Voya Balanced Income Portfolio - Class I

As of May 1, 2019, the VY Franklin Income Portfolio was renamed to the Voya Balanced Income Portfolio. Voya Investment Management Co. LLC will serve as the sole sub‐adviser to the Portfolio. As a result, the Portfolio's investment strategies, benchmark, portfolio managers and fees have changed.

Class ADV: IIFAX
Class I: IIFIX
Class S: IIFSX
Class S2: IIFTX
For more information call 1 (800) 334-3444
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Voya Balanced Income Portfolio

Multi-asset portfolio seeking to maximize income with lower volatility relative to the overall market

Daily Prices

as of December 12, 2019

Net Asset Value (NAV)$11.10
% Change+0.18
$ Change+0.02
YTD Return17.78%

Product Facts

Ticker SymbolIIFIX
CUSIP92914E606
Inception DateApril 28, 2006
Dividends Paid

About this Product

  • Actively managed strategy investing in approximately 60% of its assets in Fixed Income and 40% in Equities
  • Fixed Income uses a multi-sector strategy that seeks attractive returns by investing in the broad global fixed income universe
  • Equity strategy designed to deliver excess returns and high-dividend income at lower levels of volatility relative to the overall market

Investment Objective

The Portfolio seeks to maximize income while maintaining prospects for capital appreciation.

My Representatives

Broker/Dealer Services

1-800-334-3444

Contact Us

Performance

Average Annual Total Returns %

As of November 30, 2019

As of September 30, 2019

Most Recent Month EndMost Recent Quarter EndMost Recent Month EndMost Recent Quarter End
Most Recent Month EndYTD1 YR3 YR5 YR10 YRExpense Ratios
GrossNet
Net Asset Value+17.25+11.41+8.36+5.68+8.230.61%0.60%
With Sales Charge+17.25+11.41+8.36+5.68+8.23
Net Asset Value+15.97+7.76+8.16+5.45+8.370.61%0.60%
With Sales Charge+15.97+7.76+8.16+5.45+8.37
60% Bloomberg Barclays US Aggregate Bond Index/ 30% Russell 1000 Index/ 10% MSCI EAFE Index+15.40+12.96+7.94+5.68+6.91
S&P 500 Index+27.63+16.11+14.88+10.98+13.44
60% Bloomberg Barclays US Aggregate Bond Index/ 30% Russell 1000 Index/ 10% MSCI EAFE Index+12.69+7.58+6.49+5.71+6.89
S&P 500 Index+20.55+4.25+13.39+10.84+13.24

Inception Date - Class I:April 28, 2006

Current Maximum Sales Charge: 0.00%

The performance quoted represents past performance and does not guarantee future results. Current performance may be lower or higher than the performance information shown. The investment return and principal value of an investment in the Portfolio will fluctuate, so that your shares, when redeemed, may be worth more or less than their original cost. See above "Average Annual Total Returns %" for performance information current to the most recent month-end.

Returns Based Statistics

As of November 30, 2019

3 Year5 Year10 Year
Standard Deviation
Standard Deviation:

A measure of the degree to which an individual probability value varies from the distribution mean. The higher the number, the greater the risk.

6.617.658.05
Beta
Beta:

The sensitivity of a portfolio's returns to changes in the return of the market as measured by the index or benchmark that represents the market. A portfolio with a beta of 1.0 behaves exactly like the index. A beta less than 1.0 suggests lower risk than the index, while a beta greater than 1.0 indicates a risk level higher than the index.

1.241.411.43
R2
R2:

The proportion of the variation in a portfolio's returns that can be explained by the variability of the returns of an index. High R-squared (close to 1.0) is usually consistent with broad diversification.

76.1777.4580.65
Alpha
Alpha:

A measure of risk-adjusted performance; alpha reflects the difference between a portfolio's actual return and the return that could be expected give its risk as measured by beta.

-0.96-1.73-1.26
Sharpe Ratio
Sharpe Ratio:

A risk-adjusted measure calculated using standard deviation and excess return to determine reward per unit of risk. The higher the Sharpe ratio, the better the portfolio's historical risk-adjusted performance.

