EMPOWER FUNDS, INC.

Empower Ariel Mid Cap Value Fund Institutional Class Ticker: MXOAX Investor Class Ticker: MXMCX	Empower Small Cap Growth Fund Institutional Class Ticker: MXMSX Investor Class Ticker: MXMTX
Empower Bond Index Fund Institutional Class Ticker: MXCOX Investor Class Ticker: MXBIX	Empower Small Cap Value Fund Institutional Class Ticker: MXTFX Investor Class Ticker: MXLSX
Empower Core Bond Fund Institutional Class Ticker: MXIUX Investor Class Ticker: MXFDX	Empower T. Rowe Price Mid Cap Growth Fund Institutional Class Ticker: MXYKX Investor Class Ticker: MXMGX
Empower Emerging Markets Equity Fund Institutional Class Ticker: MXENX Investor Class Ticker: MXEOX	Empower U.S. Government Securities Fund Institutional Class Ticker: MXDQX Investor Class Ticker: MXGMX
Empower Global Bond Fund Institutional Class Ticker: MXZMX Investor Class Ticker: MXGBX	Empower Aggressive Profile Fund Institutional Class Ticker: MXGTX Investor Class Ticker: MXAPX
Empower Government Money Market Fund Institutional Class Ticker: MXGXX Investor Class Ticker: MXMXX	Empower Conservative Profile Fund Institutional Class Ticker: MXKVX Investor Class Ticker: MXCPX Class L Ticker: MXIPX
Empower High Yield Bond Fund Institutional Class Ticker: MXFRX Investor Class Ticker: MXHYX	Empower Moderate Profile Fund Institutional Class Ticker: MXITX Investor Class Ticker: MXMPX Class L Ticker: MXGPX
Empower Inflation-Protected Securities Fund Institutional Class Ticker: MXIOX Investor Class Ticker: MXIHX	Empower Moderately Aggressive Profile Fund Institutional Class Ticker: MXHRX Investor Class Ticker: MXBPX
Empower International Growth Fund Institutional Class Ticker: MXHTX Investor Class Ticker: MXIGX	Empower Moderately Conservative Profile Fund Institutional Class Ticker: MXJUX Investor Class Ticker: MXDPX Class L Ticker: MXHPX
Empower International Index Fund Institutional Class Ticker: MXPBX Investor Class Ticker: MXINX	Empower Lifetime 2015 Fund Institutional Class Ticker: MXNYX Investor Class Ticker: MXLYX Service Class Ticker: MXLZX

Empower International Value Fund Institutional Class Ticker: MXJVX Investor Class Ticker: MXIVX	Empower Lifetime 2020 Fund Institutional Class Ticker: MXAKX Investor Class Ticker: MXAGX Service Class Ticker: MXAHX
Empower Large Cap Growth Fund Institutional Class Ticker: MXGSX Investor Class Ticker: MXLGX	Empower Lifetime 2025 Fund Institutional Class Ticker: MXQBX Investor Class Ticker: MXELX Service Class Ticker: MXFLX
Empower Large Cap Value Fund Institutional Class Ticker: MXVHX Investor Class Ticker: MXEQX Investor II Class Ticker: MXHAX	Empower Lifetime 2030 Fund Institutional Class Ticker: MXAYX Investor Class Ticker: MXATX Service Class Ticker: MXAUX
Empower Mid Cap Value Fund Institutional Class Ticker: MXKJX Investor Class Ticker: MXMVX	Empower Lifetime 2035 Fund Institutional Class Ticker: MXTBX Investor Class Ticker: MXKLX Service Class Ticker: MXLLX
Empower Multi-Sector Bond Fund Institutional Class Ticker: MXUGX Investor Class Ticker: MXLMX	Empower Lifetime 2040 Fund Institutional Class Ticker: MXBGX Investor Class Ticker: MXBDX Service Class Ticker: MXBEX
Empower Real Estate Index Fund Institutional Class Ticker: MXSFX Investor Class Ticker: MXREX	Empower Lifetime 2045 Fund Institutional Class Ticker: MXWEX Investor Class Ticker: MXQLX Service Class Ticker: MXRLX
Empower S&P 500® Index Fund Institutional Class Ticker: MXKWX Investor Class Ticker: MXVIX	Empower Lifetime 2050 Fund Institutional Class Ticker: MXBSX Investor Class Ticker: MXBOX Service Class Ticker: MXBQX
Empower S&P Mid Cap 400® Index Fund Institutional Class Ticker: MXNZX Investor Class Ticker: MXMDX Class L Ticker: MXBUX	Empower Lifetime 2055 Fund Institutional Class Ticker: MXZHX Investor Class Ticker: MXWLX Service Class Ticker: MXXLX
Empower S&P Small Cap 600® Index Fund Institutional Class Ticker: MXERX Investor Class Ticker: MXISX Class L: MXNSX	Empower Lifetime 2060 Fund Institutional Class Ticker: MXGUX Investor Class Ticker: MXGNX Service Class Ticker: MXGQX
Empower Short Duration Bond Fund Institutional Class Ticker: MXXJX Investor Class Ticker: MXSDX	Empower SecureFoundation® Balanced Fund Institutional Class Ticker: MXCJX Investor Class Ticker: MXSBX Service Class Ticker: MXSHX Class L Ticker: MXLDX

(the “Fund(s)”)

STATEMENT OF ADDITIONAL INFORMATION (“SAI”)

Throughout this SAI, “Fund” is intended to refer to each Fund listed above, unless otherwise indicated. This SAI is not a prospectus. It contains information in addition to the information in the prospectuses for the Funds. The prospectuses for the Funds, which may be amended from time to time, contain the basic information you should know before investing in a Fund. This SAI should be read together with the prospectuses for the Funds, each dated April 30, 2024. Requests for copies of prospectuses should be made by writing to: Secretary, Empower Funds, Inc., 8525 East Orchard Road, Greenwood Village, Colorado 80111, by calling (866) 831-7129, or by viewing www.empower.com/investments/empower-funds/fund-documents. The financial statements appearing in the Funds’ annual reports are incorporated into this SAI by reference; please see the “Financial Statements” section of this SAI for hyperlinks to these reports. Copies of the annual reports are available, without charge, and can be obtained by calling (866) 831-7129 or by viewing at www.empower.com/investments/empower-funds/fund-documents.

April 30, 2024

TABLE OF CONTENTS

	Page
INFORMATION ABOUT EMPOWER FUNDS, INC. AND THE FUNDS	1
DESCRIPTION OF THE FUNDS’ INVESTMENTS AND RISKS	1
Investment Strategies and Risks	1
MANAGEMENT OF EMPOWER FUNDS	39
Board of Directors Leadership Structure	43
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES	47
INVESTMENT ADVISORY AND OTHER SERVICES	47
PORTFOLIO MANAGERS	56
BROKERAGE ALLOCATION AND OTHER PRACTICES	110
CAPITAL STOCK AND OTHER SECURITIES	113
TAXATION OF THE FUNDS	115
UNDERWRITERS	118
FINANCIAL STATEMENTS	118
APPENDIX A	A-1
APPENDIX B	B-1
APPENDIX C	C-1

INFORMATION ABOUT EMPOWER FUNDS, INC. AND THE FUNDS

Empower Funds, Inc. (“Empower Funds”), an open-end management investment company registered with the U.S. Securities and Exchange Commission (“SEC”), is a Maryland corporation that organized on December 7, 1981 and commenced business as an investment company on February 5, 1982. The corporation changed its name from Great-West Funds, Inc. to Empower Funds, Inc. on August 1, 2022. Empower Funds offers 45 funds. This SAI describes 40 Funds, 22 of which are diversified Funds and 18 of which are non-diversified Funds.

The Board of Directors of Empower Funds (the “Board”) may organize and offer shares of a new fund or a new share class of an existing Fund or liquidate a Fund or share class at any time. Each Fund offers two or more classes of shares. The Institutional Class, Investor Class and Investor II Class shares offered by certain Funds do not have sales charges or distribution fees. The Class L and Service Class shares offered by certain Funds do not have sales charges but have a distribution and service fee (or 12b-1 fee).

Currently, shares of the Funds may be sold to and held by separate accounts of insurance companies to fund benefits under certain variable annuity contracts and variable life insurance policies (“variable contracts”), individual retirement account (“IRA”) custodians or trustees, participants in connection with qualified retirement plans (“retirement plans”) and, with respect to certain Funds, participants in connection with college saving programs (collectively, “Permitted Accounts”) and asset allocation funds that are series of Empower Funds.

Empower Capital Management, LLC (“ECM”), a subsidiary of Empower Annuity Insurance Company of America (“Empower of America”) and an affiliate of Empower Retirement, LLC (“Empower”), serves as the investment adviser to Empower Funds. ECM has selected one or more sub-advisers (each, a “Sub-Adviser”) to manage, on a daily basis, the assets of certain Funds.

DESCRIPTION OF THE FUNDS’ INVESTMENTS AND RISKS

Classification

Each of the Funds, with exception of the Empower Global Bond Fund, Empower Real Estate Index Fund, the Empower Profile Funds (the “Profile Funds”), the Empower Lifetime Funds (the “Lifetime Funds”) and the Empower SecureFoundation Balanced Fund (the “SecureFoundation Balanced Fund”), are classified as “diversified” for purposes of the Investment Company Act of 1940, as amended (“1940 Act”).

At least 75% of the value of a diversified fund’s total assets will be represented by cash and cash items (including receivables), U.S. government securities, securities of other investment companies, and other securities, the value of which with respect to any one issuer (other than the U.S. government and other investment companies) is neither more than 5% of the Fund’s total assets nor more than 10% of the outstanding voting securities of such issuer.

The Empower Global Bond Fund, Empower Real Estate Index Fund, the Profile Funds, the Lifetime Funds and the SecureFoundation Balanced Fund are considered “non-diversified” because they may invest a greater percentage of their assets in a particular issuer or group of issuers than a diversified Fund. Because a relatively high percentage of a non-diversified Fund’s assets may be invested in the securities of a limited number of issuers, some of which may be in the same industry, the Fund may be more sensitive to changes in the market value of a single issuer or industry.

Investment Strategies and Risks

The investment objectives, investment strategies, and principal risks of each Fund are described in its prospectus. This SAI contains supplemental information about those strategies and risks and the types of securities that ECM or a Sub-Adviser may select for each Fund. Except as described below and except as otherwise specifically stated in the applicable prospectus or this SAI, each Fund’s investment policies set forth in its prospectus and in this SAI are not fundamental and may be changed without shareholder approval.

The following pages contain more detailed information about types of securities in which the Funds may invest, as well as investment strategies, practices and techniques that ECM or any Sub-Adviser may employ in pursuit of a Fund’s investment objective, together with a discussion of related restrictions and risks. This information has been organized into various categories; to the extent it overlaps two or more categories, it is referenced only once in this section. ECM and/or any Sub-Adviser may not buy these securities or use any of these techniques unless it believes they are consistent with the applicable Fund’s investment objectives and policies (as described in the Fund’s prospectus) and that doing so will help the Fund achieve its objective. In addition, with respect to any particular Fund, to the extent that a security or technique is described in a Fund’s prospectus as being part of its principal investment strategies, the information provided below regarding such security or technique is intended to supplement, but not supersede, the information contained in the prospectus.

Certain of the Funds, including the Profile Funds, the Lifetime Funds and the SecureFoundation Balanced Fund, normally invest primarily in shares of other mutual funds (“Underlying Funds”), as described in their respective prospectus. The Underlying Funds, in turn, invest directly in securities (such as stocks and bonds). The investment techniques described below may be pursued directly by the Underlying Funds or, in certain circumstances, by a Fund directly. The Funds may be subject to the risks described below indirectly through their investments in Underlying Funds. The Underlying Funds may use any or all of these techniques at any one time, and the fact that an Underlying Fund may use a technique does not mean that the technique will be used. An Underlying Fund’s transactions in a particular type of security or use of a particular technique is subject to limitations imposed by the Underlying Fund’s investment objective, policies, and restrictions described in the Underlying Fund’s prospectus and/or statement of additional information, as well as federal securities laws. For the purpose of this section, references to investments by “a Fund” or “the Funds” include the Underlying Funds.

Debt Securities

A debt security, also referred to as a fixed income security, consists of a certificate or other evidence of a debt (secured or unsecured) upon which the issuer of the debt security promises to pay the holder a fixed, variable, or floating rate of interest for a specified length of time and to repay the debt on the specified maturity date. Some debt securities, such as zero coupon bonds, do not make regular interest payments but are issued at a discount to their principal or maturity value. Debt securities include a variety of fixed income obligations, including, but not limited to, corporate bonds, government securities, municipal securities, convertible securities, mortgage-backed securities, and asset-backed securities. Debt securities include investment grade securities, below investment grade securities (commonly known as “high yield securities” or “junk bonds”), and unrated securities.

Debt securities are subject to the risk of an issuer’s inability to meet principal and interest payments on the obligations when due (credit risk). The ability of an issuer to make these payments could be affected by general economic conditions, issues specific to the issuer, litigation, legislation or other political events, the bankruptcy of the issuer, war, natural disasters, terrorism or other major events. Debt securities may also be subject to price volatility due to factors such as interest rate sensitivity, market perception of the creditworthiness of the issuer, and general market liquidity (market risk).

Asset-Backed Securities. Asset-backed securities represent interests in pools of assets, including consumer loans, auto loans, student loans, or receivables held in trust. Payment of interest and repayment of principal may be largely dependent upon the cash flows generated by the assets backing the securities and, in certain cases, supported by letters of credit, surety bonds, or other credit enhancements. Asset-backed security values may also be affected by other factors including changes in interest rates, the availability of information concerning the pool and its structure, the creditworthiness of the servicing agent for the pool, the originator of the loans or receivables, or the entities providing the credit enhancement. Asset-backed securities are subject to the risk that borrowers will prepay the principal on their loans more quickly than expected (prepayment risk) in a declining interest rate environment or more slowly than expected (extension risk) in a rising interest rate environment. Additionally, asset-backed securities present certain risks that are not presented by mortgage-backed securities. Primarily, these securities may not have the benefit of any security interest in the related assets, which raises the possibility that recoveries on repossessed collateral may not be available to support payments on these securities. To lessen the effect of failures by obligors on underlying assets to make payments, the entity administering the pool of assets may agree to ensure that the receipt of payments on the underlying pool occurs in a timely fashion (“liquidity protection”). In addition, asset-backed securities may obtain insurance, such as guarantees, policies or letters of credit obtained by the issuer or sponsor from third parties, for some or all of the assets in the pool (“credit support”). Delinquency or loss more than that anticipated, or failure of the credit support could adversely affect the return on an investment in such a security.

Collateralized Debt Obligations. Collateralized debt obligations (“CDOs”) are a type of asset-backed security and include collateralized bond obligations (“CBOs”), collateralized loan obligations (“CLOs”), and other similarly structured securities. A CBO is a trust, which is backed by a diversified pool of high risk, below investment grade fixed income securities. A CLO is a trust typically collateralized by a pool of loans, which may include, among others, domestic and foreign senior secured loans, senior unsecured loans, and subordinate corporate loans, including loans that may be rated below investment grade or equivalent unrated loans. CDOs may charge management fees and administrative expenses.

For both CBOs and CLOs, the cash flows from the trust are split into two or more portions, called tranches, varying in risk and yield. The riskiest portion is the “equity” tranche, which bears the bulk of defaults from the bonds or loans in the trust and serves to protect the other, more senior tranches from default in all but the most severe circumstances. Since it is partially protected from defaults, a senior tranche from a CBO trust or CLO trust typically has higher ratings and lower yields than its underlying securities, and can be rated investment grade. Despite the protection from the equity tranche, CBO or CLO tranches can experience substantial losses due to actual defaults, increased sensitivity to defaults due to collateral default and disappearance of protecting tranches, market anticipation of defaults, as well as aversion to CBO or CLO securities as a class.

The risks of an investment in a CDO depend largely on the type of the collateral securities and the class of the CDO in which a Fund invests. Normally, CBOs, CLOs and other CDOs are privately offered and sold, and thus, are not registered under securities laws. As a result, investments in CDOs may be characterized by a Fund as illiquid investments. However, an active dealer market may exist for CDOs allowing a CDO to qualify for Rule 144A transactions. In addition to the normal risks associated with fixed income securities, CDOs carry additional risks including, but not limited to: (1) the possibility that distributions from collateral securities will not be adequate to make interest or other payments; (2) the risk that the quality of the collateral may decline in value or default; (3) the risk that a Fund may invest in CDOs that are subordinate to other classes; and (4) the possibility that the complex structure of the security may not be fully understood at the time of investment and may produce disputes with the issuer or unexpected investment results.

Bank Loans. Bank loans are obligations of companies or other entities that are typically issued in connection with recapitalizations, acquisitions and refinancings. These investments may include institutionally traded floating and fixed rate debt securities. Bank loans often involve borrowers whose financial conditions are troubled or uncertain, including companies that are highly leveraged or are involved in bankruptcy proceedings. The Funds generally invest in bank loans directly through an agent, either by assignment from another holder of the loan or as a participation interest in another holder’s portion of the loan. Some bank loans may be purchased on a “when-issued” basis. The market for bank loans may not be highly liquid and a Fund may have difficulty selling bank loans. These investments expose a Fund to the credit risk of both the financial institution and the underlying borrower.

Bank loans generally are subject to legal or contractual restrictions on resale. Bank loans and other forms of direct indebtedness may be structured such that they are not securities under securities laws and subject to securities laws protections against fraud and misrepresentation. In the absence of definitive regulatory guidance, while there can be no assurances that fraud or misrepresentation will not occur with respect to bank loans and other investments in which a Fund invests, the Fund relies on the portfolio managers’ research to avoid situations where fraud or misrepresentation could adversely affect the Fund.

