Q:  What is the history and mission of the SmartGrowth® Mutual Funds? A : Hennion & Walsh, Inc. was founded in 1990 by Richard Hennion and William Walsh. Hennion & Walsh Asset Management, an affiliate of Hennion & Walsh, Inc., launched the SmartGrowth Lipper Funds in June of 2007. Hennion & Walsh is headquartered in Parsippany, NJ and has an additional office location in Millburn, NJ. Hennion & Walsh, Inc. has approximately $2 billion in client assets and Hennion & Walsh Asset Management has approximately $218 million in assets under management or supervison. The SmartGrowth family of funds consists of a series of three target-risk mutual funds – the SmartGrowth Lipper Optimal Conservative Index Fund (LPCAX), the SmartGrowth Lipper Optimal Moderate Index Fund (LPMAX) and the SmartGrowth Lipper Optimal Growth Index Fund (LPGAX). Hennion & Walsh Asset Management, Inc. serves as the Investment Adviser to the SmartGrowth Mutual Funds. The funds in our line-up have been designed to address the diverse objectives, time horizons and risk profiles of investors looking for diversified growth within qualified and non-qualified accounts. Our mission is to help individuals invest in accordance with their unique risk-return objectives, with disciplined strategies that have the potential to provide superior long-term results. Q:  What are the tenets of your investment philosophy? A : Our belief is that gaining an understanding of the correlation between risk and return is critical for all investors, particularly those planning for long-term goals, such as retirement. To achieve this goal, the funds incorporate exchange-traded funds and asset allocation to produce superior risk-adjusted returns for long-term investors. We seek to protect beta first and capture alpha second; meaning avoid the downside risk before searching for growth. We want to maintain a consistent risk profile and provide downside protection in any market and give our clients reasonable growth based upon a level of risk that they are comfortable with. I believe that our motto of “Winning by not Losing,” or at least striving to minimize potential losses through an emphasis on downside protection and enhanced diversification, best summarizes our investment philosophy with these Funds. Q:  How do you organize your investment strategy around this philosophy? A : The SmartGrowth Mutual Funds attempt to track the Target Risk Indices' carefully selected ETFs and ETNs whose historical returns, liquidity, correlations and expenses are analyzed to identify the appropriate mix for each index's risk/reward profile. Each target risk fund is benchmarked to one of Lipper's proprietary Optimal Target Risk Indices and offers investors three risk/reward options ranging from conservative to growth portfolios in a conveniently packaged mutual fund structure. For example, the SmartGrowth Lipper Optimal Conservative Index Fund (LPCAX) seeks to track the performance of the Lipper Optimal Conservative Index. The fund normally invests in exchange-traded funds and exchange-traded notes included in the Lipper Optimal Conservative index. The Conservative Index generally is comprised of ETFs and, as a result, the fund expects to operate as a "fund of funds.” The ETFs that comprise the Conservative Index are pooled investment vehicles whose shares are listed and traded on stock exchanges or otherwise traded in the over-the-counter market. Inherently tactical in their approach, these three target risk based funds are rebalanced quarterly utilizing a methodology that looks at all available ETPs without being restrained by certain high level pre-determined asset class constraints. Additionally, as a rule, we never invest in any strategy that has employs than two times leverage. Q:  How would you describe your investment process? A : Our firm employs exchanged-traded products (ETPs), such as exchange-traded funds (ETFs) and exchange-traded notes (ETNs), to construct a series of asset allocation portfolios built on freshly constructed indices - the Thomson Reuters Lipper Optimal Indices. These are dynamic indices formulated by Lipper, a Thomson Reuters company, using a sophisticated ETP screening process to determine the most appropriate asset allocation for a given level of risk. Individual ETFs are chosen from all broad-based, sector and industry-specific domestic equity, international equity, fixed-income, and commodity asset classes. Lipper then determines the optimal ETF allocations for each index with the goal of maximizing return and mitigating risk. All indexes will be rebalanced, or rather repositioned, by Lipper, as necessary, on a quarterly basis. At the beginning of each calendar quarter, Lipper picks the ETFs and ETNs within the portfolios, and the fund manager aligns these ETFs to provide for optimal growth while staying within a certain band of risk measured by standard deviation. After the initial screening process has been completed, from the universe of 839 currently available ETPs approximately 250 to 260 are selected. Lipper then runs a statistical routine called "factor analysis," which in layman's terms attempts