**

Shareholder Ratification of Director Pay Programs

**General Recommendation:** Vote case-by-case on management proposals seeking ratification of non-employee director compensation, based on the following factors:

■ If
 the equity plan under which non-employee director grants are made is on the ballot, whether
 or not it warrants support; and

■ An
 assessment of the following qualitative factors:

&nbsp;&nbsp;&nbsp;&nbsp;■ The
 relative magnitude of director compensation as compared to companies of a similar profile;

&nbsp;&nbsp;&nbsp;&nbsp;■ The
 presence of problematic pay practices relating to director compensation;

&nbsp;&nbsp;&nbsp;&nbsp;■ Director
 stock ownership guidelines and holding requirements;

&nbsp;&nbsp;&nbsp;&nbsp;■ Equity
 award vesting schedules;

&nbsp;&nbsp;&nbsp;&nbsp;■ The
 mix of cash and equity-based compensation;

&nbsp;&nbsp;&nbsp;&nbsp;■ Meaningful
 limits on director compensation;

&nbsp;&nbsp;&nbsp;&nbsp;■ The
 availability of retirement benefits or perquisites; and

&nbsp;&nbsp;&nbsp;&nbsp;■ The
 quality of disclosure surrounding director compensation.

Equity Plans for Non-Employee Directors

**General Recommendation:** Vote case-by-case on compensation plans for non-employee directors, based on:

■ The
 total estimated cost of the company 's
 equity plans relative to industry/market cap peers, measured by the company's
 estimated Shareholder Value Transfer (SVT) based on new shares requested plus shares remaining
 for future grants, plus outstanding unvested/unexercised grants;

■ The
 company 's
 three-year burn rate relative to its industry/market cap peers (in certain circumstances);
 and

■ The
 presence of any egregious plan features (such as an option repricing provision or liberal
 CIC vesting risk).

On occasion, non-employee director stock plans will exceed the plan cost or burn-rate benchmarks when combined with employee or executive stock plans. In such cases, vote case-by-case on the plan taking into consideration the following qualitative factors:

■ The
 relative magnitude of director compensation as compared to companies of a similar profile;

■ The
 presence of problematic pay practices relating to director compensation;

■ Director
 stock ownership guidelines and holding requirements;

■ Equity
 award vesting schedules;

■ The
 mix of cash and equity-based compensation;

■ Meaningful
 limits on director compensation;

■ The
 availability of retirement benefits or perquisites; and

■ The
 quality of disclosure surrounding director compensation.

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Non-Employee Director Retirement Plans

**General Recommendation:** Vote against retirement plans for non-employee directors. Vote for shareholder proposals to eliminate retirement plans for non-employee directors.

**Shareholder Proposals on Compensation**

Bonus Banking/Bonus Banking "Plus"

**General Recommendation:** Vote case-by-case on proposals seeking deferral of a portion of annual bonus pay, with ultimate payout linked to sustained results for the performance metrics on which the bonus was earned (whether for the named executive officers or a wider group of employees), taking into account the following factors:

■ The
 company 's
 past practices regarding equity and cash compensation;

■ Whether
 the company has a holding period or stock ownership requirements in place, such as a meaningful
 retention ratio (at least 50 percent for full tenure); and

■ Whether
 the company has a rigorous claw-back policy in place.

Compensation Consultants—Disclosure of Board or Company's Utilization

**General Recommendation:** Generally vote for shareholder proposals seeking disclosure regarding the company, board, or compensation committee's use of compensation consultants, such as company name, business relationship(s), and fees paid.

Disclosure/Setting Levels or Types of Compensation for Executives and Directors

**General Recommendation:** Generally vote for shareholder proposals seeking additional disclosure of executive and director pay information, provided the information requested is relevant to shareholders' needs, would not put the company at a competitive disadvantage relative to its industry, and is not unduly burdensome to the company.

Generally vote against shareholder proposals seeking to set absolute levels on compensation or otherwise dictate the amount or form of compensation (such as types of compensation elements or specific metrics) to be used for executive or directors.

Generally vote against shareholder proposals that mandate a minimum amount of stock that directors must own in order to qualify as a director or to remain on the board.

Vote case-by-case on all other shareholder proposals regarding executive and director pay, taking into account relevant factors, including but not limited to: company performance, pay level and design versus peers, history of compensation concerns or pay-for-performance disconnect, and/or the scope and prescriptive nature of the proposal.

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Golden Coffins/Executive Death Benefits

**General Recommendation:** Generally vote for proposals calling for companies to adopt a policy of obtaining shareholder approval for any future agreements and corporate policies that could oblige the company to make payments or awards following the death of a senior executive in the form of unearned salary or bonuses, accelerated vesting or the continuation in force of unvested equity grants, perquisites and other payments or awards made in lieu of compensation. This would not apply to any benefit programs or equity plan proposals for which the broad-based employee population is eligible.

Hold Equity Past Retirement or for a Significant Period of Time

**General Recommendation:** Vote case-by-case on shareholder proposals asking companies to adopt policies requiring senior executive officers to retain a portion of net shares acquired through compensation plans. The following factors will be taken into account:

■ The
 percentage/ratio of net shares required to be retained;

■ The
 time period required to retain the shares;

■ Whether
 the company has equity retention, holding period, and/or stock ownership requirements in
 place and the robustness of such requirements;

■ Whether
 the company has any other policies aimed at mitigating risk taking by executives;

■ Executives '
actual stock ownership and the degree to which it meets or exceeds the proponent's suggested holding period/retention
ratio or the company's existing requirements; and

■ Problematic
 pay practices, current and past, which may demonstrate a short-term versus long-term focus.

Pay Disparity

**General Recommendation:** Vote case-by-case on proposals calling for an analysis of the pay disparity between corporate executives and other non-executive employees. The following factors will be considered:

■ The
 company 's
 current level of disclosure of its executive compensation setting process, including how
 the company considers pay disparity;

■ If
 any problematic pay practices or pay-for-performance concerns have been identified at the
 company; and

■ The
 level of shareholder support for the company 's
 pay programs.

Generally vote against proposals calling for the company to use the pay disparity analysis or pay ratio in a specific way to set or limit executive pay.

Pay for Performance/Performance-Based Awards

**General Recommendation:** Vote case-by-case on shareholder proposals requesting that a significant amount of future long-term incentive compensation awarded to senior executives shall be performance-based and requesting that the board adopt and disclose challenging performance metrics to shareholders, based on the following analytical steps:

■ First,
 vote for shareholder proposals advocating the use of performance-based equity awards, such
 as performance contingent options or restricted stock, indexed options, or premium-priced
 options, unless the proposal is overly restrictive or if the company has demonstrated that
 it is using a "substantial"
 portion of performance-based awards for its top executives. Standard stock options and
 performance-accelerated awards do not meet the criteria to be considered as performance-based
 awards. Further, premium-priced options should have a meaningful premium to be considered
 performance-based awards.

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■ Second,
 assess the rigor of the company 's
 performance-based equity program. If the bar set for the performance-based program is too
 low based on the company's historical or peer group comparison, generally vote
 for the proposal. Furthermore, if target performance results in an above target payout, vote
 for the shareholder proposal due to program's poor design. If the company does
 not disclose the performance metric of the performance-based equity program, vote for the
 shareholder proposal regardless of the outcome of the first step to the test.

In general, vote for the shareholder proposal if the company does not meet both of the above two steps.

Pay for Superior Performance

**General Recommendation:** Vote case-by-case on shareholder proposals that request the board establish a pay-for- superior performance standard in the company's executive compensation plan for senior executives. These proposals generally include the following principles:

■ Set
 compensation targets for the plan 's
 annual and long-term incentive pay components at or below the peer group median;

■ Deliver
 a majority of the plan 's
 target long-term compensation through performance-vested, not simply time- vested, equity
 awards;

■ Provide
 the strategic rationale and relative weightings of the financial and non-financial performance
 metrics or criteria used in the annual and performance-vested long-term incentive components
 of the plan;

■ Establish
performance targets for each plan financial metric relative to the performance of the company 's
peer companies;

■ Limit
 payment under the annual and performance-vested long-term incentive components of the plan
 to when the company 's
 performance on its selected financial performance metrics exceeds peer group median performance.

Consider the following factors in evaluating this proposal:

■ What
 aspects of the company 's
 annual and long-term equity incentive programs are performance driven?

■ If
 the annual and long-term equity incentive programs are performance driven, are the performance
 criteria and hurdle rates disclosed to shareholders or are they benchmarked against a disclosed
 peer group?

■ Can
 shareholders assess the correlation between pay and performance based on the current disclosure?

■ What
 type of industry and stage of business cycle does the company belong to?

Pre-Arranged Trading Plans (10b5-1 Plans)

**General Recommendation:** Generally vote for shareholder proposals calling for the addition of certain safeguards in prearranged trading plans (10b5-1 plans) for executives. Safeguards may include:

■ Adoption,
 amendment, or termination of a 10b5-1 Plan must be disclosed in a Form 8-K;

■ Amendment
 or early termination of a 10b5-1 Plan allowed only under extraordinary circumstances, as
 determined by the board;

■ Request
 that a certain number of days that must elapse between adoption or amendment of a 10b5-1
 Plan and initial trading under the plan;

■ Reports
 on Form 4 must identify transactions made pursuant to a 10b5-1 Plan;

■ An
 executive may not trade in company stock outside the 10b5-1 Plan;

■ Trades
 under a 10b5-1 Plan must be handled by a broker who does not handle other securities transactions
 for the executive.

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Prohibit Outside CEOs from Serving on Compensation Committees

**General Recommendation:** Generally vote against proposals seeking a policy to prohibit any outside CEO from serving on a company's compensation committee, unless the company has demonstrated problematic pay practices that raise concerns about the performance and composition of the committee.

Recoupment of Incentive or Stock Compensation in Specified Circumstances

**General Recommendation:** Vote case-by-case on proposals to recoup incentive cash or stock compensation made to senior executives if it is later determined that the figures upon which incentive compensation is earned turn out to have been in error, or if the senior executive has breached company policy or has engaged in misconduct that may be significantly detrimental to the company's financial position or reputation, or if the senior executive failed to manage or monitor risks that subsequently led to significant financial or reputational harm to the company. Many companies have adopted policies that permit recoupment in cases where an executive's fraud, misconduct, or negligence significantly contributed to a restatement of financial results that led to the awarding of unearned incentive compensation. However, such policies may be narrow given that not all misconduct or negligence may result in significant financial restatements. Misconduct, negligence, or lack of sufficient oversight by senior executives may lead to significant financial loss or reputational damage that may have long-lasting impact.

In considering whether to support such shareholder proposals, ISS will take into consideration the following factors:

■ If
 the company has adopted a formal recoupment policy;

■ The
 rigor of the recoupment policy focusing on how and under what circumstances the company may
 recoup incentive or stock compensation;

■ Whether
 the company has chronic restatement history or material financial problems;

■ Whether
 the company 's
 policy substantially addresses the concerns raised by the proponent;

■ Disclosure
 of recoupment of incentive or stock compensation from senior executives or lack thereof;
 or

■ Any
 other relevant factors.

Severance Agreements for Executives/Golden Parachutes

**General Recommendation:** Vote for shareholder proposals requiring that golden parachutes or executive severance agreements be submitted for shareholder ratification, unless the proposal requires shareholder approval *prior* to entering into employment contracts.

