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What We Have Seen

Portfolio managers are known to be experienced in finding what they believe is the best investment approach for their clients. They must have a good understanding of the different investment vehicles available and use this knowledge to develop a thorough investment strategy. Some investment managers may even try to beat a benchmark index like the S&P 500 by carefully picking individual stocks they believe would outperform. There are alternatives to this methodthat can be done through passive investing, like Exchange Traded Funds (ETFs), or alternatively where you invest in nearly every stock in the S&P 500, hoping to mimic the index return. However, the latter approach can be costly and, as a result, reduce the size of your return and generally concedes you will likely not outperform the S&P 500.

New Dunham U.S. Enhanced Market Fund (DNSPX)

According to a worldwide statistic, more and more institutional investors are using derivatives, such as futures contracts and call options to potentially maximize their returns, but similar to all investments, comes at a risk. The statistics show 29.32 billion futures contracts traded in 2022 and 54.53 billion options contracts that same year. Instead of buying individual stocks, the new Dunham U.S. Enhanced Market Fund, gains equity exposure through investments in S&P 500 Index options, including FLEX Options and futures to compete with the S&P 500 index. The ticker symbol for the Dunham U.S. Enhanced Market Fund is DNSPX.

How Does the New Dunham U.S. Enhanced Market Fund Work?

The Dunham U.S. Enhanced Market Fund is seeking to use market volatility to achieve what it believes to be the optimal balance between risk and reward. The Fund seeks to provide upside participation in the U.S. stock market when the U.S. stock market advances. It also seeks to reduce drops in the Fund’s value when the stock market declines by using futures contracts and options rather than buying individual stocks. By leveraging these derivative instruments, the portfolio seeks to take advantage of market movements and aims to generate returns that potentially exceed those of the S&P 500 Index.

Although the portfolio uses derivative instruments based on the S&P 500 index and attempts to reduce downside risk through U.S. Treasuries and U.S. Treasury futures, it is possible these strategies may underperform the S&P 500 index in up and down markets.

PGIM Quantitative Solutions, LLC (PGIM), the Fund’s institutional Sub-Adviser, uses what is known as a tactical investment strategy. This strategy is a style of investing based on short-term market conditions. The Sub-Adviser adjusts the Fund’s exposure to the S&P 500 based on a market trend analysis, economic data, and other factors that may affect stock prices. By doing this, PGIM hopes to advance returns and manage risk.

The Dunham U.S. Enhanced Market Fund is not so much about timing when to make your investment, but rather seeking to invest for the long-term.

What are the investments in the Fund?

The Dunham U.S. Enhanced Market Fund will invest in a combination of S&P 500 Index Futures Contracts, FLEX S&P 500 Call Options, Treasury Bonds, and Treasury Bond Futures.

Through S&P Index Futures Contracts, the new Fund can gain exposure to the S&P 500 and provide liquidity. It is important to note futures involve risk and may not be suitable for all investors. Through their relationship with large financial institutions, PGIM constructed FLEX S&P 500 Call Options to help the Fund reach the Sub-Adviser’s overall targeted exposure levels to the S&P 500 index.

FLEX S&P 500 Call Options are a type of financial contract that gives the holder the right, but not the obligation to buy shares of the S&P 500 index at a predetermined price (strike price) at any time before the option’s expiration date. It is important to note that FLEX options involve risk and may not be suitable for all investors.

The remaining portion of the Fund is made up of Treasury Bonds and Treasury Bond Futures, primarily used to manage downside risk.

The Different Ways to Invest in DNSPX

The Dunham U.S. Enhanced Market Fund, DNSPX, is available through your financial advisor, an advisory program, or can be used as a standalone investment.

The Dunham U.S. Enhanced Market Fund is allocated in three different Core Allocations in the Dunham & Associates’ Custom Asset Allocation Wrap Fee Program.

As with all mutual funds, there is the risk of losing money through your investment in the Fund. Although the Fund will strive to meet its investment objective, there is no assurance that it will do so. Many factors affect the Fund’s net asset value and performance.

If you are considering an investment in this fund, carefully review the investment objectives, risk factors, charges, and expenses of the Dunham Funds before investing. This and other essential information are in the Dunham Funds’ summary prospectus and/or prospectus, which may be obtained by contacting your financial advisor or calling toll-free (800) 442‐4358.

Sources: 22%2C%2029.32%20billion%20futures,contracts%20in%20the%20same%20period.

Disclosures: Investing in a mutual fund involves risks, including the possible loss of principal. Investors should consider the investment objectives, risk factors, charges, and expenses of the Dunham Funds carefully before investing. This and other important information is contained in the Fund’s summary prospectus and/or prospectus, which may be obtained by calling (800) 442-4358. Please read prospectus materials carefully before investing or sending money. Investing involves risk, including possible loss of principal.