1.010.630.96
Information Ratio
Information Ratio:

The ratio of portfolio returns in excess of a market index to the variability of those excess returns; in effect, information ratio describes the value added by active management in relation to the risk taken to achieve those returns.

0.120.000.32

Calendar Year Returns %

Past performance is no guarantee of future results. Returns are shown in %. These figures are for the year ended December 31 of each year. They do not reflect sales charges and would be lower if they did. The bar chart above shows the Fund's annual returns and long-term performance, and illustrates the variability of the Fund’s returns.

Growth of a $10,000 Investment

For the period 12/31/2009 through 11/30/2019

Ending Value: $22,051.00

The performance quoted in the "Growth of a $10,000 Investment" chart represents past performance. Performance shown is without sales charges; had sales charges been deducted, performance would have been less. Ending value includes reinvestment of distributions.

Portfolio

Portfolio Statistics

As of November 30, 2019

Net Assets millions
Net Assets:

The per-share dollar amount of the fund, calculated by dividing the total value of all the securities in its portfolio, less any liabilities, by the number of fund shares outstanding.

$387.2
Number of Holdings
Number of Holdings:

Number of Holdings in the investment.

766
Duration years4.17
Weighted Average Life years
Weighted Average Life:

The length of time until the average security in a fund will mature or be redeemed by its issuer. It indicates a fund's sensitivity to interest rate changes: longer average weighted maturity implies greater volatility in response to interest rate changes.

4.77
Total

Top Holdings

% of Total Investments as of November 30, 2019

Voya Floating Rate Fund - Class P8.43
United States Treasury Inflation Indexed Bonds 0.25 07/20291.85
Microsoft Corp.1.49
United States Treasury Note/Bond 1.625 10/20261.29
UMBS TBA 3.5 12/20491.17
Ginnie Mae TBA 3 12/20491.09
United States Treasury Note/Bond 2.25 08/20490.85
United States Treasury Note/Bond 1.5 11/20210.80
Citigroup Commercial Mortgage Trust 2013-GC15 D 5.3882 09/20460.64
JPMorgan Chase & Co.0.60
Total#,###.2

Portfolio Composition

as of November 30, 2019

Bonds51.19
Stocks40.29
Other8.53
Total#,###.2

Top Sectors

% of Total Investments as of November 30, 2019

Information Technology19.39
Not Classified - Mutual Fund17.47
Financials12.52
Health Care10.19
Industrials8.35
Consumer Staples7.56
Consumer Discretionary7.38
Communication Services5.17
Utilities3.45
Real Estate3.41
Energy3.09
Materials2.02
Total#,###.2

Top Country Weightings

% of Total Investments as of November 30, 2019

United States83.92
Cayman Islands3.42
Japan2.13
United Kingdom1.16
France0.65
Australia0.64
Switzerland0.64
Netherlands0.61
Canada0.56
Indonesia0.54
Total#,###.2

Information provided is not a recommendation to buy or sell any security. Portfolio data is subject to daily change.

Ratings

Morningstar™ Ratings

As of November 30, 2019

Overall3 Year5 Year10 Year
498 Funds498 Funds401 Funds269 Funds

Category: Allocation--30% to 50% Equity

Distributions

Distributions

Payment Frequency:

Ex-Date
Ex-Date:

Date on which a stock begins trading without the benefit of the dividend. Typically, a stock’s price moves up by the dollar amount of the dividend as the ex-dividend date approaches, then falls by the amount of the dividend after that date.

Payable Date
Payable Date:

Date on which a declared stock dividend or a bond interest payment is scheduled to be paid.

Record Date
Record Date:

Date on which a shareholder must officially own shares in order to be entitled to a dividend. After the date of record, the stock is said to be ex-dividend.

