Exchange Rates

Many of the Funds are or can be invested in securities in a number of different currencies other than the Reference Currency in which the Funds are denominated; changes in foreign currency exchange rates will affect the value of Shares held in such Funds.

 

Interest Rates

The values of fixed income securities held by the Funds generally will vary inversely with changes in interest rates and such variation may affect Share prices accordingly.

 

Real Estate Industry

There are special risk considerations associated with investing in the securities of companies principally engaged in the real estate industry. These risks include: the cyclical nature of real estate values, risks related to general and local economic conditions, overbuilding and increased competition, increases in property taxes and operating expenses, demographic trends and variations in rental income, changes in zoning laws, casualty or condemnation losses, environmental risks, regulatory limitations on rents, changes in neighborhood values, related party risks, changes in the appeal of properties to tenants, increases in interest rates and other real estate capital market influences. Generally, increases in interest rates will increase the costs of obtaining financing, which could directly and indirectly decrease the value of the Fund’s investments.

 

Emerging Markets

In certain countries, there is the possibility of expropriation of assets, confiscatory taxation, political or social instability or diplomatic developments which could affect investment in those countries. There may be less publicly available information about certain financial instruments than some investors would find customary and entities in some countries may not be subject to accounting, auditing and financial reporting standards and requirements comparable to those to which certain investors maybe accustomed. Certain financial markets, while generally growing in volume, have, for the most part, substantially less volume than more developed markets, and securities of many companies are less liquid and their prices more volatile than securities of comparable companies in more sizeable markets. There are also varying levels of government supervision and regulation of exchanges, financial institutions and issuers in various countries.

 

Macro-factors can have a large impact on Emerging Markets. EM often can be stifled from natural disasters which can affect developing countries more with deficiencies in infrastructure. Many Emerging Markets are in regions with both political and economic strife that has the propensity to cause conflict. Regional tensions have been very high in several areas of the world with security concerns. EM’s some of which are in tropical environments have potential epidemics or pandemic contagion. Monsoon conditions in these tropical areas can have an adverse impact on markets as well. The international system is under a period of reform and change which might have a potential impact on tax considerations and further costs: compliance, execution tax, etc…

 

In addition, the manner in which foreign investors may invest in securities in certain countries, as well as limitations on such investments, may affect the investment operations of certain of the Funds. Emerging country debt will be subject to high risk and will not be required to meet a minimum rating standard and may not be rated for creditworthiness by any internationally recognized credit rating organization. The issuer or governmental authority that controls the repayment of an emerging country’s debt may not be able or willing to repay the principal and/or interest when due in accordance with the terms of such debt. As a result of the foregoing, a government obligor may default on its obligations. If such an event occurs, the Company may have limited legal recourse against the issuer and/or guarantor. Remedies must, in some cases, be pursued in the courts of the defaulting party itself, and the ability of the holder of foreign government debt securities to obtain recourse may be subject to the political climate in the relevant country. In addition, no assurance can be given that the holders of commercial debt will not contest payments to the holders of other foreign government debt obligations in the event of default under their commercial bank loan agreements. Settlement systems in emerging markets may be less well organized than in developed markets. Thus, there may be a risk that settlement may be delayed and that cash or securities of the Funds may be in jeopardy because of failures of or defects in the systems. In particular, market practice may require that payment shall be made prior to receipt of the security which is being purchased, or that delivery of a security must be made before payment is received. In such cases, default by a broker or bank (the “Counterparty”) through whom the relevant transaction is effected might result in a loss being suffered by Funds investing in emerging market securities.

 

The Company will seek, where possible, to use Counterparties whose financial status is such that this risk is reduced. However, there can be no certainty that the Company will be successful in eliminating this risk for the Funds, particularly as Counterparties operating in emerging markets frequently lack the substance or financial resources of those in developed countries. There may also be a danger that, because of uncertainties in the operation of settlement systems in individual markets, competing claims may arise in respect of securities held by or to be transferred to the Funds.

 

Furthermore, compensation schemes may be non-existent or limited or inadequate to meet the Company’s claims in any of these events. Investments in the Russian Federation and the former states of the Soviet Union are subject to certain heightened risks with regard to the ownership and custody of securities. In these countries this is evidenced by entries in the books of a company or its registrar (which is neither an agent nor responsible to the Custodian).