The Sub-Adviser receives a fulcrum fee, which will vary based on the Sub-Adviser’s performance against the benchmark. The Sub-Adviser is rewarded when performance exceeds the benchmark and is penalized when performance is short of the benchmark. Some Sub-Advisers receive minimum compensation regardless of whether or not an established performance benchmark is met or exceeded. Sub-Advisers are subject to change.

No investment strategy or risk management technique can guarantee returns or eliminate risk in any market environment. Past results are not indicative of future performance and are no guarantee that losses will not occur in the future.  Future returns are not guaranteed and a loss of principal may occur. Diversification does not guarantee profit or ensure against loss.

The S&P 500, or the Standard & Poor’s 500, is a stock market index based on the market capitalizations of 500 large companies having common stock listed on the NYSE or NASDAQ. The S&P 500 Index components and their weightings are determined by S&P Dow Jones Indices. It differs from other U.S. stock market indices, such as the Dow Jones Industrial Average or the Nasdaq Composite index, because of its diverse constituency and weighting methodology. It is one of the most commonly followed equity indices, and many consider it one of the best representations of the U.S. stock market, and a bellwether for the U.S. economy.

Principal Investment Risks

Stock Market Risk Stock markets can be volatile. In other words, the prices of stocks can fall rapidly in response to developments affecting a specific company or industry. Or to changing economic, political, or market conditions. The Fund’s investments may decline in value if the stock markets perform poorly. There is also a risk that the Fund’s investments will underperform either the securities markets generally or segments of the securities markets.

Asset Allocation Risk In allocating the Fund’s assets, the Sub-Adviser may favor markets or asset classes that perform poorly relative to other markets and asset classes. The Sub-Adviser’s investment analysis, its selection of investments, and its assessment of the risk/return potential of asset classes and markets may not produce the intended results; and/or can lead to an investment focus that results in the Fund underperforming other funds with similar investment strategies; and/or underperforming the markets in which the Fund invests.

Tactical Asset Allocation Risk – Tactical asset allocation is an investment strategy that actively adjusts a portfolio’s asset allocation. The Fund’s tactical asset management discipline may not work as intended. The Fund may not achieve its objective and may not perform as well as other funds using other asset management styles, including those based on a fundamental analysis (a method of evaluating a security that entails attempting to measure its intrinsic value by examining related economic, financial and other factors) or strategic asset allocation (a strategy that involves periodically rebalancing the portfolio in order to maintain a long-term goal for asset allocation). The Sub-Adviser’s evaluations and assumptions in selecting investments may be incorrect in view of actual market conditions and may result in owning securities that underperform other securities.

Derivatives Risk Derivatives or other similar instruments (referred to collectively as “derivatives”), such as futures, forwards, options, swaps, structured securities, and other instruments, are financial contracts whose value depends on, or is derived from, the value of an underlying asset, reference rate or index. Derivatives may involve costs and risks different from, or possibly greater than, those associated with investing directly in securities and other traditional investments. Derivatives prices can be volatile, may correlate imperfectly with price of the applicable underlying asset, reference rate or index and may move in unexpected ways, especially in unusual market conditions, such as markets with high volatility or large market declines. Some derivatives are particularly sensitive to changes in interest rates. Further, losses could result if the counterparty to the transaction does not perform as promised. Derivatives that involve a small initial investment relative to the risk assumed may be “leveraged,” which can magnify or otherwise increase investment losses. In addition, the use of derivatives for non-hedging purposes (that is, to seek to increase total return) is considered a speculative practice and may present an even greater risk of loss than when used for hedging purposes. Derivatives are also subject to operational and legal risks.

A derivative's performance generally depends on the performance of its underlying asset, reference rate or index. If using derivative instruments is unsuccessful, performance may be worse than if no derivatives were used. When used for hedging purposes, there is a risk, especially under extreme market conditions, that a derivative may provide no such hedging benefit. Additionally, there is no guarantee that a liquid secondary market will exist for a derivative position or that a derivative position will be able to be terminated, particularly with respect to “over the counter” instruments (investments not traded on an exchange). If the Fund is unable to close out a position on an options or futures contract, for example, the Fund would remain subject to the risk of adverse price movements until the Fund is able to close out the position. Changes in the value of a derivative or other similar instrument may also create margin delivery or settlement payment obligations for the Fund. Furthermore, counterparties to over-the-counter derivative contracts present the same types of credit risk as issuers of fixed income securities, including bankruptcy or insolvency. Options and futures contracts are also subject to the creditworthiness of clearing organizations and exchanges; futures are subject to the credit risk of futures commission merchants. Derivatives can also be difficult to value, especially in declining markets.