Bank Obligations. Bank obligations may be issued or guaranteed by U.S. or foreign banks. Bank obligations that may be purchased by a Fund include banker’s acceptances, certificates of deposit and fixed time deposits. A banker’s acceptance is a short-term draft drawn on a commercial bank by a borrower, usually in connection with an international commercial transaction. The borrower is liable for payment, as well as the bank, which unconditionally guarantees to pay the draft at its face amount on the maturity date. The Funds generally will not invest in acceptances with maturities exceeding seven days where doing so would tend to create liquidity problems. A certificate of deposit is a short-term negotiable certificate issued by a commercial bank against funds deposited in the bank and is either interest-bearing or purchased on a discount basis. Fixed time deposits are obligations of branches of U.S. or non-U.S. banks which are payable at a stated maturity date and bear a fixed rate of interest. Although fixed time deposits do not have a market, there are no contractual restrictions on the right to transfer a beneficial interest in the deposit to a third party. Bank obligations may be general obligations of the parent bank or may be limited to the issuing branch by the terms of the specific obligations or by government regulation.

Banks are subject to extensive governmental regulations. These regulations place limitations on the amounts and types of loans and other financial commitments which may be made by the bank and the interest rates and fees which may be charged on these loans and commitments. The profitability of the banking industry depends on the availability and costs of capital funds for the purpose of financing loans under prevailing money market conditions. General economic conditions also play a key role in the operations of the banking industry.

U.S. and global markets recently have experienced increased volatility, including as a result of the recent failures of certain U.S. and non-U.S. banks, which could be harmful to the Funds and issuers in which they invest. For example, if a bank at which a Fund or issuer has an account fails, any cash or other assets in bank or custody accounts, which may be substantial in size, could be temporarily inaccessible or permanently lost by the Fund or issuer. If a bank that provides a subscription line credit facility, asset-based facility, other credit facility and/or other services to an issuer or to a Fund fails, the issuer or Fund could be unable to draw funds under its credit facilities or obtain replacement credit facilities or other services from other lending institutions with similar terms.

Issuers in which a Fund may invest can be affected by volatility in the banking sector. Even if banks used by issuers in which a Fund invests remain solvent, continued volatility in the banking sector could contribute to, cause or intensify an economic recession, increase the costs of capital and banking services or result in the issuers being unable to obtain or refinance indebtedness at all or on as favorable terms as could otherwise have been obtained. Conditions in the banking sector are evolving, and the scope of any potential impacts to the Funds and issuers, both from market conditions and also potential legislative or regulatory responses, are uncertain. Such conditions and responses, as well as a changing interest rate environment, can contribute to decreased market liquidity and erode the value of certain holdings, including those of U.S. and non-U.S. banks. Continued market volatility and uncertainty and/or a downturn in market and economic and financial conditions, as a result of developments in the banking industry or otherwise (including as a result of delayed access to cash or credit facilities), could have an adverse impact on a Fund and issuers in which it invests.

A Fund’s investments in the obligations of foreign branches of U.S. banks and of foreign banks may subject the Fund to investment risks that are different in some respects from those of investments in obligations of U.S. domestic issuers. Such risks include future political and economic developments, the possible imposition of withholding taxes on interest income, possible seizure or nationalization of foreign deposits, the possible establishment of exchange controls or the adoption of other foreign governmental restrictions which might adversely affect the payment of principal and interest of such obligations. In addition, foreign branches of U.S. banks and foreign banks may be subject to less stringent reserve requirements and to different accounting, auditing, reporting and record keeping standards than those applicable to domestic branches of U.S. banks.

Below Investment Grade Securities. Below investment grade securities (commonly known as “high yield securities” or “junk bonds”) are debt securities that are rated Ba1 or lower by Moody’s Investors Service, Inc. (“Moody’s”) or BB+ or lower by Standard & Poor’s Global Ratings (“S&P”) or have a comparable rating from another nationally recognized statistical rating organization or are of comparable quality if unrated. Below investment grade securities may be structured as fixed-, variable- or floating-rate obligations or as zero coupon, pay-in-kind (“PIK”) and step coupon securities and may be privately placed or publicly offered.

Investments in below investment grade securities generally provide greater income and increased opportunity for capital appreciation than investments in higher-quality debt securities, but they also typically entail greater potential price volatility and principal and income risk. Below investment grade securities have poor protection with respect to the payment of interest and repayment of principal, or may be in default. These securities are often considered to be speculative and involve greater risk of loss or price changes due to changes in the issuer’s capacity to pay. The market prices of below investment grade securities may fluctuate more than those of higher-quality debt securities and may decline significantly in periods of general economic difficulty, which may follow periods of rising interest rates.

The market for below investment grade securities may be thinner and less active than that for higher-quality debt securities, which can adversely affect the prices at which the former are sold. Adverse publicity and changing investor perceptions may affect the liquidity of below investment grade securities and the ability of outside pricing services to value below investment grade securities. A severe economic downturn or increase in interest rates might increase defaults in below investment grade securities issued by highly leveraged companies. An increase in the number of defaults could adversely affect the value of all outstanding below investment grade securities, thus further disrupting the market for such securities.

Below investment grade bonds are more sensitive to adverse economic changes or individual corporate developments but less sensitive to interest rate changes than are U.S. Treasury or investment grade bonds. As a result, when interest rates rise causing bond prices to fall, the value of below investment grade bonds tend not to fall as much as U.S. Treasury or investment grade bonds. Conversely, when interest rates fall, below investment grade bonds tend to underperform U.S. Treasury and investment grade bonds because below investment grade bond prices tend not to rise as much as the prices of these bonds.

The financial stress resulting from an economic downturn or adverse corporate developments could have a greater negative effect on the ability of issuers of below investment grade securities to service their principal and interest payments, to meet projected business goals and to obtain additional financing than on more creditworthy issuers. Holders of below investment grade securities could also be at greater risk because below investment grade securities are generally unsecured and subordinate to senior debt holders and secured creditors. If the issuer of a below investment grade security owned by a Fund defaults, the Fund may incur additional expenses to seek recovery. In addition, periods of economic uncertainty and changes can be expected to result in increased volatility of market prices of below investment grade securities and a Fund’s net asset value.

Below investment grade securities present risks based on payment expectations. For example, below investment grade securities may contain redemption or call provisions. If an issuer exercises these provisions in a declining interest rate market, a Fund may have to replace the security with a lower yielding security, resulting in a decreased return for investors. Also, the value of below investment grade securities may decrease in a rising interest rate market. In addition, there is a higher risk of non-payment of interest and/or principal by issuers of below investment grade securities than in the case of investment grade bonds.

In addition, the credit ratings assigned to below investment grade securities may not accurately reflect the true risks of an investment. Credit ratings typically evaluate the safety of principal and interest payments, rather than the market value risk of below investment grade securities. Credit agencies may also fail to adjust credit ratings to reflect rapid changes in economic or company conditions that affect a security’s market value.

Because the risk of default is higher for below investment grade securities, portfolio managers will attempt to identify those issuers of below investment grade securities whose financial conditions are adequate to meet future obligations, have improved, or are expected to improve in the future. Although the ratings of recognized rating services such as Moody’s and S&P are considered, analysis will focus on relative values based on such factors as interest or dividend coverage, asset coverage, existing debt, earnings prospects, operating history, and the experience and managerial strength of the issuer. Thus, the achievement of a Fund’s investment objective may be more dependent on the portfolio manager’s own credit analysis than might be the case for a

Fund which invests in higher quality bonds. The portfolio managers continually monitor the investments in the Funds and carefully evaluate whether to dispose of or retain below investment grade securities whose credit ratings have changed. The Funds may retain a security whose credit rating has changed.

Brady Bonds. Brady bonds are securities created through the exchange of existing commercial bank loans to public and private entities in certain emerging markets for new bonds in connection with debt restructurings. In light of the history of defaults of countries issuing Brady bonds on their commercial bank loans, investments in Brady bonds may be viewed as speculative. Brady bonds may be fully or partially collateralized or uncollateralized, are issued in various currencies (but primarily the U.S. dollar) and are actively traded in over-the-counter (“OTC”) secondary markets. Incomplete collateralization of interest or principal payment obligations results in increased credit risk. Dollar-denominated collateralized Brady bonds, which may be fixed-rate bonds or floating-rate bonds, are generally collateralized by U.S. Treasury zero coupon bonds having the same maturity as the Brady bonds. Each Fund may invest in Brady bonds only if it is consistent with quality specifications established from time to time by ECM or a Sub-Adviser to that Fund.

Commercial Paper. Commercial paper is an unsecured short-term promissory note issued by banks, corporations and other entities primarily to finance short-term credit needs. Such securities normally have maturities of nine months or less and, although commercial paper is often unsecured, commercial paper may be supported by letters of credit, surety bonds or other forms of collateral. Like bonds, and other fixed income securities, commercial paper prices are susceptible to fluctuations in interest rates. As interest rates rise, commercial paper prices typically will decline and vice versa. The short-term nature of a commercial paper investment, however, makes it less susceptible to such volatility than many other securities. Commercial paper tends to yield smaller returns than longer-term corporate debt because securities with shorter maturities typically have lower effective yields than those with longer maturities. As with all fixed income securities, there is a chance that the issuer will default on its commercial paper obligations and commercial paper may become illiquid or suffer from reduced liquidity in these or other situations.

Corporate Debt Securities. Corporate debt securities are long- and short-term fixed income securities typically issued by businesses to finance their operations. Corporate debt securities are issued by public or private companies, as distinct from debt securities issued by a government or its agencies. The issuer of a corporate debt security often has a contractual obligation to pay interest at a stated rate on specific dates and to repay principal periodically or on a specified maturity date. Corporate debt securities typically have four distinguishing features: (1) they are taxable; (2) they have a par value of $1,000; (3) they have a term maturity, which means they come due at a specified time period; and (4) many are traded on major securities exchanges. Notes, bonds, debentures and commercial paper are the most common types of corporate debt securities, with the primary difference being their interest rates, maturity dates and secured or unsecured status. Corporate debt securities may be rated investment grade or below investment grade and may be structured as fixed, variable or floating rate obligations or as zero coupon, PIK and step coupon securities and may be privately placed or publicly offered. They may also be senior or subordinated obligations.

Corporate debt securities are subject to the risk of the issuer’s inability to meet principal and interest payments on the obligation and may also be subject to price volatility due to such factors as interest rate sensitivity, market perception of the creditworthiness of the issuer and general market liquidity. When interest rates rise, the value of corporate debt securities can be expected to decline. Debt securities with longer maturities tend to be more sensitive to interest rate movements than those with shorter maturities. In addition, certain corporate debt securities may be highly customized and as a result may be subject to, among others, liquidity and pricing transparency risks.

Debt Security Ratings. Portfolio managers may consider the ratings assigned by various investment services and nationally recognized statistical rating organizations, such as S&P, that publish ratings based upon their assessment of the relative creditworthiness of debt securities. Generally, a lower rating indicates higher credit risk, and higher yields are ordinarily available from securities in the lower rating categories to compensate investors for the increased credit risk. These ratings are described at the end of this SAI in Appendix A. The ratings of a nationally recognized statistical rating organization, such as S&P, represent their opinions as to the quality of the instruments they undertake to rate. It should be emphasized that ratings are general and are not absolute standards of quality.

The reliance on credit ratings in evaluating securities can involve certain risks. For example, ratings assigned by the rating agencies are based upon an analysis at the time of the rating of the obligor’s ability to pay interest and repay principal, typically relying to a large extent on historical data. They do not purport to reflect the risk of fluctuations in market value of the debt securities and only express the rating agency’s current opinion of an obligor’s overall financial capacity to pay its financial obligations. The credit rating is not a statement of fact or a recommendation to purchase, sell or hold a debt obligation. Also, credit quality can change suddenly and unexpectedly, and credit ratings may not reflect the issuer's current financial condition or events since the security was last rated.

Additionally, rating agencies may have a financial interest in generating business from the arranger or issuer of the security that normally pays for that rating, and a low rating might affect future business. While rating agencies have policies and procedures to address this potential conflict of interest, there is a risk that these policies will fail to prevent a conflict of interest from impacting the rating.

Discount Obligations. Investment in discount obligations (including most Brady bonds) may be in securities which were (1) initially issued at a discount from their face value, and (2) purchased by a Fund at a price less than their stated face amount or at a price less than their issue price plus the portion of “original issue discount” previously accrued thereon, i.e., purchased at a “market discount.” The amount of original issue discount and/or market discount on obligations purchased by a Fund may be significant, and accretion of market discount together with original issue discount, will cause the Fund to recognize income prior to the receipt of cash payments with respect to these securities.

Distressed Debt Securities. Distressed debt securities are debt securities that are purchased in the secondary market and are the subject of bankruptcy proceedings or otherwise in default as to the repayment of principal and/or interest at the time of acquisition by a Fund or are rated in the lower ratings categories (Ca or lower by Moody's and CC or lower by S&P) or which, if unrated, are in the judgment of the portfolio manager of equivalent quality. Investment in distressed debt securities is speculative and involves significant risk. The risks associated with below investment grade securities are heightened by investing in distressed debt securities.

A Fund will generally make such investments only when the portfolio manager believes it is reasonably likely that the issuer of the distressed debt securities will make an exchange offer or will be the subject of a plan of reorganization pursuant to which the Fund will receive new securities (e.g., equity securities). However, there can be no assurance that such an exchange offer will be made or that such a plan of reorganization will be adopted. In addition, a significant period of time may pass between the time at which a Fund makes its investment in distressed debt securities and the time that any such exchange offer or plan of reorganization is completed. During this period, it is unlikely that a Fund will receive any interest payments on the distressed debt securities, the Fund will be subject to significant uncertainty as to whether or not the exchange offer or plan will be completed and the Fund may be required to bear certain extraordinary expenses to protect or recover its investment. Even if an exchange offer is made or plan of reorganization is adopted with respect to the distressed debt securities held by a Fund, there can be no assurance that the securities or other assets received by the Fund in connection with such exchange offer or plan of reorganization will not have a lower value or income potential than may have been anticipated when the investment was made. Moreover, any securities received by a Fund upon completion of an exchange offer or plan of reorganization may be restricted as to resale. As a result of a Fund’s participation in negotiations with respect to any exchange offer or plan of reorganization with respect to an issuer of distressed debt securities, the Fund may be restricted from disposing of such securities. None of the Funds will generally purchase securities that are in default or subject to bankruptcy proceedings in amounts greater than 5% of such Fund’s assets. Securities that have been downgraded to Ca/CC or lower subsequent to purchase shall not be included in this limitation.

Inflation-Linked Securities. Inflation-linked securities are income-generating instruments whose interest and principal payments are periodically adjusted for inflation, which measures a sustained increase in prices of goods and services in an economy that erodes the purchasing power of a currency over time. Treasury inflation-protected securities (“TIPS”) are inflation-linked securities issued by the U.S. government. Inflation-linked securities are also issued by corporations, U.S. government agencies, states, and foreign countries. The inflation adjustment, which is typically applied monthly to the principal of the bond, follows a designated inflation index, such as the consumer price index. A fixed coupon rate is applied to the inflation-adjusted principal so that as inflation rises, both the principal value and the interest payments increase. This can provide investors with a hedge against inflation, as it helps preserve the purchasing power of the investment. Because of this inflation-adjustment feature, inflation-linked securities typically have lower yields than conventional fixed rate bonds. Municipal inflation bonds generally have a fixed principal amount, and the inflation component is reflected in the nominal coupon.

Inflation-linked securities normally will decline in price when real interest rates rise. (A real interest rate is calculated by subtracting the inflation rate from a nominal interest rate. For example, if a 10-year Treasury note is yielding 5% and the rate of inflation is 2%, the real interest rate is 3%.) If inflation is negative, the principal and income of an inflation-linked security normally will decline and could result in losses for a Fund. Funds that invest in inflation-linked securities do not always move in lockstep with changes in the inflation rate because they do not necessarily buy inflation-linked securities when they are originally issued or hold them until maturity. In addition, there is no assurance that the consumer price index or other inflation index used to determine inflation adjustments will accurately measure the real rate of inflation.

Inflation adjustments or TIPS that exceed deflation adjustments for the year will be distributed by a Fund as a short-term capital gain, resulting in ordinary income to shareholders. Net deflation adjustments for a year could result in all or a portion of dividends paid earlier in the year by a Fund being treated as a return of capital.

Loan Participations and Assignments. Loan participations and assignments are interests in loans and therefore are considered to be investments in debt securities. If a Fund purchases a loan participation, the Fund typically will have a contractual relationship only with the lender that sold the participation, and not with the borrower. A Fund will have the right to receive payments of principal, interest and any fees to which it is entitled only from the lender selling the participation and only upon receipt by the lender of the payments from the borrower. In connection with purchasing loan participations, a Fund generally will have no right to enforce compliance by the borrower with the terms of the loan agreement relating to the loan, nor any rights of set-off against the borrower, and the Fund may not benefit directly from any collateral supporting the loan in which it has purchased the participation. As a result, a Fund will assume the credit risk of both the borrower and the lender that is selling the participation. In the event of the insolvency of the lender selling a participation, a Fund may be treated as a general creditor of the lender and may not benefit from any set-off between the lender and the borrower. A Fund will acquire loan participations only if the lender interpositioned between the Fund and the borrower is believed by ECM or a Sub-Adviser to be creditworthy. When a Fund purchases assignments from lenders, the Fund will acquire direct rights against the borrower on the loan, except that under certain circumstances such rights may be more limited than those held by the assigning lender.

A Fund may have difficulty disposing of loan participations and assignments. In certain cases, such instruments may not be highly liquid and therefore could be sold only to a limited number of institutional investors. The lack of a highly liquid secondary market may have an adverse impact on the value of such instruments and will have an adverse impact on a Fund’s ability to dispose of particular loan participations or assignments in response to a specific economic event, such as deterioration in the creditworthiness of the borrower.

The Board has adopted a liquidity risk management program for the purpose of determining whether holdings are liquid or illiquid. The determination as to whether a particular loan participation or assignment is liquid or illiquid depends upon the frequency of trades and quotes, the number of dealers willing to purchase or sell, the number of other potential buyers, dealer undertakings to make a market in the security, the nature of the loan participation or assignment, and its market place, including such considerations as the time needed to dispose of it, the method of soliciting offers and the mechanics of transfer. To the extent that liquid loan participations and assignments that a Fund holds become illiquid, due to the lack of sufficient buyers or market or other conditions, the percentage of a Fund’s assets invested in illiquid investments would increase.

