sector
or of the equity market as a whole could go down. In addition, different parts of a market can react differently to adverse issuer, market, regulatory, political and economic developments.
Small- and Medium-Size Company Risk.
The Fund invests in stocks of small-size (“small-cap”) companies. In addition, each of the subadvisers that invests in stocks may from time to time invest in stocks of medium-size (“mid-cap”)
companies. Mid-cap companies are similar to those found in the Russell MidCap Index, a market capitalization weighted index of common stocks designed to track the performance of mid-cap companies. Small- and mid-cap companies usually offer a smaller
range of products and services than larger companies. They may also have limited financial resources and may lack management depth. As a result, the prices of stocks issued by small- and mid-cap companies tend to fluctuate more than the stocks of
larger, more established companies.
Style Risk.
Since some of the Fund segments focus on either a growth or value style, there is the risk that a particular style may be out of favor for a period of time.
Political Developments.
Political developments may adversely affect the value of the Fund’s foreign securities.
Foreign Market Risk.
Investing
in foreign securities involves more risk than investing in securities of U.S. issuers. Foreign markets—especially emerging markets—tend to be more volatile than U.S. markets and are generally not subject to regulatory requirements
comparable to those in the U.S.
Currency Risk.
Changes in currency exchange rates may affect the value of foreign securities held by the Fund and the amount of income available for distribution. If a foreign currency grows weaker relative to the U.S. dollar, the
value of securities denominated in that foreign currency generally decreases in terms of U.S. dollars. If the Fund does not correctly anticipate changes in exchange rates, certain hedging activities may also cause the Fund to lose money and reduce
the amount of income available for distribution.
Derivatives Risk.
The Fund may
use derivatives including swaps, options and futures as a principal investment strategy to improve its returns or to protect its assets. When used for hedging purposes, derivatives may not fully offset or match the Fund’s underlying positions
and this could result in losses to the Fund that would not otherwise have occurred.
Leverage Risk.
The Fund may
borrow from banks or through reverse repurchase agreements and dollar rolls to take advantage of investment opportunities. This is known as using “leverage.” If the Fund borrows money to purchase securities and those securities decline
in value, then the value of the Fund’s shares will decline faster than if the Fund were not leveraged.
Management Risk.
Actively
managed mutual funds are subject to management risk. The subadvisers will apply investment techniques and risk analyses in making investment decisions for the Fund, but there can be no guarantee that these techniques will produce the desired
results. Additionally, the securities selected by the subadvisers may underperform the markets in general, the Fund’s benchmark and other mutual funds with similar investment objectives.
Liquidity Risk.
The Fund may
invest to a greater degree in securities that trade in lower volumes and may make investments that may be less liquid than other investments. Also, the Fund may make investments that may become less liquid in response to market developments or
adverse investor perceptions. When there is no willing buyer and investments cannot be readily sold at the desired time or price, the Fund may have to accept a lower price or may not be able to sell the security at all. An inability to sell a
portfolio position can adversely affect the Fund’s value or prevent the Fund from being able to take advantage of other investment opportunities.
Interest Rate Risk.
Debt
obligations with longer maturities typically offer higher yields, but are subject to greater price shifts as a result of interest rate changes than debt obligations with shorter maturities. The prices of debt obligations generally move in the
opposite direction to that of market interest rates.
Market Risk
for Debt
Obligations.
Debt obligations are subject to market risk, which is the possibility that the market value of an investment may move up or down and that its movement may occur quickly or unpredictably. Market risk may
affect an industry, a sector or the entire market.
Credit Risk.
The debt
obligations in which the Fund invests are generally subject to the risk that the issuer may be unable to make principal and interest payments when they are due. The Fund may invest in below-investment-grade securities—
also known as “junk bonds”—which have a higher risk of
default and tend to be less liquid than higher-rated securities. The Fund may also invest in debt obligations of foreign issuers. Investing in foreign securities presents additional risks.
Prepayment Risk.
The Fund may
invest in mortgage-related securities and asset-backed securities, which are subject to prepayment risk. If these securities are prepaid, the Fund may have to replace them with lower-yielding securities. Stripped mortgage-backed securities are
generally more sensitive to changes in prepayment and interest rates than other mortgage-related securities.
Portfolio Turnover Risk.
The
length of time the Fund has held a particular security is not generally a consideration in investment decisions. Under certain market conditions, the Fund’s turnover rate may be higher than that of other mutual funds. Portfolio turnover
generally involves some expense to the Fund, including brokerage commissions or dealer mark-ups and other transaction costs on the sale of securities and reinvestment in other securities. These transactions may result in realization of taxable
capital gains. The trading costs and tax effects associated with portfolio turnover may adversely affect the Fund’s investment performance.