Swap agreements may include equity, interest rate, index, total return, commodity, currency, and credit default swaps. Swap agreements typically are contracts with a brokerage firm or other institutional buyer in which the parties agree to exchange the returns (or differentials in rates of return) earned or realized on a particular set dollar or currency value of predetermined investments or instruments. Currently, some, but not all, swap transactions are subject to central clearing. Non-cleared swap agreements, including credit default swaps, involve greater risks than cleared swaps, including illiquidity risk and counterparty risk. Certain non-cleared swaps are subject to margin requirements that mandate the posting and collection of minimum margin amounts, which is intended to reduce some of the risks associated with these instruments. Eventually many swaps will be centrally cleared, and exchange traded. Although central clearing is expected to decrease counterparty risk because it interposes the central clearinghouse as the counterparty in bi-laterally negotiated contracts, central clearing will not make swap transactions risk-free.

Changes in regulation relating to a mutual fund’s use of derivatives and related instruments could potentially limit or impact the Fund’s ability to invest in derivatives, limit the Fund’s ability to employ certain strategies that use derivatives, and adversely affect the value or performance or derivatives and the Fund.

FLEX Options Risk. The Fund may experience substantial downside from specific FLEX Option positions, and certain FLEX Option positions may expire worthlessly. In addition, the FLEX Options are subject to the following risks:

Valuation Risk. The value of the FLEX Options will be affected by, among others, changes in the value of the Index, changes in interest rates, changes in the actual and implied volatility of the Index and the remaining time until the FLEX Options expire. The value of the FLEX Options does not increase or decrease at the same rate as the level of the Index (although they move in the same direction).

Liquidity Risk. If trading in FLEX Options is limited or absent, the value of the Fund’s FLEX Options may decrease. There is no guarantee that a liquid secondary trading market will exist for FLEX Options.

Counterparty Risk. Counterparty risk is the risk an issuer, guarantor, or counterparty of a security in the Fund is unable or unwilling to meet its obligation on the security. The Fund will utilize FLEX Options issued and guaranteed for settlement by the Options Clearing Corporation (the “OCC”). Although guaranteed settlement by the OCC, FLEX Options are still subject to counterparty risk with the OCC and may be less liquid than more traditional standardized exchange-traded options.

Correlation Risk. The FLEX Options held by the Fund will be exercisable at the strike price only on their expiration date. Prior to the expiration date, the value of the FLEX Options will be determined based upon market quotations or using other recognized pricing methods, consistent with the Fund’s valuation policy. Because a component of the FLEX Option’s value will be affected by, among other things, changes in the value of the Index, changes in interest rates, changes in the actual and implied volatility of the Index and the remaining time until the FLEX Options expire, the value of the Fund’s FLEX Options positions is not anticipated to increase or decrease at the same rate as the Index, and it is possible they may move in different directions, and as a result, the Fund’s NAV may not increase or decrease at the same rate as the Index. Similarly, the components of the option’s value are anticipated to impact the effect of the Buffer on the Fund’s NAV, which may not be in full effect prior to the end of the Outcome Period. The Fund’s strategy is designed to produce the Outcomes upon the expiration of the FLEX Options on the last business day of the Outcome Period, and it should not be expected that the Outcomes will be provided at any point other than the end of the Outcome Period.

Upside Participation Risk/Downside Loss Risk - There can be no guarantee the Fund will be successful in its strategy to provide shareholders with a total return that matches the increase of the underlying index over a given period. In the event an investor purchases shares of the Fund after securities transactions were entered into or does not stay invested in the Fund for the long term or a full-market cycle, the returns realized by the investor may not match those that the Fund seeks to achieve.

In addition, there can be no guarantee that the Fund will be successful in its strategy to provide protection against underlying index losses. The Fund’s strategy seeks to deliver returns that participate in the returns of the underlying index while limiting downside losses if shares are held over extended periods of time. The Fund does not provide principal protection or non-principal protection, and an investor may experience significant losses on its investment, including the loss of its entire investment.

Options Risk – The Fund may use options to enhance return and or mitigate risk. However, options can fall rapidly in response to developments in specific companies or industries and the Fund’s investments may be negatively impacted by unexpected market conditions.

Changing Fixed Income Market Conditions Risk – During periods of sustained rising rates, fixed income risks will be amplified. If the U.S. Federal Reserve’s Federal Open Market Committee (“FOMC”) raises the federal funds interest rate target, interest rates across the U.S. financial system may rise. However, the magnitude of rate changes across maturities and borrower sectors is uncertain.

