Investment Objective

 

 

Income and capital appreciation.

 

Principal Strategies

 

 

Ordinarily, between 50% and 70% of the Fund’s total assets are invested in equity securities and between 30% and 50% of the Fund’s total assets are invested in debt securities.

 

The Fund’s equity investments may include common stocks, preferred stocks, securities convertible into common stocks, U.S. dollar-denominated American Depositary Receipts, and U.S. dollar-denominated foreign stocks traded on U.S. exchanges (collectively referred to as “stocks”).

 

The Fund’s assets are currently allocated among the Manager and the following three investment sub-advisors:

 

Barrow, Hanley, Mewhinney & Strauss, Inc. (“Barrow”)

 

Brandywine Global Investment Management, LLC
(“Brandywine Global”)

 

Hotchkis and Wiley Capital Management, LLC (“Hotchkis”)

 

The Manager intends to allocate all new assets, generally on an equal basis, between Barrow and Brandywine Global, who each decide the proportion of assets to invest in equity and fixed income securities in accordance with the Fund’s guidelines. The Manager does not anticipate allocating any new assets to Hotchkis, as they have reached their capacity limit for large cap value assets, nor does the Manager anticipate allocating any new assets to itself, other than to periodically rebalance the proportion of assets invested in equity and fixed income securities managed by Hotchkis and the Manager, respectively.

 

The Fund’s sub-advisors select stocks that, in their opinion, have most or all of the following characteristics (relative to the S&P 500 ^® Index):

 

 

Each of the Fund’s sub-advisors determines the earnings growth prospects of companies based upon a combination of internal and external research using fundamental analysis and considering changing economic trends. The decision to sell a stock is typically based on the belief that the company is no longer considered undervalued or shows deteriorating fundamentals, or that better investment opportunities exist in other stocks. The Manager believes that this strategy will help the Fund outperform other investment styles over the longer term while minimizing volatility and downside risk.

 

The Fund’s investments in debt securities may include: obligations of the U.S. Government, its agencies and instrumentalities (some of which are not backed by the full faith and credit of the U.S. Government); U.S. corporate debt securities, such as notes and bonds; mortgage-backed securities; asset-backed securities; master-demand notes; Yankeedollar and Eurodollar bank certificates of deposit, time deposits, bankers’ acceptances, commercial paper and other notes; and other debt securities. The Fund will only buy debt securities that are investment grade at the time of purchase. Investment grade securities include securities issued or guaranteed by the U.S. Government, its agencies and instrumentalities, as well as securities rated in one of the four highest rating categories by at least two nationally recognized statistical rating organizations rating that security (such as Standard & Poor’s Ratings Services or Moody’s Investors Service, Inc.) or rated in one of the four highest rating categories by one rating organization if it is the only organization rating that security. The Fund, at the discretion of the Manager or the applicable sub-advisor, may retain a security that has been downgraded below the initial investment criteria.

 

In determining which debt securities to buy and sell, the Manager and the sub-advisors generally use a “top-down” or “bottom-up” investment strategy, or a combination of both strategies.

 

The top-down fixed income investment strategy is implemented as follows:

 

 

 

3

Investment Objective

 

 

Long-term capital appreciation and current income.

 

Principal Strategies

 

 

Ordinarily, at least 80% of the Fund’s net assets (plus the amount of any borrowings for investment purposes) are invested in equity securities of large market capitalization U.S. companies. These companies generally have market capitalizations similar to the market capitalization of the companies in the Russell 1000 ^® Index ¹ at the time of investment. The Russell 1000 Index measures the performance of the 1,000 largest U.S. companies based on total market capitalization. As of December 31, 2006, the market capitalizations of the companies in the Russell 1000 Index ranged from $1.2 billion to $463.6 billion. The Fund’s investments may include common stocks, preferred stocks, securities convertible into U.S. common stocks, U.S. dollar-denominated American Depositary Receipts, and U.S. dollar-denominated foreign stocks traded on U.S. exchanges (collectively referred to as “stocks”).

 

The Fund’s assets are currently allocated among four investment sub-advisors:

 

Barrow, Hanley, Mewhinney & Strauss, Inc.