In valuing a loan participation or assignment held by a Fund for which a secondary trading market exists, the Fund will rely upon prices or quotations provided by banks, dealers or pricing services. To the extent a secondary trading market does not exist, a Fund’s loan participations and assignments will be valued in accordance with procedures adopted by the Board.

Mortgage-Backed Securities. A mortgage-backed security (“MBS”) is an obligation of the issuer backed by a mortgage or pool of mortgages or a direct interest in an underlying pool of mortgages. MBS include mortgage pass-through securities and collateralized mortgage obligations (“CMOs”). These mortgage loans may have either fixed or adjustable interest rates. A guarantee or other form of credit support may be attached to an MBS to protect against default on obligations. Some MBS make payments of both principal and interest at a range of specified intervals; others make semiannual interest payments at a predetermined rate and repay principal at maturity (like a typical bond). MBS are based on different types of mortgages including those on commercial real estate or residential properties. MBS may be arranged by various governmental agencies, such as the Government National Mortgage Association (“Ginnie Mae”); government sponsored enterprises (“GSEs”), such as the Federal National Mortgage Association (“Fannie Mae”) and the Federal Home Loan Mortgage Corporation (“Freddie Mac”); and private issuers, such as commercial banks, savings and loan institutions, mortgage bankers, and private mortgage insurance companies.

The value of MBS may change due to shifts in the market’s perception of issuers. An economic downturn - particularly one that contributes to an increase in delinquencies and defaults on residential mortgages, falling home prices, and unemployment - may adversely affect the market for and value of MBS. In addition, regulatory or tax changes may adversely affect the mortgage securities market as a whole. Non-government MBS may offer higher yields than those issued by government entities, but also may be subject to greater price changes and increased interest rate, credit and other risks, such as liquidity and valuation risks, than government issues. MBS are subject to prepayment risk, which is the risk that early principal payments made on the underlying mortgages, usually in response to a reduction in interest rates, will result in the return of principal to the investor, causing it to be invested subsequently at a lower current interest rate. Alternatively, in a rising interest rate environment, mortgage security values may be adversely affected when prepayments on underlying mortgages do not occur as anticipated, resulting in the extension of the security’s effective maturity and the related increase in interest rate sensitivity of a longer-term instrument.

Collateralized Mortgage Obligations. CMOs are debt obligations collateralized by residential or commercial mortgage loans or residential or commercial mortgage pass-through securities. Interest and prepaid principal are generally paid monthly. CMOs may be collateralized by whole mortgage loans or private mortgage pass-through securities but are more typically collateralized by portfolios of mortgage pass-through securities guaranteed by Ginnie Mae, Freddie Mac, or Fannie Mae.

CMOs are structured into multiple classes, often referred to as a “tranche,” each issued at a specific adjustable or fixed interest rate and bearing a different stated maturity date, and each must be fully retired no later than its final distribution

date. Actual maturity and average life will depend upon the prepayment experience of the collateral, which is ordinarily unrelated to the stated maturity date. CMOs often provide for a modified form of call protection through a de facto breakdown of the underlying pool of mortgages according to how quickly the loans are repaid. Monthly payment of principal received from the pool of underlying mortgages, including prepayments, is first returned to investors holding the shortest maturity class. Investors holding the longer maturity classes usually receive principal only after the first class has been retired. An investor may be partially protected against a sooner than desired return of principal because of the sequential payments.

The primary risk of CMOs is the uncertainty of the timing of cash flows that results from the rate of prepayments on the underlying mortgages serving as collateral and from the structure of the particular CMO transaction (i.e., the priority of the individual tranches). An increase or decrease in prepayment rates (resulting from a decrease or increase in mortgage interest rates) will affect the yield, the average life, and the price of CMOs. The prices of certain CMOs, depending on their structure and the rate of prepayments, can be volatile. Some CMOs may also not be as liquid as other securities.

CMO Residuals. CMO residuals are derivative mortgage securities issued by agencies or instrumentalities of the U.S. government or by private originators of, or investors in, mortgage loans. The cash flow generated by the mortgage assets underlying a series of CMOs is applied first to make required payments of principal and interest on the CMOs and second to pay the related administrative expenses of the issuer. The “residual” in a CMO structure generally represents the interest in any excess cash flow remaining after making the foregoing payments. Each payment of such excess cash flow to a holder of the related CMO residual represents income and/or a return of capital. The amount of residual cash flow resulting from a CMO will depend on, among other things, the characteristics of the mortgage assets, the coupon rate of each class of CMO, prevailing interest rates, the amount of administrative expenses and, in particular, the prepayment experience on the mortgage assets. In addition, if a series of a CMO includes a class that bears interest at an adjustable rate, the yield to maturity on the related CMO residual will also be extremely sensitive to changes in the level of the index upon which interest rate adjustments are based. In certain circumstances a Fund may fail to recoup fully its initial investment in a CMO residual.

CMO residuals are generally purchased and sold by institutional investors through several investment banking firms acting as brokers or dealers. The CMO residual market currently may not have the liquidity of other more established securities trading in other markets.

CMO residuals may be subject to certain restrictions on transferability, may be deemed illiquid and therefore subject to the Funds’ limitations on investment in illiquid investments.

Mortgage Dollar Rolls. In a mortgage dollar roll, a Fund sells MBS for delivery in the current month and simultaneously contracts to repurchase substantially similar (name, type, coupon, and maturity) securities on a specified future date. During the period between the sale and repurchase (the “roll period”), a Fund foregoes principal and interest paid on the MBS. A Fund is compensated by the difference between the current sales price and the lower forward price for the future purchase (often referred to as the “drop”), as well as by the interest earned on the cash proceeds of the initial sale. A Fund could suffer a loss if the contracting party fails to perform the future transaction and the Fund is therefore unable to buy back the MBS it initially sold. Mortgage dollar rolls transactions may (due to the deemed borrowing position involved), increase a Fund’s overall investment exposure and result in losses.

Dollar roll transactions involve the risk that the market value of the securities retained by a Fund may decline below the price of the securities that the Fund has sold but is obligated to repurchase under the agreement. In the event the buyer of securities under a dollar roll transaction files for bankruptcy or becomes insolvent, a Fund’s use of the proceeds from the sale of the securities may be restricted pending a determination by the other party, or its trustee or receiver, whether to enforce the Fund’s obligation to repurchase the securities.

Mortgage Pass-through Securities. Mortgage pass-through securities are interests in pools of mortgage loans, assembled and issued by various governmental, government-related, and private organizations. Unlike other forms of debt securities, which normally provide for periodic payment of interest in fixed amounts with principal payments at maturity or specified call dates, these securities provide a monthly payment consisting of both interest and principal payments. In effect, these payments are a “pass-through” of the monthly payments made by the individual borrowers on their residential or commercial mortgage loans, net of any fees paid to the issuer or guarantor of such securities. Additional payments are caused by repayments of principal resulting from the sale of the underlying property, refinancing or foreclosure, net of fees or costs. Some mortgage pass-through securities (such as securities guaranteed by Ginnie Mae) are described as “modified pass-through securities.” These securities entitle the holder to receive all interest and principal payments owed on the mortgage pool, net of certain fees, on the scheduled payment dates regardless of whether the mortgagor actually makes the payment.

The principal governmental guarantor of U.S. mortgage pass-through securities is Ginnie Mae. Ginnie Mae is authorized to guarantee, with the full faith and credit of the U.S. government, the timely payment of principal and interest on securities

issued by institutions approved by Ginnie Mae (such as savings and loan institutions, commercial banks and mortgage bankers) and backed by pools of mortgages either insured by the Federal Housing Administration or guaranteed by the U.S. Department of Veterans Affairs. Ginnie Mae is also empowered to borrow without limitation from the U.S. Treasury, if necessary, to make any payments required under its guarantee.

Government-related guarantors whose obligations are not backed by the full faith and credit of the U.S. government include Fannie Mae and Freddie Mac. Fannie Mae purchases conventional (i.e., not insured or guaranteed by any government agency) residential mortgages from a list of approved seller/servicers which include state and federally chartered savings and loan associations, mutual savings banks, commercial banks and credit unions and mortgage bankers. Freddie Mac issues participation certificates that represent interests in conventional mortgages from Freddie Mac’s national portfolio. Fannie Mae and Freddie Mac guarantee the timely payment of interest and ultimate collection of principal on securities they issue, but the securities they issue are neither issued nor guaranteed by the U.S. government. Additionally, Fannie Mae and Freddie Mac may borrow from the U.S. Treasury to meet their obligations, but the U.S. Treasury is under no obligation to lend to Fannie Mae or Freddie Mac.

Commercial banks, savings and loan institutions, private mortgage insurance companies, mortgage bankers and other secondary market issuers also create pass-through pools of conventional residential mortgage loans. Such issuers may, in addition, be the originators and/or servicers of the underlying mortgage loans as well as the guarantors of the MBS. Pools created by such non-governmental issuers generally offer a higher rate of interest than government and government-related pools because there are no direct or indirect government or agency guarantees of payments for such securities. However, timely payment of interest and principal of these pools may be supported by various forms of insurance or guarantees, including individual loan, title, pool and hazard insurance and letters of credit. The insurance and guarantees are issued by governmental entities, private insurers and the mortgage poolers. Such insurance and guarantees and the creditworthiness of the issuers thereof will be considered in determining whether a mortgage pass-through security meets a Fund’s investment quality standards. There can be no assurance that the private insurers or guarantors can meet their obligations under the insurance policies or guarantee arrangements. A Fund may buy mortgage pass-through securities without insurance or guarantees if, through an examination of the loan experience and practices of the originator/servicers and poolers, ECM or the Fund’s Sub-Adviser determines that the securities meet the Fund’s quality standards. Securities issued by certain private organizations may not be readily marketable and may therefore be subject to a Fund’s limitations on investments in illiquid investments.

Mortgage pass-through securities that are issued or guaranteed by the U.S. government, its agencies or instrumentalities, are not subject to the Funds’ industry concentration restrictions by virtue of the exclusion from the test available to all U.S. government securities. The Funds take the position that privately-issued, mortgage pass-through securities, and other asset-backed securities, do not represent interests in any particular “industry” or group of industries. The assets underlying such securities may be represented by a portfolio of first lien residential mortgages (including both whole mortgage loans and mortgage participation interests) or portfolios of mortgage pass-through securities issued or guaranteed by Ginnie Mae, Fannie Mae or Freddie Mac. In the case of private issue mortgage pass-through securities whose underlying assets are neither U.S. government securities nor U.S. government-insured mortgages, to the extent that real properties securing such assets may be located in the same geographical region, the security may be subject to a greater risk of default than other comparable securities in the event of adverse economic, political or business developments that may affect such region and, ultimately, the ability of residential homeowners to make payments of principal and interest on the underlying mortgages.

It is possible that the availability and the marketability (that is, liquidity) of the securities discussed in this section could be adversely affected by the actions of the U.S. government to tighten the availability of its credit. Since September 7, 2008, Fannie Mae and Freddie Mac have operated under a conservatorship administered by the Federal Housing Finance Agency (“FHFA”). FHFA will act as the conservator to operate Fannie Mae and Freddie Mac until they are stabilized. In connection with the conservatorship, the U.S. Treasury entered into a Senior Preferred Stock Purchase Agreement to provide additional financing to Fannie Mae and Freddie Mac. The conservatorship is still in effect as of the date of this SAI and has no specified termination date. There can be no assurance as to when or how the conservatorship will be terminated or whether Fannie Mae or Freddie Mac will continue to exist following the conservatorship or what their respective business structures will be during or following the conservatorship. FHFA, as conservator, has the power to repudiate any contract entered into by Fannie Mae or Freddie Mac prior to its appointment if it determines that performance of the contract is burdensome and repudiation of the contract promotes the orderly administration of Fannie Mae’s or Freddie Mac’s affairs. Furthermore, FHFA has the right to transfer or sell any asset or liability of Fannie Mae or Freddie Mac without any approval, assignment or consent. If FHFA were to transfer any such guarantee obligation to another party, holders of Fannie Mae or Freddie Mac MBS would have to rely on that party for satisfaction of the guarantee obligation and would be exposed to the credit risk of that party.

Stripped Mortgage-Backed Securities. Stripped mortgage-backed securities (“SMBS”) are derivative multi-class mortgage securities. They may be issued by agencies or instrumentalities of the U.S. government, or by private originators of, or

investors in, mortgage loans. SMBS are usually structured with two classes that receive different proportions of the interest and principal distributions on a pool of mortgage assets. A common type of SMBS will have one class receiving some of the interest and most of the principal from the mortgage assets, while the other class will receive most of the interest and the remainder of the principal. In the most extreme case, one class will receive all of the interest (the interest-only or “IO” class), while the other class will receive all of the principal (the principal-only or “PO” class). The yield to maturity on an IO class security is extremely sensitive to the rate of principal payments (including prepayments) on the related underlying mortgage assets, and a rapid rate of principal payments may have a material adverse effect on a Fund’s yield to maturity from these securities. If the underlying mortgage assets experience greater than anticipated prepayments of principal, a Fund may fail to recoup fully its initial investment in these securities even if the security is in one of the highest rating categories. The market value of the PO class generally is unusually volatile in response to changes in interest rates.

Although SMBS are purchased and sold by institutional investors through several investment banking firms acting as brokers or dealers, secondary markets for these securities may not be as developed or have the same volume as markets for other types of securities. These securities, therefore, may have more limited liquidity and may at times be illiquid and subject to a Fund’s limitations in illiquid investments.

Municipal Bonds. Municipal bonds are debt obligations issued by states, municipalities, and other political subdivisions; and agencies, authorities, and instrumentalities of states and multi-state agencies or authorities. Typically, the interest payable on municipal bonds is, in the opinion of bond counsel to the issuer at the time of issuance, exempt from federal income tax. However, while most municipal bonds are exempt from federal income tax, some are not. Municipal bonds have two principal classifications: general obligations and revenue bonds.

General obligation bonds are securities backed by a municipality’s pledge of full faith, credit and taxing power. Issuers of general obligation bonds include states, counties, cities, towns and regional districts. Revenue bonds are securities backed by revenues generated by a specific project, facility or tax. Revenue bonds are issued to finance a wide variety of capital projects including municipal water, sewer and power utilities; healthcare facilities; transportation projects; higher education or housing facilities; industrial development and resource recovery bonds and lease-backed bonds (including certificates of participation and municipal lease obligations).

Constitutional amendments, legislative enactments, executive orders, administrative regulations, voter initiatives and the issuer’s regional economic conditions may affect a municipal bond’s value, interest payments, repayment of principal and a Fund’s ability to sell it. Revenue bonds are generally not backed by the taxing power of the issuing municipality. To the extent that a municipal bond is not heavily followed by the investment community or such security issue is relatively small, the bond may be difficult to value or sell at a desirable price. If the Internal Revenue Service (“IRS”) determines that an issuer of a municipal bond has not complied with applicable tax requirements, interest from the bond could be treated as taxable, which could result in a decline in the bond’s value. The Funds expect to invest less than 50% of their total assets in tax-exempt municipal bonds. As a result, none of the Funds expect to be eligible to pass any exempt interest received on municipal bonds held by a Fund to shareholders as exempt interest dividends.

Tender Option Bonds. Tender option bonds are municipal derivatives created by dividing the income stream provided by an underlying security, such as municipal bonds or preferred shares issued by a tax-exempt bond fund, to create two securities issued by a special-purpose trust, one short-term and one long-term. The interest rate on the short-term component is periodically reset. The short-term component has negligible interest rate risk, while the long-term component has all of the risk of the underlying security. After income is paid on the short-term securities at current rates, the residual income goes to the long-term securities. Therefore, rising short-term interest rates result in lower income for the longer-term portion, and vice versa. The longer-term components can be very volatile and may be less liquid than other municipal bonds of comparable maturity. These securities have been developed in the secondary market to meet the demand for short-term, tax-exempt securities.

Strip Bonds. Strip bonds are debt securities that are stripped of their interest (usually by a financial intermediary) after the securities are issued. The market value of these securities generally fluctuates more in response to changes in interest rates than interest-paying securities of comparable maturity.

Structured Securities. Structured securities (also called “structured notes”) are derivative debt securities, the interest rate or principal of which is determined by an unrelated indicator. The value of the principal of and/or interest on structured securities is determined by reference to changes in the value of specific currencies, interest rates, commodities, indices or other financial indicators (the “reference”) or the relative change in two or more references. The interest rate or the principal amount payable upon maturity or redemption may be increased or decreased, depending upon changes in the applicable reference. The terms of structured securities may provide that, in certain circumstances, no principal is due at maturity and, therefore, may result in a loss of invested capital. Structured securities may be positively or negatively indexed, so that appreciation of the reference may produce an increase or a decrease in the interest rate or value of the security at maturity. In addition, changes in the interest rate or

the value of the structured security at maturity may be calculated as a specified multiple of the change in the value of the reference; therefore, the value of such security may be very volatile. Structured securities may entail a greater degree of market risk than other types of debt securities because the investor bears the risk of the reference. Structured securities may also be more volatile, less liquid, and more difficult to accurately price than less complex securities or more traditional debt securities, which could lead to an overvaluation or an undervaluation of the securities.

Certain issuers of structured securities may be deemed to be “investment companies” as defined in the 1940 Act. As a result, any investment in these structured securities may be limited by the restrictions contained in the 1940 Act.

To-Be-Announced Purchase Commitments. As with other delayed delivery transactions, a to-be-announced (“TBA”) purchase commitment is a security that is purchased or sold for a fixed price with the underlying securities to be announced at a future date. However, the seller does not specify the particular securities to be delivered. Instead, a Fund agrees to accept any securities that meet the specified terms. For example, in a TBA mortgage-backed security transaction, a Fund and seller would agree upon the issuer, interest rate and terms of the underlying mortgages, but the seller would not identify the specific underlying mortgages until it issues the security.

TBA purchase commitments involve a risk of loss if the value of the underlying security to be purchased declines prior to delivery date. The yield obtained for such securities may be higher or lower than yields available in the market on delivery date. Unsettled TBA purchase commitments are valued at the current market value of the underlying securities. On delivery for such transactions, a Fund will meet its obligations from maturities or sales of the segregated securities and/or from cash flow. In addition, recently finalized rules of the Financial Industry Regulatory Authority (“FINRA”) include mandatory margin requirements that require a fund to post collateral in connection with its TBA transactions. There is no similar requirement applicable to a fund’s TBA counterparty. The required collateralization of TBA trades could increase the cost of TBA transactions to a Fund and impose added operational complexity.

