Small Company Funds

These funds seek to provide long-term capital growth by investing in the stocks
of smaller, emerging companies. Rather than pay dividends, many of these
companies retain their earnings and continue to invest in the company's
growth...which can be extraordinary at times. The stocks of smaller companies
typically trade "over the counter" (i.e., not on one of the major stock exchanges)
and tend not to be monitored as closely by Wall Street analysts as the stocks of
major U.S. corporations. Given this diminished level of scrutiny, the investment
managers of small company funds hope to discover companies whose future
growth potential is not yet reflected in their stock prices. The incremental risks
in this type of strategy may be substantial, since these companies tend to be
more susceptible to business setbacks and market disappointments. As a result,
the price volatility of small company funds has been among the highest of all
stock funds.
