NOTES ON FUND COSTS
General The charges you pay as an investor in the fund go to coverfund operating costs, including marketing and distribution costs. Theseongoing charges reduce the performance of your investment.

the investment manager pays the shares’ portion of the administration
agent’s fees. The investment manager pays all ongoing expenses
attributable to Z shares.

For A, I, J, Q and S shares, the NAV of each class reflects its portion of
the ongoing expenses attributable to that class, except that for J shares,

For entry charges, you might be eligible to pay less than the maximum
amounts shown. Consult a financial advisor.

RISK DESCRIPTIONS
The risk descriptions below correspond to the risk factors named in theinformation about the funds. To permit the risks to be read properly inconnection with any fund’s named risks, each risk is described as for
an individual fund.

liquidity and volatility risks. The bid and offer spreads of the prices ofsuch securities may be large, and the funds may therefore incur
significant trading and realisation costs and may even suffer losses
when selling such investments.

While the risk information in this prospectus is intended to give an ideaof the main risks associated with each fund, any fund could be affectedby other risks in this section as well as risks not named here, and therisk descriptions themselves are not intended as exhaustive.

To the extent that the funds transact in the China Interbank Bond
Market, the funds may also be exposed to risks associated withsettlement procedures and default of counterparties. The counterparty
which has entered into a transaction with the funds may default in its
obligation to settle the transaction by delivery of the relevant security or
by payment for value.

Any of these risks could cause a fund to lose money, to perform lesswell than similar investments, to experience high volatility (ups anddowns in NAV), or to fail to meet its objective over any period of time.
Asset-backed securities (ABS) and mortgage-backed securities (MBS)risks Asset-backed securities are bonds that represent an ownershipinterest in an underlying pool of mortgage-related and/or consumer
receivables. Amortizing assets such as home equity loans, credit carddebt, car loans, student loans, equipment leases, collateralised repoloans and EETCs (Enhanced Equipment Trust Certificates) typicallypass principal and interest payments directly to investors, while
revolving assets (such as credit card receivables and home equity linesof credit) typically reinvest principal and interest payments in newcollateral for a specified period of time. Mortgage-backed securities are
securities representing an interest in a pool of mortgages and may
include collateralised mortgage obligations, which are debt securities
that are fully collateralised by a portfolio of mortgages or mortgagebacked securities, commercial mortgage-backed securities and strippedmortgage securities.
These securities may be subject to greater liquidity, credit, default andinterest rate risk compared to other bonds. They are often exposed toextension and prepayment risk.
Changes resulting from the United Kingdom's exit from the EU
Following the results of the referendum of June 23, 2016, on March 29,
2017, the Prime Minister of the United Kingdom officially invoked Article
50 of the Lisbon Treaty, in order to start the negotiation for the exit of
the United Kingdom from the EU, triggering political, economic andlegal uncertainty. While such uncertainty most directly affects the United
Kingdom and the EU, global markets suffered immediate andsignificant disruption. Market disruption can negatively impact funds
such as the SICAV. The United Kingdom and EU are also entering aperiod of regulatory uncertainty, as new trade and other agreements arenegotiated during a two-year transition period. This will impact the
SICAV and its portfolio companies in a variety of ways, not all of which
are readily apparent immediately following the exit vote. The SICAV may
have portfolio companies with significant operations and/or assets in
the United Kingdom, any of which could be adversely impacted by the
new legal and regulatory environment, whether by increased costs or
impediments to the implementation of its business plan. The
uncertainty resulting from any further exits from the EU, or the
possibility of such exits, would also be likely to cause market disruption
in the EU and more broadly across the global economy, as well as
introduce further legal and regulatory uncertainty in the EU.
China Interbank Bond Market Market volatility and potential lack ofliquidity due to low trading volumes of certain debt securities in the
China Interbank Bond Market may result in prices of certain debt
securities traded on such market fluctuating significantly. The funds
investing in the China Interbank Bond Market are therefore subject to50