Amount
Income Dividend07/12/201907/15/201907/11/2019$0.565600
Long-Term Capital Gain07/12/201907/15/201907/11/2019$0.671200
Totals: $1.236800

Investment Team

View Portfolio Adviser/Sub Adviser

Portfolio Management Team

Voya Investments, LLC

Investment Adviser

Voya Investments, LLC., serves as the investment adviser to each of the Funds. Voya Investments has overall responsibility for the management of the Funds. Voya Investments provides or oversees all investment advisory and portfolio management services for each Fund, and assists in managing and supervising all aspects of the general day-to-day business activities and operations of the Funds, including custodial, transfer agency, dividend disbursing, accounting, auditing, compliance and related services. The Investment Adviser may, from time to time, directly manage a portion of the Fund’s assets to seek to manage the Fund’s overall risk exposure to achieve the Fund’s desired risk/return profile and to effect the Fund’s investment strategies. The Investment Adviser may invest in futures and exchange-traded funds to implement its investment process.

Voya Investment Management Co. LLC

Investment Sub-Adviser

Voya Investment Management Co. LLC (“Voya IM” or “Sub-Adviser”), a Delaware limited liability company, was founded in 1972 and is registered with the SEC as an investment adviser. Voya IM is an indirect, wholly-owned subsidiary of Voya Financial, Inc. and is an affiliate of the Adviser. Voya IM has acted as adviser or sub-adviser to mutual funds since 1994 and has managed institutional accounts since 1972. The principal office of Voya IM is located at 230 Park Avenue, New York, New York 10169. As of December 31, 2016, Voya IM managed approximately $86.4 billion in assets.
Vincent Costa

Vincent Costa, CFA

Head of Global Quantitative Equities

Years of Experience: 34

Years with Voya: 13

Vincent Costa is head of the global quantitative equities team and also serves as a portfolio manager for the active quantitative and fundamental large cap value strategies. Vinnie joined Voya Investment Management (Voya IM) in April 2006 as head of portfolio management for quantitative equity. Prior to joining Voya IM, he managed quantitative equity investments at both Merrill Lynch Investment Management and Bankers Trust Company. He earned a BS in quantitative business analysis from Pennsylvania State University and an MBA in finance from the New York University Stern School of Business, and holds the Chartered Financial Analyst® designation.
Brian Timberlake

Brian Timberlake, PhD, CFA

Head of Fixed Income Research

Years of Experience: 16

Years with Voya: 16

Brian Timberlake is the head of fixed income research at Voya Investment Management and is responsible for managing the organization’s global fixed income research analysts as well as the coordination of macroeconomic data across the fixed income platform. His team is responsible for macro and quantitative fixed income research and provides additional assistance to individual sector groups and the risk management team. In addition, Brian is a named portfolio manager on several global and opportunistic fixed income products. Previously, he was the head of quantitative research where he helped develop an integrated, automated tool for interest rate hedging, created multifactor risk models, and was integral to the design and monitoring of customized client portfolios. Prior to that he was a senior quantitative analyst at Voya. Brian received a BS in chemical engineering from the University of Maryland, an MS in quantitative and computational finance from the Georgia Institute of Technology and a PhD in chemical engineering from the Georgia Institute of Technology. He holds the Chartered Financial Analyst® designation.
Paul Zemsky

Paul Zemsky, CFA

Chief Investment Officer, Multi-Asset Strategies and Solutions

Years of Experience: 35

Years with Voya: 14

Paul Zemsky is the chief investment officer and founder of the Multi-Asset Strategies and Solutions Team (MASS) at Voya Investment Management. He is responsible for the firm’s suite of value-added, customized and off-the-shelf products and solutions that are supported by the team’s asset allocation, manager research, quantitative research, portfolio implementation and multi-manager capabilities. Prior to joining the firm, he co-founded CaliberOne Private Funds Management, a macro hedge fund. Paul began his career at JPMorgan Investment Management, where he held a number of key positions, including head of investments for over $300 Billion of Fixed Income assets. Paul is a member of the firm’s Management Committee and a board member of Pomona Capital. He holds a dual degree in finance and electrical engineering from the Management and Technology Program at the University of Pennsylvania and holds the Chartered Financial Analyst® designation.

