B-1 STATEMENT OF ADDITIONAL INFORMATION Dated May 1 ...

• Hold - Hold an existing position regardless of the new clearing rate (these securities are notincluded in auction).• Hold at Rate/Roll - Bid to hold an existing position at a specified minimum rate. If the clearingrate is below the bid to hold rate, the securities are sold.• Sell - Sell an existing position regardless of the clearing rate set at the auction.• Buy - Submit a bid to buy a new position at a specified minimum clearing rate (new buyers orexisting holders adding to their position at a specified interest rate).In the event there are not enough buyers for a specific auction, the auction agent will determinethat the auction has “failed”. In a failed auction the clearing rate for all securities automatically resets tothe maximum rate defined in the offering documents of the issuer (primarily to compensate those whocould not sell their positions because of the failed auction), until the next successful auction. Althoughthey are not required to do so, broker-dealers may enter purchase bids on their own behalf to assist inpreventing a failed auction.There also may be an auction where all existing holders of auction rate securities submit holdorders as described above. In such a scenario, the auction agent will determine that an “All Hold” auctionhas taken place, and the clearing rate for all securities automatically resets to the All Hold Rate as definedin the offering documents of the issuer, until the next auction. This rate tends to be less than the currentmarket rate an investor could receive had they invested in a similar security outside of the auction ratemarket.The primary risk of investing in the auction rate securities market is liquidity risk. In the event ofa failed auction, a Portfolio may not be able to sell a position when desired, and may need to continue tohold the position due to the lack of an efficient secondary market until the next successful auction or thelegal maturity. A secondary risk of investing in auction rate securities, similar to investing in other typesof fixed income securities, is the credit risk of the issuer.Inflation-Indexed BondsThe Portfolios may purchase inflation-linked securities issued by the U.S. Treasury, U.S.government agencies and instrumentalities other than the U.S. Treasury, and entities other than the U.S.Treasury or U.S. government agencies an instrumentalities. Inflation-indexed bonds are debt instrumentswhose principal value is adjusted periodically according to a rate of inflation (usually a consumer priceindex). Two structures are most common. The U.S. Treasury and some other issuers use a structure thataccrues inflation into the principal value of the bond. Most other issuers pay out the inflation accruals aspart of the semiannual coupon.Inflation-linked securities are designed to offer a return linked to inflation, thereby protectingfuture purchasing power of the money invested in them. However, inflation-linked securities provide thisprotected return only if held to maturity. In addition, inflation-linked securities may not trade at parvalue. Real interest rates (the market rate of interest less the anticipated rate of inflation) change overtime as a result of many factors, such as what investors are demanding as a true value for money. Whenreal rates do change, inflation-linked securities prices will be more sensitive to these changes thanconventional bonds, because these securities were sold originally based upon a real interest rate that is nolonger prevailing. Should market expectations for real interest rates rise, the price of inflation-linkedsecurities and the share price of a Portfolio holding these securities will fall. Investors in the Portfoliosshould be prepared to accept not only this share price volatility but also the possible adverse taxconsequences it may cause.An investment in securities featuring inflation-adjusted principal and/or interest involves factorsnot associated with more traditional fixed principal securities. Such factors include the possibility that theinflation index may be subject to significant changes, those changes in the index may or may not correlateB-35