 

Brandywine Global Investment Management, LLC

 

Hotchkis and Wiley Capital Management, LLC

 

Metropolitan West Capital Management, LLC

 

The Manager does not anticipate allocating any new assets to Hotchkis and Wiley Capital Management, LLC, as they have reached their capacity limit for large cap value assets. The Manager intends to allocate all new assets, generally on an equal basis, among Barrow, Hanley, Mewhinney & Strauss, Inc., Brandywine Global Investment Management, LLC and Metropolitan West Capital Management, LLC.

 

The Fund’s sub-advisors select stocks that, in their opinion, have most or all of the following characteristics (relative to the S&P 500 ^® Index):

 

 

Each of the Fund’s sub-advisors determines the earnings growth prospects of companies based upon a combination of internal and external research using fundamental analysis and considering changing economic trends. The decision to sell a stock is typically based on the belief that the company is no longer considered undervalued or shows deteriorating fundamentals, or that better investment opportunities exist in other stocks. The Manager believes that this strategy will help the Fund outperform other investment styles over the longer term while minimizing volatility and downside risk.

 

Under adverse market conditions, the Fund may, for temporary defensive purposes, invest up to 100% of its assets in cash or cash equivalents, including investment grade short-term obligations. Investment grade obligations include securities issued or guaranteed by the U.S. Government, its agencies and instrumentalities, as well as securities rated in one of the four highest rating categories by at least two nationally recognized statistical rating organizations rating that security (such as Standard & Poor’s Ratings Services or Moody’s Investors Service, Inc.) or rated in one of the four highest rating categories by one rating organization if it is the only organization rating that security. To the extent that the Fund invokes this strategy, its ability to achieve its investment objective may be affected adversely.

 

As noted above, the Fund has a policy of investing at least 80% of its assets in securities that are consistent with the Fund’s name. If the Fund changes this policy, a notice will be sent to shareholders at least 60 days in advance of the change and the Prospectus will be supplemented.

Investment Objective

 

 

Long-term capital appreciation.

 

Principal Strategies

 

 

Ordinarily, at least 80% of the Fund’s net assets (plus the amount of any borrowings for investment purposes) are invested in equity securities of large market capitalization U.S. companies. These companies generally have market capitalizations similar to the market capitalization of the companies in the Russell 1000 Index at the time of investment. The Russell 1000 ^® Index ¹ measures the performance of the 1,000 largest U.S. companies based on total market capitalization. As of December 31, 2006, the market capitalizations of the companies in the Russell 1000 Index ranged from $1.2 billion to $463.6 billion. The Fund’s investments may include common stocks, preferred stocks, securities convertible into U.S. common stocks, U.S. dollar-denominated American Depositary Receipts, and U.S. dollar-denominated foreign stocks traded on U.S. exchanges (collectively referred to as “stocks”) that the investment sub-advisors believe have above-average growth potential.

 

The Manager currently allocates the Fund’s assets, generally on an equal basis, between two investment sub-advisors:

 

Goldman Sachs Asset Management, L.P. (“GSAM”)

 

The Renaissance Group LLC (“Renaissance”)

 

GSAM utilizes quantitative techniques and fundamental research in seeking to maximize its portion of the Fund’s expected return, while maintaining risk, style, capitalization and industry characteristics similar to the Russell 1000 ^® Growth Index. ¹ GSAM attempts to structure a portfolio that overweights stocks that it believes are attractively valued and profitable with positive momentum, better than average quality earnings and positive sentiment.

 

Renaissance attempts to construct a portfolio of attractively priced companies with demonstrated records of above-average profitability and accelerating earnings trends. Renaissance employs a disciplined decision-making process to create and manage a somewhat concentrated growth-oriented equity portfolio. The cornerstone of its process is a quantitative model that is designed to identify large market capitalization companies with above-average historical rates of profitability and strong financial characteristics.

 

The Fund’s investment strategies are likely to result in a portfolio turnover rate greater than 100%. Portfolio turnover is a measure of the Fund’s trading activity over a one-year period. A portfolio turnover rate of 100% would indicate that the Fund sold and replaced the entire value of its securities holdings during the period. High portfolio turnover could increase the Fund’s transaction costs and possibly have a negative impact on performance. Frequent trading by the Fund could also result in increased short-term capital gain distributions to shareholders, which are taxable as ordinary income.

 

Under adverse market conditions, the Fund may, for temporary defensive purposes, invest up to 100% of its assets in cash or cash equivalents, including investment grade short-term obligations. Investment grade obligations include securities issued or guaranteed by the U.S. Government, its agencies and instrumentalities, as well as securities rated in one of the four highest rating categories by at least two nationally recognized statistical rating organizations rating that security (such as Standard & Poor’s Ratings Services or Moody’s Investors Service, Inc.) or rated in one of the four highest rating categories by one rating organization if it is the only organization rating that security. To the extent that the Fund invokes this strategy, its ability to achieve its investment objective may be affected adversely.

 

As noted above, the Fund has a policy of investing at least 80% of its assets in securities that are consistent with the Fund’s name. If the Fund changes this policy, a notice will be sent to shareholders at least 60 days in advance of the change and the Prospectus will be supplemented.

Investment Objective

 

 

Long-term capital appreciation and current income.

 

Principal Strategies

 

 

Ordinarily, at least 80% of the Fund’s net assets (plus the amount of any borrowings for investment purposes) are invested in equity securities of middle market capitalization U.S. companies. These companies generally have market capitalizations between $1 billion and the market capitalization of the largest company in the Russell Midcap ^® Index ¹ at the time of investment. As of December 31, 2006, the market capitalization of the largest company in the Russell Midcap Index was $21.4 billion. The Fund’s investments may include common stocks, preferred stocks, securities convertible into U.S. common stocks, U.S. dollar-denominated American Depositary Receipts, and U.S. dollar-denominated foreign stocks traded on U.S. exchanges (collectively referred to as “stocks”).

 

The Manager currently allocates the Fund’s assets, generally on an equal basis, between two investment sub-advisors:

 

Barrow, Hanley, Mewhinney & Strauss, Inc. (“Barrow”)

 

Pzena Investment Management, LLC (“Pzena”)

 

In general, the sub-advisors select stocks that, in their opinion, have most or all of the following characteristics (relative to the Russell Midcap Index):

 

 

Barrow invests in medium-sized companies with low price to earnings and price to book value ratios and high dividend yields in relation to the Russell Midcap Index. Through extensive research and meetings with company management teams, Barrow seeks to identify companies that not only possess these three characteristics, but that also exhibit high or improving profitability translating into earnings growth above that of the overall Russell Midcap Index. Barrow’s portfolio will generally consist of 35 to 45 stocks.

 

Pzena invests in medium-sized companies and intends to maintain a concentrated portfolio of 30 to 40 stocks selected from the most undervalued or “deep” value portion of its investment universe. Pzena looks for companies within that universe that sell for a low price relative to normal earnings (with “normal earnings” defined as a 5 year estimate of what the company should earn in a normal environment based on research of the company’s history and the history of its industry).

 

Each of the Fund’s sub-advisors determines the earnings growth prospects of companies based upon a combination of internal and external research using fundamental analysis and considering changing economic trends. The decision to sell a security is typically based on the belief that the company is no longer considered undervalued or shows deteriorating fundamentals, or that better investment opportunities exist in other stocks. The Manager believes that this strategy will help the Fund outperform other investment styles over the longer term while minimizing volatility and downside risk.

 

Under adverse market conditions, the Fund may, for temporary defensive purposes, invest up to 100% of its assets in cash or cash equivalents, including investment grade short-term obligations. Investment grade obligations include securities issued or guaranteed by the U.S. Government, its agencies and instrumentalities, as well as securities rated in one of the four highest rating categories by at least two nationally recognized statistical rating organizations rating that security (such as Standard & Poor’s Ratings Services or Moody’s Investors Service, Inc.) or rated in one of the four highest rating categories by one rating organization if it is the only organization rating that security. To the extent that the Fund invokes this strategy, its ability to achieve its investment objective may be affected adversely.