Vote case-by-case on proposals to ratify or cancel golden parachutes. An acceptable parachute should include, but is not limited to, the following:

■ The
 triggering mechanism should be beyond the control of management;

■ The
 amount should not exceed three times base amount (defined as the average annual taxable W-2
 compensation during the five years prior to the year in which the change of control occurs);

■ Change-in-control
payments should be double-triggered, i.e., (1) after a change in control has taken place, and (2) termination of the executive as a result
of the change in control. Change in control is defined as a change in the company ownership structure.

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Share Buyback Impact on Incentive Program Metrics

**General Recommendation:** Vote case-by-case on proposals requesting the company exclude the impact of share buybacks from the calculation of incentive program metrics, considering the following factors:

■ The
 frequency and timing of the company 's
 share buybacks;

■ The
 use of per-share metrics in incentive plans;

■ The
 effect of recent buybacks on incentive metric results and payouts; and

■ Whether
 there is any indication of metric result manipulation.

Supplemental Executive Retirement Plans (SERPs)

**General Recommendation:** Generally vote for shareholder proposals requesting to put extraordinary benefits contained in SERP agreements to a shareholder vote unless the company's executive pension plans do not contain excessive benefits beyond what is offered under employee-wide plans.

Generally vote for shareholder proposals requesting to limit the executive benefits provided under the company's supplemental executive retirement plan (SERP) by limiting covered compensation to a senior executive's annual salary or those pay elements covered for the general employee population.

Tax Gross-Up Proposals

**General Recommendation:** Generally vote for proposals calling for companies to adopt a policy of not providing tax gross-up payments to executives, except in situations where gross-ups are provided pursuant to a plan, policy, or arrangement applicable to management employees of the company, such as a relocation or expatriate tax equalization policy.

Termination of Employment Prior to Severance Payment/Eliminating Accelerated Vesting of Unvested Equity

**General Recommendation:** Vote case-by-case on shareholder proposals seeking a policy requiring termination of employment prior to severance payment and/or eliminating accelerated vesting of unvested equity.

The following factors will be considered:

■ The
 company 's
 current treatment of equity upon employment termination and/or in change-in-control situations
 (i.e., vesting is double triggered and/or pro rata, does it allow for the assumption of equity
 by acquiring company, the treatment of performance shares, etc.);

■ Current
 employment agreements, including potential poor pay practices such as gross-ups embedded
 in those agreements.

Generally vote for proposals seeking a policy that prohibits automatic acceleration of the vesting of equity awards to senior executives upon a voluntary termination of employment or in the event of a change in control (except for pro rata vesting considering the time elapsed and attainment of any related performance goals between the award date and the change in control).

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**6.** Routine/Miscellaneous

Adjourn Meeting

**General Recommendation:** Generally vote against proposals to provide management with the authority to adjourn an annual or special meeting absent compelling reasons to support the proposal.

Vote for proposals that relate specifically to soliciting votes for a merger or transaction if supporting that merger or transaction. Vote against proposals if the wording is too vague or if the proposal includes "other business."

Amend Quorum Requirements

**General Recommendation:** Vote case-by-case on proposals to reduce quorum requirements for shareholder meetings below a majority of the shares outstanding, taking into consideration:

■ The
 new quorum threshold requested;

■ The
 rationale presented for the reduction;

■ The
 market capitalization of the company (size, inclusion in indices);

■ The
 company 's
 ownership structure;

■ Previous
 voter turnout or attempts to achieve quorum;

■ Any
 provisions or commitments to restore quorum to a majority of shares outstanding, should voter
 turnout improve sufficiently; and

■ Other
 factors as appropriate.

In general, a quorum threshold kept as close to a majority of shares outstanding as is achievable is preferred.

Vote case-by-case on directors who unilaterally lower the quorum requirements below a majority of the shares outstanding, taking into consideration the factors listed above.

Amend Minor Bylaws

**General Recommendation:** Vote for bylaw or charter changes that are of a housekeeping nature (updates or corrections).

Change Company Name

**General Recommendation:** Vote for proposals to change the corporate name unless there is compelling evidence that the change would adversely impact shareholder value.

Change Date, Time, or Location of Annual Meeting

**General Recommendation:** Vote for management proposals to change the date, time, or location of the annual meeting unless the proposed change is unreasonable.

Vote against shareholder proposals to change the date, time, or location of the annual meeting unless the current scheduling or location is unreasonable.

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Other Business

**General Recommendation:** Vote against proposals to approve other business when it appears as a voting item.

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**7.** Social
 and Environmental Issues

**Global Approach – E&S Shareholder Proposals**

ISS applies a common approach globally to evaluating social and environmental proposals which cover a wide range of topics, including consumer and product safety, environment and energy, labor standards and human rights, workplace and board diversity, and corporate political issues. While a variety of factors goes into each analysis, the overall principle guiding all vote recommendations focuses on how the proposal may enhance or protect shareholder value in either the short or long term.

**General Recommendation:** Generally vote case-by-case, examining primarily whether implementation of the proposal is likely to enhance or protect shareholder value. The following factors will be considered:

■ If
 the issues presented in the proposal are being appropriately or effectively dealt with through
 legislation or government regulation;

■ If
 the company has already responded in an appropriate and sufficient manner to the issue(s)
 raised in the proposal;

■ Whether
 the proposal 's
 request is unduly burdensome (scope or timeframe) or overly prescriptive;

■ The
 company 's
 approach compared with any industry standard practices for addressing the issue(s) raised
 by the proposal;

■ Whether
 there are significant controversies, fines, penalties, or litigation associated with the
 company 's
 practices related to the issue(s) raised in the proposal;

■ If
 the proposal requests increased disclosure or greater transparency, whether reasonable and
 sufficient information is currently available to shareholders from the company or from other
 publicly available sources; and

■ If
 the proposal requests increased disclosure or greater transparency, whether implementation
 would reveal proprietary or confidential information that could place the company at a competitive
 disadvantage.

**Endorsement of Principles**

**General Recommendation:** Generally vote against proposals seeking a company's endorsement of principles that support a particular public policy position. Endorsing a set of principles may require a company to take a stand on an issue that is beyond its own control and may limit its flexibility with respect to future developments.

Management and the board should be afforded the flexibility to make decisions on specific public policy positions based on their own assessment of the most beneficial strategies for the company.

**Animal Welfare**

Animal Welfare Policies

**General Recommendation:** Generally vote for proposals seeking a report on a company's animal welfare standards, or animal welfare-related risks, unless:

■ The
 company has already published a set of animal welfare standards and monitors compliance;

■ The
 company 's
 standards are comparable to industry peers; and

■ There
are no recent significant fines, litigation, or controversies related to the company 's
and/or its suppliers' treatment of animals.

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Animal Testing

**General Recommendation:** Generally vote against proposals to phase out the use of animals in product testing, unless:

■ The
 company is conducting animal testing programs that are unnecessary or not required by regulation;

■ The
 company is conducting animal testing when suitable alternatives are commonly accepted and
 used by industry peers; or

■ There
 are recent, significant fines or litigation related to the company 's
 treatment of animals.

Animal Slaughter

**General Recommendation:** Generally vote against proposals requesting the implementation of Controlled Atmosphere Killing (CAK) methods at company and/or supplier operations unless such methods are required by legislation or generally accepted as the industry standard.

Vote case-by-case on proposals requesting a report on the feasibility of implementing CAK methods at company and/or supplier operations considering the availability of existing research conducted by the company or industry groups on this topic and any fines or litigation related to current animal processing procedures at the company.

**Consumer Issues**

Genetically Modified Ingredients

**General Recommendation:** Generally vote against proposals requesting that a company voluntarily label genetically engineered (GE) ingredients in its products. The labeling of products with GE ingredients is best left to the appropriate regulatory authorities.

Vote case-by-case on proposals asking for a report on the feasibility of labeling products containing GE ingredients, taking into account:

■ The
 potential impact of such labeling on the company 's
 business;

■ The
quality of the company 's disclosure on GE
product labeling, related voluntary initiatives, and how this disclosure compares with industry peer disclosure; and

■ Company 's
 current disclosure on the feasibility of GE product labeling.

Generally vote against proposals seeking a report on the social, health, and environmental effects of genetically modified organisms (GMOs). Studies of this sort are better undertaken by regulators and the scientific community.

Generally vote against proposals to eliminate GE ingredients from the company's products, or proposals asking for reports outlining the steps necessary to eliminate GE ingredients from the company's products. Such decisions are more appropriately made by management with consideration of current regulations.

Reports on Potentially Controversial Business/Financial Practices

**General Recommendation:** Vote case-by-case on requests for reports on a company's potentially controversial business or financial practices or products, taking into account:

■ Whether
 the company has adequately disclosed mechanisms in place to prevent abuses;

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■ Whether
 the company has adequately disclosed the financial risks of the products/practices in question;

■ Whether
 the company has been subject to violations of related laws or serious controversies; and

■ Peer
 companies '
 policies/practices in this area.

Pharmaceutical Pricing, Access to Medicines, and Prescription Drug Reimportation

**General Recommendation:** Generally vote against proposals requesting that companies implement specific price restraints on pharmaceutical products unless the company fails to adhere to legislative guidelines or industry norms in its product pricing practices.

Vote case-by-case on proposals requesting that a company report on its product pricing or access to medicine policies, considering:

■ The
 potential for reputational, market, and regulatory risk exposure;

■ Existing
 disclosure of relevant policies;

■ Deviation
 from established industry norms;

■ Relevant
 company initiatives to provide research and/or products to disadvantaged consumers;

■ Whether
 the proposal focuses on specific products or geographic regions;

■ The
 potential burden and scope of the requested report;

■ Recent
 significant controversies, litigation, or fines at the company.

Generally vote for proposals requesting that a company report on the financial and legal impact of its prescription drug reimportation policies unless such information is already publicly disclosed.

Generally vote against proposals requesting that companies adopt specific policies to encourage or constrain prescription drug reimportation. Such matters are more appropriately the province of legislative activity and may place the company at a competitive disadvantage relative to its peers.

Product Safety and Toxic/Hazardous Materials

**General Recommendation:** Generally vote for proposals requesting that a company report on its policies, initiatives/procedures, and oversight mechanisms related to toxic/hazardous materials or product safety in its supply chain, unless:

■ The
 company already discloses similar information through existing reports such as a supplier
 code of conduct and/or a sustainability report;

■ The
 company has formally committed to the implementation of a toxic/hazardous materials and/or
 product safety and supply chain reporting and monitoring program based on industry norms
 or similar standards within a specified time frame; and

■ The
 company has not been recently involved in relevant significant controversies, fines, or litigation.

Vote case-by-case on resolutions requesting that companies develop a feasibility assessment to phase-out of certain toxic/hazardous materials, or evaluate and disclose the potential financial and legal risks associated with utilizing certain materials, considering:

■ The
 company 's
 current level of disclosure regarding its product safety policies, initiatives, and oversight
 mechanisms;

■ Current
 regulations in the markets in which the company operates; and

■ Recent
 significant controversies, litigation, or fines stemming from toxic/hazardous materials at
 the company.

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Generally vote against resolutions requiring that a company reformulate its products.

Tobacco-Related Proposals

**General Recommendation:** Vote case-by-case on resolutions regarding the advertisement of tobacco products, considering:

■ Recent
 related fines, controversies, or significant litigation;

■ Whether
 the company complies with relevant laws and regulations on the marketing of tobacco;

■ Whether
 the company 's
 advertising restrictions deviate from those of industry peers;

■ Whether
 the company entered into the Master Settlement Agreement, which restricts marketing of tobacco
 to youth; and

■ Whether
 restrictions on marketing to youth extend to foreign countries.