Rule 18f-4 under the 1940 Act (“Rule 18f-4”) permits a Fund to enter into delayed delivery basis securities notwithstanding the limitation on the issuance of senior securities in Section 18 of the 1940 Act, provided that the Fund intends to physically settle the transaction and the transaction will settle within 35 days of its trade date. If a delayed delivery basis security entered into by a Fund does not satisfy those requirements, the Fund would need to comply with the Rule 18f-4 with respect to its delayed delivery transactions, which are considered derivatives transactions under the Rule 18f-4. See “Derivative Instruments” below.

U.S. Government Securities. A Fund may purchase obligations issued or guaranteed by the U.S. government or its agencies or instrumentalities. Such securities will typically include, without limitation, U.S. Treasury securities such as Treasury Bills, Treasury Notes or Treasury Bonds that differ in their interest rates, maturities and times of issuance. U.S. government securities may be backed by the credit of the government as a whole or only by the issuing agency. U.S. Treasury bonds, notes, and bills and some agency securities, such as those issued by the Federal Housing Administration and Ginnie Mae are backed by the full faith and credit of the U.S. government as to payment of principal and interest and are the highest quality government securities. Other securities issued by U.S. government agencies or instrumentalities, such as securities issued by the Federal Home Loan Banks and Freddie Mac are supported only by the credit of the agency that issued them, and not by the U.S. government. Securities issued by the Federal Farm Credit System, the Federal Land Banks and Fannie Mae are supported by the agency's right to borrow money from the U.S. Treasury under certain circumstances but are not backed by the full faith and credit of the U.S. government.

Any guarantee by the U.S. government or its agencies or instrumentalities of a security held by a Fund does not apply to the market value of such security or to shares of the Fund itself. In the case of obligations not backed by the full faith and credit of the U.S., the investor must look principally to the agency or instrumentality issuing or guaranteeing the obligation for ultimate repayment, which agency or instrumentality may be privately owned. There can be no assurance that the U.S. government would provide financial support to U.S. government sponsored agencies or instrumentalities, such as Fannie Mae or Freddie Mac, since it is not obligated to do so by law. In addition, U.S. government securities are subject to fluctuations in market value due to fluctuations in market interest rates. As a general matter, the value of debt instruments, including U.S. government securities, declines when market interest rates increase and rises when market interest rates decrease.

From time to time, uncertainty regarding the status of negotiations in the U.S. government to increase the statutory debt ceiling or periodic legislation to fund the government could increase the risk that the U.S. government may default on payments on certain U.S. government securities, cause the credit rating of the U.S. government to be downgraded, increase volatility in the stock and bond markets, result in higher interest rates, reduce prices of U.S. Treasury securities, and/or increase the costs of various kinds of debt. If a U.S. GSE is negatively impacted by legislative or regulatory action, is unable to meet its obligations, or its creditworthiness declines, the performance of a Fund that holds securities of the entity will be adversely impacted.

Variable or Floating Rate Securities. Variable and floating rate securities are debt securities that provide for periodic adjustments in the interest rate paid on the security. Variable rate securities provide for a specified periodic adjustment in the interest rate, while floating rate securities have interest rates that change whenever there is a change in a designated benchmark or

reference rate (such as the Secured Overnight Financing Rate or another reference rate) or the issuer’s credit quality. There is a risk that the current interest rate on variable and floating rate securities may not accurately reflect current market interest rates or adequately compensate the holder for the current creditworthiness of the issuer. Some variable or floating rate securities are structured with liquidity features such as (1) put options or tender options that permit holders (sometimes subject to conditions) to demand payment of the unpaid principal balance plus accrued interest from the issuers or certain financial intermediaries or (2) auction rate features, remarketing provisions, or other maturity-shortening devices designed to enable the issuer to refinance or redeem outstanding debt securities (market-dependent liquidity features). Variable or floating rate securities that include market-dependent liquidity features may have greater liquidity risk than other securities. The greater liquidity risk may exist, for example, because of the failure of a market-dependent liquidity feature to operate as intended (as a result of the issuer’s declining creditworthiness, adverse market conditions, or other factors) or the inability or unwillingness of a participating broker-dealer to make a secondary market for such securities. As a result, variable or floating rate securities that include market-dependent liquidity features may lose value, and the holders of such securities may be required to retain them until the later of the repurchase date, the resale date, or the date of maturity. A demand instrument with a demand notice exceeding seven days may be considered illiquid if there is no secondary market for such security.

Floating Rate Loans. Floating rate loans are debt instruments issued by companies or other entities with floating interest rates that reset periodically. Most floating rate loans are secured by specific collateral of the borrower and are senior to most other instruments of the borrower (e.g., common stock or debt instruments) in the event of bankruptcy. Floating rate loans are often issued in connection with recapitalizations, acquisitions, leveraged buyouts and refinancing. Floating rate loans are typically structured and administered by a financial institution that acts as the agent of the lenders participating in the floating rate loan. Floating rate loans may be acquired directly through the agent, as an assignment from another lender who holds a direct interest in the floating rate loan, or as a participation interest in another lender’s portion of the floating rate loan.

Floating rate loans generally are less sensitive to interest rate changes than obligations with fixed interest rates but may decline in value if their interest rates do not rise as much, or as quickly, as interest rates in general. Conversely, floating rate instruments will not generally increase in value if interest rates decline. Changes in interest rates will also affect the amount of interest income a Fund earns on its floating rate investments. Most floating rate loans allow for prepayment of principal without penalty. If a borrower prepays a loan, a Fund might have to reinvest the proceeds in an investment that may have lower yields than the yield on the prepaid loan or might not be able to take advantage of potential gains from increases in the credit quality of the issuer.

The value of collateral, if any, securing a floating rate loan can decline, and may be insufficient to meet the borrower’s obligations or difficult to liquidate. In addition, a Fund’s access to collateral may be limited by bankruptcy or other insolvency proceedings. Floating rate loans may not be fully collateralized and may decline in value. Loans may not be considered “securities,” and it is possible that a Fund may not be entitled to rely on anti-fraud and other protections under the federal securities laws when it purchases loans.

Although the market for the types of floating rate loans in which a Fund invests has become increasingly liquid over time, this market is still developing, and there can be no assurance that adverse developments with respect to this market or particular borrowers will not prevent the Fund from selling these loans at their market values when ECM or a Sub-Adviser considers such a sale desirable. In addition, the settlement period (the period between the execution of the trade and the delivery of cash to the purchaser) for floating rate loan transactions may be significantly longer than the settlement period for other investments, and in some cases longer than seven days. Requirements to obtain consent of borrower and/or agent can delay or impede a Fund’s ability to sell the floating rate loans and can adversely affect the price that can be obtained. It is possible that sale proceeds from floating rate loan transactions will not be available to meet redemption obligations.

Variable Amount Master Demand Notes. A variable amount master demand note is an unsecured instrument that permits the indebtedness thereunder to vary and provide for periodic adjustments in the interest rate. Although the notes are not normally traded and there may be no secondary market in the notes, a Fund may demand payment of the principal of the instrument at any time. The notes are not typically rated by credit rating agencies, but issuers of variable amount master demand notes must satisfy the same criteria as set forth for issuers of commercial paper. If an issuer of a variable amount master demand note defaulted on its payment obligation, a Fund might be unable to dispose of the note because of the absence of a secondary market and might, for this or other reasons, suffer a loss to the extent of the default.

Zero Coupon Securities, Pay-In-Kind Bonds and Deferred Payment Securities. Zero coupon securities are debt securities that pay no cash income but are sold at substantial discounts from their value at maturity. When a zero coupon security is held to maturity, its entire return, which consists of the amortization of discount, comes from the difference between its purchase price and its maturity value. This difference is known at the time of purchase, so that investors holding zero coupon securities until maturity know at the time of their investment what the expected return on their investment will be. Certain zero coupon securities also are sold at substantial discounts from their maturity value and provide for the commencement of regular interest payments at

a deferred date. Zero coupon securities may have conversion features. PIK bonds pay all or a portion of their interest in the form of debt or equity securities. Deferred payment securities are securities that remain zero coupon securities until a predetermined date, at which time the stated coupon rate becomes effective and interest becomes payable at regular intervals.

Zero coupon securities, PIK bonds and deferred payment securities tend to be subject to greater price fluctuations in response to changes in interest rates than are ordinary interest-paying debt securities with similar maturities. The value of zero coupon securities appreciates more during periods of declining interest rates and depreciates more during periods of rising interest rates than ordinary interest-paying debt securities with similar maturities. Zero coupon securities, PIK bonds and deferred payment securities may be issued by a wide variety of corporate and governmental issuers. Although these instruments are generally not traded on a national securities exchange, they are widely traded by brokers and dealers and, to such extent, will not be considered illiquid for the purposes of a Fund’s limitation on investments in illiquid investments.

To avoid liability for federal income and excise taxes, a Fund may be required to distribute income accrued with respect to these securities prior to the receipt of the corresponding cash payments and may have to dispose of portfolio securities under disadvantageous circumstances in order to generate cash to satisfy these distribution requirements.

Zero Coupon Treasury Securities. Zero coupon treasury securities are U.S. Treasury bonds that have been stripped of their unmatured interest coupons, the coupons themselves, and receipts or certificates representing interests in such stripped debt obligations and coupons. Interest is not paid in cash during the term of these securities, but is accrued and paid at maturity. Such obligations have greater price volatility than coupon obligations and other normal interest-paying securities, and the value of zero coupon securities reacts more quickly to changes in interest rates than do coupon bonds. Because interest income is accrued throughout the term of the zero coupon obligation, but not actually received until maturity, a Fund may have to sell other securities to distribute such accrued interest prior to maturity of the zero coupon obligation in order to satisfy the distribution requirements for regulated investment companies under the Internal Revenue Code of 1986, as amended (the “Code”). Zero coupon securities are purchased at a discount from face value, the discount reflecting the current value of the deferred interest. The discount is taxable even though there is no cash return until maturity.

Zero coupon treasury securities are generally subject to greater fluctuations in value in response to changing interest rates than debt obligations that pay interest currently.

Equity Securities

Equity securities represent ownership interests, or the rights to acquire ownership interests, in an issuer and include common stocks, preferred stocks, convertible securities, rights and warrants, with different types of equity securities providing different voting and dividend rights and priority if the issuer becomes bankrupt.

Equity securities generally have greater price volatility than fixed income securities. The value of equity securities varies in response to many factors, including the activities and financial condition of individual companies, the business market in which individual companies compete and general market and economic conditions. Equity securities fluctuate in value, often based on factors unrelated to the value of the issuer of the securities, and such fluctuations can be significant.

Common Stock. Common stock is a type of equity security that represents partial ownership in a company and entitles stockholders to share in the company’s profits (or losses). Common stock typically entitles the owner to vote on the election of directors and other important matters, as well as to receive dividends on such stock. In the event an issuer is liquidated or declares bankruptcy, the claims of owners of bonds, other debt holders, and owners of preferred stock take precedence over the claims of those who own common stock.

The fundamental risk of investing in common stock is that the value of the stock might decrease. Stock values fluctuate in response to the activities of an individual company or in response to general market and/or economic conditions. While common stocks have historically provided greater long-term returns than preferred stocks, fixed income and money market investments, common stocks have also experienced significantly more volatility than the returns from those other investments.

Convertible Securities. Convertible securities are bonds, debentures, notes, preferred stocks or other securities that may be converted or exchanged (by the holder or by the issuer) into shares of the underlying common stock (or cash or securities of equivalent value) at a stated exchange ratio or stated price, which enable an investor to benefit from increases in the market price of the underlying common stock. A convertible security may also be called for redemption or conversion by the issuer after a particular date and, under certain circumstances (including a specified price), may be called for redemption or conversion on a date established upon issue. If a convertible security held by a Fund is called for redemption or conversion, the Fund could be required to tender it for redemption, convert it into the underlying common stock, or sell it to a third party. Convertible securities generally have less potential for gain or loss than common stocks. Convertible securities generally provide yields higher than the underlying common stocks, but generally lower than comparable non-convertible securities. Because of this higher yield,

convertible securities generally sell at prices above their “conversion value,” which is the current market value of the stock to be received upon conversion. The difference between this conversion value and the price of convertible securities will vary over time depending on changes in the value of the underlying common stocks and interest rates. When the underlying common stocks decline in value, convertible securities will tend not to decline to the same extent because of the interest or dividend payments and the repayment of principal at maturity for certain types of convertible securities. However, securities that are convertible other than at the option of the holder generally do not limit the potential for loss to the same extent as securities convertible at the option of the holder. When the underlying common stocks rise in value, the value of convertible securities may also be expected to increase. At the same time, however, the difference between the market value of convertible securities and their conversion value will narrow, which means that the value of convertible securities will generally not increase to the same extent as the value of the underlying common stocks. Because convertible securities may also be interest rate sensitive, their value may increase as interest rates fall and decrease as interest rates rise. Convertible securities are also subject to credit risk, and are often lower quality securities.

Contingent convertible securities (“COCOs”) are a complex subset of convertible securities that are designed so that the issuer of the security can absorb losses if the issuer’s capital falls below a predetermined trigger level. If triggered, COCOs absorb losses for the issuer by either (1) converting from a fixed income security to common stock of the issuer or (2) writing down the value of the security. If the COCO is converted to a common stock of the issuer, the common stock may not pay a dividend, which could result in a reduced income rate for a Fund. Additionally, if the COCO is converted to a common stock of the issuer and the issuer declares bankruptcy, a Fund would be less likely to recover its claim in bankruptcy because owners of common stock are generally last in line for payment priority. If the COCO undergoes a mandatory write-down, a Fund may lose some or all of its investment in the COCO.

Initial Public Offerings. Initial public offerings (“IPOs”) are new issues of equity securities. IPOs do not have trading history, and information about the company may be available only for recent periods. A Fund’s purchase of shares issued in IPOs exposes it to the risks inherent in those sectors of the market where these new issuers operate. The market for IPO issuers has been volatile and share prices of newly priced companies have fluctuated in significant amounts over short periods of time. IPOs may generate substantial gains for a Fund, but investors should not rely on any past gains that may have been produced by IPOs as an indication of a Fund’s future performance, because there is no guarantee that a Fund will have access to profitable IPOs in the future. As with newly issued secondary offerings, a Fund may be limited in the quantity of IPO shares that it may buy at the offering price, or a Fund may not be able to buy any shares of an IPO at the offering price. As the size of a Fund increases, the impact of IPOs on the Fund’s performance generally would decrease; conversely, as the size of a Fund decreases, the impact of IPOs on the Fund’s performance generally would increase.

Master Limited Partnerships. Certain companies are organized as master limited partnerships (“MLPs”) in which ownership interests are publicly traded. MLPs often own several properties or businesses (or directly own interests) that are related to real estate development and oil and gas industries, but they also may finance motion pictures, research and development and other projects. Generally, an MLP is operated under the supervision of one or more managing general partners. Limited partners (including a Fund if it invests in an MLP) are not involved in the day-to-day management of the partnership. They are allocated income and capital gains associated with the partnership in accordance with the terms established in the partnership agreement.

The risks of investing in an MLP are generally those inherent in investing in a partnership as opposed to a corporation. For example, state law governing partnerships is often less restrictive than state law governing corporations. Accordingly, there may be less protections afforded investors in an MLP than investors in a corporation. Additional risks involved with investing in an MLP are risks associated with the specific industry or industries in which the partnership invests, such as the risks of investing in real estate, or oil and gas industries.

Preferred Stock. Preferred stock represents an equity interest in a company that generally entitles the holder to receive, in preference to the holders of common stock, dividends and a fixed share of the proceeds resulting from a liquidation of the company; however, preferred stockholders typically do not have voting rights with respect to the issuing company. Preferred stocks may pay fixed or adjustable rates of return, and may be convertible into, or carry the right to purchase, the company’s common stock.

The value of a company’s preferred stock may fall as a result of factors relating directly to that company’s products or services or due to factors affecting companies in the same industry or in a number of different industries. The value of preferred stock also may be affected by changes in financial markets that are relatively unrelated to the company or its industry, such as changes in interest rates or currency exchange rates. In addition, a company’s preferred stock generally pays dividends only after the company makes required payments to holders of its bonds and other debt. For this reason, the value of the preferred stock usually will react more strongly than bonds and other debt to actual or perceived changes in the company’s financial condition or prospects. Preferred stocks of smaller companies may be more vulnerable to adverse developments than those of larger companies.

Real Estate Investment Trusts. Real Estate Investment Trusts (“REITs”) are typically publicly traded corporations or trusts that invest in residential or commercial real estate. REITs generally can be divided into the following three types: (1) equity REITs which invest the majority of their assets directly in real property and derive their income primarily from rents and capital gains or real estate appreciation; (2) mortgage REITs which invest the majority of their assets in real estate mortgage loans and derive their income primarily from interest payments; and (3) hybrid REITs which combine the characteristics of equity REITs and mortgage REITs. Similar to regulated investment companies, REITs are not subject to federal income tax on income distributed to shareholders provided they comply with several requirements of the Code. A Fund will indirectly bear its proportionate share of expenses incurred by REITs in which the Fund invests in addition to the expenses incurred directly by the Fund.

Investing in REITs involves certain unique risks in addition to those risks associated with investing in the real estate industry in general. Equity REITs may be affected by changes in the value of the underlying property owned by the REITs, while mortgage REITs may be affected by the quality of any credit extended. REITs are dependent upon management skills and on cash flows, are not diversified, and are subject to default by borrowers and self-liquidation. REITs are also subject to the possibilities of failing to qualify for tax free pass-through of income under the Code and failing to maintain their exemption from registration under the 1940 Act.

REITs (especially mortgage REITs) are also subject to interest rate risks. When interest rates decline, the value of a REIT’s investment in fixed rate obligations can be expected to rise. Conversely, when interest rates rise, the value of a REIT’s investment in fixed rate obligations can be expected to decline. In contrast, as interest rates on adjustable rate mortgage loans are reset periodically, yields on a REIT’s investment in such loans will gradually align themselves to fluctuate less dramatically in response to interest rate fluctuations than would investments in fixed rate obligations.