Disclosures

Principal Risks

You could lose money on an investment in the Portfolio. Any of the following risks, among others, could affect Portfolio performance or cause the Portfolio to lose money or to underperform market averages of other funds.

Bank Instruments: Bank instruments include certificates of deposit, fixed time deposits, bankers’ acceptances, and other debt and deposit-type obligations issued by banks. Changes in economic, regulatory or political conditions, or other events that affect the banking industry may have an adverse effect on bank instruments or banking institutions that serve as counterparties in transactions with the Portfolio.

Company: The price of a company’s stock could decline or underperform for many reasons including, among others, poor management, financial problems, reduced demand for company goods or services, regulatory fines and judgments, or business challenges. If a company declares bankruptcy or becomes insolvent, its stock could become worthless.

Convertible Securities: Convertible securities are securities that are convertible into or exercisable for common stocks at a stated price or rate. Convertible securities are subject to the usual risks associated with debt instruments, such as interest rate and credit risk. In addition, because convertible securities react to changes in the value of the stocks into which they convert, they are subject to market risk.

Credit: The price of a bond or other debt instrument is likely to fall if the issuer’s actual or perceived financial health deteriorates, whether because of broad economic or issuer-specific reasons. In certain cases, the issuer could be late in paying interest or principal, or could fail to pay its financial obligations altogether.

Credit Default Swaps: The Portfolio may enter into credit default swaps, either as a buyer or a seller of the swap. A buyer of a swap pays a fee to buy protection against the risk that a security will default. If no default occurs, the Portfolio will have paid the fee, but typically will recover nothing under the swap. A seller of a swap receives payment(s) in return for an obligation to pay the counterparty the full notional value of a security in the event of a default of the security issuer. As a seller of a swap, the Portfolio would effectively add leverage to its portfolio because, in addition to its total net assets, the Portfolio would be subject to investment exposure on the full notional value of the swap. Credit default swaps are particularly subject to counterparty, credit, valuation, liquidity and leveraging risks and the risk that the swap may not correlate with its underlying asset as expected. Certain standardized swaps are subject to mandatory central clearing. Central clearing is expected to reduce counterparty credit risk and increase liquidity; however, there is no assurance that central clearing will achieve that result, and in the meantime, central clearing and related requirements expose the Portfolio to new kinds of costs and risks. In addition, credit default swaps expose the Portfolio to the risk of improper valuation.

Currency: To the extent that the Portfolio invests directly or indirectly in foreign (non-U.S.) currencies or in securities denominated in, or that trade in, foreign (non-U.S.) currencies, it is subject to the risk that those foreign (non-U.S.) currencies will decline in value relative to the U.S. dollar or, in the case of hedging positions, that the U.S. dollar will decline in value relative to the currency being hedged by the Portfolio through foreign currency exchange transactions.

Deflation: Deflation occurs when prices throughout the economy decline over time - the opposite of inflation. When there is deflation, the principal and income of an inflation-protected bond will decline and could result in losses.

Derivative Instruments: Derivative instruments are subject to a number of risks, including the risk of changes in the market price of the underlying securities, credit risk with respect to the counterparty, risk of loss due to changes in market interest rates and liquidity and volatility risk. The amounts required to purchase certain derivatives may be small relative to the magnitude of exposure assumed by the Portfolio. Therefore, the purchase of certain derivatives may have an economic leveraging effect on the Portfolio and exaggerate any increase or decrease in the net asset value. Derivatives may not perform as expected, so the Portfolio may not realize the intended benefits. When used for hedging purposes, the change in value of a derivative may not correlate as expected with the currency, security or other risk being hedged. When used as an alternative or substitute for direct cash investments, the return provided by the derivative may not provide the same return as direct cash investment. In addition, given their complexity, derivatives expose the Portfolio to the risk of improper valuation.

Dividend: Companies that issue dividend yielding equity securities are not required to continue to pay dividends on such securities. Therefore, there is the possibility that such companies could reduce or eliminate the payment of dividends in the future. As a result, the Portfolio’s ability to execute its investment strategy may be limited.