 

As noted above, the Fund has a policy of investing at least 80% of its assets in securities that are consistent with the Fund’s name. If the Fund changes this policy, a notice will be sent to shareholders at least 60 days in advance of the change and the Prospectus will be supplemented.

Investment Objective

 

 

Long-term capital appreciation and current income.

 

Principal Strategies

 

 

Ordinarily, at least 80% of the Fund’s net assets (plus the amount of any borrowings for investment purposes) are invested in equity securities of small market capitalization U.S. companies. These companies generally have market capitalizations of $3 billion or less at the time of investment. The Fund’s investments may include common stocks, preferred stocks, securities convertible into common stocks, U.S. dollar-denominated American Depositary Receipts, and U.S. dollar-denominated foreign stocks traded on U.S. exchanges (collectively, “stocks”).

 

The Fund’s assets are currently allocated among five investment sub-advisors:

 

Barrow, Hanley, Mewhinney & Strauss, Inc. (“Barrow”)

 

Brandywine Global Investment Management, LLC (“Brandywine Global”)

 

Hotchkis and Wiley Capital Management, LLC (“Hotchkis”)

 

Opus Capital Group, LLC (“Opus”)

 

The Boston Company Asset Management, LLC (“The Boston Company”)

 

The Fund’s Board of Trustees has appointed the following three investment sub-advisors to the Fund, but the Manager has not allocated Fund assets to these sub-advisors:

 

Dreman Value Management, LLC (“Dreman”)

 

Metropolitan West Capital Management, LLC (“MetWest Capital”)

 

SSgA Funds Management, Inc. (“SSgA”)

 

The Manager does not anticipate allocating any new assets to Barrow or Hotchkis, as these sub-advisors have reached their capacity limit for small cap assets. The Manager intends to allocate new assets among Brandywine Global, Dreman, MetWest Capital, Opus, SSgA, and The Boston Company as their capacity commitments to the Fund permit.

 

The sub-advisors, except SSgA, select stocks that, in their opinion, have most or all of the following characteristics (relative to the Russell 2000 ^® Index ¹ ):

 

 

SSgA pursues an enhanced index strategy, seeking to outperform the Russell 2000 ^® Value Index ¹ (the “Index”) by selecting stocks that are undervalued by the market and that possess superior earnings growth potential. In deciding to purchase or hold a stock, SSgA considers perspectives on the stock’s growth potential and valuation as well as sentiment toward the stock by the market and the company’s management. As an essential component of its investment process, SSgA attempts to control risk by constructing a portfolio with overall characteristics similar to the Index.

 

Each of the sub-advisors determines the earnings growth prospects of companies based upon a combination of internal and external research using fundamental analysis and considering changing economic trends. The decision to sell a stock is typically based on the belief that the company is no longer considered undervalued or shows deteriorating fundamentals, or that better investment opportunities exist in other stocks. The Manager believes that this strategy will help the Fund outperform other investment styles over the longer term while minimizing volatility and downside risk.

 

Under adverse market conditions, the Fund may, for temporary defensive purposes, invest up to 100% of its assets in cash or cash equivalents, including investment grade short-term obligations. Investment grade obligations include securities issued or guaranteed by the U.S. Government, its agencies and instrumentalities, as well as securities rated in one of the four highest rating categories by at least two nationally recognized statistical rating organizations rating that security (such as Standard & Poor’s Ratings Services or Moody’s Investors Service, Inc.) or rated in one of the four highest rating categories by one rating organization if it is the only organization rating that security. To the extent that the Fund invokes this strategy, its ability to achieve its investment objective may be affected adversely.

 

As noted above, the Fund has a policy of investing at least 80% of its assets in securities that are consistent with the Fund’s name. If the Fund changes this policy, a notice will

 

 

¹       Russell 2000 Index and Russell 2000 Value Index are registered trademarks of Frank Russell Company.

 

 

16

Investment Objective

 

 

Long-term capital appreciation and current income.

