the near future, and in derivatives and other
instruments that have economic characteristics similar to such securities.
The Fund can invest in issuers in all capitalization ranges. Currently, the Fund’s stock
investments are focused on large-cap issuers, but that emphasis can change over time. While the Fund mainly invests in common stocks of U.S. companies, it may also invest in other securities, including foreign securities, convertible securities,
preferred stocks, and derivatives.
In selecting investments for the
Fund, the Fund uses a “bottom up” approach that focuses on the fundamental prospects of individual companies and issuers. The Fund mainly seeks companies that are believed to possess durable advantages relative to
competitors within its industry, as well as whose managers generally prioritize dividend growth relative to other uses of corporate cash flow.
Principal Risks of Investing in the Fund
As with any mutual fund investment, loss of money is a risk of investing. An investment in the Fund is not a deposit in a bank and is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other governmental agency. The risks associated with an investment in the Fund can increase during times of significant market volatility. The
principal risks of investing in the Fund are:
Market Risk. The market values of the Fund’s investments, and therefore the value of the Fund’s shares, will go up and
down, sometimes rapidly or unpredictably. Market risk may affect a single issuer, industry or section of
the economy, or it may affect the market as a whole. The value of the Fund’s investments may go up or down due to general market conditions that are not specifically related to the particular issuer, such as real or perceived adverse economic
conditions, changes in the general outlook for revenues or corporate earnings, changes in interest or currency rates, regional or global instability, natural or environmental disasters, widespread disease or other public health
issues, war, military conflict, acts of terrorism, economic crisis or adverse investor sentiment generally. During a general downturn in the financial markets, multiple asset classes may decline in value. When markets perform well,
there can be no assurance that specific investments held by the Fund will rise in value.
Investing in Stocks
Risk. The value of the Fund’s portfolio may be affected by changes in the stock markets. Stock markets may experience significant short-term volatility and may fall or
rise sharply at times. Adverse events in any part of the equity or fixed-income markets may have unexpected
negative effects on other market segments. Different stock markets may behave differently from each other and U.S. stock markets may move in the opposite direction from one or more foreign stock markets.
The prices of individual stocks generally do not all move in the same direction at
the same time. However, individual stock prices tend to go up and down more dramatically than those of certain other types of investments, such as bonds. A variety of factors can negatively affect the price of a particular company’s stock.
These factors may include, but are not limited to: poor earnings reports, a loss of customers, litigation against the company, general unfavorable performance of the company’s sector or industry, or changes in government regulations
affecting the company or its industry. To the extent that securities of a particular type are emphasized (for
example foreign stocks, stocks of small- or mid-cap companies, growth or value stocks, or stocks of
companies in a particular industry), fund share values may fluctuate more in response to events affecting the market for those types of securities.
Sector Focus Risk. The Fund may from time to
time have a significant amount of its assets invested in one market sector or group of related industries.
In this event, the Fund’s performance will depend to a greater extent on the overall condition of the sector or group of industries and there is increased risk that the Fund will lose significant value if conditions adversely affect that sector or group of
industries.
Dividend Risk. As a group, securities that pay high dividends may fall out of favor with investors and underperform companies that do
not pay high dividends. Also, changes in the dividend policies of such companies
and the capital resources available for such
companies’ dividend payments may affect the Fund. There is the possibility that dividend-paying companies could reduce or eliminate the payment of dividends in the future or an anticipated acceleration of dividends may not
occur. Depending on market conditions, dividend paying stocks that meet the Fund’s investment criteria
may not be widely available for purchase by the Fund, which may increase the volatility of the Fund’s
returns and limit its ability to produce current income while remaining fully diversified. High-dividend stocks may not experience high earnings growth or capital appreciation. The Fund’s performance during a broad market advance
could suffer because dividend paying stocks may not experience the same capital appreciation as
non-dividend paying stocks.
Small- and Mid-Capitalization Companies
Risk. Investing in
securities of small- and mid-capitalization companies involves greater risk than customarily is associated
with investing in larger, more established companies. Stocks of small- and mid-capitalization companies tend to be more vulnerable to changing market conditions, may have little or no operating history or track record of success, and
may have more limited product lines and markets, less experienced management and fewer financial resources
than larger companies. These companies’ securities may be more volatile and less liquid than those of more established companies. They may be more sensitive to changes in a company’s earnings expectations and may experience more abrupt and
erratic price movements. Smaller companies’ securities often trade in lower volumes and in many
instances, are traded over-the-counter or on a regional securities exchange, where the frequency and volume
of trading is substantially less than is typical for securities of larger companies traded on national securities exchanges. Therefore, the securities of smaller companies may be subject to wider price fluctuations and it might be
harder for the Fund to dispose of its holdings at an acceptable price when it wants to sell them. Since small- and mid-cap companies typically reinvest a high proportion of their earnings in their business, they may not pay
dividends for some time, particularly if they are newer companies. It may take a substantial period of time to realize a gain on an investment in a small- or mid-cap company, if any gain is realized at all.
Foreign Securities Risk. The Fund's foreign investments may be adversely affected by political and social instability, changes in economic or taxation policies, difficulty in
enforcing obligations, decreased liquidity or increased volatility. Foreign investments also involve the risk of the possible seizure, nationalization or expropriation of the issuer or foreign deposits (in which the Fund could lose its entire
investments in a certain market) and the possible adoption of foreign governmental restrictions such as exchange controls. Foreign companies generally may be subject to less stringent regulations than U.S. companies, including
financial reporting requirements and auditing and accounting controls, and may therefore be more
susceptible to fraud or corruption. There may be less public information available about foreign companies
than U.S. companies, making it difficult to evaluate those foreign companies. Unless the Fund has hedged its
foreign currency exposure, foreign securities risk also involves the risk of negative foreign currency rate
fluctuations, which may cause the value of securities denominated in such foreign currency (or other instruments through which the Fund has exposure to foreign currencies) to decline in value. Currency exchange rates may fluctuate
significantly over short periods of time. Currency hedging strategies, if used, are not always
successful.
Convertible Securities
Risk. The market values of convertible securities are affected by market interest rates, the risk of actual issuer default on interest or principal payments
and the value of the underlying common stock into which the convertible security may be converted.
Additionally, a convertible security is subject to the same types of market and issuer risks that apply to
the underlying common stock. In addition, certain convertible securities are subject to involuntary conversions and may undergo principal write-downs upon the occurrence of certain triggering events, and, as a result, are subject to an
increased risk of loss. Convertible