risks, credit risk,
interest rate risk, extension risk, prepayment risk and liquidity risk.
Market Risk—market prices of investments held by the Fund may fall rapidly or unpredictably due to a variety
of factors, including economic, political, or market conditions, or other factors including
terrorism, war, natural disasters and the spread of infectious illness or other public health issues, including epidemics or pandemics such as the COVID-19 outbreak, or in response to events that affect particular
industries or companies.
Interest Rate Risk—fixed coupon payments (cash flows) of bonds and debt securities may become less competitive with the market in periods of rising interest
rates and cause bond prices to decline. During periods of increasing interest rates, the Fund
may experience high levels of volatility and shareholder redemptions, and may have to sell
securities at times when it would otherwise not do so, and at unfavorable prices, which could
reduce the returns of the Fund.
Credit and Counterparty Risk—the issuer of bonds or other debt securities or a counterparty to a derivatives contract may be unable or unwilling, or may be
perceived as unable or unwilling, to make timely interest, principal or settlement payments or otherwise honor its obligations.
Emerging Markets Risk—investments in emerging markets are subject to the general risks of foreign investments, as well as additional risks which can result in
greater price volatility. Such additional risks include the risk that markets in emerging market countries are typically less developed and less liquid than markets in developed countries and such
markets are subjected to increased economic, political, or regulatory uncertainties.
Asset-Backed and Mortgage-Backed Securities Risk—investments in asset-backed and mortgage-backed securities involve risk of severe credit
downgrades, loss due to prepayments that occur earlier or later than expected, illiquidity
and default.
Call Risk— call risk is the possibility that an issuer may redeem a fixed income security before maturity (a call). The increased likelihood of a call may reduce
the security’s price and may result in the Fund reinvesting at lower interest rates in
securities with greater credit risk.
Changing Distribution Level Risk—the Fund will normally receive income which may include interest, dividends and/or capital gains, depending upon its
investments. The distribution amount paid by the Fund will vary and generally depends on the
amount of income the Fund earns (less expenses) on its portfolio holdings, and capital
gains or losses it recognizes. A decline in the Fund’s income or net capital gains arising from its investments may reduce its distribution level.
Currency Risk—fluctuations in exchange rates may affect the total loss or gain on a non-U.S. dollar investment when converted back to U.S. dollars and exposure to
non-U.S. currencies may subject the Fund to the risk that those currencies will decline in
value relative to the U.S. dollar.
Derivatives
Risk—the use of derivatives involves costs, the risk that the value of derivatives
may not correlate perfectly with their underlying assets, rates or indices, liquidity risk, and the risk of mispricing or improper valuation. The use of derivatives may not succeed for various reasons,
and the complexity and rapidly changing structure of derivatives markets may increase the
possibility of market losses.
ESG Investing Risk—the Subadviser incorporates ESG criteria into its investment process, which may result in the
selection or exclusion of securities of certain issuers for reasons other than financial
performance, and carries the risk that the Fund’s investment returns may underperform funds that do not utilize an ESG investment strategy. The application of this strategy may affect the Fund’s investment
exposure to certain companies, sectors, regions, countries or types of investments, which could negatively impact the Fund’s performance depending on whether such investments are in or out of
favor. Applying ESG criteria to investment decisions is qualitative and subjective by nature, and there is no guarantee that the criteria utilized by the Subadviser or any judgment exercised by the
Subadviser will reflect the beliefs or values of any particular investor. ESG standards differ by region and industry, and a company’s ESG practices or the Subadviser’s assessment of a
company’s ESG practices may change over time.
Extension
Risk—during periods of rising interest rates, a debtor may pay back a bond or other
fixed income security slower than expected or required, and the value of such security may
fall.
Foreign Investment Risk—investments in foreign issuers involve additional risks (such as risks arising from less frequent trading, changes in political or
social conditions, and less publicly available information about non-U.S. issuers) that differ from those associated with investments in U.S. issuers and may result in greater price
volatility.
Hedging Risk—there is no guarantee that hedging strategies will be successful. For example, changes in the
value of a hedging transaction may not completely offset changes in the value of the assets
and liabilities being hedged. Hedging transactions involve costs and may result in losses.
High Yield
Risk—below investment grade debt securities and unrated securities of similar credit
quality (commonly known as “junk bonds” or “high yield securities”) may be subject to greater levels of interest rate, credit, liquidity, and market risk than higher-rated securities. These
securities are considered predominately speculative with respect to the issuer’s continuing ability to make principal and interest payments.
Inflation/Deflation Risk—inflation risk is the risk that the value of assets or income from investments will be worth less
in the future. Deflation risk is the risk that the prices throughout the economy decline
over time—the opposite of inflation. Deflation may have an adverse effect on the creditworthiness of issuers and may make issuer default more likely, which may result in a decline in the value of the
Fund’s portfolio.