Vote case-by-case on proposals regarding second-hand smoke, considering;

■ Whether
 the company complies with all laws and regulations;

■ The
degree that voluntary restrictions beyond those mandated by law might hurt the company 's
competitiveness; and

■ The
 risk of any health-related liabilities.

Generally vote against resolutions to cease production of tobacco-related products, to avoid selling products to tobacco companies, to spin-off tobacco-related businesses, or prohibit investment in tobacco equities. Such business decisions are better left to company management or portfolio managers.

Generally vote against proposals regarding tobacco product warnings. Such decisions are better left to public health authorities.

**Climate Change**

Say on Climate (SoC) Management Proposals

**General Recommendation:** Vote case-by-case on management proposals that request shareholders to approve the company's climate transition action plan**<sup>23</sup>**, taking into account the completeness and rigor of the plan. Information that will be considered where available includes the following:

■ The
extent to which the company 's climate related
disclosures are in line with TCFD recommendations and meet other market standards;

■ Disclosure
 of its operational and supply chain GHG emissions (Scopes 1, 2, and 3);

■ The
 completeness and rigor of company 's
 short-, medium-, and long-term targets for reducing operational and supply chain GHG emissions
 (Scopes 1, 2, and 3 if relevant);

■ Whether
 the company has sought and received third-party approval that its targets are science-based;

■ Whether
the company has made a commitment to be "net
zero" for operational and supply chain emissions (Scopes 1, 2, and 3) by 2050;

■ Whether
 the company discloses a commitment to report on the implementation of its plan in subsequent
 years;

■ Whether
 the company 's
 climate data has received third-party assurance;

**<sup>23</sup>** Variations of this request also include climate transition related ambitions, or commitment to reporting on the implementation of a climate plan.

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■ Disclosure
 of how the company 's
 lobbying activities and its capital expenditures align with company strategy;

■ Whether
 there are specific industry decarbonization challenges; and

■ The
 company 's
 related commitment, disclosure, and performance compared to its industry peers.

Say on Climate (SoC) Shareholder Proposals

**General Recommendation:** Vote case-by-case on shareholder proposals that request the company to disclose a report providing its GHG emissions levels and reduction targets and/or its upcoming/approved climate transition action plan and provide shareholders the opportunity to express approval or disapproval of its GHG emissions reduction plan, taking into account information such as the following:

■ The
 completeness and rigor of the company 's
 climate-related disclosure;

■ The
 company 's
 actual GHG emissions performance;

■ Whether
 the company has been the subject of recent, significant violations, fines, litigation, or
 controversy related to its GHG emissions; and

■ Whether
 the proposal 's
 request is unduly burdensome (scope or timeframe) or overly prescriptive.

Climate Change/Greenhouse Gas (GHG) Emissions

**General Recommendation:** Generally vote for resolutions requesting that a company disclose information on the financial, physical, or regulatory risks it faces related to climate change on its operations and investments or on how the company identifies, measures, and manages such risks, considering:

■ Whether
 the company already provides current, publicly-available information on the impact that climate
 change may have on the company as well as associated company policies and procedures to address
 related risks and/or opportunities;

■ The
 company 's
 level of disclosure compared to industry peers; and

■ Whether
 there are significant controversies, fines, penalties, or litigation associated with the
 company 's
 climate change-related performance.

Generally vote for proposals requesting a report on greenhouse gas (GHG) emissions from company operations and/or products and operations, unless:

■ The
 company already discloses current, publicly-available information on the impacts that GHG
 emissions may have on the company as well as associated company policies and procedures to
 address related risks and/or opportunities;

■ The
 company 's
 level of disclosure is comparable to that of industry peers; and

■ There
 are no significant, controversies, fines, penalties, or litigation associated with the company 's
 GHG emissions.

Vote case-by-case on proposals that call for the adoption of GHG reduction goals from products and operations, taking into account:

■ Whether
 the company provides disclosure of year-over-year GHG emissions performance data;

■ Whether
 company disclosure lags behind industry peers;

■ The
 company 's
 actual GHG emissions performance;

■ The
 company 's
 current GHG emission policies, oversight mechanisms, and related initiatives; and

■ Whether
 the company has been the subject of recent, significant violations, fines, litigation, or
 controversy related to GHG emissions.

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Energy Efficiency

**General Recommendation:** Generally vote for proposals requesting that a company report on its energy efficiency policies, unless:

■ The
 company complies with applicable energy efficiency regulations and laws, and discloses its
 participation in energy efficiency policies and programs, including disclosure of benchmark
 data, targets, and performance measures; or

■ The
proponent requests adoption of specific energy efficiency goals within specific timelines.

Renewable Energy

**General Recommendation:** Generally vote for requests for reports on the feasibility of developing renewable energy resources unless the report would be duplicative of existing disclosure or irrelevant to the company's line of business.

Generally vote against proposals requesting that the company invest in renewable energy resources. Such decisions are best left to management's evaluation of the feasibility and financial impact that such programs may have on the company.

Generally vote against proposals that call for the adoption of renewable energy goals, taking into account:

■ The
 scope and structure of the proposal;

■ The
 company 's
 current level of disclosure on renewable energy use and GHG emissions; and

■ The
 company 's
 disclosure of policies, practices, and oversight implemented to manage GHG emissions and
 mitigate climate change risks.

**Diversity**

Board Diversity

**General Recommendation:** Generally vote for requests for reports on a company's efforts to diversify the board, unless:

■ The
gender and racial minority representation of the company 's
board is reasonably inclusive in relation to companies of similar size and business; and

■ The
 board already reports on its nominating procedures and gender and racial minority initiatives
 on the board and within the company.

Vote case-by-case on proposals asking a company to increase the gender and racial minority representation on its board, taking into account:

■ The
degree of existing gender and racial minority diversity on the company 's
board and among its executive officers;

■ The
 level of gender and racial minority representation that exists at the company 's
 industry peers;

■ The
 company 's
 established process for addressing gender and racial minority board representation;

■ Whether
 the proposal includes an overly prescriptive request to amend nominating committee charter
 language;

■ The
 independence of the company 's
 nominating committee;

■ Whether
 the company uses an outside search firm to identify potential director nominees; and

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■ Whether
 the company has had recent controversies, fines, or litigation regarding equal employment
 practices.

Equality of Opportunity

**General Recommendation:** Generally vote for proposals requesting a company disclose its diversity policies or initiatives, or proposals requesting disclosure of a company's comprehensive workforce diversity data, including requests for EEO-1 data, unless:

■ The
 company publicly discloses equal opportunity policies and initiatives in a comprehensive
 manner;

■ The
 company already publicly discloses comprehensive workforce diversity data; and

■ The
 company has no recent significant EEO-related violations or litigation.

Generally vote against proposals seeking information on the diversity efforts of suppliers and service providers. Such requests may pose a significant burden on the company.

Gender Identity, Sexual Orientation, and Domestic Partner Benefits

**General Recommendation:** Generally vote for proposals seeking to amend a company's EEO statement or diversity policies to prohibit discrimination based on sexual orientation and/or gender identity, unless the change would be unduly burdensome.

Generally vote against proposals to extend company benefits to, or eliminate benefits from, domestic partners. Decisions regarding benefits should be left to the discretion of the company.

Gender, Race/Ethnicity Pay Gap

**General Recommendation:** Vote case-by-case on requests for reports on a company's pay data by gender or race/ ethnicity, or a report on a company's policies and goals to reduce any gender or race/ethnicity pay gaps, taking into account:

■ The
 company 's
 current policies and disclosure related to both its diversity and inclusion policies and
 practices and its compensation philosophy on fair and equitable compensation practices;

■ Whether
 the company has been the subject of recent controversy, litigation, or regulatory actions
 related to gender, race, or ethnicity pay gap issues;

■ The
 company 's
 disclosure regarding gender, race, or ethnicity pay gap policies or initiatives compared
 to its industry peers; and

■ Local
 laws regarding categorization of race and/or ethnicity and definitions of ethnic and/or racial
 minorities.

Racial Equity and/or Civil Rights Audit Guidelines

**General Recommendation:** Vote case-by-case on proposals asking a company to conduct an independent racial equity and/or civil rights audit, taking into account:

■ The
 company 's
 established process or framework for addressing racial inequity and discrimination internally;

■ Whether
 the company adequately discloses workforce diversity and inclusion metrics and goals;

■ Whether
 the company has issued a public statement related to its racial justice efforts in recent
 years, or has committed to internal policy review;

■ Whether
 the company has engaged with impacted communities, stakeholders, and civil rights experts;

■ The
 company 's
 track record in recent years of racial justice measures and outreach externally; and

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■ Whether
 the company has been the subject of recent controversy, litigation, or regulatory actions
 related to racial inequity or discrimination.

**Environment and Sustainability**

Facility and Workplace Safety

**General Recommendation:** Vote case-by-case on requests for workplace safety reports, including reports on accident risk reduction efforts, taking into account:

■ The
company 's current level of disclosure of
its workplace health and safety performance data, health and safety management policies, initiatives, and oversight mechanisms;

■ The
 nature of the company 's
 business, specifically regarding company and employee exposure to health and safety risks;

■ Recent
 significant controversies, fines, or violations related to workplace health and safety; and

■ The
 company 's
 workplace health and safety performance relative to industry peers.

Vote case-by-case on resolutions requesting that a company report on safety and/or security risks associated with its operations and/or facilities, considering:

■ The
 company 's
 compliance with applicable regulations and guidelines;

■ The
 company 's
 current level of disclosure regarding its security and safety policies, procedures, and compliance
 monitoring; and

■ The
existence of recent, significant violations, fines, or controversy regarding the safety and security of the company's operations
and/or facilities.

General Environmental Proposals and Community Impact Assessments

**General Recommendation:** Vote case-by-case on requests for reports on policies and/or the potential (community) social and/or environmental impact of company operations, considering:

■ Current
 disclosure of applicable policies and risk assessment report(s) and risk management procedures;

■ The
 impact of regulatory non-compliance, litigation, remediation, or reputational loss that may
 be associated with failure to manage the company 's
 operations in question, including the management of relevant community and stakeholder relations;

■ The
 nature, purpose, and scope of the company 's
 operations in the specific region(s);

■ The
 degree to which company policies and procedures are consistent with industry norms; and

■ The
 scope of the resolution.

Hydraulic Fracturing

**General Recommendation:** Generally vote for proposals requesting greater disclosure of a company's (natural gas) hydraulic fracturing operations, including measures the company has taken to manage and mitigate the potential community and environmental impacts of those operations, considering:

■ The
 company 's
 current level of disclosure of relevant policies and oversight mechanisms;

■ The
 company 's
 current level of such disclosure relative to its industry peers;

■ Potential
 relevant local, state, or national regulatory developments; and

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■ Controversies,
 fines, or litigation related to the company 's
 hydraulic fracturing operations.

Operations in Protected Areas

**General Recommendation:** Generally vote for requests for reports on potential environmental damage as a result of company operations in protected regions, unless:

■ Operations
 in the specified regions are not permitted by current laws or regulations;

■ The
 company does not currently have operations or plans to develop operations in these protected
 regions; or

■ The
 company 's
 disclosure of its operations and environmental policies in these regions is comparable to
 industry peers.

Recycling

**General Recommendation:** Vote case-by-case on proposals to report on an existing recycling program, or adopt a new recycling program, taking into account:

■ The
 nature of the company 's
 business;

■ The
 current level of disclosure of the company 's
 existing related programs;

■ The
 timetable and methods of program implementation prescribed by the proposal;

■ The
 company 's
 ability to address the issues raised in the proposal; and

■ How
 the company 's
 recycling programs compare to similar programs of its industry peers.