 

Principal Strategies

 

 

Ordinarily, at least 80% of the Fund’s net assets (plus the amount of any borrowings for investment purposes) are invested in equity securities of small market capitalization U.S. companies. These companies generally have market capitalizations of $3 billion or less at the time of investment. The Fund’s investments may include common stocks, preferred stocks, securities convertible into common stocks, U.S. dollar-denominated American Depositary Receipts, and U.S. dollar-denominated foreign stocks traded on U.S. exchanges (collectively referred to as “stocks”).

 

The Manager currently allocates all of the Fund’s assets to PanAgora Asset Management, Inc. (“PanAgora”).

 

PanAgora’s investment process follows a bottom-up approach. The strategy applies quantitative techniques combined with traditional investment theory. The investment team utilizes a proprietary, multi-factor, quantitative model to create a return forecast for each stock in the Russell 2000 ^® Value Index. ¹ Factors indicating relative value, such as book-to-price ratio, sales-to-price ratio, forward earnings-to-price ratio, and dividend yield, play a significant role in the model. Additional factor categories include earnings quality, earnings momentum, and price momentum. Each stock’s return forecast is then weighed against its contribution to the risk of the portfolio in comparison to the benchmark and transaction costs. PanAgora attempts to construct a portfolio with the highest return potential and the lowest risk. A key component of their investment process is the fundamental analysis of potential investments by the investment team. This insight is used to enhance and verify the quantitative techniques.

 

Under adverse market conditions, the Fund may, for temporary defensive purposes, invest up to 100% of its assets in cash or cash equivalents, including investment grade short-term obligations. Investment grade obligations include securities issued or guaranteed by the U.S. Government, its agencies and instrumentalities, as well as securities rated in one of the four highest rating categories by at least two nationally recognized statistical rating organizations rating that security (such as Standard & Poor’s Ratings Services or Moody’s Investors Service, Inc.) or rated in one of the four highest rating categories by one rating organization if it is the only organization rating that security. To the extent that the Fund invokes this strategy, its ability to achieve its investment objective may be affected adversely.

 

As noted above, the Fund has a policy of investing at least 80% of its assets in securities that are consistent with the Fund’s name. If the Fund changes this policy, a notice will be sent to shareholders at least 60 days in advance of the change and the Prospectus will be supplemented.

Investment Objective

 

 

Long-term capital appreciation.

 

Principal Strategies

 

 

Ordinarily, at least 80% of the Fund’s net assets (plus the amount of any borrowings for investment purposes) are invested in common stocks and securities convertible into common stocks (collectively, “stocks”) of issuers based in at least three different countries located outside the United States. The Fund will primarily invest in countries comprising the Morgan Stanley Capital International Europe Australasia Far East Index (“EAFE Index”). The EAFE Index is comprised of equity securities of companies from various industrial sectors whose primary trading markets are located outside the United States. Companies included in the EAFE Index are selected from among the larger capitalization companies in these markets.

 

The Fund’s assets are currently allocated among four investment sub-advisors:

 

Causeway Capital Management LLC

 

Lazard Asset Management LLC

 

Templeton Investment Counsel, LLC

 

The Boston Company Asset Management, LLC (“The Boston Company”)

 

The Manager does not anticipate allocating any new assets to Causeway Capital Management LLC, as it has closed its international value equity strategy to further investments by the Fund. The Manager intends to allocate all new assets among Lazard Asset Management LLC, Templeton Investment Counsel, LLC and The Boston Company. The Boston Company has recently been selected as a sub-advisor to the Fund, and as such, the Manager intends to gradually increase the portion of Fund assets under The Boston Company’s management to approximate that of the other sub-advisors.

 

The sub-advisors select stocks that, in their opinion, have most or all of the following characteristics (relative to that stock’s country, sector or industry):

 

 

The sub-advisors may consider potential changes in currency exchange rates when choosing stocks. Each of the sub-advisors determines the earnings growth prospects of companies based upon a combination of internal and external research using fundamental analysis and considering changing economic trends. The decision to sell a stock is typically based on the belief that the company is no longer considered undervalued or shows deteriorating fundamentals, or that better investment opportunities exist in other stocks. The Manager believes that this strategy will help the Fund outperform other investment styles over the longer term while minimizing volatility and downside risk. A sub-advisor may trade forward foreign currency contracts or currency futures in an attempt to reduce the Fund’s risk exposure to adverse fluctuations in currency exchange rates.

