Credit
Risk
A
Fund may be exposed to credit risk in the event that an issuer or guarantor
fails to perform or that an institution or entity with which the Fund has
unsettled or open transactions defaults.
Market
Risk
Each
Fund’s investments are subject to changes in general economic conditions,
general market fluctuations and the risks inherent in investment in securities
markets. Investment markets can be volatile and prices of investments can change
substantially due to various factors including, but not limited to, economic
growth or recession, changes in interest rates, changes in the actual or
perceived creditworthiness of issuers, and general market liquidity. Each Fund
is subject to the risk that geopolitical events will disrupt securities markets
and adversely affect global economies and markets. Local, regional or global
events such as war, acts of terrorism, the spread of infectious illness or other
public health issues, or other events could have a significant impact on a Fund
and its investments.
An
outbreak of a respiratory disease caused by a novel coronavirus first detected
in China in December 2019 has spread globally. In an organized attempt to
contain and mitigate the effects of the spread of the coronavirus known as
COVID-19, governments and businesses world-wide have taken aggressive measures,
including closing borders, restricting international and domestic travel, and
the imposition of prolonged quarantines of large populations. COVID-19 has
resulted in the disruption of and delays in the delivery of healthcare services
and processes, the cancellation of organized events and educational
institutions, the disruption of production and supply chains, a decline in
consumer demand for certain goods and services, and general concern and
uncertainty, all of which have contributed to increased volatility in global
markets. The effects of COVID-19 will likely affect certain sectors and
industries more dramatically than others, which may adversely affect the value
of a Fund’s investments in those sectors or industries. COVID-19, and other
epidemics and pandemics that may arise in the future, could adversely affect the
economies of many nations, the global economy, individual companies and capital
markets in ways that cannot be foreseen at the present time. In addition, the
impact of infectious diseases in developing or emerging market countries may be
greater due to limited health care resources. Political, economic and social
stresses caused by COVID-19 also may exacerbate other pre-existing political,
social and economic risks in certain countries. The duration of COVID-19 and its
effects cannot be determined at this time, but the effects could be present for
an extended period of time.
Russian
Sanctions Risk
Sanctions
threatened or imposed by a number of jurisdictions, including the United States,
the European Union and the United Kingdom, and other intergovernmental actions
that have been or may be undertaken in the future, against Russia, Russian
entities or Russian individuals, may result in the devaluation of Russian
currency, a downgrade in the country’s credit rating, an immediate freeze of
Russian assets, a decline in the value and liquidity of Russian securities,
property or interests, and/or other adverse consequences to the Russian economy
or a Fund. The scope and scale of sanctions in place at a particular time may be
expanded or otherwise modified in a way that have negative effects on a Fund.
Sanctions, or the threat of new or modified sanctions, could impairthe ability
of a Fund to buy, sell, hold, receive, deliver or otherwise transact in certain
affected securities or other investment instruments. Sanctions could also result
in Russia taking counter measures or other actions in response, which may
further impair the value and liquidity of Russian securities. These sanctions,
and the resulting disruption of the Russian economy, may cause volatility in
other regional and global markets and may negatively impact the performance of
various sectors and industries, as well as companies in other countries, which
could have a negative effect on the performance of a Fund, even if a Fund does
not have direct exposure to securities of Russian issuers. As a collective
result of the imposition of sanctions, Russian government countermeasures and
the impact that they have had on the trading markets for Russian securities,
certain Funds have used, and may in the future use, fair valuation procedures
approved by the Fund’s Board to value certain Russian securities, which could
result in such securities being deemed to have a zero value.
12. Recent
Accounting Pronouncement
In
March 2020, the Financial Accounting Standards Board (“FASB”) issued Accounting
Standards Update No. 2020-04 (“ASU 2020-04”), “Reference Rate Reform (Topic
848)”. In response to concerns about structural risks of interbank offered
rates, and particularly the risk of cessation of LIBOR, regulators have
undertaken reference rate reform initiatives to identify alternative reference
rates that are more observable or transaction based and less susceptible to
manipulation. ASU 2020-04 provides optional guidance for a limited period of
time to ease the potential burden in accounting for (or recognizing the effects
of) reference rate reform on financial reporting. ASU 2020-04 is elective and
applies to all entities, subject to meeting certain criteria, that have
contracts, hedging relationships, and other transactions that reference LIBOR or
another reference rate expected to be discontinued