Since the relevant filings and account opening for investment in the
China Interbank Bond Market have to be carried out via an onshore
settlement agent, the funds are subject to the risks of default or errors
on the part of the onshore settlement agent.
The China Interbank Bond Market is also subject to regulatory risks.
The relevant rules and regulations on investment in the China Interbank
Bond Market is subject to change which may have potential
retrospective effect. In the event that the relevant mainland Chinese
authorities suspend account opening or trading on the China Interbank
Bond Market, the fund’s ability to invest in the China Interbank Bond
Market will be limited and, after exhausting other trading alternatives,
the funds may suffer substantial losses as a result.
Convertible bond risk Convertible bonds are debt instruments whichembed an option to convert the bond to stock of the issuer. They are
most often issued by companies with a lower credit rating and higher
growth potential. Until conversion, they have similar characteristics tobonds with the exception that their price will normally be also
influenced by the underlying security market fluctuations and dividendchanges. The market for convertible bonds is usually less liquid than it
is for non-convertible debt securities.
Contingent convertible bond risk Contingent Convertible Bonds, also
known as CoCos, are typically issued by financial institutions and have
similar characteristics to convertible bonds with the main exception that
their conversion is subject to predetermined conditions referred to as
trigger events usually set to capital ratio and which vary from one issue
to the other. As an example, when the capital ratio of the CoCo issuer
falls under a certain level, which depends on the accounting rules
currently applicable, the issuer needs to convert debt to equity and the
CoCo holders receive common shares in exchange of the CoCo. Thismay happen at a time which is not ideal to buy the common sharesand investors may also suffer a loss depending on the conversion ratio.
The issuer’s supervisory authority may intervene at any time in theconversion or written down process. Depending on the scenario, theprincipal amount invested may be lost permanently or temporarily, fullyor partially. CoCos may be held for longer than expected and thus also
expose investors to higher Interest Rate risk. Investments in CoCos canalso be subject to additional risks such as: capital structure inversion
risk (contrary to the classic capital hierarchy, it represents the risk for
CoCo investors to suffer a loss of capital when equity holders do not orat an earlier stage); trigger level risk (the risk of incurring a trigger event.
The trigger could be activated either through a material loss in capitalor an increase in risk weighted assets of the issuer of the CoCos.
Changes in accounting rules may also impact the calculation of thetrigger event); coupon cancellation risk (coupon payments are entirely
discretionary and it represents the risk of having the coupon cancelled