 

Under adverse market conditions, the Fund may, for temporary defensive purposes, invest up to 100% of its assets in cash or cash equivalents, including investment grade short-term obligations. Investment grade obligations include securities issued or guaranteed by the U.S. Government, its agencies and instrumentalities, as well as securities rated in one of the four highest rating categories by at least two nationally recognized statistical rating organizations rating that security (such as Standard & Poor’s Ratings Services or Moody’s Investors Service, Inc.) or rated in one of the four highest rating categories by one rating organization if it is the only organization rating that security. To the extent that the Fund invokes this strategy, its ability to achieve its investment objective may be affected adversely.

 

As noted above, the Fund has a policy of investing at least 80% of its assets in securities that are consistent with the Fund’s name. If the Fund changes this policy, a notice will be sent to shareholders at least 60 days in advance of the change and the Prospectus will be supplemented.

Investment Objective

 

 

Long-term capital appreciation.

 

Principal Strategies

 

 

Ordinarily, at least 80% of the Fund’s net assets (plus the amount of any borrowings for investment purposes) are invested in equity securities of issuers that:

 

 

An emerging market country is one that:

 

 

The Fund’s investments may include common stocks, preferred stocks, securities convertible into common stocks, rights, warrants, and depositary receipts (collectively referred to as “stocks”).

 

The Manager currently allocates the Fund’s assets, generally on an equal basis, between two investment sub-advisors:

 

Morgan Stanley Investment Management Inc. (“MSIM Inc.”)

 

The Boston Company Asset Management, LLC (“The Boston Company”)

 

MSIM Inc. combines a top-down country allocation investment approach with bottom-up stock selection. MSIM Inc. first allocates its portion of the Fund’s assets among emerging market countries based on relative economic, political and social fundamentals, stock valuations and investor sentiment. MSIM Inc. then selects individual securities within these countries on the basis of attractive growth characteristics, reasonable valuations and company managements with a strong shareholder value orientation. To manage risk, MSIM Inc. emphasizes thorough macroeconomic and fundamental research.

 

The Boston Company utilizes a bottom-up investment strategy that is value-oriented and research-driven. This style is both quantitative and fundamentally based, focusing first on stock selection, then enhanced by broadly diversified country allocation.

 

The sub-advisors may consider potential changes in currency exchange rates when choosing stocks. A sub-advisor may trade forward foreign currency contracts or currency futures in an attempt to reduce the Fund’s risk exposure to adverse fluctuations in currency exchange rates.

 

Under adverse market conditions, the Fund may, for temporary defensive purposes, invest up to 100% of its assets in cash or cash equivalents, including investment grade short-term obligations. Investment grade obligations include securities issued or guaranteed by the U.S. Government, its agencies and instrumentalities, as well as securities rated in one of the four highest rating categories by at least two nationally recognized statistical rating organizations rating that security (such as Standard & Poor’s Ratings Services or Moody’s Investors Service, Inc.) or rated in one of the four highest rating categories by one rating organization if it is the only organization rating that security. To the extent that the Fund invokes this strategy, its ability to achieve its investment objective may be affected adversely.

 

As noted above, the Fund has a policy of investing at least 80% of its assets in securities that are consistent with the Fund’s name. If the Fund changes this policy, a notice will be sent to shareholders at least 60 days in advance of the change and the Prospectus will be supplemented.

Investment Objective

 

 

To replicate as closely as possible, before expenses, the performance of the Standard & Poor’s 500 Composite Stock Price Index (“S&P 500 Index” or “Index”).

Investment Objective

 

 

To match the performance of the Russell 2000 ^® Index ¹ (the “Russell 2000” or “Index”) as closely as possible before the deduction of Fund expenses.

Investment Objective

 

 

To match the performance of the Morgan Stanley Capital International EAFE Index (the “EAFE Index” or “Index”) as closely as possible before the deduction of Fund expenses.