Sustainability Reporting

**General Recommendation:** Generally vote for proposals requesting that a company report on its policies, initiatives, and oversight mechanisms related to social, economic, and environmental sustainability, unless:

■ The
 company already discloses similar information through existing reports or policies such as
 an environment, health, and safety (EHS) report; a comprehensive code of corporate conduct;
 and/or a diversity report; or

■ The
 company has formally committed to the implementation of a reporting program based on Global
 Reporting Initiative (GRI) guidelines or a similar standard within a specified time frame.

Water Issues

**General Recommendation:** Vote case-by-case on proposals requesting a company report on, or adopt a new policy on, water-related risks and concerns, taking into account:

■ The
 company 's
 current disclosure of relevant policies, initiatives, oversight mechanisms, and water usage
 metrics;

■ Whether
 or not the company 's
 existing water-related policies and practices are consistent with relevant internationally
 recognized standards and national/local regulations;

■ The
 potential financial impact or risk to the company associated with water-related concerns
 or issues; and

■ Recent,
 significant company controversies, fines, or litigation regarding water use by the company
 and its suppliers.

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**General Corporate Issues**

Charitable Contributions

**General Recommendation:** Vote against proposals restricting a company from making charitable contributions. Charitable contributions are generally useful for assisting worthwhile causes and for creating goodwill in the community. In the absence of bad faith, self-dealing, or gross negligence, management should determine which, and if, contributions are in the best interests of the company.

Data Security, Privacy, and Internet Issues

**General Recommendation:** Vote case-by-case on proposals requesting the disclosure or implementation of data security, privacy, or information access and management policies and procedures, considering:

■ The
 level of disclosure of company policies and procedures relating to data security, privacy,
 freedom of speech, information access and management, and Internet censorship;

■ Engagement
 in dialogue with governments or relevant groups with respect to data security, privacy, or
 the free flow of information on the Internet;

■ The
 scope of business involvement and of investment in countries whose governments censor or
 monitor the Internet and other telecommunications;

■ Applicable
 market-specific laws or regulations that may be imposed on the company; and

■ Controversies,
 fines, or litigation related to data security, privacy, freedom of speech, or Internet censorship.

ESG Compensation-Related Proposals

**General Recommendation:** Vote case-by-case on proposals seeking a report or additional disclosure on the company's approach, policies, and practices on incorporating environmental and social criteria into its executive compensation strategy, considering:

■ The
 scope and prescriptive nature of the proposal;

■ The
 company 's
 current level of disclosure regarding its environmental and social performance and governance;

■ The
 degree to which the board or compensation committee already discloses information on whether
 it has considered related E&S criteria; and

■ Whether
 the company has significant controversies or regulatory violations regarding social or environmental
 issues.

**Human Rights, Human Capital Management, and International Operations**

Human Rights Proposals

**General Recommendation:** Generally vote for proposals requesting a report on company or company supplier labor and/or human rights standards and policies unless such information is already publicly disclosed.

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Vote case-by-case on proposals to implement company or company supplier labor and/or human rights standards and policies, considering:

■ The
 degree to which existing relevant policies and practices are disclosed;

■ Whether
 or not existing relevant policies are consistent with internationally recognized standards;

■ Whether
 company facilities and those of its suppliers are monitored and how;

■ Company
 participation in fair labor organizations or other internationally recognized human rights
 initiatives;

■ Scope
 and nature of business conducted in markets known to have higher risk of workplace labor/human
 rights abuse;

■ Recent,
 significant company controversies, fines, or litigation regarding human rights at the company
 or its suppliers;

■ The
 scope of the request; and

■ Deviation
 from industry sector peer company standards and practices.

Vote case-by-case on proposals requesting that a company conduct an assessment of the human rights risks in its operations or in its supply chain, or report on its human rights risk assessment process, considering:

■ The
 degree to which existing relevant policies and practices are disclosed, including information
 on the implementation of these policies and any related oversight mechanisms;

■ The
 company 's
 industry and whether the company or its suppliers operate in countries or areas where there
 is a history of human rights concerns;

■ Recent
 significant controversies, fines, or litigation regarding human rights involving the company
 or its suppliers, and whether the company has taken remedial steps; and

■ Whether
 the proposal is unduly burdensome or overly prescriptive.

Mandatory Arbitration

**General Recommendation:** Vote case-by-case on requests for a report on a company's use of mandatory arbitration on employment-related claims, taking into account:

■ The
 company 's
 current policies and practices related to the use of mandatory arbitration agreements on
 workplace claims;

■ Whether
 the company has been the subject of recent controversy, litigation, or regulatory actions
 related to the use of mandatory arbitration agreements on workplace claims; and

■ The
 company 's
 disclosure of its policies and practices related to the use of mandatory arbitration agreements
 compared to its peers.

Operations in High-Risk Markets

**General Recommendation:** Vote case-by-case on requests for a report on a company's potential financial and reputational risks associated with operations in "high-risk" markets, such as a terrorism-sponsoring state or politically/socially unstable region, taking into account:

■ The
 nature, purpose, and scope of the operations and business involved that could be affected
 by social or political disruption;

■ Current
 disclosure of applicable risk assessment(s) and risk management procedures;

■ Compliance
 with U.S. sanctions and laws;

■ Consideration
 of other international policies, standards, and laws; and

■ Whether
 the company has been recently involved in recent, significant controversies, fines, or litigation
 related to its operations in "high-risk"
 markets.

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Outsourcing/Offshoring

**General Recommendation:** Vote case-by-case on proposals calling for companies to report on the risks associated with outsourcing/plant closures, considering:

■ Controversies
 surrounding operations in the relevant market(s);

■ The
 value of the requested report to shareholders;

■ The
company 's current level of disclosure of
relevant information on outsourcing and plant closure procedures; and

■ The
 company 's
 existing human rights standards relative to industry peers.

Sexual Harassment

**General Recommendation:** Vote case-by-case on requests for a report on company actions taken to strengthen policies and oversight to prevent workplace sexual harassment, or a report on risks posed by a company's failure to prevent workplace sexual harassment, taking into account:

■ The
 company 's
 current policies, practices, oversight mechanisms related to preventing workplace sexual
 harassment;

■ Whether
 the company has been the subject of recent controversy, litigation, or regulatory actions
 related to workplace sexual harassment issues; and

■ The
 company 's
 disclosure regarding workplace sexual harassment policies or initiatives compared to its
 industry peers.

Weapons and Military Sales

**General Recommendation:** Vote against reports on foreign military sales or offsets. Such disclosures may involve sensitive and confidential information. Moreover, companies must comply with government controls and reporting on foreign military sales.

Generally vote against proposals asking a company to cease production or report on the risks associated with the use of depleted uranium munitions or nuclear weapons components and delivery systems, including disengaging from current and proposed contracts. Such contracts are monitored by government agencies, serve multiple military and non-military uses, and withdrawal from these contracts could have a negative impact on the company's business.

**Political Activities**

Lobbying

**General Recommendation:** Vote case-by-case on proposals requesting information on a company's lobbying (including direct, indirect, and grassroots lobbying) activities, policies, or procedures, considering:

■ The
 company 's
 current disclosure of relevant lobbying policies, and management and board oversight;

■ The
 company 's
 disclosure regarding trade associations or other groups that it supports, or is a member
 of, that engage in lobbying activities; and

■ Recent
 significant controversies, fines, or litigation regarding the company 's
 lobbying-related activities.

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Political Contributions

**General Recommendation:** Generally vote for proposals requesting greater disclosure of a company's political contributions and trade association spending policies and activities, considering:

■ The
 company 's
 policies, and management and board oversight related to its direct political contributions
 and payments to trade associations or other groups that may be used for political purposes;

■ The
 company 's
 disclosure regarding its support of, and participation in, trade associations or other groups
 that may make political contributions; and

■ Recent
 significant controversies, fines, or litigation related to the company 's
 political contributions or political activities.

Vote against proposals barring a company from making political contributions. Businesses are affected by legislation at the federal, state, and local level; barring political contributions can put the company at a competitive disadvantage.

Vote against proposals to publish in newspapers and other media a company's political contributions. Such publications could present significant cost to the company without providing commensurate value to shareholders.

Political Expenditures and Lobbying Congruency

**General Recommendation:** Generally vote case-by-case on proposals requesting greater disclosure of a company's alignment of political contributions, lobbying, and electioneering spending with a company's publicly stated values and policies, considering:

■ The
 company 's
 policies, management, board oversight, governance processes, and level of disclosure related
 to direct political contributions, lobbying activities, and payments to trade associations,
 political action committees, or other groups that may be used for political purposes;

■ The
 company 's
 disclosure regarding: the reasons for its support of candidates for public offices; the reasons
 for support of and participation in trade associations or other groups that may make political
 contributions; and other political activities;

■ Any
incongruencies identified between a company 's
direct and indirect political expenditures and its publicly stated values and priorities.

■ Recent
significant controversies related to the company 's
direct and indirect lobbying, political contributions, or political activities.

Generally vote case-by-case on proposals requesting comparison of a company's political spending to objectives that can mitigate material risks for the company, such as limiting global warming.

Political Ties

**General Recommendation:** Generally vote against proposals asking a company to affirm political nonpartisanship in the workplace, so long as:

■ There
are no recent, significant controversies, fines, or litigation regarding the company 's
political contributions or trade association spending; and

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■ The
 company has procedures in place to ensure that employee contributions to company-sponsored
 political action committees (PACs) are strictly voluntary and prohibit coercion.

Vote against proposals asking for a list of company executives, directors, consultants, legal counsels, lobbyists, or investment bankers that have prior government service and whether such service had a bearing on the business of the company. Such a list would be burdensome to prepare without providing any meaningful information to shareholders.

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**8.** Mutual
 Fund Proxies

Election of Directors

**General Recommendation:** Vote case-by-case on the election of directors and trustees, following the same guidelines for uncontested directors for public company shareholder meetings. However, mutual fund boards do not usually have compensation committees, so do not withhold for the lack of this committee.

Closed End Funds- Unilateral Opt-In to Control Share Acquisition Statutes

**General Recommendation:** For closed-end management investment companies (CEFs), vote against or withhold from nominating/governance committee members (or other directors on a case-by-case basis) at CEFs that have not provided a compelling rationale for opting-in to a Control Share Acquisition statute, nor submitted a by-law amendment to a shareholder vote.

Converting Closed-end Fund to Open-end Fund

**General Recommendation:** Vote case-by-case on conversion proposals, considering the following factors:

■ Past
 performance as a closed-end fund;

■ Market
 in which the fund invests;

■ Measures
 taken by the board to address the discount; and

■ Past
 shareholder activism, board activity, and votes on related proposals.

Proxy Contests

**General Recommendation:** Vote case-by-case on proxy contests, considering the following factors:

■ Past
 performance relative to its peers;

■ Market
 in which the fund invests;

■ Measures
 taken by the board to address the issues;

■ Past
 shareholder activism, board activity, and votes on related proposals;

■ Strategy
 of the incumbents versus the dissidents;

■ Independence
 of directors;

■ Experience
 and skills of director candidates;

■ Governance
 profile of the company;

■ Evidence
 of management entrenchment.

Investment Advisory Agreements

**General Recommendation:** Vote case-by-case on investment advisory agreements, considering the following factors:

■ Proposed
 and current fee schedules;

■ Fund
 category/investment objective;

■ Performance
 benchmarks;

■ Share
 price performance as compared with peers;

■ Resulting
 fees relative to peers;

■ Assignments
 (where the advisor undergoes a change of control).

