Skyline Special Equities Portfolio

Skyline Asset Management, L.P.

Skyline Asset Managment L.P.’s ("Skyline") research effort focuses on finding good companies that are not widely followed. Typically they invest in firms with market caps of less than $2.5 billion. The selection process involves using outside research services, computer screens, and internally maintained lists of potential companies/stocks to identify new ideas. These ideas are then screened to determine whether they meet certain basic criteria: relative valuation, capitalization, financial strength, and opportunities for continued growth. This screening process reduces the list from 2000 names to 150-200 names. This list is then more rigorously analyzed to answer the question, “Why will earnings increase at an above-average rate?” All company documents are analyzed, any available industry or research reports are reviewed and, most importantly, questions are addressed directly to senior company management.

In addition, other companies in the same industry are reviewed to determine relative valuation of the company being investigated. The final portfolio will contain 65-85 stocks and is generally fully invested. The portfolio will tend to be well diversified and the portfolio’s P/E ratio will consistently be below that of the Russell 2000®. Skyline sells stocks when they rise to a sell target, which is usually a P/E equal to the overall stock market, or if the company’s fundamentals have changed so that the original investment thesis is no longer valid.

Ideal Company

The ideal company exhibits many of the following traits:

• Market capitalization less than $2.5 billion
• Discounted price/earnings ratio relative to the market
• Above average growth prospects
• Neglected, under followed, and often out of favor

Portfolio Construction

Portfolio management:

• Remain fully invested
• Broad diversification among economic sectors
• Keep attentive to earnings
• Maintain favorable risk/reward

The portfolio:

• Stocks have a maximum weighting of 5% for each holding
• Typically holds 65-85 stocks
• Cash equivalents averaging less than 5%

Sell Discipline

The following factors influence the sell decision when:

• P/E equals the market/industry P/E
• Change in fundamentals
• Holding reaches 5.0% of the portfolio

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.