The sub-adviser
(“Sub-Adviser”) defines small-capitalization companies as companies that are included in the Standard & Poor's SmallCap 600 (“S&P SmallCap 600”) Index or the Russell 2000
®
Index at the time of purchase, or if not included in either index, have market capitalizations that fall within the range of the market capitalizations of
companies included in the S&P SmallCap 600 Index or the Russell 2000
®
Index. The market capitalization range is reset monthly and will change with market conditions as the range of the companies in the S&P SmallCap 600
Index and Russell 2000
®
Index change. As of June 28, 2013, the smallest company in the S&P SmallCap 600 Index had a market capitalization of $94.6 million and the largest
company had a market capitalization of $5.3 billion. As of June 28, 2013, the smallest company in the Russell 2000
®
Index had a market capitalization of $30.4 million and the largest company had a market capitalization of $3.9 billion.
The Fund may invest in
derivative instruments including, but not limited to, put and call options. The Fund typically uses derivative instruments to seek to reduce exposure to other risks, such as currency risk, to substitute for taking a
position in the underlying asset, and/or to seek to enhance returns in the Fund. The Fund may also invest, to a limited extent, in foreign stocks.
The Fund may invest in other
investment companies, including exchange-traded funds, to the extent permitted under the Investment Company Act of 1940, as amended, and the rules, regulations, and exemptive orders thereunder (“1940
Act”).
In managing the Fund, the
Sub-Adviser invests in stocks that it believes have the potential for long-term growth, as well as those that appear to be trading below their perceived value. The Sub-Adviser uses internally developed quantitative
computer models to evaluate financial and fundamental characteristics (
e.g.
, changes in earnings, return on equity, and price to equity multiples) of over 2,000 companies. The Sub-Adviser analyzes these characteristics in an attempt to identify companies
whose perceived value is not reflected in the stock price; considers the potential of each company to create or take advantage of unique product opportunities, its potential to achieve long-term sustainable growth,
and the quality of its management.
The Sub-Adviser may sell
securities for a variety of reasons, such as to secure gains, limit losses, or redeploy assets into opportunities believed to be more promising, among others.
The Fund may lend portfolio
securities on a short-term or long-term basis, up to 33
1
∕
3
% of its total assets.
PRINCIPAL RISKS
You could lose money on an
investment in the Fund. Any of the following risks, among others, could affect Fund performance or cause the Fund to lose money or to underperform market averages of other funds.
Company
The price of a given company's stock could decline or underperform for many reasons including, among others, poor management, financial
problems, or business challenges. If a company declares bankruptcy or becomes insolvent, its stock could become worthless.
Currency
To the extent that the Fund invests directly in foreign (non-U.S.) currencies or in securities denominated in, or that trade in, foreign
(non-U.S.) currencies, it is subject to the risk that those foreign (non-U.S.) currencies will decline in value relative to the U.S. dollar or, in the case of hedging positions, that the U.S. dollar will decline in
value relative to the currency being hedged.
Derivative Instruments
Derivative instruments are subject to a number of risks, including the risk of changes in the market price of the underlying securities,
credit risk with respect to the counterparty, risk of loss due to changes in interest rates and liquidity risk. The use of certain derivatives may also have a leveraging effect which may increase the volatility of the
Fund and reduce its returns. Derivatives may not perform as expected, so the Fund may not realize the intended benefits. When used for hedging, the change in value of a derivative may not correlate as expected with
the currency, security or other risk being hedged. In addition, given their complexity, derivatives expose the Fund to the risk of improper valuation.
Foreign Investments
Investing in foreign (non-U.S.) securities may result in the Fund experiencing more rapid and extreme changes in value than a fund that
invests exclusively in securities of U.S. companies due to: smaller markets; differing reporting, accounting, and auditing standards; nationalization, expropriation, or confiscatory taxation; foreign currency
fluctuations, currency blockage, or replacement; potential for default on sovereign debt; or political changes or diplomatic developments. Markets and economies throughout the world are becoming increasingly
interconnected, and conditions or events in one market, country or region may adversely impact investments or issuers in another market, country or region.
Investment Model
The manager's proprietary model may not adequately allow for existing or unforeseen market factors or the interplay between such
factors.
Liquidity
If a security is illiquid, the Fund might be unable to sell the security at a time when the Fund's manager might wish to sell, and the
security could have the effect of decreasing the overall level of the Fund's liquidity. Further, the lack of an established secondary market may make it more difficult to value illiquid securities, which could vary
from the amount the Fund could realize upon disposition. The Fund may make investments that become less liquid in response to market developments or adverse investor perception. The Fund could lose money if it cannot
sell a security at the time and price that would be most beneficial to the Fund.
Market
Stock prices may be volatile and are affected by the real or perceived impacts of such factors as economic conditions and political
events. Stock markets tend to be cyclical, with