Under normal conditions, the fund invests at least 80% of its net assets (including any borrowings for investment purposes) in bonds. For purposes of determining whether the fund invests at least 80% of its net asset in bonds, the fund includes derivative instruments that are linked to, or provide investment exposure to bonds. The fund invests in a diversified portfolio of shorter-term investment-grade corporate and government securities, including mortgage- and asset-backed securities, municipal securities, money market securities and bank obligations, and

securities of foreign issuers. All of the securities purchased by the fund will be rated investment grade (i.e., rated in one of the four highest credit rating categories) at the time of purchase by at least one of the credit rating agencies or, if unrated, deemed by the adviser to be investment-grade quality. The fund will not be required to sell a holding if it is later downgraded to a below investment-grade rating. While the fund may purchase an individual security with an effective maturity of up to five years, under normal conditions the fund’s dollar-weighted average effective maturity will be 1.5 years or less.

The fund may use a variety of derivatives, such as futures, forwards, and swaps for a number of purposes, such as exposure or hedging. Specifically, the fund uses interest rate futures, credit default swaps, credit default swaptions, and forward currency exchange contracts. Interest rate futures are used to manage the fund’s cash flow, exposure to changes in interest rates or to adjust portfolio duration. Credit default swaps and credit default swaptions are typically used in an effort to protect the value of certain portfolio holdings or to manage the fund’s overall exposure to changes in credit quality. Forward currency exchange contracts are typically used to protect the fund’s non-U.S. dollar-denominated securities from adverse currency movements.

Investment decisions generally reflect the portfolio manager’s outlook for interest rates and the economy, as well as the prices, yields, and credit quality of various securities in which the fund may invest. For example, if interest rates are expected to fall, the fund may purchase securities with longer maturities (to the extent consistent with the fund’s investment program) in an attempt to seek higher yields and/or capital appreciation. Conversely, if interest rates are expected to rise, the fund may seek securities with shorter maturities.