various agencies of
the U.S. Government, or by various instrumentalities which have been established
or sponsored by the U.S. Government. U.S. Treasury securities are backed by the
“full faith and credit” of the United States. Securities issued or guaranteed by
federal agencies and U.S. Government-sponsored instrumentalities may or may not
be backed by the full faith and credit of the United States. In the case of
those U.S. Government securities not backed by the full faith and credit of the
United States, the investor must look principally to the agency or
instrumentality issuing or guaranteeing the security for ultimate repayment, and
may not be able to assert a claim against the United States itself in the event
that the agency or instrumentality does not meet its commitment. The U.S.
Government, its agencies and instrumentalities do not guarantee the market value
of their securities, and consequently, the value of such securities may
fluctuate.
Mortgage-Backed
and Asset-Backed Securities Risk. The Fund may
invest in mortgage- and asset-backed securities, which are subject to call
(prepayment) risk, reinvestment risk and extension risk. In addition, these
securities are susceptible to an unexpectedly high rate of defaults on the
mortgages held by a mortgage pool, which may adversely affect their value. The
risk of such defaults depends on the quality of the mortgages underlying such
security, the credit quality of its issuer or guarantor, and the nature and
structure of its credit support. For example, the risk of default generally is
higher in the case of mortgage pools that include subprime mortgages, which are
loans made to borrowers with weakened credit histories or with lower capacity to
make timely mortgage payments.
Agency
Debt Risk. The Fund invests
in debt issued by government agencies, including the Federal National Mortgage
Association (“Fannie Mae”) and the Federal Home Loan Mortgage Corporation
(“Freddie Mac”). Instruments issued by government agencies generally are backed
only by the general creditworthiness and reputation of the government agency
issuing the instrument and are not backed by the full faith and credit of the
U.S. government. As a result, there is uncertainty as to the current status of
many obligations of Fannie Mae, Freddie Mac and other agencies that are placed
under conservatorship of the federal government.
Collateralized
Loan Obligations Risk. In addition to the
normal interest rate, default and other risks of fixed income securities, CLOs
carry additional risks, including the possibility that distributions from
collateral securities will not be adequate to make interest or other payments,
the quality of the collateral may decline in value or default, CLOs may be
subordinate to other classes, values may be volatile, and disputes with the
issuer may produce unexpected investment results.
Emerging
Markets Investment Risk. Investments in the
securities of issuers in emerging market countries involve risks often not
associated with investments in the securities of issuers in developed countries.
Securities in emerging markets may be subject to greater price fluctuations than
securities in more developed markets. Companies in emerging market countries
generally may be subject to less stringent regulatory, disclosure, financial
reporting, accounting, auditing and recordkeeping standards than companies in
more developed countries. In addition, information about such companies may be
less available and reliable. Emerging markets usually are subject to greater
market volatility, political, social and economic instability, uncertainty
regarding the existence of trading markets and more governmental limitations on
foreign investment than are more developed markets. Securities law in many
emerging market countries is relatively new and unsettled. Therefore, laws
regarding foreign investment in emerging market securities, securities
regulation, title to securities, and shareholder rights may change quickly and
unpredictably, and the ability to bring and enforce actions, or to obtain
information needed to pursue or enforce such actions, may be limited. In
addition, the enforcement of systems of taxation at federal, regional and local
levels in emerging market countries may be inconsistent and subject to sudden
change. Investments in emerging market securities may be subject to additional
transaction costs, delays in settlement procedures, unexpected market closures,
and lack of timely information. In addition, lack of relevant data and reliable
public information,