Investing in certain REITs, which often have small market capitalizations, may also involve the same risks as investing in other small capitalization companies. These risks include limited financial resources, infrequent or limited trading, and more abrupt or erratic price movements than larger company securities. Historically, small capitalization stocks, such as REITs, have been more volatile in price than the larger capitalization stocks such as those included in the S&P 500 Index.

Special Purpose Acquisition Companies. A special purpose acquisition company (“SPAC”) is typically a publicly traded company that raises funds through an initial public offering for the purpose of acquiring or merging with an unaffiliated company to be identified subsequent to the SPAC’s initial public offering. SPACs are often used as a vehicle to transition a company from private to publicly traded. The securities of a SPAC are often issued in “units” that include one share of common stock and one right or warrant (or partial right or warrant) conveying the right to purchase additional shares or partial shares. Unless and until a transaction is completed, a SPAC generally invests its assets (less a portion retained to cover expenses) in U.S. government securities, money market fund securities and cash. To the extent the SPAC is invested in cash or similar securities, this may impact a Fund’s ability to meet its investment objective. If an acquisition or merger that meets the requirements for the SPAC is not completed within a pre-established period of time, the invested funds are returned to the SPAC’s shareholders, less certain permitted expenses, and any rights or warrants issued by the SPAC will expire worthless. Because SPACs and similar entities have no operating history or ongoing business other than seeking acquisitions, the value of their securities is particularly dependent on the ability of the entity’s management to identify and complete a suitable transaction. Some SPACs may pursue acquisitions or mergers only within certain industries or regions, which may further increase the volatility of their securities’ prices. In addition to purchasing publicly traded SPAC securities, a Fund may invest in SPACs through additional financings via securities offerings that are exempt from registration under the federal securities laws (restricted securities). No public market will exist for these restricted securities unless and until they are registered for resale with the SEC, and such securities may be considered illiquid and/or be subject to restrictions on resale. It may also be difficult to value restricted securities issued by SPACs.

An investment in a SPAC is subject to a variety of risks, including that: a significant portion of the funds raised by the SPAC for the purpose of identifying and effecting an acquisition or merger may be expended during the search for a target transaction; an attractive acquisition or merger target may not be identified and the SPAC will be required to return any remaining invested funds to shareholders; attractive acquisition or merger targets may become scarce if the number of SPACs seeking to acquire operating businesses increases; any proposed merger or acquisition may be unable to obtain the requisite approval, if any, of a SPAC’s shareholders and/or antitrust and securities regulators; an acquisition or merger once effected may prove unsuccessful and an investment in the SPAC may lose value; the warrants or other rights with respect to the SPAC held by a Fund may expire worthless or may be repurchased or retired by the SPAC at an unfavorable price; a Fund may be delayed in receiving any redemption or liquidation proceeds from a SPAC to which it is entitled; an investment in a SPAC may be diluted by subsequent public or private offerings of securities in the SPAC or by other investors exercising existing rights to purchase securities of the SPAC; SPAC sponsors generally purchase interests in the SPAC at more favorable terms than investors in the initial public offering or subsequent investors on the open market; no or only a thinly traded market for shares of or interests in a SPAC may develop, leaving a Fund unable to sell its interest in a SPAC or to sell its interest only at a price below what a Fund believes is the SPAC security’s value; and the values of investments in SPACs may be highly volatile and may depreciate significantly over time.

Warrants. Warrants are options to purchase equity securities at a specific price valid for a specific period of time. They do not represent ownership of the securities, but only the right to buy them. Warrants are speculative in that they have no voting rights, pay no dividends and have no rights with respect to the assets of the corporation issuing them. Warrants differ from call options in that warrants are issued by the issuer of the security which may be purchased on their exercise, whereas call options may be written or issued by anyone. The prices of warrants do not necessarily move parallel to the prices of the underlying securities. Investments in warrants involve certain risks, including the possible lack of a liquid market for the resale of the warrants, potential price fluctuations as a result of speculation or other factors and failure of the price of the common stock to rise. A warrant becomes worthless if it is not exercised within the specified time period.

Foreign Securities

Typically, foreign securities are considered to be equity or debt securities issued by entities organized, domiciled, or with a principal executive office outside the U.S., such as foreign corporations and governments. Securities issued by certain companies organized outside the U.S. may not be deemed to be foreign securities if the company’s principal operations are conducted from the U.S. or when the company’s equity securities trade principally on a U.S. stock exchange. Foreign securities may trade in U.S. or foreign securities markets. A Fund may make foreign investments either directly by purchasing foreign securities or indirectly by purchasing depositary receipts or depositary shares of similar instruments for foreign securities. Direct investments in foreign securities may be made either on foreign securities exchanges or in the OTC markets.

There may be less information publicly available about a foreign corporate or government issuer than about a U.S. issuer, and foreign corporate issuers are not generally subject to accounting, auditing and financial reporting standards and practices comparable to those in the U.S. The securities of some foreign issuers are less liquid and at times more volatile than securities of comparable U.S. issuers. Foreign brokerage commissions and securities custody costs are often higher than those in the U.S., and judgments against foreign entities may be more difficult to obtain and enforce. With respect to certain foreign countries, there is a possibility of governmental expropriation of assets, confiscatory taxation, political or financial instability and diplomatic developments that could affect the value of investments in those countries. The receipt of interest on foreign government securities may depend on the availability of tax or other revenues to satisfy the issuer’s obligations.

Most foreign securities in a Fund will be denominated in foreign currencies or traded in securities markets in which settlements are made in foreign currencies. Similarly, any income on such securities is generally paid to a Fund in foreign currencies. The value of these foreign currencies relative to the U.S. dollar varies continually, causing changes in the dollar value of a Fund’s investments (even if the price of the investments is unchanged) and changes in the dollar value of a Fund’s income available for distribution to its shareholders. The effect of changes in the dollar value of a foreign currency on the dollar value of a Fund’s assets and on the net investment income available for distribution may be favorable or unfavorable.

A Fund may incur costs in connection with conversions between various currencies. In addition, a Fund may be required to liquidate portfolio assets, or may incur increased currency conversion costs, to compensate for a decline in the dollar value of a foreign currency occurring between the time when a Fund declares and pays a dividend, or between the time when a Fund accrues and pays an operating expense in U.S. dollars.

Foreign securities and cash may be held with foreign banks, agents, and securities depositories appointed by a Fund’s custodian (each a “Foreign Custodian”). Some Foreign Custodians may be recently organized or new to the foreign custody business. In some countries, Foreign Custodians may be subject to little or no regulatory oversight over or independent evaluation of their operations. Further, the laws of certain countries may place limitations on a Fund’s ability to recover its assets if a Foreign Custodian enters bankruptcy. Investments in emerging markets may be subject to even greater custody risks than investments in more developed markets. Custody services in emerging market countries are very often undeveloped and may be considerably less well regulated than in more developed countries, and thus may not afford the same level of investor protection as would apply in developed countries.

Depositary Receipts. Depositary receipts, including American Depositary Receipts (“ADRs”), European Depositary Receipts (“EDRs”) and Global Depositary Receipts (“GDRs”) are securities that evidence ownership interests in a security or a pool of securities that have been deposited with a “depository.” These certificates are issued by depository banks and generally trade on an established market in the U.S. or elsewhere. The underlying shares are held in trust by a custodian bank or similar financial institution in the issuer’s home country. The depository bank may not have physical custody of the underlying security at all times and may charge fees for various services, including forwarding dividends and interest and corporate actions. ADRs typically are issued by a U.S. bank or trust company and evidence ownership of underlying securities by a foreign corporation. EDRs are receipts issued in Europe, typically by foreign banks and trust companies, that evidence ownership of either foreign or domestic underlying securities. GDRs are depositary receipts structured like global debt issues to facilitate trading on an international basis. Depositary receipts may not necessarily be denominated in the same currency as their underlying securities. Generally, ADRs are designed for use in the U.S. securities markets and EDRs are designed for use in European securities markets. GDRs are tradable both in the U.S. and in Europe and are designed for use throughout the world.

Depositary receipts are an alternative to directly purchasing the underlying foreign securities in their national markets and currencies. However, depositary receipts continue to be subject to the risks associated with investing directly in foreign securities which include currency and foreign exchange risks as well as the political and economic risks of the underlying issuer’s country. Additionally, issuers of depositary receipts may discontinue issuing new depositary receipts and withdraw existing depositary receipts at any time, which may result in costs and delays in the distribution of the underlying assets to a Fund and may negatively impact the Fund’s performance.

Emerging Markets Issuers. Emerging markets include (1) countries that have an emerging stock market as defined by MSCI, Inc.; (2) countries with low- to middle-income economies as classified by the World Bank; or (3) other countries or markets with similar emerging characteristics. Issuers whose principal activities are in countries with emerging markets include issuers: (a) organized under the laws of, (b) whose securities have their primary trading market in, (c) deriving at least 50% of their revenues or profits from goods sold, investments made, or services performed in, or (d) having at least 50% of their assets located in, a country with an emerging market.

Many of the risks with respect to foreign investments are more pronounced for investments in issuers in emerging market countries. Emerging market countries tend to have more government exchange controls, more volatile interest and currency exchange rates, less market regulation, and less developed and less stable economic, political and legal systems than those of more developed countries. There may be less publicly available and reliable information about issuers in emerging markets than is available about issuers in more developed capital markets, and such issuers may not be subject to regulatory, accounting, auditing, and financial reporting and recordkeeping standards comparable to those to which U.S. companies are subject. The Public Company Accounting Oversight Board (“PCAOB”), which regulates auditors of U.S. public companies, for example, may be unable to inspect audit work and practices in certain countries.

In addition, emerging market countries may experience high levels of inflation and may have fewer liquid securities markets and less efficient trading and settlement systems. Some countries with emerging securities markets have experienced high rates of inflation for many years. Inflation and rapid fluctuations in inflation rates have had and may continue to have negative effects on the economies and securities markets of certain countries.

Their economies also depend heavily upon international trade and may be adversely affected by protective trade barriers and the economic conditions of their trading partners. The U.S., other nations, or other governmental entities (including supranational entities) could impose sanctions on a country that limits or restricts foreign investment, the movement of assets or other economic activity. In addition, an imposition of sanctions upon certain issuers in a country could have a materially adverse effect on the value of such companies’ securities, delay a Fund’s ability to exercise certain rights as security holder, and/or impair a Fund’s ability to meet its investment objectives. A Fund may be prohibited from investing in securities issued by companies subject to such sanctions and may be required to freeze its existing investments in those companies, prohibiting the Fund from selling or otherwise transacting in these investments. Such sanctions, or other intergovernmental actions that may be taken in the future, may result in the devaluation of the country’s currency, a downgrade in the country’s credit rating, and/or a decline in the value and liquidity of impacted company stocks.

Currencies of emerging market countries are subject to significantly greater risks than currencies of developed countries. Some emerging market currencies may not be internationally traded or may be subject to strict controls by local governments, resulting in undervalued or overvalued currencies. Some emerging market countries have experienced balance of payment deficits and shortages in foreign exchange reserves, which has resulted in some governments restricting currency conversions. Future restrictive exchange controls could prevent or restrict a company’s ability to make dividend or interest payments in the original currency of the obligation (usually U.S. dollars). In addition, even though the currencies of some emerging market countries may be convertible into U.S. dollars, the conversion rates may be artificial relative to their actual market values.

Emerging markets typically have substantially less volume than U.S. markets, securities in these markets are less liquid, and their prices often are more volatile than those of comparable U.S. companies. Securities markets in emerging markets may also be susceptible to manipulation or other fraudulent trade practices, which could disrupt the functioning of these markets or adversely affect the value of investments traded in these markets, including investments of a Fund.

A Fund’s rights with respect to its investments in emerging markets, if any, will generally be governed by local law, which may make it difficult or impossible for the Fund to pursue legal remedies or to obtain and enforce judgments in local courts. Delays may occur in settling securities transactions in emerging market countries, which could adversely affect a Fund’s ability to make or liquidate investments in those markets in a timely fashion. In addition, it may not be possible for a Fund to find satisfactory custodial services in an emerging market country, which could increase the Fund’s costs and cause delays in the transportation and custody of its investments.

Eurodollar and Yankee Dollar Investments. Eurodollar instruments are bonds of foreign corporate and government issuers that pay interest and principal in U.S. dollars generally held in banks outside the U.S., primarily in Europe. Yankee dollar instruments are U.S. dollar-denominated bonds typically issued in the U.S. by foreign governments and their agencies and foreign banks and corporations. Eurodollar certificates of deposit are U.S. dollar-denominated certificates of deposit issued by foreign branches of domestic banks; Eurodollar time deposits are U.S. dollar-denominated deposits in a foreign branch of a U.S. bank or in a foreign bank; and Yankee certificates of deposit are U.S. dollar-denominated certificates of deposit issued by a U.S. branch of a foreign bank and held in the U.S.

There is generally less publicly available information about foreign issuers and there may be less governmental regulation and supervision of foreign stock exchanges, brokers and listed companies. Foreign issuers may use different accounting and financial standards, and the addition of foreign governmental restrictions may affect adversely the payment of principal and interest on foreign investments. In addition, not all foreign branches of U.S. banks are supervised or examined by regulatory authorities as are U.S. banks, and such branches may not be subject to reserve requirements. Eurodollar (and, to a limited extent, Yankee dollar) obligations are subject to certain sovereign risks. One such risk is the possibility that a sovereign country might prevent capital, in the form of dollars, from flowing across its borders. Other risks include adverse political and economic developments; the extent and quality of government regulation of financial markets and institutions; the imposition of foreign withholding taxes; and the expropriation or nationalization of foreign issuers.

Foreign Government Securities. Foreign government securities generally consist of obligations issued or backed by national, state or provincial governments or similar political subdivisions or central banks in foreign countries. Foreign government securities also include debt obligations of supranational entities, which include international organizations designated or backed by governmental entities to promote economic reconstruction or development, international banking institutions and related government agencies. Examples include the International Bank for Reconstruction and Development (the “World Bank”), the Asian Development Bank and the Inter-American Development Bank.

Foreign government securities also include debt securities of “quasi-governmental agencies” and debt securities denominated in multinational currency units of an issuer (including supranational issuers). Debt securities of quasi-governmental agencies are issued by entities owned by either a national, state or equivalent government or are obligations of a political unit that is not backed by the national government’s full faith and credit and general taxing powers.

Issuers of foreign government securities may be unable or unwilling to repay the principal and/or interest when due in accordance with the terms of such debt. A governmental entity’s willingness or ability to repay principal and interest due in a timely manner may be affected by, among other factors, its cash flow situation, the extent of its foreign reserves, the availability of sufficient foreign exchange on the date a payment is due, the relative size of the debt service burden to the economy as a whole, the governmental entity’s policy towards the International Monetary Fund and the political constraints to which a governmental entity may be subject. Governmental entities may also be dependent on expected disbursements from foreign governments, multilateral agencies and others abroad to reduce principal and interest arrearage on their debt. The commitment of these third parties to make such disbursements may be conditioned on the implementation of economic reforms or economic performance and the timely service of the debtor’s obligations. Failure to implement such reforms, achieve such levels of economic performance or repay principal or interest when due may result in the cancellation of such third parties’ commitments to lend funds to the governmental entity, which may further impair such debtor’s ability or willingness to timely service its debts. In certain instances, a Fund may invest in foreign government securities that is in default as to payments of principal or interest. In the event that a Fund holds nonperforming foreign government securities, the Fund may incur additional expenses in connection with any restructuring of the issuer’s obligations or in otherwise enforcing its rights thereunder. Holders of foreign government securities may be requested to participate in the rescheduling of such debt and to extend further loans to governmental entities. In the event of a default by a governmental entity, there may be few or no effective legal remedies for collecting on such debt.

Foreign Investment Companies. Some foreign countries may not permit, or may place economic restrictions on, direct investment by investors from outside of such countries. Investments in such countries may be permitted only through foreign government-approved or -authorized investment vehicles, which may include other investment companies. These funds may also invest in other investment companies that invest in foreign securities. Investing through such vehicles may involve frequent or layered fees or expenses and may also be subject to limitation under the 1940 Act. As a shareholder of another investment company, a Fund would bear, along with other shareholders, its pro rata portion of the other investment company’s expenses, including advisory fees. Those expenses would be in addition to the advisory and other expenses that a Fund bears directly in connection with its own operations.

Privatizations. The governments of some foreign countries have been engaged in programs of selling part or all of their stakes in government owned or controlled enterprises (“privatizations”). Privatizations may offer opportunities for significant capital appreciation. In certain foreign countries, the ability of foreign entities to participate in privatizations may be limited by local law, or the terms on which a Fund may be permitted to participate may be less advantageous than those for local investors. There can

be no assurance that foreign governments will continue to sell companies currently owned or controlled by them or that privatization programs will be successful.

Derivative Instruments

Derivatives are financial instruments designed to achieve a certain economic result when an underlying security, index, interest rate, currency, commodity, or other financial instrument moves in price. If a Fund enters into a derivatives contract, it would obligate or entitle the Fund to deliver or receive an asset or cash payment that is based on the change in value of the underlying financial instrument. Examples of common derivative instruments include forward contracts, futures, options and swap agreements. Some derivative contracts (such as futures, forwards and options) require payments relating to a future trade involving the underlying asset. Other derivative contracts (such as swaps) require payments relating to the income or returns from the underlying asset. Derivatives may provide a cheaper, quicker or more specifically focused way to invest than “traditional” securities would. Whether or not a Fund may use some or all of these derivatives varies by Fund. In addition, a Fund may decide not to employ some or all of these strategies, and there is no assurance that any derivatives strategy used by a Fund will succeed.

A Fund may use derivative instruments for a variety of reasons, including: (1) to employ leverage to enhance returns; (2) to increase or decrease exposure to particular securities or markets; (3) to protect against possible unfavorable changes in the market value of securities held in, or to be purchased for, its portfolio (i.e., to hedge); (4) to protect its unrealized gains reflected in the value of its portfolio; (5) to facilitate the sale of portfolio securities for investment purposes; (6) to reduce transaction costs; (7) to manage the effective maturity or duration of its portfolio; and/or (8) to maintain cash reserves while remaining fully invested.