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Approving New Classes or Series of Shares

**General Recommendation:** Vote for the establishment of new classes or series of shares.

Preferred Stock Proposals

**General Recommendation:** Vote case-by-case on the authorization for or increase in preferred shares, considering the following factors:

■ Stated
 specific financing purpose;

■ Possible
 dilution for common shares;

■ Whether
 the shares can be used for antitakeover purposes.

1940 Act Policies

**General Recommendation:** Vote case-by-case on policies under the Investment Advisor Act of 1940, considering the following factors:

■ Potential
 competitiveness;

■ Regulatory
 developments;

■ Current
 and potential returns; and

■ Current
 and potential risk.

Generally vote for these amendments as long as the proposed changes do not fundamentally alter the investment focus of the fund and do comply with the current SEC interpretation.

Changing the Fundamental Restriction to a Nonfundamental Restriction

**General Recommendation:** Vote case-by-case on proposals to change the Fundamental restriction to a non- fundamental restriction, considering the following factors:

■ The
 fund 's
 target investments;

■ The
 reasons given by the fund for the change; and

■ The
 projected impact of the change on the portfolio.

Change Fundamental Investment Objective to Nonfundamental

**General Recommendation:** Vote against proposals to change the Fund's fundamental investment objective to non- fundamental.

Name Change Proposals

**General Recommendation:** Vote case-by-case on name change proposals, considering the following factors:

■ Political/economic
 changes in the target market;

■ Consolidation
 in the target market; and

■ Current
 asset composition.

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Change in Fund's Subclassification

**General Recommendation:** Vote case-by-case on changes in the Fund's sub-classification, considering the following factors:

■ Potential
 competitiveness;

■ Current
 and potential returns;

■ Risk
 of concentration;

■ Consolidation
 in target industry.

Business Development Companies—Authorization to Sell Shares of Common Stock at a Price below Net Asset Value

**General Recommendation:** Vote for proposals authorizing the board to issue shares below Net Asset Value (NAV) if:

■ The
 proposal to allow share issuances below NAV has an expiration date no more than one year
 from the date shareholders approve the underlying proposal, as required under the Investment
 Company Act of 1940;

■ The
 sale is deemed to be in the best interests of shareholders by (1) a majority of the company 's
 independent directors and (2) a majority of the company's directors who have
 no financial interest in the issuance; and

■ The
 company has demonstrated responsible past use of share issuances by either:

■ Outperforming
 peers in its 8-digit GICS group as measured by one- and three-year median TSRs; or

■ Providing
 disclosure that its past share issuances were priced at levels that resulted in only small
 or moderate discounts to NAV and economic dilution to existing non-participating shareholders.

Disposition of Assets/Termination/Liquidation

**General Recommendation:** Vote case-by-case on proposals to dispose of assets, to terminate or liquidate, considering the following factors:

■ Strategies
 employed to salvage the company;

■ The
 fund 's
 past performance;

■ The
 terms of the liquidation.

Changes to the Charter Document

**General Recommendation:** Vote case-by-case on changes to the charter document, considering the following factors:

■ The
 degree of change implied by the proposal;

■ The
 efficiencies that could result;

■ The
 state of incorporation;

■ Regulatory
 standards and implications.

Vote against any of the following changes:

■ Removal
 of shareholder approval requirement to reorganize or terminate the trust or any of its series;

■ Removal
 of shareholder approval requirement for amendments to the new declaration of trust;

■ Removal
 of shareholder approval requirement to amend the fund 's
 management contract, allowing the contract to be modified by the investment manager and the
 trust management, as permitted by the 1940 Act;

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■ Allow
 the trustees to impose other fees in addition to sales charges on investment in the
 Fund, such as deferred sales charges and redemption fees that may be imposed upon redemption
 of the Fund 's
 shares;

■ Removal
 of shareholder approval requirement to engage in and terminate subadvisory arrangements;

■ Removal
 of shareholder approval requirement to change the domicile of the fund.

Changing the Domicile of the Fund

**General Recommendation:** Vote case-by-case on re-incorporations, considering the following factors:

■ Regulations
 of both states;

■ Required
 fundamental policies of both states;

■ The
 increased flexibility available.

Authorizing the Board to Hire and Terminate Subadvisers Without Shareholder Approval

**General Recommendation:** Vote against proposals authorizing the board to hire or terminate subadvisers without shareholder approval if the investment adviser currently employs only one subadviser.

Distribution Agreements

**General Recommendation:** Vote case-by-case on distribution agreement proposals, considering the following factors:

■ Fees
 charged to comparably sized funds with similar objectives;

■ The
 proposed distributor 's
 reputation and past performance;

■ The
 competitiveness of the fund in the industry;

■ The
 terms of the agreement.

Master-Feeder Structure

**General Recommendation:** Vote for the establishment of a master-feeder structure.

Mergers

**General Recommendation:** Vote case-by-case on merger proposals, considering the following factors:

■ Resulting
 fee structure;

■ Performance
 of both funds;

■ Continuity
 of management personnel;

■ Changes
 in corporate governance and their impact on shareholder rights.

**Shareholder Proposals for Mutual Funds**

Establish Director Ownership Requirement

**General Recommendation:** Generally vote against shareholder proposals that mandate a specific minimum amount of stock that directors must own in order to qualify as a director or to remain on the board.

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Reimburse Shareholder for Expenses Incurred

**General Recommendation:** Vote case-by-case on shareholder proposals to reimburse proxy solicitation expenses. When supporting the dissidents, vote for the reimbursement of the proxy solicitation expenses.

Terminate the Investment Advisor

**General Recommendation:** Vote case-by-case on proposals to terminate the investment advisor, considering the following factors:

■ Performance
 of the fund 's
 Net Asset Value (NAV);

■ The
 fund 's
 history of shareholder relations;

■ The
 performance of other funds under the advisor 's
 management.

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Part C – OTHER INFORMATION

ITEM 28. <u>Exhibits</u>.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;*a)* *Articles of Incorporation* 

(a)(1) [Agreement and Declaration of Trust of the Registrant dated April 27, 2006 incorporated by reference to PEA No. 49 filed August 24, 2006.](http://www.sec.gov/Archives/edgar/data/810695/000131814806001126/ex-dot.txt)

(a)(2) [Amendment No. 1 to Agreement and Declaration of Trust of the Registrant dated April 27, 2006 incorporated by reference to PEA No. 49 filed August 24, 2006.](http://www.sec.gov/Archives/edgar/data/810695/000131814806001126/ex-dotamd.txt)

(a)(3) [Certificate of Amendment to Certificate of Trust of the Registrant incorporated by reference to PEA No. 115 filed March 4, 2016.](http://www.sec.gov/Archives/edgar/data/810695/000158064216007509/ex99a3.htm)

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;*b)* *By Laws* 

(b)(1) [Bylaws of the Registrant dated April 27, 2006 incorporated by reference to PEA No. 49 filed August 24, 2006.](http://www.sec.gov/Archives/edgar/data/810695/000131814806001126/ex-bylaws.txt)

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;*c)* *Instruments Defining Rights of Security Holders* 

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| | |
|:---|:---|
| (c)(1) | [Specimen Certificate for Shares of Beneficial Interest of the Registrant dated April 18, 2006, including Certificate of Amendment dated May 17, 2006 incorporated by reference to PEA No. 49 filed August 24, 2006.](http://www.sec.gov/Archives/edgar/data/810695/000131814806001126/ex-cot.txt) |

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;*d)* *Investment Advisory Contracts* 

---

| | |
|:---|:---|
| (d)(1) | [Management Agreement, dated January 1, 2016, between the Registrant and Rational Advisors, Inc. (formerly, Huntington Asset Advisors, Inc. incorporated by reference to PEA No. 111 filed February 5, 2016.](http://www.sec.gov/Archives/edgar/data/810695/000158064216006698/ex99d40.htm) |

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| | |
|:---|:---|
| (d)(2) | [Amendment to Management Agreement, dated June 18, 2021, between the Registrant and Rational Advisors, Inc. incorporated by reference to PEA No. 214 filed August 18, 2021.](http://www.sec.gov/Archives/edgar/data/810695/000158064221003850/ex99d2.htm) |
| (d)(3) | Second Amendment to Management Agreement, dated March 25, 2025, between the Registrant and Rational Advisors, Inc. incorporated by reference to PEA No. 230 filed April 29, 2025. |

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| | |
|:---|:---|
| (d)(4) | Investment Advisory Agreement, dated September 11, 2024, between the Registrant and Rational Advisors, Inc. respecting the Rational/RGN Hedged Equity Fund incorporated by reference to PEA No. 227 filed September 27, 2024. |
| (d)(5) | Amendment to Investment Advisory Agreement, dated March 25, 2025, between the Registrant and Rational Advisors, Inc. respecting the Rational/RGN Hedged Equity Fund incorporated by reference to PEA No. 230 filed April 29, 2025. |
| (d)(6) | [Sub-Advisory Agreement between Rational Advisors, Inc. and Accuvest Global Advisors relating to the Rational Dynamic Brands Fund incorporated by reference to PEA No. 220 filed April 26, 2024.](https://www.sec.gov/Archives/edgar/data/810695/000158064224002318/ex99d4.htm) |

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| | |
|:---|:---|
| (d)(7) | [Sub-Advisory Agreement between Rational Advisors, Inc. and Warrington Asset Management LLC relating to the Rational Premium Income Fund (formerly known as Rational Tactical Return Fund) incorporated by reference to PEA No. 163 filed December 1, 2017.](http://www.sec.gov/Archives/edgar/data/810695/000158064217006407/ex99d12.htm) |

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---

| | |
|:---|:---|
| (d)(8) | [Sub-Advisory Agreement between Rational Advisors, Inc. and ESM Management, LLC relating to the Rational Special Situations Income Fund incorporated by reference to PEA No. 197 filed August 28, 2019.](http://www.sec.gov/Archives/edgar/data/810695/000158064219003976/ex99d17.htm) |

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| | |
|:---|:---|
| (d)(9) | [Sub-Advisory Agreement between Rational Advisors, Inc. and Pier 88 Investment Partners, LLC relating to the Rational/Pier 88 Convertible Securities Fund incorporated by reference to PEA No. 214 filed August 18, 2021.](http://www.sec.gov/Archives/edgar/data/810695/000158064221003850/ex99d8.htm) |

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| | |
|:---|:---|
| (d)(10) | [Sub-Advisory Agreement between Rational Advisors, Inc. and Equity Armor Investments, LLC relating to the Rational Equity Armor Fund (formerly known as Rational Dividend Capture Fund) is incorporated by reference to PEA No. 204 filed December 13, 2019.](http://www.sec.gov/Archives/edgar/data/810695/000158064219005552/ex99d20.htm) |

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| | |
|:---|:---|
| (d)(11) | [Sub-Advisory Agreement between Rational Advisors, Inc. and Newfound Research LLC relating to the Return Stacked® Balanced Allocation & Systematic Macro Fund (formerly known as Rational/ReSolve Adaptive Asset Allocation Fund](http://www.sec.gov/Archives/edgar/data/810695/000158064221001766/ex99d10.htm)) incorporated by reference to PEA No. 229 filed December 31, 2024. |
| (d)(12) | [Sub-Advisory Agreement between Rational Advisors, Inc. and ReSolve Asset Management, Inc. relating to the Return Stacked® Balanced Allocation & Systematic Macro Fund (formerly known as Rational/ReSolve Adaptive Asset Allocation Fund](http://www.sec.gov/Archives/edgar/data/810695/000158064221001766/ex99d10.htm)) incorporated by reference to PEA No. 229 filed December 31, 2024. |