Floating Rate Loans: In the event a borrower fails to pay scheduled interest or principal payments on a floating rate loan, the Portfolio will experience a reduction in its income and a decline in the market value of such investment. This will likely reduce the amount of dividends paid and may lead to a decline in the net asset value. If a floating rate loan is held by the Portfolio through another financial institution, or the Portfolio relies upon another financial institution to administer the loan, the receipt of scheduled interest or principal payments may be subject to the credit risk of such financial institution. Investors in floating rate loans may not be afforded the protections of the anti-fraud provisions of the Securities Act of 1933, as amended, and the Securities Exchange Act of 1934, as amended, because loans may not be considered “securities” under such laws. Additionally, the value of collateral, if any, securing a floating rate loan can decline or may be insufficient to meet the issuer’s obligations under the loan. Furthermore, such collateral may be difficult to liquidate. No active trading market may exist for many floating rate loans and many floating rate loans are subject to restrictions on resale. Transactions in loans typically settle on a delayed basis and may take longer than 7 days to settle. As a result, the Portfolio may not receive the proceeds from a sale of a floating rate loan for a significant period of time. Delay in the receipts of settlement proceeds may impair the ability of the Portfolio to meet its redemption obligations. It may also limit the ability of the Portfolio to repay debt, pay dividends, or to take advantage of new investment opportunities.

Foreign Investments/Developing and Emerging Markets: Investing in foreign (non-U.S.) securities may result in the Portfolio experiencing more rapid and extreme changes in value than a fund that invests exclusively in securities of U.S. companies due to: smaller markets; differing reporting, accounting, and auditing standards; nationalization, expropriation, or confiscatory taxation; foreign currency fluctuations, currency blockage, or replacement; potential for default on sovereign debt; or political changes or diplomatic developments, which may include the imposition of economic sanctions or other measures by the United States or other governments and supranational organizations. Markets and economies throughout the world are becoming increasingly interconnected, and conditions or events in one market, country or region may adversely impact investments or issuers in another market, country or region. Foreign investment risks may be greater in developing and emerging markets than in developed markets.

High-Yield Securities: Lower quality securities (including securities that have fallen below investment-grade and are classified as “junk bonds” or “high yield securities”) have greater credit risk and liquidity risk than higher quality (investment-grade) securities, and their issuers’ long-termability to make payments is considered speculative. Prices of lower quality bonds or other debt instruments are also more volatile, are more sensitive to negative news about the economy or the issuer, and have greater liquidity and price volatility risk.

Inflation-Indexed Bonds: If the index measuring inflation falls, the principal value of inflation-indexed bonds will be adjusted downward, and consequently the interest payable on these securities (calculated with respect to a smaller principal amount) will be reduced. In addition, inflation-indexed bonds are subject to the usual risks associated with debt instruments, such as interest rate and credit risk. Repayment of the original bond principal upon maturity (as adjusted for inflation) is guaranteed in the case of U.S. Treasury inflation-indexed bonds. For bonds that do not provide a similar guarantee, the adjusted principal value of the bond repaid at maturity may be less than the original principal.

Interest in Loans: The value and the income streams of interests in loans (including participation interests in lease financings and assignments in secured variable or floating rate loans) will decline if borrowers delay payments or fail to pay altogether. A significant rise in market interest rates could increase this risk. Although loans may be fully collateralized when purchased, such collateral may become illiquid or decline in value.

Interest Rate: With bonds and other fixed rate debt instruments, a rise in market interest rates generally causes values to fall; conversely, values generally rise as market interest rates fall. The higher the credit quality of the instrument, and the longer its maturity or duration, the more sensitive it is likely to be to interest rate risk. In the case of inverse securities, the interest rate paid by the securities is a floating rate, which generally will decrease when the market rate of interest to which the inverse security is indexed increases and will increase when the market rate of interest to which the inverse security is indexed decreases. As of the date of this Prospectus, the United States experiences a low interest rate environment, which may increase the Portfolio’s exposure to risks associated with rising market interest rates. Rising market interest rates could have unpredictable effects on the markets and may expose fixed-income and related markets to heightened volatility. To the extent that the Portfolio invests in fixed-income securities, an increase in market interest rates may lead to increased redemptions and increased portfolio turnover, which could reduce liquidity for certain investments, adversely affect values, and increase costs. Increased redemptions may cause the Portfolio to liquidate portfolio positions when it may not be advantageous to do so and may lower returns. If dealer capacity in fixed-income markets is insufficient for market conditions, it may further inhibit liquidity and increase volatility in the fixed-income markets. Further, recent and potential future changes in government policy may affect interest rates.