Derivatives may be purchased on established exchanges or through privately negotiated transactions referred to as OTC derivatives. Exchange-traded derivatives, primarily futures contracts and options, generally are guaranteed by the clearing agency that is the issuer or counterparty to such derivatives. This guarantee usually is supported by a variation margin payment system operated by the clearing agency in order to reduce overall credit risk. As a result, unless the clearing agency defaults, there is relatively little counterparty credit risk associated with derivatives purchased on an exchange. In contrast, no clearing agency guarantees OTC derivatives. Therefore, each party to an OTC derivative bears the risk that the counterparty will default. Accordingly, ECM or a Sub-Adviser will consider the creditworthiness of counterparties to OTC derivatives in the same manner as it would review the credit quality of a security to be purchased by a Fund. OTC derivatives are less liquid than exchange-traded derivatives since the other party to the transaction may be the only investor with sufficient understanding of the derivative to be interested in bidding for it. Derivatives that are considered illiquid will be subject to a Fund’s limit on illiquid investments.

Some derivatives may involve leverage (e.g., an instrument linked to the value of a securities index may return income calculated as a multiple of the price movement of the underlying index). This economic leverage will increase the volatility of these instruments as they may increase or decrease in value more quickly than the underlying security, index, futures contract, currency or other economic variable.

Successful use of certain derivatives may be a highly specialized activity that requires skills that may be different than the skills associated with ordinary portfolio securities transactions. If ECM or a Sub-Adviser is incorrect in its forecasts of market factors, or a counterparty defaults, investment performance would diminish compared with what it would have been if derivatives were not used. Successful use of derivatives by a Fund also is subject to ECM’s or a Sub-Adviser’s ability to correctly predict movements in the direction of the relevant market and, to the extent the transaction is entered into for hedging purposes, to ascertain the appropriate correlation between the securities or position being hedged and the price movements of the corresponding derivative position. For example, if a Fund enters into a derivative position to hedge against the possibility of a decline in the market value of securities held in its portfolio and the prices of such securities instead increase, the Fund will lose part or all of the benefit of the increased value of securities which it has hedged because it will have offsetting losses in the derivative position. It is possible that developments in the derivatives markets, including potential government regulation, could adversely affect the ability to terminate existing derivatives positions or to realize amounts to be received in such transactions.

Derivatives can be volatile and involve various types and degrees of risk, depending upon the characteristics of the particular derivative and the portfolio as a whole. Derivatives permit a Fund to increase or decrease the level of risk, or change the character of the risk, to which its portfolio is exposed in much the same way as the Fund can increase or decrease the level of risk, or change the character of the risk, of its portfolio by making investments in specific securities. However, derivatives may entail investment exposures that are greater than their cost would suggest, meaning that a small investment in derivatives could have a large potential impact on a Fund’s performance. Derivatives involve greater risks than if a Fund had invested in the reference obligation directly.

An investment in derivatives at inopportune times or when market conditions are judged incorrectly may lower return or result in a loss. A Fund could experience losses if its derivatives were poorly correlated with underlying instruments or the Fund’s other investments or if the Fund were unable to liquidate its position because of an illiquid secondary market. The market for many derivatives is, or suddenly can become, illiquid. Changes in liquidity may result in significant, rapid and unpredictable changes in

the prices for derivatives. Depending upon how a Fund uses derivative contracts and the relationships between the market value of a derivative contract and the underlying asset, derivative contracts may increase or decrease the Fund’s exposure to interest rate, and currency risks, and may also expose the Fund to liquidity and leverage risks. OTC contracts also expose a Fund to credit risks in the event that a counterparty defaults on the contract.

Rule 18f-4 provides a comprehensive regulatory framework for the use of derivatives by registered investment companies, such as the Funds, and imposes requirements and restrictions on funds using derivatives. Rule 18f-4 requires funds that invest in derivatives above a specified amount to adopt and implement a derivatives risk management program (“DRMP”) administered by a derivatives risk manager that is appointed by and overseen by the fund’s board, and to comply with an outer limit on fund leverage risk based on value at risk, or “VaR.” Funds that use derivative instruments in a limited amount are considered “limited derivatives users,” as defined by Rule 18f-4, and are not subject to the full requirements of Rule 18f-4, but are required to adopt and implement policies and procedures reasonably designed to manage the fund’s derivatives risk. Funds are subject to reporting and recordkeeping requirements regarding their derivatives use. In addition, Rule 18f-4 provides special treatment for reverse repurchase agreements and similar financing transactions and unfunded commitment agreements. Specifically, a fund may elect whether to treat reverse repurchase agreements and similar financing transactions as “derivatives transactions” subject to the requirements of Rule 18f-4 or as senior securities equivalent to bank borrowings for purposes of Section 18 of the 1940 Act. Repurchase agreements are not subject to Rule 18f-4 but are still subject to other provisions of the 1940 Act.

Under Rule 18f-4, “derivatives transactions” include the following: (1) any swap, security-based swap (including a contract for differences), futures contract, forward contract, option (excluding purchased options), any combination of the foregoing, or any similar instrument, under which a Fund is or may be required to make any payment or delivery of cash or other assets during the life of the instrument or at maturity or early termination, whether as margin or settlement payment or otherwise; (2) any short sale borrowing; (3) reverse repurchase agreements and similar financing transactions (e.g., recourse and non-recourse tender option bonds, and borrowed bonds), if a Fund elects to treat these transactions as derivatives transactions under Rule 18f-4; and (4) when-issued or forward-settling securities (e.g., firm and standby commitments, including TBA commitments, and dollar rolls) and non-standard settlement cycle securities, unless a Fund intends to physically settle the transaction and the transaction will settle within 35 days of its trade date.

The Funds that invest in derivatives and that are not limited derivatives users have established a DRMP and appointed a derivatives risk manager to administer the DRMP, consistent with Rule 18f-4. The requirements of Rule 18f-4 may limit a Fund’s ability to engage in derivatives transactions as part of its investment strategies. These requirements may also increase the cost of a Fund’s investments and cost of doing business, which could adversely affect the value of the Fund’s investments or the performance of the Fund. Rule 18f-4 also may not be effective to limit a Fund’s risk of loss. In particular, measurements of VaR rely on historical data and may not accurately measure the degree of risk reflected in a Fund’s derivatives or other investments.

The U.S. government and foreign governments are in the process of adopting and implementing regulations governing derivatives markets, including mandatory clearing of certain derivatives, margin and reporting requirements. The ultimate impact of the regulations remains unclear. Additional regulation of derivatives may make derivatives more costly, limit their availability or utility, otherwise adversely affect their performance or disrupt markets.

Forward Contracts. A forward contract is an OTC derivative transaction between two parties to buy or sell a specified amount of an underlying reference at a specified price (or rate) on a specified date in the future. Forward contracts are negotiated on an individual basis and are not standardized or traded on exchanges. The market for forward contracts is substantially unregulated (there is no limit on daily price movements and speculative position limits are not applicable). The principals who deal in certain forward contract markets are not required to continue to make markets in the underlying references in which they trade and these markets can experience periods of illiquidity, sometimes of significant duration. There have been periods during which certain participants in forward contract markets have refused to quote prices for certain underlying references or have quoted prices with an unusually wide spread between the price at which they were prepared to buy and that at which they were prepared to sell. At or prior to maturity of a forward contract, a Fund may enter into an offsetting contract and may incur a loss to the extent there has been adverse movement in forward contract prices. The liquidity of the markets for forward contracts depends on participants entering into offsetting transactions rather than making or taking delivery. To the extent participants make or take delivery, liquidity in the market for forwards could be reduced. A relatively small price movement in a forward contract may result in substantial losses to a Fund, exceeding the amount of the margin paid. Forward contracts can increase a Fund’s risk exposure to underlying references and their attendant risks, such as credit risk, market risk, foreign currency risk and interest rate risk, while also exposing the Fund to correlation risk, counterparty risk, hedging risk, inflation risk, leverage risk, liquidity risk, pricing risk and volatility risk.

Forward Foreign Currency Transactions. Foreign currency transactions are contracts to purchase or sell foreign currencies for settlement on a future date. Any Fund which may invest in non-dollar denominated foreign securities may conduct foreign currency transactions on a spot (i.e., cash) basis or by entering into forward contracts to purchase or sell foreign currencies at a future date and price. Forward contracts are generally traded in an interbank market conducted directly

between currency traders (usually large commercial banks) and their customers. The parties to a forward contract may agree to offset or terminate the contract before its maturity, or may hold the contract to maturity and complete the contemplated currency exchange. A Fund may use currency forward contracts for any purpose consistent with its principal investment strategies.

When a Fund agrees to buy or sell a security denominated in a foreign currency, it may desire to “lock in” the U.S. dollar price for the security. By entering into a forward contract for the purchase or sale, for a fixed amount of U.S. dollars, of the amount of foreign currency involved in the underlying security transaction, a Fund will be able to protect itself against an adverse change in foreign currency values between the date the security is purchased or sold and the date on which payment is made or received. This technique is sometimes referred to as a “settlement hedge” or “transaction hedge.” A Fund may also enter into forward contracts to purchase or sell a foreign currency in anticipation of future purchases or sales of securities denominated in or exposed to foreign currency, even if the specific investments have not yet been selected by the portfolio manager.

A Fund may also use forward contracts to hedge against a decline in the value of existing investments denominated in or exposed to foreign currency. For example, if a Fund owned securities denominated in or exposed to pounds sterling, it could enter into a forward contract to sell pounds sterling in return for U.S. dollars to hedge against possible declines in the pound’s value. Such a hedge, sometimes referred to as a “position hedge,” would tend to offset both positive and negative currency fluctuations, but would not offset changes in security values caused by other factors. This type of hedge, sometimes referred to as a “proxy hedge,” could offer advantages in terms of cost, yield, or efficiency, but generally would not hedge currency exposure as effectively as a simple hedge into U.S. dollars. Proxy hedges may result in losses if the currency used to hedge does not perform similarly to the currency in which the hedged securities are denominated or exposed.

A Fund may enter into forward contracts to shift its investment exposure from one currency into another. This may include shifting exposure from U.S. dollars into a foreign currency, or from one foreign currency into another foreign currency. This type of strategy, sometimes known as a “cross-hedge,” will tend to reduce or eliminate exposure to the currency that is sold, and increase exposure to the currency that is purchased, much as if a Fund had sold a security denominated in or exposed to one currency and purchased an equivalent security denominated in or exposed to another. Cross-hedges protect against losses resulting from a decline in the hedged currency, but will cause a Fund to assume the risk of fluctuations in the value of the currency it purchases.

Successful use of currency management strategies will depend on a portfolio manager’s skill in analyzing and predicting currency values. Currency management strategies may substantially change a Fund’s investment exposure to changes in currency exchange rates, and could result in losses to the Fund if currencies do not perform as the portfolio manager anticipates. For example, if a currency’s value rose at a time when the portfolio manager had hedged a Fund by selling that currency in exchange for dollars, the Fund would be unable to participate in the currency’s appreciation. If a portfolio manager hedges currency exposure through proxy hedges, a Fund could realize currency losses from the hedge and the security position at the same time if the two currencies do not move in tandem. Similarly, if a portfolio manager increases a Fund’s exposure to a foreign currency, and that currency’s value declines, the Fund will realize a loss. There is no assurance that a portfolio manager’s use of currency management strategies will be advantageous to a Fund or that the portfolio manager will hedge at an appropriate time.

Forward Volatility Agreements. Forward volatility agreements are agreements in which two parties agree to exchange a straddle option (holding a position in both call and put options with the same exercise price and expiration date, allowing the holder to profit regardless of whether the price of the underlying asset goes up or down, assuming a significant change in the price of the underlying asset) at a specific expiration date and volatility. Essentially, a forward volatility agreement is a forward contract on the realized volatility of a given underlying asset, which may be, among other things, a stock, stock index, interest rate or currency. Forward volatility agreements are OTC derivative instruments that are subject to the credit risk of the counterparty.

Futures Contracts. Futures contracts are standardized, exchange-traded contracts and the price at which the purchase and sale will take place is fixed when the buyer and seller enter into the contract. In purchasing a futures contract, the buyer agrees to purchase a specified underlying instrument at a specified future date. In selling a futures contract, the seller agrees to sell a specified underlying instrument at a specified date. Futures can be held until their delivery dates or can be closed out before then if a liquid secondary market is available.

The value of a futures contract tends to increase and decrease in tandem with the value of its underlying instrument. Therefore, purchasing futures contracts will tend to increase a Fund’s exposure to positive and negative price fluctuations in the underlying instrument, much as if it had purchased the underlying instrument directly. When a Fund sells a futures contract, by contrast, the value of its futures position will tend to move in a direction contrary to the market. Types of futures contracts in which a Fund may invest include, for example, interest rate futures, index futures, securities futures and currency futures.

The underlying items to which futures contracts may relate include foreign currencies, currency indices, interest rates, bond indices, and debt securities, including corporate debt securities, non-U.S. government debt securities and U.S. government debt obligations. In most cases the contractual obligation under a futures contract may be offset, or “closed out,” before the settlement date so that the parties do not have to make or take delivery. The closing out of a contractual obligation is usually accomplished by buying or selling, as the case may be, an identical, offsetting futures contract. This transaction, which is effected through a member of an exchange, cancels the obligation to make or take delivery of the underlying instrument or asset. Although some futures contracts by their terms require the actual delivery or acquisition of the underlying instrument or asset, some require cash settlement.

The use of futures contracts may expose a Fund to additional risks, such as credit risk, liquidity risk, and counterparty risk, that it would not be subject to if it invested directly in the securities underlying those futures contracts. There can be no assurance that any strategy used will succeed. There may at times be an imperfect correlation between the movement in the prices of futures contracts and the value of their underlying instruments or index. Futures contracts may experience potentially dramatic price changes and imperfect correlations between the price of the contract and the underlying security, index or currency, which may increase the volatility of a Fund. An abrupt change in the price of an underlying security could render the underlying derivative instrument worthless. Futures contracts may involve a small investment of cash (the amount of initial and variation margin) relative to the magnitude of the risk assumed (the potential increase or decrease in the price of the futures contract). There can be no assurance that, at all times, a liquid market will exist for offsetting a futures contract that a Fund has previously bought or sold and this may result in the inability to close a futures contract when desired. Futures contracts are subject to the risk that an exchange may impose price fluctuation limits, which may make it difficult or impossible for a Fund to close out a position when desired. When a Fund purchases or sells a futures contract, it is subject to daily variation margin calls that could be substantial. If a Fund has insufficient cash to meet daily variation margin requirements, it might need to sell securities at a time when such sales are disadvantageous.

A Fund may buy and sell futures contracts on U.S. and foreign exchanges. Futures contracts in the U.S. have been designed by exchanges that have been designated “contract markets” by the Commodity Futures Trading Commission (“CFTC”) and must be executed through a futures commission merchant (“FCM”), which is a brokerage firm, that is a member of the relevant contract market. Each exchange guarantees performance of the contracts as between the clearing members of the exchange. Because all transactions in the futures market are made, offset or fulfilled by an FCM through a clearinghouse associated with the exchange on which the contracts are traded, a Fund will incur brokerage fees when it buys or sells futures contracts. A Fund may purchase and sell futures contracts and options thereon only to the extent that such activities are consistent with the requirements of Rule 4.5 under the Commodity Exchange Act, as amended (“CEA”), under which a Fund is excluded from the definition of a “commodity pool operator.” A notice of eligibility for exclusion from the definition of the term “commodity pool operator” has been filed with the National Futures Association with respect to the Funds. The Funds intend to limit their use of futures and options on futures or commodities or engage in swap transactions so as to remain eligible for the exclusion. If the Funds were no longer able to claim the exclusion, ECM would be required to register as a “commodity pool operator” and the Funds and ECM would be subject to regulation under the CEA.

A Fund generally buys and sells futures contracts only on contract markets (including exchanges or boards of trade) where there appears to be an active market for the futures contracts, but there is no assurance that an active market will exist for any particular contract or at any particular time. An active market makes it more likely that futures contracts will be liquid and bought and sold at competitive market prices. In addition, many of the futures contracts available may be relatively new instruments without a significant trading history. As a result, there can be no assurance that an active market will develop or continue to exist.

Foreign Currency Futures. A foreign currency futures contract is a standardized exchange-traded contract for the future delivery of a specified amount of a foreign currency at a price set at the time of the contract. Foreign currency futures contracts are similar to foreign currency forward contracts, except that they are traded on exchanges (and may have margin requirements) and are standardized as to contract size and delivery date. Foreign currency futures contracts are regulated by the CFTC.

At the maturity of a futures contract, a Fund may either accept or make delivery of the currency specified in the contract, or at or prior to maturity enter into a closing transaction involving the purchase or sale of an offsetting contract. Closing transactions with respect to futures contracts may be effected only on a commodities exchange or board of trade which provides a secondary market in such contracts. There is no assurance that a secondary market on an exchange or board of trade will exist for any particular contract or at any particular time. In such event, it may not be possible to close a futures position and, in the event of adverse price movements, a Fund would continue to be required to make daily cash payments of variation margin.

Futures Margin Payments. The purchaser or seller of a futures contract is not required to deliver or pay for the underlying instrument unless the contract is held until the delivery date. However, both the purchaser and seller are required to deposit “initial margin” with a futures broker, known as an FCM, when they enter into the contract. Initial margin deposits are

typically equal to a percentage of the contract’s value. If the value of either party’s position declines, that party will be required to make additional “variation margin” payments to settle the change in value on a daily basis. The party that has a gain may be entitled to receive all or a portion of this amount. Initial and variation margin payments do not constitute purchasing securities on margin for purposes of a Fund’s investment limitations. In the event of a bankruptcy of an FCM that holds margin on behalf of a Fund, the Fund may be entitled to return of margin owed to it only in proportion to the amount received by the FCM’s other customers, potentially resulting in losses to the Fund.

Index Futures Contracts. An index futures contract obligates the seller to deliver (and the purchaser to take) an amount of cash equal to a specific dollar amount times the difference between the value of a specific index at the close of the last trading day of the contract and the price at which the agreement is made. No physical delivery of the underlying security in the index is made.