---

---

| | |
|:---|:---|
| (d)(13) | [Trading Advisory Agreement between Rational Advisors, Inc. and ReSolve Asset Management SEZC (Cayman) relating to the Return Stacked® Balanced Allocation & Systematic Macro Fund (formerly known as Rational/ReSolve Adaptive Asset Allocation Fund](http://www.sec.gov/Archives/edgar/data/810695/000158064221001766/ex99d11.htm)) incorporated by reference to PEA No. 229 filed December 31, 2024. |

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| | |
|:---|:---|
| (d)(14) | [Sub-Advisory Agreement between Rational Advisors, Inc. and SL Advisors, LLC dated August 17, 2021 relating to the Rational Real Assets Fund (formerly, Rational Inflation Growth Fund) incorporated by reference to PEA No. 214 filed August 18, 2021.](http://www.sec.gov/Archives/edgar/data/810695/000158064221003850/ex99d12.htm) |

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(d)(15) Sub-Advisory Agreement between Rational Advisors, Inc. and R.G. Niederhoffer Capital Management, Inc., dated September 26, 2024, relating to the Rational/RGN Hedged Equity Fund incorporated by reference to PEA No. 227 filed September 27, 2024.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;*e)* *Underwriting Contracts* 

(e)(1) [Underwriting Agreement dated February 1, 2019 between the Registrant and Northern Lights Distributors, LLC incorporated by reference to PEA No. 207 filed April 15, 2020.](http://www.sec.gov/Archives/edgar/data/810695/000158064220001622/ex99e3.htm)

(e)(2) Amended Schedule A dated March 26, 2024 to the Underwriting Agreement dated February 1, 2019 between the Registrant and Northern Lights Distributors, LLC incorporated by reference to PEA No. 227 filed September 27, 2024.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;*f)* *Bonus or Profit-Sharing Contracts* – Not Applicable

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;*g)* *Custodian Agreements* 

(g)(1) [Custodian Agreement between the Registrant and U.S. Bank National Association dated January 28, 2020 incorporated by reference to PEA No. 207 filed April 15, 2020.](http://www.sec.gov/Archives/edgar/data/810695/000158064220001622/ex99g5.htm)

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| | |
|:---|:---|
| (g)(2) | <u>Second Amendment</u> [to the Custodian Agreement between the Registrant and U.S. Bank National Association dated August 6, 2021 incorporated by reference to PEA No. 214 filed August 18, 2021.](http://www.sec.gov/Archives/edgar/data/810695/000158064221003850/ex99g2.htm) |

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(g)(3) Third Amendment to the Custodian Agreement between the Registrant and U.S. Bank National Association dated March 26, 2024 incorporated by reference to PEA No. 227 filed September 27, 2024.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;*h)* *Other Material Contracts* 

(h)(1) [Fund Services Agreement dated December 10, 2021, between the Registrant and Ultimus Fund Solutions, LLC incorporated by reference to PEA No. 215 filed April 29, 2022.](https://www.sec.gov/Archives/edgar/data/810695/000158064222002367/ex99h_1.htm)

(h)(2) [Expense Limitation Agreement between the Registrant and Rational Advisors, Inc. is incorporated by reference to PEA No. 211 filed April 16, 2021.](http://www.sec.gov/Archives/edgar/data/810695/000158064221001766/ex99h2.htm)

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| | |
|:---|:---|
| (h)(3) | Amended Exhibit A to Expense Limitation Agreement between the Registrant and Rational Advisors, Inc. to be filed by subsequent amendment. |
| (h)(4) | Amended and Restated [Shareholder Services Plan, dated February 26, 2016 incorporated by reference to PEA No. 115 filed March 4, 2016.](http://www.sec.gov/Archives/edgar/data/810695/000158064216007509/ex99h164.htm) |

---

(h)(5) Amended Exhibit A, dated March 26, 2024, to Shareholder Services Plan incorporated by reference to PEA No. 227 filed September 27, 2024.

---

| | |
|:---|:---|
| (h)(6) | Amended and Restated Management Services Agreement between the Registrant and MFund Services, LLC, dated September 16, 2022 incorporated by reference to PEA No. 227 filed September 27, 2024. |
| (h)(7) | Amended Exhibit A, dated March 26, 2024, to Amended and Restated Management Services Agreement incorporated by reference to PEA No. 227 filed September 27, 2024. |
| (h)(8) | [Wholesale Marketing and Distribution Agent Agreement incorporated by reference to PEA No. 130 filed January 11, 2017.](http://www.sec.gov/Archives/edgar/data/810695/000158064217000166/ex99h7.htm) |

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| | |
|:---|:---|
| (h)(9) | [Amended and Restated Compliance Services Agreement between the Registrant and MFund Services, LLC dated June 24, 2022 incorporated by reference to PEA No. 216 filed April 28, 2023.](https://www.sec.gov/Archives/edgar/data/810695/000158064223002302/ex99h_14.htm) |

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| | |
|:---|:---|
| (h)(10) | [Management Agreement between Rational Advisors, Inc. and RDMF Fund Limited (a wholly owned subsidiary of Return Stacked® Balanced Allocation & Systematic Macro Fund (formerly known as Rational/ReSolve Adaptive Asset Allocation Fund)) dated August 29, 2016 incorporated by reference to PEA 127 filed September 20, 2016.](http://www.sec.gov/Archives/edgar/data/810695/000158064216011099/exh177.htm) |

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| | |
|:---|:---|
| (h)(11) | <u>Amendment to</u> [Management Agreement between Rational Advisors, Inc. and RDMF Fund Limited (a wholly owned subsidiary of Return Stacked® Balanced Allocation & Systematic Macro Fund (formerly known as Rational/ReSolve Adaptive Asset Allocation Fund)) dated March 26, 2024 incorporated by reference to PEA No. 220 filed April 26, 2024.](https://www.sec.gov/Archives/edgar/data/810695/000158064224002318/ex99h10.htm) |

---

(h)(12) [Custodian Agreement between RDMF Fund Limited and U.S. Bank National Association dated March 16, 2020 incorporated by reference to PEA No. 207 filed April 15, 2020.](http://www.sec.gov/Archives/edgar/data/810695/000158064220001622/ex99g6.htm)

---

| | |
|:---|:---|
| (h)(13) | [Trading Advisory Agreement between Rational Advisors, Inc. and ReSolve Asset Management SEZC (Cayman) relating to RDMF Fund Limited (a wholly owned subsidiary of Return Stacked® Balanced Allocation & Systematic Macro Fund (formerly known as Rational/ReSolve Adaptive Asset Allocation Fund))](http://www.sec.gov/Archives/edgar/data/810695/000158064221001766/ex99h11.htm) incorporated by reference to PEA No. 229 filed December 31, 2024. |
| (h)(14) | [Sub-Advisory Agreement between Rational Advisors, Inc. and ReSolve Asset Management, Inc. relating to RDMF Fund Limited (a wholly owned subsidiary of Return Stacked® Balanced Allocation & Systematic Macro Fund (formerly known as Rational/ReSolve Adaptive Asset Allocation Fund)](http://www.sec.gov/Archives/edgar/data/810695/000158064221001766/ex99h12.htm)) incorporated by reference to PEA No. 229 filed December 31, 2024. |

---

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| | |
|:---|:---|
| (h)(15) | Investment Advisory Agreement between Rational Advisors, Inc. and RRDEF Fund Limited (a wholly owned subsidiary of Rational/RGN Hedged Equity Fund) dated September 26, 2024 incorporated by reference to PEA No. 227 filed September 27, 2024. |
| (h)(16) | Sub-Advisory Agreement between Rational Advisors, Inc. and R.G. Niederhoffer Capital Management, Inc. dated September 26, 2024 relating to RRDEF Fund Limited (a wholly owned subsidiary of Rational/RGN Hedged Equity Fund) incorporated by reference to PEA No. 227 filed September 27, 2024. |

---

<br> (h)(17) Custodian Agreement between RRDEF Fund Limited and U.S. Bank National Association incorporated by reference to PEA No. 227 filed September 27, 2024.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;*i)* *Legal Opinions* 

(i)(1) [Opinion and Consent of Stradley Ronon Stevens & Young with respect to Rational Special Situations Income Fund incorporated by reference to PEA No. 193 filed June 14, 2019.](http://www.sec.gov/Archives/edgar/data/810695/000158064219002860/ex99i.htm)

(i)(2) [Opinion and Consent of Stradley Ronon Stevens & Young with respect to Rational/Pier 88 Convertible Securities Fund incorporated by reference to PEA No. 201 filed November 22, 2019.](http://www.sec.gov/Archives/edgar/data/810695/000158064219005257/ex99i1.htm)

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| | |
|:---|:---|
| (i)(3) | [Opinion and Consent of Stradley Ronon Stevens & Young with respect to Rational Equity Armor Fund and Rational Strategic Allocation Fund incorporated by reference to PEA No. 204 filed December 13, 2019.](http://www.sec.gov/Archives/edgar/data/810695/000158064219005552/ex99i.htm) |

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| | |
|:---|:---|
| (i)(4) | [Opinion and Consent of Stradley Ronon Stevens & Young with respect to Rational Premium Income Fund (formerly, Rational Tactical Return Fund), Rational Dynamic Brands Fund and Return Stacked® Balanced Allocation & Systematic Macro Fund (formerly known as Rational/ReSolve Adaptive Asset Allocation Fund) incorporated by reference to PEA No. 208 filed April 28, 2020.](http://www.sec.gov/Archives/edgar/data/810695/000158064220001804/ex99i.htm) |

---

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| | |
|:---|:---|
| (i)(5) | [Opinion and Consent of Stradley Ronon Stevens & Young with respect to Rational Real Assets Fund (formerly, Rational Inflation Growth Fund) incorporated by reference to PEA No. 214 filed August 18, 2021.](http://www.sec.gov/Archives/edgar/data/810695/000158064221003850/ex99i1.htm) |

---

(i)(6) Opinion and Consent of Stradley Ronon Stevens & Young with respect to Rational/RGN Hedged Equity Fund incorporated by reference to PEA No. 227 filed September 27, 2024.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;*j)* *Other Opinions* 

(j)(1) Consent of Cohen & Company, Ltd. – to be filed by subsequent amendment.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;*k)* *Omitted Financial Statements - Not applicable.* 

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;*l)* *Initial Capital Agreements* 

(l)(1) Initial Capital Understanding of Trust incorporated by reference to PEA No. 20 filed April 26, 1996.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;*m)* *Rule 12b-1 Plan* 

(m)(1) [Distribution Plan of the Registrant dated February 26, 2016 incorporated by reference to PEA No 115 filed March 4, 2016.](http://www.sec.gov/Archives/edgar/data/810695/000158064216007509/ex99m.htm)

(m)(2) Amended Exhibit A dated March 26, 2024 to Distribution Plan of the Registrant incorporated by reference to PEA No. 227 filed September 27, 2024.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;*n)* *Rule 18f-3 Plans* 

(n)(1) [Fifth Amended Multiple Class Plan of the Registrant dated January 20, 2017 incorporated by reference to PEA No. 213 filed June 4, 2021.](http://www.sec.gov/Archives/edgar/data/810695/000158064221002664/ex99n1.htm)

(n)(2) Amended Exhibit dated March 26, 2024 to Fifth Amended Multiple Class Plan of the Registrant dated incorporated by reference to PEA No. 227 filed September 27, 2024.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;*o)* *Reserved* 

(o)(1) [Power of Attorney of Tobias Caldwell for the Trust, dated August 2, 2019 incorporated by reference to PEA No. 197 filed August 28, 2019.](http://www.sec.gov/Archives/edgar/data/810695/000158064219003976/ex99o14.htm)

(o)(2) [Power of Attorney of Stephen Lachenauer for the Trust, dated August 2, 2019 incorporated by reference to PEA No. 197 filed August 28, 2019.](http://www.sec.gov/Archives/edgar/data/810695/000158064219003976/ex99o15.htm)

(o)(3) [Power of Attorney of Donald McIntosh for the Trust, dated August 2, 2019 incorporated by reference to PEA No. 197 filed August 28, 2019.](http://www.sec.gov/Archives/edgar/data/810695/000158064219003976/ex99o16.htm)

(o)(4) [Power of Attorney of Erik Naviloff for the Trust, dated August 2, 2019 incorporated by reference to PEA No. 197 filed August 28, 2019.](http://www.sec.gov/Archives/edgar/data/810695/000158064219003976/ex99o17.htm)

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;*p)* *Code of Ethics* 

(p)(1) [Code of Ethics of Rational Advisors, Inc. incorporated by reference to Registrant's PEA No. 168 filed January 24, 2018.](http://www.sec.gov/Archives/edgar/data/810695/000158064218000349/ex99p8.htm)

(p)(2) [Code of Ethics of Northern Lights Distributors, LLC dated October 2019 incorporated by reference to PEA No. 207 filed April 15, 2020](http://www.sec.gov/Archives/edgar/data/810695/000158064220001622/ex99p2.htm) .