Investing through Bond Connect: Chinese debt instruments trade on the China Interbank Bond Market (“CIBM”) and may be purchased through a market access program that is designed to, among other things, enable foreign investment in the People’s Republic of China (“Bond Connect”). There are significant risks inherent in investing in Chinese debt instruments, similar to the risks of other fixed-income securities markets in emerging markets. The prices of debt instruments traded on the CIBM may fluctuate significantly due to low trading volume and potential lack of liquidity. The rules to access debt instruments that trade on the CIBM through Bond Connect are relatively new and subject to change, which may adversely affect the Portfolio’s ability to invest in these instruments and to enforce its rights as a beneficial owner of these instruments. Trading through Bond Connect is subject to a number of restrictions that may affect the Portfolio’s investments and returns.

Investment Model: A manager’s proprietary model may not adequately allow for existing or unforeseen market factors or the interplay between such factors. Volatility management techniques may not always be successful in reducing volatility, may not protect against market declines, and may limit the Portfolio’s participation in market gains, negatively impacting performance even during periods when the market is rising. During sudden or significant market rallies, such underperformance may be significant. Moreover, volatility management strategies may increase portfolio transaction costs, which may increase losses or reduce gains. The Portfolio’s volatility may not be lower than that of the Index during all market cycles due to market factors. Portfolios that are actively managed, in whole or in part, according to a quantitative investment model can perform differently from the market as a whole based on the investment model and the factors used in the analysis, the weight placed on each factor, and changes from the factors’ historical trends. Mistakes in the construction and implementation of the investment models (including, for example, data problems and/or software issues) may create errors or limitations that might go undetected or are discovered only after the errors or limitations have negatively impacted performance. There is no guarantee that the use of these investment models will result in effective investment decisions for the Portfolio.

Liquidity: If a security is illiquid, the Portfolio might be unable to sell the security at a time when the Portfolio’s manager might wish to sell, or at all. Further, the lack of an established secondary market may make it more difficult to value illiquid securities, exposing the Portfolio to the risk that the price at which it sells illiquid securities will be less than the price at which they were valued when held by the Portfolio. The prices of illiquid securities may be more volatile than more liquid investments. The risks associated with illiquid securities may be greater in times of financial stress. The Portfolio could lose money if it cannot sell a security at the time and price that would be most beneficial to the Portfolio.

Market: Stock prices may be volatile or have reduced liquidity in response to real or perceived impacts of factors including, but not limited to, economic conditions, changes in market interest rates, and political events. Stock markets tend to be cyclical, with periods when stock prices generally rise and periods when stock prices generally decline. Any given stock market segment may remain out of favor with investors for a short or long period of time, and stocks as an asset class may underperform bonds or other asset classes during some periods. Additionally, legislative, regulatory or tax policies or developments in these areas may adversely impact the investment techniques available to a manager, add to costs and impair the ability of the Portfolio to achieve its investment objectives.

Market Capitalization: Stocks fall into three broad market capitalization categories - large, mid, and small. Investing primarily in one category carries the risk that, due to current market conditions, that category may be out of favor with investors. If valuations of large-capitalization companies appear to be greatly out of proportion to the valuations of mid- or small-capitalization companies, investors may migrate to the stocks of mid- and small-sized companies causing a fund that invests in these companies to increase in value more rapidly than a fund that invests in larger companies. Investing in mid and small-capitalization companies may be subject to special risks associated with narrower product lines, more limited financial resources, smaller management groups, more limited publicly available information, and a more limited trading market for their stocks as compared with larger companies. As a result, stocks of mid- and small-capitalization companies may be more volatile and may decline significantly in market downturns.

