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BTS BOND ASSET ALLOCATION PORTFOLIOS

Goal

The BTS Bond Asset Allocation (BAA) Portfolios seek to manage investment risk, enhance returns, preserve capital during market downturns and reduce bond portfolio volatility.

Bond Asset Allocation Portfolio

Investment Strategy1

The BAA portfolios are an extension of the BTS High Yield Portfolios, established in 1981, which move assets between High Yield Bond and Money Market Funds based on how the BTS model evaluates the current trend in High Yield Bonds.

While enhanced returns are more likely to be derived from High Yield instruments over the long term, BAA may use U.S. Government bonds funds when High Yield instruments are not trending up since their correlation to High Yields is low-to- negative. In those periods when the BTS model favors neither alternative, assets are placed in money market funds.

Approach

BAA uses a tactical approach, leveraging a broad range of market trend data, technical analysis and economic factors, to allocate assets to the bond market sectors BTS believes will perform best in the current environment for fixed income securities. Conversely, if bond sectors are declining, we will seek to preserve capital by exiting the bond market and shifting assets to money market instruments.

Program Options

BTS offers a number of BAA Portfolio options. Please consult with your advisor to select the option that meets your needs.

1 Investing in bond funds carries some risks including; credit risk, which is the risk that the issuers of the bonds owned by a fund may default (fail to pay the debt that they owe on the bonds that they have issued), prepayment risk, which is the risk that the issuers of the bonds owned by a fund will prepay them at a time when interest rates have declined, and interest rate risk, which is the risk that the market value of the bonds owned by a fund will fluctuate as interest rates go up and down.