(p)(3) [Code of Ethics of Accuvest Global Advisors incorporated by reference to PEA No. 160 filed October 17, 2017.](http://www.sec.gov/Archives/edgar/data/810695/000158064217005574/coe.htm)

(p)(4) Code of Ethics of Warrington Asset Management LLC incorporated by reference to PEA No. 163 filed December 1, 2017.

(p)(5) [Code of Ethics of ReSolve Asset Management, Inc. incorporated by reference to PEA No. 170 filed February 27, 2018.](http://www.sec.gov/Archives/edgar/data/810695/000158064218001064/ex99p13.htm)

(p)(6) [Code of Ethics of ESM Management LLC incorporated by reference to PEA No. 193 filed June 14, 2019.](http://www.sec.gov/Archives/edgar/data/810695/000158064219002860/exp16.htm)

(p)(7) [Code of Ethics of Pier 88 Investment Partners, LLC incorporated by reference to Registrant's PEA No. 201 filed November 22, 2019.](http://www.sec.gov/Archives/edgar/data/810695/000158064219005257/ex99p17.htm)

(p)(8) [Code of Ethics of Equity Armor Investments, LLC incorporated by reference PEA No. 204 filed December 13, 2019.](http://www.sec.gov/Archives/edgar/data/810695/000158064219005552/ex99p18.htm)

(p)(9) [Code of Ethics of ReSolve Asset Management SEZC (Cayman) is incorporated by reference to PEA No. 212 filed April 30, 2021.](http://www.sec.gov/Archives/edgar/data/810695/000158064221001973/exp10.htm)

(p)(10) [Code of Ethics of SL Advisors, LLC incorporated by reference to PEA No. 214 filed August 18, 2021.](http://www.sec.gov/Archives/edgar/data/810695/000158064221003850/ex99p10.htm)

(p)(11) Code of Ethics of R.G. Niederhoffer Capital Management, Inc. incorporated by reference to PEA No. 227 filed September 27, 2024. <br>(p)(12) Code of Ethics of Newfound Research LLC incorporated by reference to PEA No. 229 filed December 31, 2024.

ITEM 29. <u>Persons Controlled by or Under Common Control with the Registrant</u>.

No person is controlled by or under common control with the Registrant.

ITEM 30. <u>Indemnification</u>.

Indemnification is provided to Officers and Trustees of the Registrant pursuant to Article VII, Section 4 of Registrant's Agreement and Declaration of Trust and Section 2 of the Trustees' Indemnification Agreements. The Investment Advisory Contracts provide that, in the absence of willful misfeasance, bad faith or gross negligence, on the part of the Adviser in the performance of its duties or from reckless

disregard by it of its obligations and duties under the Investment Advisory Contracts. Adviser shall not be liable for any error of judgment or mistake of law or for any loss suffered by the Fund in connection with the performance of the Investment Advisory Contracts. Indemnification of Registrant's distributor, custodian and transfer agent against certain losses is provided for, respectively, in Section 10 of the Distributor's Contract, incorporated herein by reference as Exhibit (e)(i), Section 8 of the Custodian Contract, incorporated herein by reference as Exhibit (g)(i) and Section 8 of the Transfer Agency Agreement incorporated herein by reference as Exhibit (h)(i). Registrant's Trustees and Officers are covered by an Investment Trust Errors and Omissions Policy.

Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to Trustees, Officers, and controlling persons of the Registrant by the Registrant pursuant to the Declaration of Trust or otherwise, the Registrant is aware that in the opinion of the Securities and Exchange Commission, such indemnification is against public policy as expressed in the Act and, therefore, is unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Registrant of expenses incurred or paid by Trustees, Officers, or controlling persons of the Registrant in connection with the successful defense of any act, suit, or proceeding) is asserted by such Trustees, Officers, or controlling persons in connection with the shares being registered, the Registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issues.

Insofar as indemnification for liabilities may be permitted pursuant to Section 17 of the Investment Company Act of 1940 for Trustees, Officers, and controlling persons of the Registrant by the Registrant pursuant to the Declaration of Trust or otherwise, the Registrant is aware of the position of the Securities and Exchange Commission as set forth in Investment Company Act Release No. IC-11330. Therefore, the Registrant undertakes that in addition to complying with the applicable provisions of the Declaration of Trust or otherwise, in the absence of a final decision on the merits by a court or other body before which the proceeding was brought, that an indemnification payment will not be made unless in the absence of such a decision, a reasonable determination based upon factual review has been made (i) by a majority vote of a quorum of non-party Trustees who are not interested persons of the Registrant or (ii) by independent legal counsel in a written opinion that the indemnitee was not liable for an act of willful misfeasance, bad faith, gross negligence, or reckless disregard of duties. The Registrant further undertakes that advancement of expenses incurred in the defense of a proceeding (upon undertaking for repayment unless it is ultimately determined that indemnification is appropriate) against an Officer, Trustee, or controlling person of the Registrant will not be made absent the fulfillment of at least one of the following conditions: (i) the indemnitee provides security for his undertaking; (ii) the Registrant is insured against losses arising by reason of any lawful advances; or (iii) a majority of a quorum of disinterested non-party Trustees or independent legal counsel in a written opinion makes a factual determination that there is reason to believe the indemnitee will be entitled to indemnification.

ITEM 31. <u>Business and Other Connections of the Investment Adviser</u>.

(a) Rational Advisors, Inc. ("Rational"), 207 Calle del Parque, AM Tower, Floor 7, Suite 2, San Juan, PR 00912-3242, is registered with the Securities and Exchange Commission ("SEC") as an investment adviser, file number 801-60176.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i) Rational has engaged in no other business during the past two fiscal years.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii) Jerry Szilagyi is the President of Rational and has been engaged within the last two fiscal years in the capacity of director, officer, employee, partner, or trustee of the following other companies:

Trustee, Mutual Fund Series Trust, 4221 N 203<sup>rd</sup> St, Suite 100, Elkhorn, NE 68022;

Trustee, Variable Insurance Trust, 4221 N 203<sup>rd</sup> St, Suite 100, Elkhorn, NE 68022;

Managing Member and Chief Executive Officer of Catalyst Capital Advisors, 207 Calle del Parque, AM Tower, Floor 7, Suite 2, San Juan, PR 00912-3242, a registered investment. Catalyst Capital Advisors LLC serves as advisor to certain series of Mutual Fund Series Trust ("MFST"), a registered investment company;

Managing Member, MFund Services LLC, 36 North New York Avenue, Huntington, NY 11743, an administrator to mutual funds (including each series of the Trust);

Managing Member, MFund Distributors LLC, 36 North New York Avenue, Huntington, NY 11743, (TBP), a provider of marketing services to mutual funds;

Managing Member of AlphaCentric Advisors LLC, 207 Calle del Parque, AM Tower, Floor 7, Suite 2, San Juan, PR 00912-3242, a registered investment advisor. AlphaCentric serves as an advisor to AlphaCentric Prime Meridian Income Fund and certain series of MFST;

CEO of Catalyst Capital International, LLC, 36 North New York Avenue, Huntington, NY 11743;

CEO of Catalyst International Advisors, LLC, 207 Calle del Parque, AM Tower, Floor 7, Suite 2, San Juan, PR 00912-3242;

CEO of Insights Media LLC, 207 Calle del Parque, AM Tower, Floor 7, Suite 2, San Juan, PR 00912-3242; and

CEO, MFund Management LLC, 207 Calle del Parque, AM Tower, Floor 7, Suite 2, San Juan, PR 00912-3242.

(b) Accuvest Global Advisors ("Accuvest"), 3575 N. 100 E. Suite 350, Provo, UT 84604, is registered with the SEC as an investment advisor, file number 801-68887.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;i. Accuvest has engaged in no other business during the past two fiscal years.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;ii. None of the directors or officers of Accuvest have engaged in any other business during the last two fiscal years.

(c) Warrington Asset Management LLC ("Warrington"), 200 Crescent Court, Suite 520, Dallas, TX 75201, is registered with the SEC as an investment adviser, file number 801-111865.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;i. Warrington has engaged in no other business during the past two fiscal years.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;ii. Scott Kimple; Manager and Principal of Warrington is the Manager of Warrington GP, LLC.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;iii. Kenneth S. Webster, Chief Compliance Officer of Warrington is the Chief Operating Officer and Chief Compliance Officer of Warrington, GP, LLC.

(d) ReSolve Asset Management, Inc. ("ReSolve Canada"), 401 Bay Street, 16<sup>th</sup> Floor, Toronto, Ontario, M5H 2Y4, is registered with the SEC as an investment advisor, file number 801-107065.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;i. ReSolve Canada has engaged in no other business during the past two fiscal years.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;ii. None of the directors or officers of ReSolve Canada have engaged in any other business during the last two fiscal years.

(e) ESM Management LLC ("ESM"), 100 Westchester Road, Newton, MA 02458, is registered with the SEC as an investment advisor, file number 801-70456.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;i. ESM has engaged in no other business during the past two fiscal years.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;ii. None of the directors or officers of ESM have engaged in any other business during the last two fiscal years.

(f) Pier 88 Investment Partners, LLC ("Pier 88"), 71 Stevenson Street, Suite 825, San Francisco, CA 94105, is registered with the SEC as an investment advisor, file number 801-107193.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;i. Pier 88 has engaged in no other business during the past two fiscal years.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;ii. None of the directors or officers of Pier 88 have engaged in any other business during the last two fiscal years.