Rising rates tend to decrease liquidity, increase trading costs, and increase volatility, all of which make portfolio management more difficult and costly to the Fund and its shareholders. Additionally, default risk increases when issuers borrow at higher rates. Prolonged declines in the Fund’s share price may lead to increased redemption requests by shareholders. To meet redemption requests, the Fund may have to sell securities in times of overall market turmoil, lower liquidity, and declining prices. Each of these changing market conditions’ risks may cause the Fund’s share price to fluctuate or decline more than other types of investments.

Interest Rate Risk Debt securities have varying levels of sensitivity to changes in interest rates. In general, the price of debt security may fall when interest rates rise. Securities with longer maturities may be more sensitive to interest rate changes. Certain corporate bonds and mortgage-backed securities may be significantly affected by changes in interest rates. Some mortgage-backed securities may have a structure that makes their reaction to interest rates and other factors difficult to predict, making their value highly volatile. Because zero coupon securities do not make interest payments, they are considered more volatile than bonds making periodic payments. When interest rates rise, zero coupon securities fall more sharply than interest paying bonds. However, zero coupon securities rise more rapidly in value when interest rates drop.

Leveraging Risk – The Fund’s use of leverage through futures options will magnify the Fund’s gains or losses. Futures require small cash investment to control substantial amounts of derivatives, which magnifies gains and losses to the Fund. Leveraging the Fund creates an opportunity for increased returns but simultaneously creates special risk considerations. For example, leveraging may exaggerate changes in the net asset value of the Fund’s shares and in the yield on the Fund’s portfolio.

Non-Diversification Risk A Fund that is a non-diversified investment company means that more of the Fund’s assets may be invested in the securities of a single issuer than a diversified investment company. This may make the value of the Fund’s shares more susceptible to certain risk than shares of a diversified investment company. As a non-diversified fund, the Fund has a greater potential to realize losses upon the occurrence of adverse events affecting a particular issuer.

Management Risk Each Fund is subject to management risk because it is an actively managed investment portfolio. The Sub-Adviser’s judgments about the attractiveness and potential appreciation of a security, whether selected under a “value,” “growth” or other investment style, may prove to be inaccurate and may not produce the desired results. The Adviser and Sub-Adviser will apply its investment techniques and risk analyses in making investment decisions for the Funds, but there is no guarantee that its decisions will produce the intended result. The successful use of hedging and risk management techniques may be adversely affected by imperfect correlation between movements in the price of the hedging vehicles and the securities being hedged.

Limited History of Operations Risk – The Fund is a new mutual fund and has a limited history of operations for investors to evaluate.

Portfolio Turnover Risk The frequency of a Fund’s transactions will vary from year to year. Increased portfolio turnover may result in higher brokerage commissions, dealer mark-ups and other transaction costs and may result in taxable capital gains. Higher costs associated with increased portfolio turnover may offset gains in a Fund’s performance.

U.S. Government Securities Risk – Obligations issued or guaranteed by the U.S. Government, its agencies, authorities, and instrumentalities and backed by the full faith and credit of the United States only guarantee principal and interest will be timely paid to holders of the securities. The entities do not guarantee that the value of fund shares will increase, and in fact, the market values of such obligations may fluctuate. In addition, not all U.S. Government securities are backed by the full faith and credit of the United States; some are the obligation solely of the entity through which they are issued. There is no guarantee that the U.S. Government would provide financial support to its agencies and instrumentalities if not required to do so by law.

Natural Disaster / Endemic Risk Natural or environmental disasters, such as earthquakes, fires, floods, hurricanes, tsunamis, and other severe weather-related phenomena; Widespread disease and illness, including pandemics and epidemics, have been and can be highly disruptive to economies and markets. They may adversely impact individual companies, sectors, industries, markets, currencies, interest and inflation rates, credit ratings, investor sentiment, and other factors affecting the value of the Fund’s investments. For example, the novel coronavirus (COVID -19), which was first detected in 2019, has resulted in, among other things, stressors to healthcare service infrastructure, country border closings, business and school closings, and disruptions to supply chains and customer activity. Natural disaster/epidemic risk could have a significant adverse impact on the Fund’s portfolio investments.

Securities Lending Risk – Portfolio securities may be loaned to brokers, dealers, and financial institutions to realize additional income. A risk of lending portfolio securities, as with other extensions of credit, is the possible loss of rights in the collateral should the borrower fail financially. The Fund might not be able to recover the securities or their value. In determining whether to lend securities, the Adviser, or its agent, will consider all relevant facts and circumstances, including the creditworthiness of the borrower.

Dunham & Associates Investment Counsel, Inc. serves as adviser (the Adviser) and distributor of the Dunham Funds, and as such, receives a separate fee.

Dunham & Associates Investment Counsel, Inc. is a Registered Adviser and Broker/Dealer. Member FINRA/SIPC.