This disclosure is provided by Equity Associates Inc. as required by industry regulations to ensure that all investors who are considering borrowing money to invest are made aware of the risks associated with such a strategy.

Mutual funds may be purchased using available cash, or a combination of cash and borrowed money.  (Borrowed money could be in the form of a line of credit or a 2nd mortgage (secured line of credit) on a home as an example).

It is important that the investor be aware of the terms of a loan secured by their financial institution.  The lender may require that the amount outstanding on the loan not rise above an agreed percentage of the market value of their mutual fund shares.  Should this occur, the borrower may be forced to pay down the loan or sell shares so as to return the loan to the agreed percentage relationship.  Terms may vary between different lenders.

Investors who leverage their investments are advised to have adequate financial resources available to pay interest and reduce the loan if the loan borrowing arrangements require such payment.

It is apparent that leveraging magnifies gains and losses. To what extent a leverage purchase involves undue risk is a determination to be made on a individual case basis, and will vary depending on the circumstances on the purchaser and the mutual funds purchased.  It is important that an investor consult a professional advisor/planner and use a prudent strategy when using this investment approach.