Dear Fellow Shareholders

After another challenging year for investors, thank you for the confidence you’ve placed in us.  It’s not always easy being different and our approach is an unconventional one: we actively adjust our portfolios.  While many fund managers adhere rigidly to their specific style or specialty, we are agnostic about style and region.  We select funds and ETFs based on near-term performance while conventional wisdom looks to long-term performance.    And we continue to believe that mutual funds and exchange traded funds (ETFs) are efficient ways to access a variety of opportunities, even while some are predicting the demise of mutual funds.

For forty years we’ve stuck to our strategy, even though it wasn’t what everyone else was doing – and to our surprise, over time, it seems the fund industry has become a lot more like us. After years of limiting international exposure and restricting their portfolios to specific style boxes, many fund managers now tout their go-anywhere, global approaches.  What’s new to the rest of the fund industry is what we’ve been doing since 1969. Now, we believe there’s more demand for process-based investment approaches like ours.  Most have recognized that star fund managers come and go.

You’ve hired us to actively manage your portfolios and to take advantage of a variety of opportunities as they present themselves.  In some years, like last, it may be difficult to appreciate the added value of our active management.  Leadership swings in 2011 made trend following-challenging. Yet, we stay disciplined and move incrementally.  By changing our portfolios, we seek to minimize excessive damage.  In a year when the MSCI EAFE Index of foreign stocks was down more than 12%, we are glad our ranking system led us away from international funds that had previously dominated.

I am confident in the sound logic and foundation of our Upgrading strategy.  In addition to our original Upgrading funds,  we have an expanded offering of mutual funds for you, including funds that are not always fully invested.

We believe that the right combination of Upgrader Funds can help you stay the course. Our risk-managed Tactical Upgrader funds provide an alternative to conventional stock and bond investments and can play a role in providing balance.  In my own accounts, I’ve been pleased with allocating beyond just growth and income funds into the Tactical funds.  No one likes steep declines, and when markets sell-off sharply, these hedged portfolios may help provide a buffer.  

We are always happy to discuss any questions you may have and invite you to call us at 800-763-8639.

The MSCI EAFE Index (Morgan Stanley Capital International, Europe, AustralAsia and Far East) is an unmanaged index of over 1000 foreign common stock prices including the reinvestment of dividends. It is widely recognized as a benchmark for measuring the performance of international value funds. You cannot invest directly in an index.