Interest Rate Futures. Interest rate futures contracts are exchange-traded contracts for which the underlying reference asset is an interest-bearing fixed income security or an inter-bank deposit. Interest rate futures contracts may be purchased or sold for hedging purposes to attempt to protect against the effects of interest rate changes on a Fund’s current or intended investments in fixed income securities. For example, if a Fund owned long-term bonds and interest rates were expected to increase, the Fund might sell interest rate futures contracts. Such a sale would have much the same effect as selling some of the long-term bonds in a Fund’s portfolio. However, since the market for interest rate futures contracts may generally be more liquid than the cash market for individual bonds, the use of interest rate futures contracts as a hedging technique allows a Fund to hedge its interest rate risk without having to sell its portfolio securities. If interest rates were to increase, the value of the debt securities in the portfolio would decline, but the value of a Fund’s interest rate futures contracts would be expected to increase at approximately the same rate, thereby keeping the net asset value of the Fund from declining as much as it otherwise would have. On the other hand, if interest rates were expected to decline, interest rate futures contracts could be purchased to hedge in anticipation of subsequent purchases of long-term bonds at higher prices. Because the fluctuations in the value of the interest rate futures contracts should be similar to those of long-term bonds, a Fund could protect itself against the effects of the anticipated rise in the value of long-term bonds without actually buying them until the necessary cash becomes available or the market has stabilized. At that time, the interest rate futures contracts could be liquidated and a Fund’s cash reserves could then be used to buy long-term bonds on the cash market.

Options on Futures Contracts. An option on a futures contract gives the purchaser the right, in return for the premium paid, to assume a position in a futures contract (a long position if the option is a call and a short position if the option is a put) at a specified exercise price at any time during the option period. When an option on a futures contract is exercised, delivery of the futures position is accompanied by cash representing the difference between the current market price of the futures contract and the exercise price of the option. A Fund may purchase put options on futures contracts in lieu of, and for the same purpose as, a sale of a futures contract. It also may purchase such put options in order to hedge a long position in the underlying futures contract in the same manner as it purchases protective puts on securities.

As with options on securities, the holder of an option may terminate a position by selling an option of the same series. There is no guarantee that such closing transactions can be effected. A Fund is required to deposit initial margin and maintenance margin with respect to put and call options on futures contracts written by it pursuant to brokers’ requirements similar to those applicable to futures contracts described above, and, in addition, net option premiums received will be included as initial margin deposits.

Writing an option on a futures contract involves risks similar to those arising in the sale of futures contracts. In addition, there are several special risks relating to options on futures contracts. The ability to establish and close out positions on such options will be subject to the development and maintenance of a liquid secondary market. It is not certain that this market will develop. Compared to the use of futures contracts, the purchase of options on futures contracts involves less potential risk to a Fund, because the maximum amount at risk is the premium paid for the options (plus transaction costs). However, there may be circumstances when the use of an option on a futures contract would result in a loss to a Fund when the use of a futures contract would not, such as when there is no movement in the prices of the underlying securities.

Hybrid Instruments. Hybrid instruments have recently been developed and combine the elements of futures contracts or options with those of debt, preferred equity or depository instruments. Often these hybrid instruments are indexed to the price of a commodity, particular currency, or a domestic or foreign debt or equity securities index.

Hybrid instruments may take a variety of forms, including, but not limited to, debt instruments with interest or principal payments or redemption terms determined by reference to the value of a currency or commodity or securities index at a future point in time, preferred stock with dividend rates determined by reference to the value of a currency, or convertible securities with the conversion terms related to a particular commodity. Hybrid instruments can also be an efficient means of creating exposure to a particular market, or segment of a market, with the objective of enhancing total return.

The risks associated with hybrid instruments reflect a combination of the risks of investing in securities, options, futures and currencies, including volatility and lack of liquidity. Further, the prices of the hybrid instrument and the related commodity or currency may not move in the same direction or at the same time. Hybrid instruments may bear interest or pay preferred dividends at below market (or even relatively nominal) rates. Alternatively, hybrid instruments may bear interest at above market rates but bear an increased risk of principal loss (or gain). The latter situation may result in leverage, meaning that the hybrid instrument is structured such that the risk of loss, as well as the potential for gain, is magnified. Under certain conditions, the redemption value of such an instrument could even be zero.

Credit Linked Notes. A credit linked note (“CLN”) is a type of hybrid instrument in which a special purpose entity issues a structured note (the “note issuer”) with respect to which the reference instrument is a single bond, a portfolio of bonds or the unsecured credit of an issuer, in general (each a “reference credit”). The purchaser of the CLN (the “note purchaser”) invests a par amount and receives a payment during the term of the CLN that equals a fixed or floating rate of interest equivalent to a high rated funded asset (such as a bank certificate of deposit) plus an additional premium that relates to taking on the credit risk of the reference credit. Upon maturity of the CLN, the note purchaser will receive a payment equal to: (1) the original par amount paid to the note issuer, if there is no occurrence of a designated event of default, restructuring or other credit event (each a “credit event”) with respect to the issuer of the reference credit; or (2) the market value of the reference credit, if a credit event has occurred. Depending upon the terms of the CLN, it is also possible that the note purchaser may be required to take physical delivery of the reference credit in the event of a credit event. Most CLNs use a corporate bond (or a portfolio of corporate bonds) as the reference credit. However, almost any type of fixed-income security (including foreign government securities), index or derivative contract (such as a credit default swap) can be used as the reference credit.

Most CLNs are structured as Rule 144A securities so that they may be freely traded among institutional buyers. However, the market for CLNs may be, or suddenly can become, illiquid. The other parties to the transaction may be the only investors with sufficient understanding of the CLN to be interested in bidding for it. Changes in liquidity may result in significant, rapid and unpredictable changes in the prices of CLNs. In certain cases, a market price for a CLN may not be available or may not be reliable, and a Fund could experience difficulty in selling such security at a price a portfolio manager believes is fair.

Options. An option is a contract between two parties for the purchase and sale of a financial instrument for a specified price (known as the “strike price” or “exercise price”) at any time during the option period. Unlike a futures contract, an option grants a right (not an obligation) to buy or sell a financial instrument. Generally, a seller of an option can grant a buyer two kinds of rights: a “call” (the right to buy the security) or a “put” (the right to sell the security). Options have various types of underlying instruments, including specific securities, indices of securities prices, foreign currencies, interest rates and futures contracts. Options may be traded on an exchange (exchange-traded options) or may be customized agreements between the parties (OTC options). Like futures, a financial intermediary, known as a clearing corporation, financially backs exchange-traded options. However, OTC options have no such intermediary and are subject to the risk that the counterparty will not fulfill its obligations under the contract. The principal factors affecting the market value of an option include supply and demand, interest rates, the current market value of the underlying instrument relative to the exercise price of the option, the volatility of the underlying instrument, and the time remaining until the option expires.

If a trading market in particular options were illiquid, investors in those options would be unable to close out their positions until trading resumes, and option writers may be faced with substantial losses if the value of the underlying asset moves adversely during that time. However, there can be no assurance that a liquid market will exist for any particular options product at any specific time. Lack of investor interest, changes in volatility, or other factors or conditions might adversely affect the liquidity, efficiency, continuity, or even the orderliness of the market for particular options. Exchanges or other facilities on which options are traded may establish limitations on options trading, may order the liquidation of positions in excess of these limitations, or may impose other sanctions that could adversely affect parties to an options transaction. Many options, in particular OTC options, are complex and often valued based on subjective factors. Improper valuations can result in increased cash payment requirements to counterparties or a loss of value to a Fund.

Purchasing Put and Call Options. By purchasing a put option, a Fund obtains the right (but not the obligation) to sell the option’s underlying instrument at a fixed strike price. In return for this right, a Fund pays the current market price for the option (known as the option premium). A Fund may terminate its position in a put option it has purchased by allowing it to expire or by exercising the option. If the option is allowed to expire, a Fund will lose the entire premium it paid. If a Fund exercises the option, it completes the sale of the underlying instrument at the strike price. A Fund may also terminate a put option position by closing it out in the secondary market (that is by selling it to another party) at its current price, if a liquid secondary market exists.

The buyer of a typical put option can expect to realize a gain if security prices fall substantially. However, if the underlying instrument’s price does not fall enough to offset the cost of purchasing the option, a put buyer can expect to suffer a loss (limited to the amount of the premium paid, plus related transaction costs).

The features of call options are essentially the same as those of put options, except that the purchaser of a call option obtains the right to purchase, rather than sell, the underlying instrument at the option's strike price. A call buyer typically attempts to participate in potential price increases of the underlying instrument with risk limited to the cost of the option if security prices fall. At the same time, the buyer can expect to suffer a loss if security prices do not rise sufficiently to offset the cost of the option.

Writing Put and Call Options. When a Fund writes a put option, it takes the opposite side of the transaction from the option’s purchaser. In return for receipt of the premium, a Fund assumes the obligation to pay the strike price for the option’s underlying instrument if the other party to the option chooses to exercise it. When writing an option on a futures contract, a Fund will be required to make margin payments to an FCM as described above for futures contracts. A Fund may seek to terminate its position in a put option it writes before exercise by closing out the option in the secondary market at its current price. If the secondary market is not liquid for a put option a Fund has written, however, the Fund must continue to be prepared to pay the strike price while the option is outstanding, regardless of price changes, and must continue to set aside assets to cover its position.

If security prices rise, a put writer would generally expect to profit, although its gain would be limited to the amount of the premium it received. If security prices remain the same over time, it is likely that the writer will also profit, because it should be able to close out the option at a lower price. If security prices fall, the put writer would expect to suffer a loss from purchasing the underlying instrument directly, which can exceed the amount of the premium received.

Writing a call option obligates a Fund to sell or deliver the option’s underlying instrument, in return for the strike price, upon exercise of the option. The characteristics of writing call options are similar to those of writing put options, except that writing calls generally is a profitable strategy if prices remain the same or fall. Through receipt of the option premium, a call writer can mitigate the effect of a price decline. At the same time, a call writer gives up some ability to participate in security price increases.

Closing out options (exchange-traded options). As the writer of an option, if a Fund wants to terminate its obligation, the Fund may effect a “closing purchase transaction” by buying an option of the same series as the option previously written. The effect of the purchase is that the clearing corporation will cancel a Fund’s position. However, a writer may not effect a closing purchase transaction after being notified of the exercise of an option. Likewise, the buyer of an option may recover all or a portion of the premium that it paid by effecting a “closing sale transaction” by selling an option of the same series as the option previously purchased and receiving a premium on the sale. There is no guarantee that either a closing purchase or a closing sale transaction may be made at a time desired by a Fund. Closing transactions allow a Fund to terminate its positions in written and purchased options. A Fund will realize a profit from a closing transaction if the price of the transaction is less than the premium received from writing the original option (in the case of written options) or is more than the premium paid by the Fund to buy the option (in the case of purchased options). As a result, any loss resulting from a closing transaction on a written call option is likely to be offset in whole or in part by appreciation of the underlying instrument owned by a Fund.

Foreign Currency Options. Options on foreign currencies operate similarly to options on securities. Rather than the right to buy or sell a single security at a specified price, options on foreign currencies give the holder the right to buy or sell foreign currency for a fixed amount in U.S. dollars or other base currencies. Options on foreign currencies are traded primarily in the OTC market, but may also be traded on U.S. and foreign exchanges. The value of a foreign currency option is dependent upon the value of the underlying foreign currency relative to the U.S. dollar or other base currency. The price of the option may vary with changes, among other things, in the value of either or both currencies and has no relationship to the investment merits of a foreign security. Options on foreign currencies are affected by all of those factors that influence foreign exchange rates and foreign investment generally. As with other options, a Fund may close out its position in foreign currency options through closing purchase transactions and closing sale transactions provided that a liquid market exists for such options.

Options on Swaps. An option on a swap (“swaption”) gives a party the right (but not the obligation) to enter into a new swap agreement or to extend, shorten, cancel or modify an existing contract at a specific date in the future in exchange for a premium. Depending on the terms of the particular option agreement, a Fund will generally incur a greater degree of risk when it writes (sells) a swaption than it will incur when it purchases a swaption. When a Fund purchases a swaption, it risks losing only the amount of the premium it has paid should it decide to let the option expire unexercised. However, when a Fund writes a swaption, upon exercise of the option the Fund will become obligated according to the terms of the underlying agreement. A Fund that writes a swaption receives the premium and bears the risk of unfavorable changes in the preset rate on the underlying interest rate swap. Whether a Fund’s use of options on swaps will be successful in furthering its investment objective will depend on the ability to predict correctly whether certain types of investments are likely to produce greater returns than other investments. Options on swaps may involve risks similar to those discussed below in “Swaps.”

OTC Options. Unlike exchange-traded options, which are standardized with respect to the underlying instrument, expiration date, contract size, and strike price, the terms of OTC options (options not traded on exchanges) generally are established through negotiation with the other party to the option contract. While this type of arrangement allows a Fund greater flexibility to tailor an option to its needs, OTC options generally involve greater credit risk than exchange-traded options, which are guaranteed by the clearing organization of the exchanges where they are traded.

Swaps. Generally, swap agreements are contracts between a Fund and another party (the swap counterparty) involving the exchange of payments on specified terms over periods ranging from a few days to multiple years. A swap agreement may be negotiated bilaterally and traded OTC between the two parties (for an uncleared swap) or, in some instances, must be transacted through an FCM and cleared through a clearinghouse that serves as a central counterparty (for a cleared swap). In a basic swap transaction, a Fund agrees with the swap counterparty to exchange the returns (or differentials in rates of return) and/or cash flows earned or realized on a particular “notional amount” or value of predetermined underlying reference instruments. The notional amount is the set dollar or other value selected by the parties to use as the basis on which to calculate the obligations that the parties to a swap agreement have agreed to exchange. The parties typically do not actually exchange the notional amount. Instead, they agree to exchange the returns that would be earned or realized if the notional amount were invested in given investments or at given interest rates. Examples of returns that may be exchanged in a swap agreement are those of a particular security, a particular fixed or variable interest rate, a particular non-U.S. currency, or a “basket” of securities representing a particular index. Swaps can also be based on credit and other events.

A Fund will generally enter into swap agreements on a net basis, which means that the two payment streams that are to be made by the Fund and its counterparty with respect to a particular swap agreement are netted out, with the Fund receiving or paying, as the case may be, only the net difference in the two payments. A Fund’s obligations (or rights) under a swap agreement that is entered into on a net basis will generally be the net amount to be paid or received under the agreement based on the relative values of the obligations of each party upon termination of the agreement or at set valuation dates. A Fund will accrue its obligations under a swap agreement daily (offset by any amounts the counterparty owes the Fund). If the swap agreement does not provide for that type of netting, the full amount of a Fund’s obligations will be accrued on a daily basis.

In a cleared swap, a Fund’s ultimate counterparty is a central clearinghouse rather than a brokerage firm, bank or other financial institution. Cleared swaps are submitted for clearing through each party’s FCM, which must be a member of the clearinghouse that serves as the central counterparty. Transactions executed on a swap execution facility may increase market transparency and liquidity but may require a Fund to incur increased expenses to access the same types of swaps that it has used in the past. When a Fund enters into a cleared swap, it must deliver to the central counterparty (via the FCM) an amount referred to as “initial margin.” Initial margin requirements are determined by the central counterparty and are typically calculated as an amount equal to the volatility in market value of the cleared swap over a fixed period, but an FCM may require additional initial margin above the amount required by the central counterparty. During the term of the swap agreement, a “variation margin” amount also may be required to be paid by a Fund or may be received by a Fund in accordance with margin controls set for such accounts.

In an uncleared swap, the swap counterparty typically is a brokerage firm, bank or other financial institution. During the term of an uncleared swap, a Fund will be required to pledge to the swap counterparty, from time to time, an amount of cash and/or other assets equal to the total net amount (if any) that would be payable by the Fund to the counterparty if all outstanding swaps between the parties were terminated on the date in question, including any early termination payments. Likewise, the counterparty will be required to pledge cash or other assets to cover its obligations to a Fund. However, the amount pledged may not always be equal to or more than the amount due to the other party. Therefore, if a counterparty defaults in its obligations to a Fund, the amount pledged by the counterparty and available to the Fund may not be sufficient to cover all the amounts due to the Fund and the Fund may sustain a loss.

The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (the “Dodd-Frank Act”) and related regulatory developments have imposed comprehensive new regulatory requirements on swaps and swap market participants. The regulatory framework includes: (1) registration and regulation of swap dealers and major swap participants; (2) requiring central clearing and execution of standardized swaps; (3) imposing margin requirements on swap transactions; (4) regulating and monitoring swap transactions through position limits and large trader reporting requirements; and (5) imposing record keeping and centralized and public reporting requirements, on an anonymous basis, for most swaps. The CFTC is responsible for the regulation of most swaps. The SEC has jurisdiction over a small segment of the market referred to as “security-based swaps,” which includes swaps on single securities or credits, or narrow-based indices of securities or credits.

A Fund’s use of swaps is subject to the risks associated with derivative instruments generally. Many swaps may be considered to be illiquid and involve the risk that a Fund may not be able to establish or liquidate a position at an advantageous time or price, which may result in significant losses. Additionally, certain swap agreements entail complex terms and may require a greater degree of subjectivity in their valuation.

As noted above, under recent financial reforms, certain types of swaps are, and others eventually are expected to be, required to be cleared through a central counterparty, which may affect counterparty risk and other risks faced by a Fund. Central clearing is designed to reduce counterparty credit risk and increase liquidity compared to uncleared swaps, but it does not eliminate those risks completely and may involve additional costs and risk not involved with uncleared swaps. A Fund is also subject to the risk that, after entering into a cleared swap with an executing broker, no FCM or central counterparty is willing or able to clear the transaction. In such an event, a Fund may be required to break the trade and make an early termination payment to the executing broker.