to identify the smallest number of ETPs that explain the day-to-day behavior of the larger pool of remaining ETPs. In turn, this narrows down the pool of ETPs to somewhere between 50 and 60 ETPs. Finally, following a modern portfolio theory (MPT) approach that utilizes the prior six months of actual capital marketsdata, Lipper runs a mean variance optimization (MVO) routine to arrive at three different distinct target risk-oriented portfolios - actually five since they have five Optimal Indices - to stay within a certain band of risk that they believe will help to provide for optimal risk adjusted return potential over the next three-month period. To reiterate, Thomson Reuters Lipper independently oversees the optimized indices and performs the previously described optimization routine after the end of each quarter. Q:  Would you explain the reason for investing in exchange-traded products (ETPs)? A : Our funds are flexible enough to go in and out of different asset classes and sectors - both long and short - depending upon the models and outlook for the market. The way we approach this is that we can be in U.S. equity funds, international equity funds, emerging market equity funds, sectors, commodities, currencies, tax-free bonds, taxable bonds, international bonds, long or short, or any of those applicable asset classes and sectors based upon the products that are available. The ETP universe provides an enormous opportunity for us to access different areas of the market that we couldn’t access before on a tax-efficient, transparent, and low-cost manner. Too often, investors try to find the “needles in the haystack” and fall short of their overall investment expectations. We, on the other hand, prefer to invest in the “haystacks” themselves following a disciplined, quantitative strategy that is free of human emotion and opinions. Q:  Do you have the flexibility to modify the portfolio once Lipper does the asset allocation? A : For the most part, no, as our Funds are designed to track the Lipper Optimal Indices. As portfolio manager for the Funds, I am essentially responsible for the day-to-day investments into and out of the funds, and as a result keep track of the market and the components of the market, in the event, that there are any market abnormalities or trading disruptions to any of the underlying products in the portfolio. For instance, in December of 2007 we had an allocation to an ETF that was focused on the Indian stocks. At that time, the Indian government passed a moratorium on any derivative product that they felt derived its value from the underlying equity market. Once that moratorium was passed, it started to look a lot more like a closed-end fund as it was straying significantly from its NAV. We notified Lipper of the situation and together started to look at a substitute ETF in the event that we couldn’t trade efficiently into that product for the remainder of the quarter. Fortunately, the Indian government lifted that moratorium shortly thereafter and we didn’t have to implement any type of substitution but we have that ability to go in and make changes, in conjunction with the collective input of the Research team at Lipper, as necessary. Q:  How does Lipper construct the portfolios? A : Lipper usually takes up to a month leading into the end of the quarter to determine the new portfolio for the upcoming quarter. It is a very comprehensive and exhaustive process as together we review the underlying potential components of the Funds to ensure that there aren’t any issues in terms of ETFs that we would have difficulty holding in our mutual funds for a variety of reasons. Q:  At a portfolio level, how many names do you generally have? What is the relevant benchmark for each portfolio? A : Historically, the Funds have ranged from including anywhere from four ETPs in a portfolio to as many as twenty-five ETPs in any given quarter. But since the ETP investments underlying those are investments in futures contracts and individual stocks or in bonds, we generally have, in any given quarter, allocations anywhere between 2,000 and 3,000 different securities across the three Funds. In terms of relevant benchmarks, since the Funds represent asset allocation strategies oriented towards growth, our risk adjusted performance is generally measured against the S&P 500 index, which is widely considered as representative of the equity market in general. However, the Funds are also classified in the Multi-Cap Core category by Lipper. Q:  What further improvements have you made to your model in the process? A : One fairly recent improvement made to the process is our volume or liquidity criteria because as our funds grow obviously our liquidity concerns grow as well. When we first launched the funds, we used the volume criteria of just $1 million trading per day but we have since increased that to $1.5 million because it is important to us to be able to get into and out of the ETPs without any detriment to our shareholders. Therefore, liquidity is of the utmost important to us and it is something we are continually looking at and screening for.