 

No certificates representing ownership of such companies will be held by the Custodian or any of its local correspondents or in an effective central depository system. As a result of this system and the lack of effective state regulation and enforcement, the Company could lose its registration and ownership of such securities through fraud, negligence or even mere oversight. However, in recognition of such risks, the relevant correspondent to the Custodian follows increased “due diligence” procedures. The correspondent has entered into agreements with company registrars and will only permit investment in those companies that have adequate registrar procedures in place. In addition, the settlement risk is minimized as the correspondent will not release cash until registrar extracts have been received and checked.

 

In addition, debt securities in these countries have an increased custodial risk associated with them as such securities are, in accordance with market practice, held in custody with institutions which may not have adequate insurance coverage to cover loss due to theft, destruction or default whilst such assets are in its custody.

 

Fixed Income Securities

Certain Funds may invest in fixed income securities rated below investment grade. Such securities may have greater price volatility and greater risk of loss of principal and interest than more highly rated securities.

 

Warrants

Certain Funds may invest in equity linked securities or equity linked instruments such as warrants. The gearing effect of investment in warrants and the volatility of warrant prices make the risk attached to the investment in warrants higher than in the case with investment in equities.

 

Transactions in Options, Futures and Swaps

Each of the Funds may seek to protect or enhance the returns from the underlying assets by using options, futures and swap contracts and by entering into forward foreign exchange transactions in currency. The ability to use these strategies may be limited by market conditions and regulatory limits and there can be no assurance that the objective sought to be attained from the use of these strategies will be achieved. Participation in the options or futures markets and in swap contracts and in currency exchange transactions involves investment risks and transaction costs to which the Funds would not be subject if the Fund did not use these strategies. If the Investment Adviser’s predictions of movements in the direction of the securities, foreign currency and interest rate markets are inaccurate, the adverse consequences to a Fund may leave the Fund in a worse position than if such strategies were not used. Risks inherent in the use of options, foreign currency, swaps and futures contracts and options on futures contracts include, but are not limited to

 

(a) dependence on the Investment Adviser’s ability to predict correctly movements in the direction of interest rates, securities prices and currency markets;

(b) imperfect correlation between the price of options and futures contracts and options

thereon and movements in the prices of the securities or currencies being hedged;

(c) the fact that skills needed to use these strategies are different from those needed to select portfolio securities;

(d) the possible absence of a liquid secondary market for any particular instrument at any time; and

(e) the possible inability of a Fund to purchase or sell a portfolio security at a time that otherwise would be favorable for it to do so, or the possible need for a Fund to sell a portfolio security at a disadvantageous time.

 

Where a Fund enters into swap transactions it is exposed to a potential counterparty risk. In case of insolvency or default of the swap counterparty, such event would affect the assets of the Fund.

 

Subject to policies established by the Directors, the Investment Adviser is primarily responsible for the execution of each Fund’s investment transactions and the allocation of the brokerage commissions. The Company has no obligation to deal with any broker or group of brokers in execution of transactions in portfolio securities. However, the Company contemplates that a substantial amount of its portfolio transactions will be conducted through the Investment Adviser, the Distributor, the Sub-Advisers, or any of their affiliates or through certain of the distributors appointed by the Distributor. Such transactions maybe subject to a commission or dealer mark-up which may not be the lowest commission or spread available. Brokers who provide supplemental investment research and research related services to the Investment Adviser may receive orders for transactions by the Company. Information so received will be in addition to and not in lieu of the services required to be performed by the Investment Adviser under the Investment Advisory Agreement, and the expenses of the Investment Adviser will not necessarily be reduced as a result of the receipt of such supplemental information. Although each and every service received may not be used for the benefit of all of the Funds, the Investment Adviser believes that those services are, in aggregate, of significant assistance in fulfilling its investment responsibilities to the Company.

 

Securities held by a Fund also may be held by another Fund or by other funds or investment advisory clients for which the Investment Adviser or its affiliates act as an adviser. Securities maybe held by, or be an appropriate investment for, a Fund as well as other clients of the Investment Adviser or its affiliates. Because of different objectives or other factors, a particular security may be bought for one or more such clients when one or more clients are selling the same security. If purchases or sales of securities for a Fund or other clients for which the Investment Adviser acts as investment adviser arise for consideration at or about the same time, transactions in such securities will be made, insofar as feasible, for the respective funds and clients in a manner deemed equitable to all. There may be circumstances when purchases or sales of Fund securities for one or more clients have an adverse effect on other clients.