Mortgage- and/or Asset-Backed Securities: Defaults on, or low credit quality or liquidity of the underlying assets of the asset-backed (including mortgage-backed) securities may impair the value of these securities and result in losses. There may be limitations on the enforceability of any security interest or collateral granted with respect to those underlying assets and the value of collateral may not satisfy the obligation upon default. These securities also present a higher degree of prepayment and extension risk and interest rate risk than do other types of debt instruments.

Other Investment Companies: The main risk of investing in other investment companies, including exchange-traded funds (“ETFs”), is the risk that the value of the securities underlying an investment company might decrease. Shares of investment companies that are listed on an exchange may trade at a discount or premium from their net asset value. You will pay a proportionate share of the expenses of those other investment companies (including management fees, administration fees, and custodial fees) in addition to the expenses of the Portfolio. The investment policies of the other investment companies may not be the same as those of the Portfolio; as a result, an investment in the other investment companies may be subject to additional or different risks than those to which the Portfolio is typically subject.

Prepayment and Extension: Many types of debt instruments are subject to prepayment and extension risk. Prepayment risk is the risk that the issuer of a debt instrument will pay back the principal earlier than expected. This may occur when interest rates decline. Prepayment may expose the Portfolio to a lower rate of return upon reinvestment of principal. Also, if a debt instrument subject to prepayment has been purchased at a premium, the value of the premium would be lost in the event of prepayment. Extension risk is the risk that the issuer of a debt instrument will pay back the principal later than expected. This may occur when interest rates rise. This may negatively affect performance, as the value of the debt instrument decreases when principal payments are made later than expected. Additionally, the Portfolio may be prevented from investing proceeds it would have received at a given time at the higher prevailing interest rates.

Real Estate Companies and Real Estate Investment Trusts (“REITs”): Investing in real estate companies and REITs may subject the Portfolio to risks similar to those associated with the direct ownership of real estate, including losses from casualty or condemnation, changes in local and general economic conditions, supply and demand, market interest rates, zoning laws, regulatory limitations on rents, property taxes, and operating expenses in addition to terrorist attacks, war, or other acts that destroy real property. Investments in REITs are affected by the management skill and creditworthiness of the REIT. The Portfolio will indirectly bear its proportionate share of expenses, including management fees, paid by each REIT in which it invests.

Securities Lending: Securities lending involves two primary risks: “investment risk” and “borrower default risk.” When lending securities, the Portfolio will receive cash or U.S. government securities as collateral. Investment risk is the risk that the Portfolio will lose money from the investment of the cash collateral received from the borrower. Borrower default risk is the risk that the Portfolio will lose money due to the failure of a borrower to return a borrowed security. Securities lending may result in leverage. The use of leverage may exaggerate any increase or decrease in the net asset value, causing the Portfolio to be more volatile. The use of leverage may increase expenses and increase the impact of the Portfolio’s other risks.

Sovereign Debt: These securities are issued or guaranteed by foreign government entities. Investments in sovereign debt are subject to the risk that a government entity may delay payment, restructure its debt, or refuse to pay interest or repay principal on its sovereign debt. Some of these reasons may include cash flow problems, insufficient foreign currency reserves, political considerations, social changes, the relative size of its debt position to its economy or its failure to put in place economic reforms required by the International Monetary Fund or other multilateral agencies. If a government entity defaults, it may ask for more time in which to pay or for further loans. There is no legal process for collecting sovereign debts that a government does not pay or bankruptcy proceeding by which all or part of sovereign debt that a government entity has not repaid may be collected.

U.S. Government Securities and Obligations: U.S. government securities are obligations of, or guaranteed by, the U.S. government, its agencies or government-sponsored enterprises. U.S. government securities are subject to market and interest rate risk, and may be subject to varying degrees of credit risk.

An investment in the Portfolio is not a bank deposit and is not insured or guaranteed by the Federal Deposit Insurance Corporation, the Federal Reserve Board or any other government agency.