warrants, options,
rights, convertible securities, sponsored and unsponsored depositary receipts
and shares, trust certificates, participatory notes, limited partnership
interests, shares of other investment companies (including exchange-traded funds
(ETFs)), real estate investment trusts (REITs), and equity participations.
Equity participations are loans that give the lender a portion of equity
ownership in a property, in addition to principal and interest payments. A
convertible security is a bond, debenture, note, preferred stock, or other
security that may be converted into or exchanged for a prescribed amount of
common stock of the same or a different issuer within a particular period of
time at a specified price or formula.
The fund defines non-U.S. companies
as companies: (i) that are organized under the laws of a foreign country; (ii)
whose principal trading market is in a foreign country; or (iii) that have a
majority of their assets, or that derive a majority of their revenue or profits,
from businesses, investments, or sales outside of the United States. The fund’s
non-U.S. investments, which may be denominated in U.S. or foreign currencies,
primarily focus on developed markets, but may include emerging- and
frontier-market investments.
The fund defines
large and mid-capitalization as those companies with a market capitalization
over $250 million.
The fund generally
invests in the equity securities of issuers the manager believes are
undervalued. The manager applies a bottom-up stock selection process using a
combination of fundamental and quantitative analysis of issuer-specific factors
such as price-to-book value, price-to-sales and earnings ratios, dividend
yields, strength of management, and cash flow.
The fund may invest
in derivatives. Derivatives may be used to reduce risk, obtain efficient market
exposure, and/or enhance investment returns, and may include put and call
options, futures, forward contracts, and swaps. The fund may invest up to 15% of
its net assets in illiquid securities and may participate as a purchaser in
Initial Public Offerings (IPOs). The fund may also seek to increase its income
by lending portfolio securities.
Due to the nature of
certain of the fund’s investments, the fund may, under certain circumstances,
effect a portion or all of creations and redemptions for cash, rather than
in-kind securities.
The fund is non-diversified, which
means that it may invest in a smaller number of issuers than a diversified fund
and may invest more of its assets in the securities of a single
issuer.
Principal
risks
An investment in the
fund is not a bank deposit and is not insured or guaranteed by the Federal
Deposit Insurance Corporation or any other government
agency.
Many factors affect performance, and fund shares will fluctuate in price,
meaning you could lose money. The fund’s
investment strategy may not produce the intended results.
The fund’s main risks
are listed below in alphabetical order, not in order of importance. Before
investing, be sure to read the additional descriptions of these risks beginning
on page 7 of the prospectus.
Active
trading market risk.
Active trading
markets for fund shares may not be developed or maintained by market makers or
authorized participants. Market makers are not obligated to make a market in the
fund’s shares or to submit purchase or redemption orders for creation
units.
Authorized
participant concentration risk.
To the extent that
authorized participants are unable or otherwise unavailable to proceed with
creation and/or redemption orders and no other authorized participant is able to
create or redeem in their place, shares may trade at a discount to net asset
value (NAV) and may face delisting.
Cash
transactions risk.
Under certain
circumstances, the fund intends to effect some or all of its creation and
redemption transactions using cash, rather than in-kind securities. As a result,
an investment in the fund may be less tax-efficient than an investment in an ETF
that effects all of its creation and redemption transactions in-kind. In order
to obtain the cash needed to distribute redemption proceeds, the fund may be
required to sell portfolio securities which may cause the fund to recognize
capital gains or losses and incur higher brokerage costs. To the extent that the
maximum additional charge for creation or redemption transactions is
insufficient to cover these costs and expenses, the fund’s NAV could be
negatively impacted.
Convertible
securities risk.
Convertible
securities are subject to certain risks of both equity and debt securities. The
market values of convertible securities tend to fall as interest rates rise and
rise as interest rates fall. As the market price of underlying common stock
declines below the conversion price, the market value of the convertible
security tends to be increasingly influenced by its
yield.
Credit and
counterparty risk.
The counterparty to an
over-the-counter derivatives contract or a borrower of fund securities may not
make timely payments or otherwise honor its
obligations.
Economic
and market events risk.
Events in the U.S.
and global financial markets, including actions taken by the U.S. Federal
Reserve or foreign central banks to stimulate or stabilize economic growth, may
at times result in unusually high market volatility, which could negatively
impact performance. Reduced liquidity in credit and fixed-income markets could
adversely affect issuers worldwide. Banks and financial services companies could
suffer losses if interest rates rise or economic conditions
deteriorate.
Emerging-market
risk.
The risks of investing in foreign
securities are magnified in emerging markets. Emerging-market countries may
experience higher inflation, interest rates, and unemployment and greater
social, economic, and political uncertainties than more developed
countries.