due to, among other
things, the potential for greater market volatility, lower trading volume, a
lack of liquidity, potential for market manipulation, higher levels of
inflation, political and economic instability, greater risk of a market shutdown
and more governmental limitations on foreign investments in emerging market
countries than are typically found in more developed market countries. Also,
certain regions, countries or asset types may suffer periods of relative
illiquidity. Moreover, emerging market countries often have less uniformity in
accounting and reporting requirements, unsettled securities laws, less reliable
securities valuations and greater risks associated with custody of securities
than developed markets. In addition, the Public Company Accounting Oversight
Board, which regulates auditors of U.S. public companies, is unable to inspect
audit work papers in certain emerging market countries. Emerging market
countries often have greater risk of capital controls through such measures as
taxes or interest rate control than developed markets. Certain emerging market
countries may also lack the infrastructure necessary to attract large amounts of
foreign trade and investment. Local securities markets in emerging market
countries may trade a small number of securities and may be unable to respond
effectively to increases in trading volume, potentially making prompt
liquidation of holdings difficult or impossible. Settlement procedures in
emerging market countries are frequently less developed and reliable than those
in the U.S. and other developed market countries. In addition, significant
delays may occur in registering the transfer of securities. Settlement or
registration problems may make it more difficult for the Fund to value its
portfolio securities and could cause the Fund to miss attractive investment
opportunities. Investing in emerging market countries involves a higher risk of
expropriation, nationalization, confiscation of assets and property or the
imposition of restrictions on foreign investments and on repatriation of capital
invested by certain emerging market countries. Enforcing legal rights may be
made difficult, costly and slow in emerging markets as there may be additional
problems enforcing claims against non-U.S. governments. As such, the rights and
remedies associated with emerging market investment securities may be different
than those available for investments in more developed markets. For example, it
may be more difficult for shareholders to bring derivative litigation or for
U.S. regulators to bring enforcement actions against issuers in emerging
markets.
In
addition, due to the differences in regulatory, accounting, audit and financial
recordkeeping standards, including financial disclosures, less
information about emerging market companies is publicly available and
information that is available may be unreliable or outdated. This may affect the
Index Provider’s ability to compute and construct the Index and may further
impede the Advisor’s ability to accurately evaluate the index data provided.
This potential for error in index construction and index data could affect the
overall performance of the Fund.
EQUITY
SECURITIES RISK. The value of the
Fund’s shares will fluctuate with changes in the value of the equity securities
in which it invests.
Equity
securities prices fluctuate for several reasons, including changes in investors'
perceptions of the financial condition of an issuer or the general condition of
the relevant equity market, such as market volatility, or when political or
economic events affecting the issuers occur. Common stock prices may be
particularly sensitive to rising interest rates, as the cost of capital rises
and borrowing costs increase. Equity securities may decline significantly in
price over short or extended periods of time, and such declines may occur in the
equity market as a whole, or they may occur in only a particular country,
company, industry or sector of the market. Additionally, holders of an issuer's
common stock may be subject to greater risks than holders of its preferred stock
and debt securities because common stockholders' claims are subordinated to
those of holders of preferred stocks and debt securities upon the bankruptcy of
an issuer.
FINANCIAL
COMPANIES RISK. The Fund invests
significantly in financial companies. Financial companies are subject to
extensive governmental regulation and intervention, which may adversely affect
the scope of their activities, the prices they can charge, the amount and types
of capital they must maintain and, potentially, their size. Governmental
regulation may change frequently and may have significant adverse consequences
for financial companies, including effects not intended by such regulation. The
impact of more stringent capital requirements, or recent or future regulation in
various countries, on any individual financial company or on financial companies
as a whole cannot be predicted. Certain risks may impact the value of
investments in financial companies more severely than those of investments in
other issuers, including the risks associated with companies that operate with
substantial financial leverage. Financial companies may also be adversely
affected by volatility in interest rates, loan losses and other customer
defaults, decreases in the availability of money or asset valuations, credit
rating downgrades and adverse conditions in other related markets. Insurance
companies in particular may be subject to severe price competition and/or rate
regulation, which may have an adverse impact on their profitability. Financial
companies are also a target for cyber attacks and may experience technology
malfunctions and disruptions as a result.
INDEX
CONCENTRATION RISK. The Fund will be
concentrated in an industry or a group of industries to the extent that the
Index is so concentrated. To the extent that the Fund invests a significant
percentage of its assets in a single asset class or the securities of issuers
within the same country, region, industry or sector, an adverse economic,
business or political development may affect the value of the Fund’s investments
more than if the Fund were more broadly diversified. A significant exposure
makes the Fund more susceptible to any single occurrence and may subject the
Fund to greater market risk than a fund that is more broadly diversified. There
may be instances in which the Index, for a variety of reasons including changes