INVEST WITH CONFIDENCE

by the issuer of the CoCos at any point, for any reason, and for any
period of time); call extension risk (CoCos are issued as perpetual
instruments and may not be called on the call date. It represents therisk that CoCos’ principal will neither be returned at the call date nor at
any given date); unknown risk (the structure of CoCos is innovative andadditional risks, yet unknown, may appear in the future); yield/valuation
risk (CoCos offer comparatively high yield for quality bank issuers but
all their associated risks may be difficult to factor into their valuation);conversion risk (it represents the risk of having CoCos converted into
equity at a non-favourable time with the investors that may suffer a loss
depending on the conversion rate); write down risk (it represents therisk of incurring in a total loss of principal); industry concentration risk
(this risk is related to the fact that CoCos are issued by bankinstitutions); liquidity risk (it represents the risk that CoCos may become
difficult to sell and it is uncertain how the market will react in a stressed
environment).
Counterparty risk An entity with which the fund does business could
become unwilling or unable to meet its obligations to the fund.
Country risk – China All investments in China are subject to the risks
described under “Emerging market risk” below. In addition, investmentsthat are purchased or held in connection with a QFII licence or the
Stock Connect program may be subject to additional risks, as follows.
QFII Licence Some funds may invest in local Chinese securities (“China
A securities”) using a qualified foreign institutional investor (“QFII”)
licence. Chinese regulators require that the name of the QFII licenceholder be used in connection with assets held on behalf of the relevant
funds. The regulators acknowledge that the assets in a fund’s accountbelong to that fund and not to the investment manager or a submanager, and the depositary has set up a sub-account in the name ofeach relevant fund (which is allowed under Chinese law). However,should creditors of the QFII assert that the assets in the accounts are
owned by the QFII and not the relevant fund, and if a court should
uphold this assertion, creditors of the QFII could seek payment fromthe assets of the relevant fund.
Stock Connect The funds may invest in certain Shanghai-listed andShenzhen-listed securities (“Stock Connect Securities”) through the
Shanghai-Hong Kong Stock Connect or the Shenzhen-Hong Kong
Stock Connect respectively (“Stock Connect”), a joint securities trading
and clearing program designed to permit mutual stock market accessbetween mainland China and Hong Kong. Stock Connect is a joint
project of the Hong Kong Exchanges and Clearing Limited (“HKEC”),
China Securities Depository and Clearing Corporation Limited(“ChinaClear”), the Shanghai Stock Exchange and the Shenzhen Stock
Exchange. Hong Kong Securities Clearing Company Limited(“HKSCC”), a clearing house that in turn is operated by HKEC, acts asnominee for investors accessing Stock Connect Securities.
Risks of investing through Stock Connect include:
The regulations governing the Stock Connect are untested, subject
to change and may have potential retrospective effect. It is
uncertain how they will be applied, and they could be changed.
Q The Stock Connect Securities in respect of the funds are held by
the depositary/ sub-custodian in accounts in the Hong Kong
Central Clearing and Settlement System (“CCASS”) maintained by
the HKSCC as central securities depositary in Hong Kong. HKSCC
in turn holds the Stock Connect Securities, as the nominee holder,through an omnibus securities account in its name registered with
ChinaClear for the Stock Connect. The precise nature and rights ofthe funds as the beneficial owners of the Stock Connect Securities
through HKSCC as nominee is not well defined under Chinese law.
Therefore, the exact nature and methods of enforcement of therights and interests of the funds under Chinese law is uncertain.
Q Should ChinaClear default, HKSCC’s contractual liabilities will belimited to assisting participants with claims against ChinaClear. A
fund’s attempts to recover lost assets could involve considerable
delays and expenses and may not be successful.
Q

INVEST WITH CONFIDENCE

Q

Q

Q

Q

Q

The Stock Connect is subject to quota limitations. In particular, theStock Connect is subject to a daily quota which does not belong to
the SICAV or the funds and can only be utilised on a first-come-firstserve basis. Once the daily quota is exceeded, buy orders will berejected (although investors will be permitted to sell their crossboundary securities regardless of the quota balance). Therefore,
quota limitations may restrict the relevant fund’s ability to invest in
the Stock Connect Securities on a timely basis, and the relevantfund may not be able to effectively pursue its investment strategy.
When a stock is recalled from the scope of eligible stocks for
trading via the Stock Connect, the stock can only be sold but
restricted from being bought. This may affect the investment
portfolio or strategies of the funds.
Each of the HKEC, the Shanghai Stock Exchange and theShenzhen Stock Exchange reserves the right to suspend trading.
Where a suspension is effected, the relevant fund’s ability to accessthe Chinese market will be adversely affected.
Investment in Stock Connect Securities is conducted throughbrokers, and is subject to the risks of default by such brokers’ intheir obligations.
The relevant rules and regulations on the Stock Connect are
subject to change which may have potential retrospective effect.
The Stock Connect is subject to quota limitations. Where asuspension in the trading through the programme is effected, thefund’s ability to invest in China A-shares or access the PRC market
through the programme will be adversely affected. In such event,the fund’s ability to achieve its investment objective could be
negatively affected.

