Fremont Micro-Cap Fund

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The Fund employs multiple portfolio managers who specialize in distinct investment approaches. This “intelligence diversification” not only serves to manage risk, but also helps us tap the markets’ full potential by focusing different analytical insights on each class of investment. Fund management strives to achieve this performance and diversification while ensuring that the Fund operates within the framework of its investment objective and principal investment strategies.

Lord, Abbett & Co, LLC

The team focuses its stock selection effort by focusing on companies that have revenue growth of at least 15%, are experiencing year-to-year operating margin improvement and are experiencing earnings growth that is driven by top-line growth rather than being driven by one time events or simple cost cutting measures. The focus is also on identifying companies with higher quality balance sheets (often captured by finding companies with manageable debt-to-total capital ratios) and that are already profitable. Once this process is completed, the focus for the team is on forecasting both revenue and earnings growth over the next several years. To achieve this goal, and to find companies that will be growing considerably faster than their industry average, members of the team spend an extensive amount of time understanding the competitive advantages of a firm, the industry dynamics within which they operate and the strength of management.

The sell discipline is enacted if there is a fundamental change in the business, a more attractive alternative is found or if a holding reaches a 5% weight in the overall portfolio.

The portfolio typically holds between 75 and 100 stocks with no individual holding exceeding 5%. There is a risk constraint that prevents any individual industry from being greater than 25% of the total portfolio weight. The approximate annual turnover in the portfolio is 200% although this is not an explicit target as part of either the stock selection or the portfolio construction processes.

Next Century Growth Investors, LLC

The team requires historical revenue growth of at least 15% for a company before conducting further research. Other key factors considered initially by the team are strong historical revenue growth, low debt and high ROE. Quantitative screening is done on a regular basis to see which stocks over the past year are experiencing significant growth. The next stage of this process involves intensive first-hand research to determine the growth prospects of a company with the team choosing a stock only when it has become convinced a company has an extraordinary opportunity to grow their business. The uniqueness of this process lies in the fact that the team seeks these companies regardless of their short-term prospects and\or current valuation. The team is looking for “home runs” and companies that will grow to the point that they will eventually reside in their small cap portfolio.

The sell discipline is enacted if there is a change in the original investment thesis or a fundamental disappointment in the company. In addition, a holding will become a candidate for sale if it reaches an extreme valuation, becomes larger than 5% of the overall portfolio or as it approaches $1 billion in market capitalization. Typically companies are sold out of the micro cap portfolio because they have approached $1 billion in market capitalization, and are bought for the small cap portfolio.

The portfolio is concentrated and typically has 40-60 holdings which can create a high level of volatility. The only risk constraints are that sector weights can not exceed two times the Russell 2000 Growth sector weights and no individual holding can be greater than 5% of the portfolio.

OFI Institutional Asset Management

The team relies on both quantitative and qualitative tools to help with their stock selection process. The team quantitatively screens on both quality and value characteristics such as high return on equity and assets for quality and low Price/Earnings and Price/Book ratios for valuation. The quality and valuation screen leaves the team with a strong, focused universe with which to conduct its fundamental analysis where the team spends time meeting with company management as well as customers and suppliers in an effort to better understand the dynamics of the industry within which a company operates. The analysts then use a discounted cash flow analysis to arrive at a price target for each security using a static discount rate over a 1- year rolling time horizon.

The sell discipline is enacted if a stock achieves peak profitability or valuation, or the fundamentals of the original investment thesis deteriorate. In addition, a stock may be sold if a more attractive opportunity is found in the portfolio or if a stock reaches a 5% total position.

The portfolio typically holds between 40-70 securities with position sizes generally ranging from 1% to 3% with a maximum of 5% allowed in any one holding. In addition, there is a constraint that limits the maximum exposure to any sector at 30%.

WEDGE Capital Management L.L.P.

The investment process is a combination of both quantitative and fundamental research insights. The quantitative portion of the investment process uses commonly found factors and characteristics that can be accessed via any number of commercial databases. The value-added portion of the process, therefore, comes from the use of a number of different factors across five major categories: valuation, earnings quality, operating efficiency, capital usage and momentum, whose efficacy has been verified via long-term regression analysis. This is the Fundamental Value model. The top results of this model are combined with the best resulting stocks from the Financial Quality model, which measures stocks across categories such as multiple earnings growth, profitability, leverage and liquidity. The top stocks that appear in both models are eligible for fundamental research. The fundamental research portion of the investment process is exclusionary in nature and meant to eliminate stocks that are not strong in earnings forecasts, valuation metrics, sector\industry outlook or any factor that can not be easily captured quantitatively.

A stock is scrutinized for possible sale if it falls below the top four deciles in the Fundamental Value model. Stocks are sold when they become fairly valued, an upgrade opportunity develops or the original investment thesis materially deteriorates.

The portfolio is confined to plus or minus 10% in any given sector although sector positions tend to be much closer to the sector weighting than this. (It should be noted that these self-imposed sector weighting constraints are based on a proprietary liquidity analysis conducted on an ongoing basis by the micro cap team and is NOT driven by the sector weightings of any micro cap benchmark). The final portfolio tends to be well diversified and holds approximately 150 securities and consistently maintains a value bias relative to the benchmark. The portfolio tends to hold securities within the $40 million to $400 million market capitalization range although does not require a sale of a holding until it reaches $800 million in market capitalization.

Investors should carefully consider the fund's investment objectives, risks, charges, and expenses before investing. For this and other information, please call 800.835.3879 or download a free prospectus. Read it carefully before investing or sending money.

The performance shown represents past performance and is not a guarantee of future results. Current performance may be lower or higher than the performance data quoted. The investment return and the principal value of an investment will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. From time to time the advisor has waived fees or reimbursed expenses, which may have resulted in higher returns. The listed returns and yields on the Fund are net of expenses and the returns and yields on the indices exclude expenses. Current performance of the Fund may be lower or higher than the performance quoted.

There is no guarantee that these investment strategies will work under all market conditions, and each investor should evaluate their ability to invest for a long-term, especially during periods of downturns in the market.

The investment return and the principal value of an investment will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost.