EQUITY FUNDS invest primarily in common stocks. Depending on their investment philosophies, equity funds can invest primarily in small-, mid- or large-cap companies, either domestic or international. And any equity fund can also be managed using specific "growth," "value" or "blend" investment styles. Index funds try to match the performance of a specific index, generally by attempting to own the same stocks as the index.

Small-Cap Equity Funds: Small-cap equity funds generally invest in the stocks of smaller companies with a market cap less than $3.9 billion at the time of investment.¹ They offer more growth potential than larger companies. In addition, sometimes their small size can help them capitalize on certain business opportunities quicker than larger companies. However, small companies do involve greater risk than larger, more established companies.

Mid-Cap Equity Funds: Like the name implies, mid-cap equity funds generally invest in the stocks of companies that are neither small nor large with a market cap between $3.9 billion and $16.3 billion at the time of investment,¹ which may offer you an appealing risk/reward option. Mid-size companies do involve greater risk than larger, more established companies.

Large-Cap Equity Funds: Large-cap equity funds typically invest in stocks of some of the largest, best-known, most established companies on the market with a market cap of more than $16.3 billion at the time of investment.¹ "Blue-chip" companies are generally large-cap companies.

International Equity Funds: International equity funds usually invest in stocks of companies located in foreign (non-U.S.) markets. Some funds may concentrate in specific regions or countries, while others may focus on developed or emerging markets. Keep in mind that investing internationally involves special risks, which are usually greater with emerging market countries than with more economically and politically established foreign countries.

Growth-Style Equity Funds: Growth equity funds invest in stocks of companies with strong prospects for future earnings growth. These are generally companies that have demonstrated sustained patterns of profitability and have strong finances. Given their earnings potential, growth stocks tend to be relatively more expensive. Growth stocks are often issued by companies in new or expanding industries and with global presences.

Value-Style Equity Funds: Value equity funds search for bargain stocks that are considered undervalued. These are often stocks of companies that are temporarily out of favor on Wall Street because of short-term developments, such as an earnings disappointment or a competitive threat. Value fund managers look for signs that management is addressing these short-term problems, and that a company's fully perceived value may eventually be realized.

Blend Equity Funds: A blend equity fund invests in both growth stocks and value stocks and/or stocks that exhibit both characteristics, depending on market conditions and current management approach. This provides a potentially greater range of investment choices for the fund manager.

Index Equity Funds: Index equity funds seek to match the returns of a specific market index, such as the S&P 500.² By investing in all of the stocks in an index or a representative sampling of those stocks, index fund managers hope to pursue the stock market's long-term growth potential. This management style is known as "passive investing" because the managers do not "actively" trade stocks based on their own research. They make changes in the fund's holdings only when the stocks in the index change. Index funds often have lower operating expenses than actively managed funds.

Equity funds are subject generally to market, market sector, market liquidity, issuer and investment style risks, among other factors, to varying degrees, all of which are more fully described in the fund's prospectus.

Investing internationally involves special risks, including changes in currency exchange rates, political, economic and social instability, a lack of comprehensive company information, differing auditing and legal standards and less market liquidity.

1. Source: Lipper as of February 2007.

2. The S&P 500 Composite Stock Index is a widely accepted, unmanaged index of U.S. stock market performance. Investors cannot invest directly in any index.

Investors should consider the investment objectives, risks, charges, and expenses of a fund carefully before investing. Download a prospectus that contains this and other information about a fund, and read it carefully before investing.

Click here to read our Online Privacy Policy and Terms of Use.
© MBSC Securities Corporation, Distributor