Onshore and offshore renminbi In China, the government maintains
two separate currencies: internal renminbi (CNY), which must remain
within China and generally cannot be owned by foreigners, and externalrenminbi (CNH), which can be owned by any investor. The exchange
rate between the two, and the extent to which currency exchanges
involving CNH are allowed, are managed by the government, based on
a combination of market and policy considerations. This effectively
creates currency risk within a single nation’s currency, as well as
liquidity risk, since the conversion of CNY to CNH, and of CNH to othercurrencies, can be restricted, as can the removal of any currency from
China or Hong Kong.
Country risk – Russia and Ukraine In these countries, risks associatedwith custody and counterparties are higher than in developed countries.
Russian custodial institutions observe their own rules, have significantly
less responsibilities to investors, may be poorly regulated, or mayotherwise be susceptible to fraud, negligence or error. The Russian
securities market may also suffer from impaired efficiency and liquidity,
which may worsen price volatility and market disruptions.
Direct investment in Russian securities that are not traded throughMoscow Exchange is limited to 10% of fund assets. However, as theRussian Trading System and the Moscow Interbank Currency Exchange
are recognised as regulated markets, securities that are listed or tradedon those markets are not subject to that 10% limit. This does not meanthese securities are free from the risks mentioned in the previous
paragraph, or from a generally higher degree of risk than, for example,
comparable European or US securities.
Russia and Ukraine also can be subject to strong or sudden politicalrisks, such as sanctions or military actions.
Country risk – Saudi Arabia It is necessary in Saudi Arabia to use a
trading account to buy and sell securities. This trading account can beheld directly with a broker or held with a custodian. Where the trading
account is held at the custodian, this is known as the Independent
Custody Model (ICM). The ICM approach is preferable because
securities are under the safe keeping and control of the custodian andwould be recoverable in the event of the bankruptcy of thecustodian. Where investments are held in Saudi Arabia through the
ICM, a broker Standing Instruction letter is in place to authorise thefund’s sub-custodian to move securities to a trading account for
settlement, based on the details supplied by the broker. At this stage an51

authorised broker could potentially either fraudulently or erroneously sell
the securities (and whether the securities were held through the ICM or
direct broker approach). Opportunities for a local broker to conductfraudulent transactions on the market are limited due to short trading
hours (e.g. trading hours are 10am to 3pm). This risk is further
mitigated by a manual pre-matching process, which validates client
settlement instructions with the local broker contract note and thetransaction report from the depository. Similar risks also apply to using
a broker trading account. In addition, where a broker trading account isused, the account is set up directly with the broker, in the fund’s name,but in the event of the broker defaulting, although it is believed assets
are ring-fenced, there may be a delay to recovering them and legal
proceedings may need to be initiated in order to do so. All investments
in Saudi Arabia are subject to the risks described under the section“Emerging market risk” below.
Credit risk A bond or money market security could lose value if theissuer’s financial health deteriorates.
If the financial health of the issuer of a bond or money market security
weakens, the value of the bond or money market security may fall. In
extreme cases, the issuer may delay scheduled payments to investors,
or may become unable to make its payments at all. The lower thecredit quality of the debt, the greater the credit risk.
Cybersecurity risks The funds may be subject to operational andinformation security risks resulting from breaches in cybersecurity.
Cybersecurity breaches may involve unauthorized access to the digital
information systems (e.g., through “hacking” or malicious software
coding) of the funds or their third-party service providers, but may also
result from outside attacks such as denial-of-service attacks. These
breaches may, among other things, result in financial losses to thefunds and their shareholders, cause the funds to lose proprietary
information, disrupt business operations, or result in the unauthorized
release of confidential information. Further, cybersecurity breaches
involving third-party service providers, trading counterparties, or issuers
in which the funds invests could subject the funds to many of the samerisks associated with direct breaches.
Currency risk Changes in currency exchange rates could reduceinvestment gains or increase investment losses. Exchange rates canchange rapidly and unpredictably.
Default risk The issuers of certain bonds could become unable to
make payments on their bonds.
If a bond is downgraded to a default credit rating, the manager willassess whether it should be sold or kept in the portfolio, in accordancewith the investment strategy of the respective fund.
Derivatives risk Certain derivatives could behave unexpectedly or could
expose the fund to losses that are significantly greater than the cost of
the derivative, in other words, they provide leverage.
Through derivatives, the fund may take long or short position in theunderlying asset(s). Long positions are generally taken to gain
exposure. Short positions may be taken to hedge long positions but
may also be fully or partially uncovered thus creating a synthetic shortposition.
Derivatives in general are highly volatile and do not carry any voting
rights. The pricing and volatility of many derivatives (especially credit
default swaps (CDS)) may diverge from strictly reflecting the pricing or
volatility of their underlying reference(s). In difficult market conditions, it
may be impossible or unfeasible to place orders that would limit oroffset the market exposure or financial losses created by certain
derivatives.
OTC derivatives
Because OTC derivatives are in essence private agreements between afund and one or more counterparties, they are less highly regulated
than market-traded securities. OTC derivatives carry greatercounterparty risk and liquidity risk, and it may be more difficult to force
a counterparty to honour its obligations to a fund. If a counterparty

52

ceases to offer a derivative that a fund had been planning on using, thefund may not be able to find a comparable derivative elsewhere andmay miss an opportunity for gain or find itself unexpectedly exposed torisks or losses, including losses from a derivative position for which it
was unable to buy an offsetting derivative.
Because it is generally impractical for the SICAV to divide its OTC
derivative transactions among a wide variety of counterparties, a decline
in the financial health of any one counterparty could cause significant
losses. Conversely, if any fund experiences any financial weakness or
fails to meet an obligation, counterparties could become unwilling to dobusiness with the SICAV, which could leave the SICAV unable tooperate efficiently and competitively.
Exchange-traded derivatives
While exchange-traded derivatives are generally considered lower-riskthan OTC derivatives, there is still the risk that a suspension of trading
in derivatives or in their underlying assets could make it impossible fora fund to realize gains or avoid losses, which in turn could cause adelay in handling redemptions of shares. There is also a risk that
settlement of exchange-traded derivatives through a transfer system may
not happen when or as expected.
Derivatives synthetic short positions
Some funds may take synthetic short positions in the expectation torealise gains when the position underperforms. This is not guaranteed.
The possible loss from using derivatives to create synthetic shortpositions is theoretically unlimited, for some asset types, since there is
no restriction on the price to which a position may rise. Unlike shortsales of equities or other instruments, the potential for the price of
certain fixed-income securities to rise may be limited as the fixedincome security will not exceed par at maturity.
Distressed or defaulted debt securities risk Distressed or defaulted
debt securities are the result of their issuer’s inability to meet its
financial obligations. This will be the case for issuers experiencing
significant financial stress, including potentially defaulting and filing forbankruptcy protection or other reorganisation proceedings. These
securities may bear substantially higher degree of risks and can be
more difficult to price. An investment in such securities may lead to
unrealised capital losses and/or losses that can adversely impact the
net asset value of the Fund. In some cases, the recovery of investments
in Distressed or Defaulted Securities is subject to uncertainty related tocourt orderings and corporate reorganisations among other things.
Because of the issuer’s bankruptcy, reorganisation or liquidation
process, the securities may lose their entire value, may be difficult todispose of and may have to be held for an extended period of timewith a high degree of uncertainty in the final level of recovery.
Emerging markets risk Emerging markets are less established thandeveloped markets and therefore involve higher risks.
Reasons for this higher risk include:
Q
Q
Q
Q
Q
Q
Q
Q
Q
Q

political, economic, or social instability
unfavourable changes in regulations and laws
failure to enforce laws or regulations, or to recognise the rights ofinvestors as understood in developed markets
excessive fees, trading costs or taxation, or outright seizure ofassetsrules or practices that place outside investors at a disadvantage
incomplete, misleading, or inaccurate information about securities
issuers
lack of uniform accounting, auditing and financial reporting
standards
manipulation of market prices by large investors
arbitrary delays and market closures
fraud, corruption and error

For purposes of risk, the category of emerging markets includes
markets that are less developed, such as most countries in Asia, Africa,
South America and Eastern Europe, as well as countries that have

INVEST WITH CONFIDENCE

successful economies but whose investor protections are questionable,
such as Russia, Ukraine and China.
Examples of developed markets are those of Western Europe, the US,
and Japan.
Equity risk In general, equities involve higher risks than bonds ormoney market instruments. Equities can lose value rapidly and canremain at low prices indefinitely. Equities of rapidly growing companies
can be highly sensitive to bad news, because much of their value isbased on high expectations for the future. Equities of companies thatappear to be priced below their true value may continue to beundervalued. If a company goes through bankruptcy or a similar
financial restructuring, its equities may lose most or all of their value.
Frontier markets risk The securities markets of small nations that are at
an earlier stage of economic and political development relative to moremature emerging markets typically have limited investability and liquidity.
Geographic concentration risk To the extent that a fund invests a large
portion of its assets in a particular geographic area, its performance will
be more strongly affected by any social, political, economic,
environmental or market conditions within that area. This can mean
higher volatility and risk of loss as compared to a fund that invests
more broadly.
Hedging risk A fund’s attempts to reduce or eliminate certain risks may
not work as intended.
To the extent that a fund takes measures that are designed to offset
specific risks (such as seeking to eliminate currency risks in a shareclass that is denominated in a different currency than the fund’s
portfolio), these measures may work imperfectly, may not be feasible attimes, or may fail completely. Hedging involves costs, which reduceinvestment performance. To the extent that a hedge is successful, it
generally eliminates opportunities for gain as well as risks of loss.
High yield bond risk A bond or debt security rated below BBB- by
Standard & Poor’s or an equivalent rating, also termed ‘below
investment grade’, is generally subject to higher yields but to greaterrisks too.
The higher yield is offered to compensate for the reduced
creditworthiness and the increased risk of default of the issuer to meetits payments obligations of income and principal. In some cases, thedebt may be called by its issuer before maturity or it may be subject tothe issuer’s debt restructuring by which the fund will become the ownerof another debt or a common stock with, potentially, a partial or total
loss of the invested capital and generated income. As a consequenceof issuers being in bankruptcy, reorganisation or liquidation processes,
a fund may hold distressed or defaulted bonds.
In addition, high yield bonds are usually more sensitive to market
conditions and fluctuations. Their market is typically thinner and lessactive, creating a higher liquidity risk than for higher-rated bonds. Thisimplies they may become hard to value or to sell at a desired priceand/or time.
Interest rate risk When interest rates rise, bond values generally fall.
This risk is generally greater the longer the maturity of a bondinvestment and the higher its credit quality.
Investment fund risk As with any investment fund, investing in any ofthese funds involves certain risks an investor would not face if investingin markets directly:
the actions of other investors, in particular sudden large outflows ofcash, could interfere with orderly management of a fund and cause
the fund’s NAV to fall
Q the investor cannot direct or influence how money is invested while
it is in a fundQ a fund’s buying and selling of investments may not be optimal forthe tax efficiency of any given investor
Q

INVEST WITH CONFIDENCE

the funds are subject to various investment laws and regulations
that limit the use of certain securities and investment techniquesthat might improve performance; to the extent that the funds decideto register in jurisdictions that impose narrower limits, this decision
could further limit the fund’s investment activities
Q because the funds are based in Luxembourg, any protections thatwould have been provided by other regulators (including, forinvestors outside Luxembourg, those of their home regulator) may
not apply
Q because fund shares are not publicly traded, the only option for
liquidation of shares is generally redemption, which could be
subject to delays and any other redemption policies set by the fundQ

Investment in Participatory Notes The fund may gain exposure toinvestments through Participatory Notes (P-notes), which are issued bybanks, broker-dealers or other counterparties. P-notes may carry illiquid
securities risk and may trade at prices that are below the value of theirunderlying securities. Owners of P-notes may lack some of the rights(such as voting rights) they would have if they owned the underlying
securities directly. If the issuer of a P-note becomes unable or unwillingto honour its obligations to the fund, the fund will lose money,
irrespective of the value of the underlying securities.
Issuer concentration risk To the extent that a fund invests a large
portion of its assets in securities from a relatively small number ofissuers, its performance will be more strongly affected by any business,
industry, economic, financial or market conditions affecting thoseissuers. This can mean higher volatility and risk of loss as compared toa fund that invests more broadly.
Liquidity risk Any security could become hard to value or to sell at adesired time and price.
Additionally, certain securities may, by nature, be hard to value, or hard
to sell at a reasonable price or in large volumes. This includes securities
that are labelled as illiquid, such as Rule 144A securities, as well as
stocks, bonds, and any other type of security that represents a small
issue, trades infrequently, or is traded on markets that are comparatively
small or that have long settlement times.
Management risk The investment manager or its designees may attimes find their obligations to a fund to be in conflict with their
obligations to other investment portfolios they manage (although insuch cases, all portfolios will be dealt with equitably).
Market risk Prices of many securities change daily and can fall basedon a wide variety of factors.
Examples of these factors include:
Q
Q
Q
Q
Q
Q
Q
Q

political and economic news
government policychanges in technology and business practices
changes in demographics, cultures and populations
natural or human-caused disasters
weather and climate patternsscientific or investigative discoveries
costs and availability of energy, commodities and natural resources

The effects of market risk can be immediate or gradual, short-term or
long-term, narrow or broad.
Operational risk A fund may be subject to errors affecting valuation,
pricing, accounting, tax reporting, financial reporting, and trading,among other things. In addition, in any market, but especially inemerging markets, there could be losses due to fraud, corruption,
political or military actions, the seizure of assets, or other irregular
events.
Prepayment and extension risk With asset-backed securities (ABS) andmortgage-backed securities (MBS), or any other securities whosemarket prices typically reflect the assumption that the securities will be
paid off before maturity, any unexpected behaviour in interest rates
could hurt fund performance.

53

Receiving increasing prepayments when interest rates are falling causes
the average maturity of the portfolio to shorten, reducing its potential for
price gains. It also requires a fund to reinvest proceeds at lower interest
rates, reducing the portfolio’s total return and yield, and could result ina loss.
Mortgage-backed securities are also subject to extension risk. Wheninterest rates are rising, a lack of refinancing opportunities will cause afund’s average maturity to lengthen due to a drop in expected
prepayments of mortgage-backed securities and asset-backed
securities. This would increase a fund’s sensitivity to rising rates and its
potential for price declines.
Real estate investments risk Real estate and related investments canbe hurt by any factor that makes an area or individual property lessvaluable.
Specifically, investments in real estate holdings or related businesses or
securities (including interests in mortgages) can be hurt by natural
disasters, economic declines, overbuilding, zoning changes, tax
increases, population or lifestyle trends, environmental contamination,
defaults on mortgages, failures of management, and other factors that
may affect the market value or cash flow of the investment.

54

Sector concentration risk To the extent that a fund invests a large
portion of its assets in a particular economic sector (or, for bond funds,
a particular market segment), its performance will be more strongly
affected by any business, industry, economic, financial or market
conditions affecting that sector or segment of the fixed income market.
This can mean higher volatility and risk of loss as compared to a fundthat invests more broadly.
Small and mid-cap stock risk Stocks of small and mid-size companies
can be more volatile than stocks of larger companies. Small and midsize companies often have fewer financial resources, shorter operating
histories, and less diverse business lines, and as a result can be at
greater risk of long-term or permanent business setbacks. Initial public
offerings (IPOs) can be highly volatile and can be hard to evaluate
because of a lack of trading history and relative lack of public
information.
Style risk Different investment styles typically go in and out of favour
depending on market conditions and investor sentiment. At any given
time, for instance, a growth-style portfolio may underperform a valuestyle portfolio, or vice-versa, and either may at any time underperformthe market as a whole.

INVEST WITH CONFIDENCE