(g) Equity Armor Investments, LLC ("Equity Armor"), 318 West Adams Street, 10th Floor, Chicago, IL 60606, is registered with the SEC as an investment advisor, file no. 801-117276.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;i. Equity Armor has engaged in no other business during the past two fiscal years.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;ii. Luke Rahbari, Managing Member and a Portfolio Manager of Equity Armor, (a) is a member of LBD Capital, LLC, a private equity firm; (b) is a partner in MacroGrowth Advisors, which plans to develop index-based strategies; (c) serves as a business advisor to Madoldnut productions, a media post-production company; and (d) is a partner of Tremis, LLC, a cryptocurrency trading and mining firm;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;iii. Joseph Tigay, Chief Trading Officer and a Portfolio Manager of Equity Armor, is a member of Tremis, LLC, a cryptocurrency trading and mining firm;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;iv. Brian Stutland, Chief Investment Officer and Chief Compliance Officer of Equity Armor, is a member of: (a) LBD Capital, LLC, a private equity firm; and (b) Tremis, LLC, a cryptocurrency trading and mining firm; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;v. Equity Armor is a member of Equity Armor Advisers, LLC, an investment advisory firm, of which Equity Armor principals are engaged in the day to day operations of the company.

(h) ReSolve Asset Management SEZC (Cayman) ("ReSolve Global"), 103 South Church Street Harbour Place, 4th Floor George Town, Grand Cayman, Cayman Islands, KY1-1002.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;i. ReSolve Global has engaged in no other business during the past two fiscal years.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;ii. Michael Philbrick, CEO of ReSolve Global, previously served as President of ReSolve Canada from 2015 to 2019.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;iii. Adam Butler, CIO of ReSolve Global, previously served as CEO and CIO of ReSolve Canada from 2015 to 2020.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;iv. Rodrigo Gordillo, President of ReSolve Global, previously served as Managing Partner and President of ReSolve Canada for the periods 2015 to 2019, and 2020, respectively.

(i) SL Advisors, LLC ("SL"), located at 210 Elmer Street, Westfield, NJ. 07090 is registered with the SEC as an investment adviser, file number 801-80396.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i) SL has engaged in no other business during the past two fiscal years.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii) None of the directors or officers of SL have engaged in any other business during the last two fiscal years.

(j) R.G. Niederhoffer Capital Management, Inc. ("Niederhoffer"), located at 16690 Collins Ave, Suite 801, Sunny Isles Beach, FL 33160 is registered with the SEC as an investment adviser, file number 801-65629.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i) Niederhoffer has engaged in no other business during the past two fiscal years.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii) None of the directors or officers of Niederhoffer have engaged in any other business during the last two fiscal years.

(k) Newfound Research LLC ("Newfound"), located at 200 Central Ave, 4<sup>th</sup> Floor Ste 324, St. Petersburg, FL 33701 is registered with the SEC as an investment adviser, file number 801-73042.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i) Newfound has engaged in no other business during the past two fiscal years.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii) None of the directors or officers of Newfound have engaged in any other business during the last two fiscal years.

ITEM 32. <u>Principal Underwriters</u>.

(a) Northern Lights Distributors, LLC ("NLD"), is the principal underwriter for all series of Mutual Fund and Variable Insurance Trust.

NLD also acts as principal underwriter for the following open end investment companies:

Atlas U.S. Tactical Income Fund, Atlas U.S. Government Money Market Fund, Boyar Value Fund Inc., Capitol Series Trust, Copeland Trust, DGI Investment Trust, Grandeur Peak Global Trust, Humankind Benefit Corporation, Miller Investment Trust, Mutual Fund Series Trust, Northern Lights Fund Trust, Northern Lights Fund Trust II, Northern Lights Fund Trust III, Northern Lights Fund Trust IV, Northern Lights Variable Trust, OCM Mutual Fund, The North Country Funds, Texas Capital Funds Trust, The North Country Funds, The Saratoga Advantage Trust, Segall Bryand Hamill Trust, THOR Financial Technologies Trust, Tributary Funds, Inc., Two Roads Shared Trust, Ultimus Managers Trust, Unified Series Trust, and Valued Advisers Trust, Zacks Trust.

NLD also acts as principal underwriter for the following closed end investment companies:

CIM Real Assets & Credit Fund, US Treasury Fund, and Princeton Everest Fund.

(b) NLD is registered with the Securities and Exchange Commission as a broker-dealer and is a member of the Financial Industry Regulatory Authority, Inc. ("FINRA"). The principal business address of NLD is 4221 North 203<sup>rd</sup> St., Suite 100, Elkhorn, NE 68022. NLD is an affiliate of Ultimus Fund Solutions, LLC. Both NLD and Ultimus Fund Solutions, LLC are under common ownership of The Ultimus Group, LLC. To the best of Registrant's knowledge, the following are the members and officers of NLD:

---

| | | |
|:---|:---|:---|
| **Name** | **Positions and Offices<br> with Underwriter** | **Positions and Offices<br> with the Fund** |
| Kevin Guerette | President | None |
| Stephen Preston | Chief Compliance Officer | None |
| Emily Andersen | Vice President, Compliance | None |
| Gary Danahy | Assistant Chief Compliance Officer | None |
| Greg Evans | Assistant Chief Compliance Officer | None |

---

(c) Not Applicable. No underwriting commissions are paid in connection with the sale of Registrant's Shares.

ITEM 33. <u>Location of Accounts and Records</u>.

All accounts and records required to be maintained by Section 31(a) of the Investment Company Act of 1940 and rules 31a-1 through 31a-3 promulgated thereunder are maintained at one of the following locations:

---

| | |
|:---|:---|
| Registrant | 36 North New York Avenue<br> Huntington, NY 11743 |
| Northern Lights Distributors, LLC ("Distributor") | 4221 North 203<sup>rd</sup> St., Suite 100<br> Elkhorn, NE 68022 |
| Rational Advisors, Inc. ("Advisor") | 207 Calle del Parque, AM Tower, Floor 7, Suite 2 <br> San Juan, PR 00912-3242  |
| U.S. Bank National Association ("Custodian") | 1555 N. Rivercenter Drive, Suite 302<br> Milwaukee, WI 53212 |
| Ultimus Fund Solutions, LLC | 225 Pictoria Dr, Suite 450<br> Cincinnati, OH 45246 |
| Accuvest Global Advisors | 3575 N. 100 E. Suite 350<br> Provo, UT 84604 |

---

---

| | |
|:---|:---|
| Warrington Asset Management LLC | 200 Crescent Court, Suite 520<br> Dallas, TX 75201 |
| ReSolve Asset Management, Inc. | 401 Bay Street, 16th Floor<br> Toronto, Ontario, M5H 2Y4 |
| ESM Management LLC | 100 Westchester Road<br> Newton, MA 02458 |

---

---

| | |
|:---|:---|
| Pier 88 Investment Partners, LLC | 71 Stevenson Street, Suite 825<br> San Francisco, CA 94105 |
| Equity Armor Investments, LLC | 318 West Adams Street, 10th Floor<br> Chicago, IL 60606 |
| ReSolve Asset Management SEZC (Cayman) | 103 South Church Street Harbour Place, 4th Floor<br> George Town, Grand Cayman<br> Cayman Islands, KY1-1002 |
| SL Advisors, LLC | 210 Elmer Street<br> Westfield, NJ, 07090 |
| R.G. Niederhoffer Capital Management, Inc.<br>| 16690 Collins Ave, Suite 801<br> Sunny Isles Beach, FL 33160  |
| Newfound Research LLC | 200 Central Ave 4th Floor, Suite 324<br> St. Petersburg, FL 33701 |

---

ITEM 34. <u>Management Services</u>.

Not Applicable.

ITEM 35. <u>Undertakings</u>.

The Registrant undertakes that RDMF Fund Limited (the "Subsidiary") and each Director of the Subsidiary hereby consents to service of process within the United States at the address provided in the Registrant's Statement of Additional Information. The Registrant further undertakes that the Subsidiary maintains its books and records consistently with the requirements of Section 31 of Investment Company

Act of 1940 and rules thereunder, and submits to the examination of its books and records by the Securities and Exchange Commission.

SIGNATURES

Pursuant to the requirements of the Securities Act and Investment Company Act, that the Registrant has duly caused this Amendment to its Registration Statement to be signed on its behalf by the undersigned, thereto duly authorized, in the City of Huntington, and the State of New York, and City of San Juan, Commonwealth of Puerto Rico, on October 30, 2025.

---

| | |
|:---|:---|
| Mutual Fund and Variable Insurance Trust | Mutual Fund and Variable Insurance Trust |
| BY: | <u>/s/ Michael Schoonover</u> |
|  | Michael Schoonover |
|  | President and Principal Executive Officer |

---

Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed below by the following persons in the capacities and on the date(s) indicated:

---

| | |
|:---|:---|
| <u>/s/ Michael Schoonover</u> | <u>October 30, 2025</u> |
| Michael Schoonover, President and Principal Executive Officer | Date |
| <u>/s/ Erik Naviloff \*</u> | <u>October 30, 2025</u> |
| Erik Naviloff, Treasurer and Principal | Date |
| Financial Officer, and Principal Accounting Officer |  |
| <u>/s/ Tobias Caldwell\*</u> | <u>October 30, 2025</u> |
| Tobias Caldwell, Trustee | Date |
| <u>/s/ Stephen Lachenauer\*</u> | <u>October 30, 2025</u> |
| Stephen Lachenauer, Trustee | Date |
| <u>/s/ Donald McIntosh\*</u> | <u>October 30, 2025</u> |
| Donald McIntosh, Trustee | Date |

---

\*BY<u>:/s/ Jennifer A. Bailey</u> 

Jennifer A. Bailey

Secretary

(Pursuant to Powers of Attorney previously filed for [Caldwell](http://www.sec.gov/Archives/edgar/data/810695/000158064219003976/ex99o14.htm), [Lachenauer](http://www.sec.gov/Archives/edgar/data/810695/000158064219003976/ex99o15.htm), [McIntosh](http://www.sec.gov/Archives/edgar/data/810695/000158064219003976/ex99o16.htm), and [Naviloff](http://www.sec.gov/Archives/edgar/data/810695/000158064219003976/ex99o17.htm))

## Corresp

![](image_005.jpg)

2005 Market Street<br> Suite 2600<br> Philadelphia, PA 19103<br> T: 215.564.8000

Shawn A. Hendricks

shendricks@stradley.com

215.564.8778 1933 Act Rule 485(a)

1933 Act File No. 033-11905

1940 Act File No. 811-05010

October 30, 2025

**<u>VIA EDGAR TRANSMISSION</u>**

Filing Desk

U.S. Securities and Exchange Commission

100 F Street, N.E.

Washington, DC 20549

**RE: Mutual Fund and Variable Insurance Trust (the "Registrant")**

**<u>File Nos. 033-11905 and 811-05010</u>**

Dear Sir or Madam:

On behalf of the Registrant, and pursuant to Rule 485(a) under the Securities Act of 1933, as amended (the "1933 Act"), please find transmitted herewith, for filing via the EDGAR system, Post-Effective Amendment Nos. 231/232 to the Registrant's Registration Statement on Form N-1A (the "Amendment").

The Registrant is filing this Amendment to make changes to the investment strategies of the Rational Tactical Return Fund (the "Fund") and to reflect corresponding updates to the Fund's principal risks and certain other related changes.

The Registrant intends, prior to the effective date of the Amendment, to file a subsequent post-effective amendment, pursuant to Rule 485(b) under the 1933 Act, for the purposes of: (i) responding to any comments conveyed by the Staff on the Amendment; (ii) updating certain information contained in the prospectus and statement of additional information relating to the Fund; and (iii) filing relevant exhibits relating to the Fund.

The Amendment relates only to the Fund and does not affect the prospectuses and statements of additional information of the Registrant's other series.

Please direct any questions or comments relating to this filing to me at the above-referenced telephone number or Michael P. O'Hare at 215.564.8198.

Very truly yours,

<u>/s/ Shawn A. Hendricks</u> 

Shawn A. Hendricks