Credit Default Swaps. Under a credit default swap agreement, the protection “buyer” in a credit default contract is generally obligated to pay the protection “seller” an upfront or a periodic stream of payments over the term of the contract, provided that no credit event, such as a default, on a reference instrument has occurred. If such a credit event occurs, the seller must pay the buyer the “par value” (full notional value) of the reference obligation in exchange for the reference obligation or must make a cash settlement payment. A Fund may be either the buyer or seller in the transaction. If a Fund is a buyer and no credit event occurs, the Fund will receive no return on the stream of payments made to the seller. However, if a credit event occurs, a Fund, as the buyer, receives the full notional value for a reference obligation that may have little or no value. As a seller, a Fund receives a fixed rate of income throughout the term of the contract, which typically is between six months and three years, provided that there is no credit event. If a credit event occurs, a Fund, as the seller, must pay the buyer the full notional value of the reference obligation. A Fund, as the seller, would be entitled to receive the reference obligation. Alternatively, a Fund may be required to make a cash settlement payment, where the reference obligation is received by the Fund as seller. The value of the reference obligation, coupled with the periodic payments previously received, would likely be less than the full notional value a Fund pays to the buyer, resulting in a loss of value to the Fund as seller. A Fund may also invest in a particular type of credit derivative commonly called a “CDX” instrument, which is an index of credit default swap agreements.

The Dodd-Frank Act and related regulatory developments requires the clearing and exchange trading of certain interest rate swaps and credit default swaps. Under the Dodd-Frank Act, certain derivatives will potentially become subject to margin requirements and swap dealers will potentially be required to collect margin from a Fund with respect to such derivatives.

Credit default swaps involve special risks because they are difficult to value, are highly susceptible to liquidity and credit risk and generally pay a return to the party that has paid the premium only in the event of an actual default by the issuer of the reference obligation (as opposed to a credit downgrade or other indication of financial difficulty). A Fund bears the loss of the amount expected to be received under a swap agreement in the event of the default or bankruptcy of a swap counterparty. When a Fund acts as a seller of a credit default swap agreement it is exposed to the risks of a leveraged transaction. Additionally, credit default swaps may involve greater risks than if a Fund had invested in the reference obligation directly.

Currency Swaps. Currency swaps are transactions in which one currency is simultaneously bought for a second currency on a spot basis and sold for the second currency on a forward basis. Currency swaps involve the exchange of the rights of a Fund and another party to make or receive payments in specified currencies, and typically require the delivery of the entire principal value of one designated currency in exchange for the other designated currency. As a result, the entire principal value of a currency swap is subject to the risk that the other party to the swap will default on its contractual delivery obligations.

Inflation Swaps. An inflation swap is a contract between two parties, whereby one party makes payments based on the cumulative percentage increase in an index that serves as a measure of inflation (typically, the Consumer Price Index) and the other party makes a regular payment based on a compounded fixed rate. Each party’s payment obligation under the swap is determined by reference to a specified “notional” amount of money. Typically, an inflation swap has payment obligations netted and exchanged upon maturity. The value of an inflation swap is expected to change in response to changes in the rate of inflation. If inflation increases at a faster rate than anticipated at the time the swap is entered into, the swap will increase in value. Similarly, if inflation increases at a rate slower than anticipated at the time the swap is entered into, the swap will decrease in value.

Interest Rate Swaps, Caps and Floors. Interest rate swaps and interest rate caps and floors are types of hedging transactions which are utilized to attempt to protect a Fund against and potentially benefit from fluctuations in interest rates and to preserve a return or spread on a particular investment or portion of the Fund’s holdings. These transactions may also be used to attempt to protect against possible declines in the market value of a Fund’s assets resulting from downward trends in the debt securities markets (generally due to a rise in interest rates) or to protect unrealized gains in the value of a Fund’s holdings, or to facilitate the sale of such securities.

Interest rate swaps involve the exchange with another party of commitments to pay or receive interest; e.g., an exchange of fixed rate payments for variable rate payments. The purchase of an interest rate cap entitles the purchaser, to the extent that a

specified index exceeds a predetermined interest rate, to receive payments of interest on a notional principal amount from the party selling such interest rate cap. The purchase of an interest rate floor entitles the purchaser, to the extent that a specified index falls below a predetermined interest rate, to receive payments of interest on a notional principal amount from the party selling such interest rate floor.

The successful utilization of interest rate transactions depends on a portfolio manager’s ability to predict correctly the direction and degree of movements in interest rates. If a portfolio manager’s judgment about the direction or extent of movement in interest rates is incorrect, a Fund’s overall performance would be worse than if it had not entered into such transactions. For example, if a Fund purchases an interest rate swap or an interest rate floor to hedge against the expectation that interest rates will decline but instead interest rates rise, the Fund would lose part or all of the benefit of the increased payments it would receive as a result of the rising interest rates because it would have to pay amounts to its counterparts under the swap agreement or would have paid the purchase price of the interest rate floor.

The swap market has grown substantially in recent years with a large number of banks and investment banking firms acting both as principals and agents utilizing standardized swap documentation. Caps and floors are more recent innovations for which standardized documentation has not yet been developed and, accordingly, they are less liquid than swaps. Interest rate swaps, caps and floors are considered by the staff of the SEC to be illiquid investments and, therefore, a Fund may not invest more than 15% of its assets in such instruments. Finally, there can be no assurance that a Fund will be able to enter into interest rate swaps or to purchase interest rate caps or floors at prices or on terms a portfolio manager believes are advantageous to the Fund. In addition, although the terms of interest rate swaps, caps and floors may provide for termination, there can be no assurance that a Fund will be able to terminate an interest rate swap or to sell or offset interest rate caps or floors that it has purchased.

Total Return Swaps. Total return swaps are contracts in which one party agrees to make payments of the total return from a reference instrument - which may be a single asset, a pool of assets or an index of assets - during a specified period, in return for payments equal to a fixed or floating rate of interest or the total return from another underlying reference instrument. The total return includes appreciation or depreciation on the underlying asset, plus any interest or dividend payments. Payments under the swap are based upon an agreed upon principal amount but, since the principal amount is not exchanged, it represents neither an asset nor a liability to either counterparty, and is referred to as notional. Total return swaps are marked to market daily using different sources, including quotations from counterparties, pricing services, brokers or market makers. The unrealized appreciation or depreciation related to the change in the valuation of the notional amount of the swap is combined with the amount due to a Fund at termination or settlement. The primary risks associated with total return swaps are credit risks (if the counterparty fails to meet its obligations) and market risk (if there is no liquid market for the swap or unfavorable changes occur to the underlying reference instrument).

Volatility Swaps. A volatility swap is an agreement between two parties to make payments in connection with changes in the volatility (i.e., the magnitude of change over a specified period of time) of an underlying reference instrument, such as a currency, rate, index, security or other financial instrument. Specifically, one party will be required to make a payment to the other party if the volatility of an underlying reference instrument increases over an agreed upon period of time, but will be entitled to receive a payment from the other party if the volatility decreases over that time period. A volatility swap that requires a single payment on a stated future date will be treated as a forward contract. Payments on a volatility swap will be greater if they are based upon the mathematical square of volatility (i.e., measured volatility multiplied by itself, which is referred to as “variance”). This type of a volatility swap is frequently referred to as a variance swap. Volatility swaps are subject to credit risk if the counterparty fails to meet its obligations, and the risk that a portfolio manager may be incorrect in forecasts of volatility of the underlying reference instrument.

Other Permitted Investment Activities and Risks

Borrowing. The Funds may borrow from banks or through reverse repurchase agreements. If a Fund borrows money, its share price may be subject to greater fluctuation until the borrowing is paid off. If a Fund makes additional investments while borrowings are outstanding, this may be considered a form of leverage. In the event a Fund borrows in excess of 5% of its total assets, at the time of such borrowing it will have an asset coverage of at least 300%.

Under the 1940 Act, the Funds may also borrow for temporary purposes in an amount not exceeding 5% of the value of its total assets at the time when the loan is made. A loan shall be presumed to be for temporary purposes if it is repaid within 60 days and is not extended or renewed.

Brexit Risk. The United Kingdom (“UK”) left the European Union (“EU”) on January 31, 2020 under the terms of a negotiated departure deal. On May, 1, 2021 the EU-UK Trade and Cooperation Agreement took affect and now governs certain aspects of the EU and UK's relationship. Further discussions are to be held between the UK and the EU in relation to matters not covered by the trade agreement, such as financial services. Significant economic and regulatory uncertainty caused by the UK’s exit from

the EU has resulted in volatile markets for the UK and broader international financial markets. While the long-term effects of Brexit remain unclear, in the short term, financial markets may experience, among other things, greater volatility and/or illiquidity, currency fluctuations, and a decline in cross-border investment between the UK and the EU. The effects of Brexit will also be shaped by new trade deals that the UK is negotiating with more than 60 other countries, including the U.S. Brexit could lead to legal and tax uncertainty and potentially divergent national laws and regulations as the UK determines which EU laws to replicate or replace. The impact of Brexit on the UK and in global markets as well as any associated adverse consequences remains unclear, and the uncertainty may have a significant negative effect on the value of a Fund’s investments.

Cybersecurity Risk. Like other funds and business enterprises, the use of the internet and other electronic media and technology, including cloud based technology, exposes the Funds, the Funds’ shareholders, and the Funds’ service providers and their respective operations, to potential risks from cybersecurity attacks or incidents (collectively, “cyber events”). Cyber events may include, for example, unauthorized access to systems, networks or devices (such as through “hacking” activity), “ransomware” attacks, infection from or spread of malware, computer viruses or other malicious software code, corruption of data, and attacks which shut down, disable, slow or otherwise disrupt operations, business processes or website or internet access, functionality or performance. Cyber events could adversely affect a Fund and its shareholders by, among other things, interfering with processing shareholder transactions, impeding a Fund’s ability to calculate its net asset value, or causing the release, or misuse, of confidential Fund information or shareholder information (which may result in privacy law violations). Like other funds and business enterprises, a Fund, or its adviser, Sub-Adviser, custodians, transfer agent and other third-party service providers have experienced, and will continue to experience, cyber events consistently. As the frequency of cyber events in the market has become more prevelant, they have not had a material adverse effect on the Funds’ business operations or performance. In addition to intentional cyber events, unintentional cyber events can occur, such as, for example, the inadvertent release of confidential information. Any cyber event could adversely impact a Fund and its shareholders and cause the Fund to incur financial loss and expense, as well as face exposure to regulatory penalties, reputational damage and additional compliance costs associated with corrective measures. A cyber event may cause a Fund, or its adviser, Sub-Adviser, custodians, transfer agent and other third-party service providers to lose proprietary information, suffer data corruption, lose operational capacity (such as, for example, the loss of the ability to process transactions, calculate the Fund’s net asset value, or allow shareholders to transact business), and/or fail to comply with applicable privacy and other laws. Among other potentially harmful effects, cyber events also may result in theft, unauthorized monitoring and failures in the physical infrastructure or operating systems that support a Fund and its service providers. In addition, cyber events affecting issuers in which a Fund invests could cause the Fund’s investments to lose value. ECM has established risk management systems reasonably designed to seek to reduce the risks associated with cyber events, however, there is no guarantee that the efforts of ECM or its affiliates, or other service providers, will succeed, either entirely or partially. There is also the risk cyber events or cybersecurity breaches may not be detected. Among other reasons, the nature of malicious cyber attacks is becoming increasingly sophisticated and ECM and its relevant affiliates, cannot control the cyber systems and cybersecurity systems of issuers or third-party service providers.

Environmental, Social, and Governance Considerations. The environmental, social, and governance (“ESG”) considerations assessed as part of the investment process to implement a Fund’s investment strategy in pursuit of its investment objective may vary across types of eligible investments and issuers, and not every ESG factor may be identified or evaluated for every investment. A Fund’s portfolio will not be solely based on ESG considerations, and therefore the issuers in which the Fund invests may not be considered ESG-focused companies. The incorporation of ESG factors may affect a Fund’s exposure to certain issuers or industries and may not work as intended. A Fund may perform differently than other funds that do not assess an issuer’s ESG factors or that use a different methodology to identify and/or incorporate ESG factors. Information used by a Fund to evaluate such factors may not be readily available, complete or accurate, and may vary across providers and issuers as ESG is not a uniformly defined characteristic. There is no guarantee that the evaluation of ESG considerations will be additive to a Fund’s performance.

Exchange-Traded Funds. Exchange-traded funds (“ETFs”) are a type of investment company the shares of which are bought and sold on a securities exchange. An ETF generally represents a fixed portfolio of securities, commodities and/or currencies that are designed to replicate, as closely as possible before expenses, the performance of a particular market index. These indexes may be broad-based, sector or international. The performance results of ETFs will not replicate exactly the performance of the pertinent index due to transaction and other expenses, including fees to service providers, borne by ETFs. Furthermore, there can be no assurance that the portfolio of securities, commodities and/or currencies purchased by an ETF will replicate a particular index. Some ETFs are actively managed and instead of replicating a particular index they seek to outperform it or outperform a basket of securities or price of a commodity or currency. A Fund may use ETFs to gain exposure to various asset classes and markets or types of strategies and investments.

The risks of owning an ETF generally reflect the risks of owning the underlying securities they are designed to track, although lack of liquidity in an ETF could result in it being more volatile. ETFs are also subject to certain additional risks, including (1) the risk that their market prices may not correlate perfectly with changes in the prices of the underlying securities they are designed to track; and (2) the risk of possible trading halts due to market conditions or other reasons, based on the policies of the exchange upon which an ETF trades. In addition, a sector ETF may be adversely affected by the performance of that specific

sector or group of industries on which it is based. A Fund investing in an ETF would bear, along with other shareholders of an ETF, its pro rata portion of the ETF’s expenses, including management fees. Accordingly, in addition to bearing their proportionate share of a Fund’s expenses (i.e., management fees and operating expenses), shareholders of the Fund may also indirectly bear similar expenses of an ETF.

A Fund will also incur brokerage commissions and related charges when purchasing shares in an ETF in secondary market transactions. Unlike typical investment company shares, which are purchased and sold once daily, shares in an ETF may be purchased or sold on a listed securities exchange throughout the trading day at market prices that are generally close to net asset value.

An ETF may purchase, retain and sell securities at times when an actively managed open-end mutual fund would not do so. As a result, you can expect greater risk of loss (and a corresponding greater prospect of gain) from changes in the value of securities that are heavily weighted in the index than would be the case if the investment vehicle was not fully invested in such securities.

Greater China Risk. The Greater China region encompasses China, Hong Kong and Taiwan. The region is highly interconnected and interdependent, with relationships and tensions built on trade, finance, culture, and politics. There are special risks associated with investments in China, Hong Kong and Taiwan, including exposure to currency fluctuations, less liquidity, expropriation, confiscatory taxation, nationalization and exchange control regulations (including currency blockage). Inflation and rapid fluctuations in inflation and interest rates have had, and may continue to have, negative effects on the economy and securities markets of China, Hong Kong and Taiwan.

Hong Kong is closely tied to China, economically and politically, following the UK’s 1997 handover of the former colony to China to be governed as a Special Administrative Region. Changes to Hong Kong’s legal, financial, and monetary system could negatively impact its economic prospects. Hong Kong’s evolving relationship with the central government in Beijing has been a source of political unrest and may result in economic disruption.

Although many Taiwanese companies heavily invest in China, a state of hostility continues to exist between China and Taiwan. Taiwan’s political stability and ability to sustain its economic growth could be significantly affected by its political and economic relationship with China. Although economic and political relations have both improved, Taiwan remains vulnerable to both Chinese territorial ambitions and economic downturns.

Export growth continues to be a major driver of China’s rapid economic growth. As a result, a reduction in spending on Chinese products and services, the institution of tariffs or other trade barriers, or a downturn in any of the economies of China’s key trading partners may have an adverse impact on the Chinese economy. The current political climate has intensified concerns about a potential trade war between China and the U.S., as each country has recently imposed tariffs on the other country’s products. These actions may trigger a significant reduction in international trade, the oversupply of certain manufactured goods, substantial price reductions of goods and possible failure of individual companies and/or large segments of China’s export industry, which could have a negative impact on a Fund’s performance.

On December 2, 2020, the U.S. Congress also passed the Holding Foreign Companies Accountable Act, which could cause the securities of foreign issuers (including Chinese issuers) to be delisted from U.S. stock exchanges if those companies do not permit U.S. oversight of the auditing of their financial information. To the extent a Fund invests in securities of Chinese companies listed in the U.S., delisting could decrease the Fund’s ability to transact in such securities and could significantly impact its liquidity and market price. In addition, a Fund would have to seek other markets in which to transact in such securities which would also increase its costs. Events such as these and their consequences are difficult to predict, and it is unclear whether further tariffs may be imposed, or other escalating actions may be taken in the future.

Additionally, China is alleged to have participated in state-sponsored cyberattacks against foreign companies and foreign governments. Actual and threatened responses to such activity and strained international relations, including purchasing restrictions, sanctions, tariffs or cyberattacks on the Chinese government or Chinese companies, may impact China’s economy and Chinese issuers of securities in which a Fund invests.

Certain Funds may invest in eligible renminbi-denominated shares of China-based companies that trade on Chinese stock markets such as the Shanghai Stock Exchange and the Shenzhen Stock Exchange (referred to as “A-shares”) through the Shanghai and Shenzhen–Hong Kong Stock Connect programs (“Stock Connect”). The Stock Connect program is a mutual market access program designed to, among other things, enable foreign investment in China via brokers in Hong Kong. There are significant risks inherent in investing in A-shares through Stock Connect. Specifically, trading can be affected by a number of issues. Stock Connect can only operate when both China and Hong Kong markets are open for trading and when banking services are available in both markets on the corresponding settlement days. As such, if one or both markets are closed on a U.S. trading day, a Fund may not be able to dispose of its shares in a timely manner, which could adversely affect the Fund’s performance. Trading through Stock Connect may require pre-delivery or pre-validation of cash or securities to or by a broker. If the cash or

securities are not in the broker’s possession before the market opens on the day of selling, the sell order will be rejected. This requirement may limit a Fund’s ability to dispose of its A-shares purchased through Stock Connect in a timely manner.

Additionally, Stock Connect is subject to daily quota limitations on purchases into China. Foreign investors, in the aggregate, are subject to ownership limitations for Shanghai or Shenzhen listed companies, including those purchased through Stock Connect. Once the daily quota is reached, orders to purchase additional A-shares through Stock Connect will be rejected. Only certain A-shares are eligible to be accessed through Stock Connect and such securities could lose their eligibility at any time. In addition, a Fund’s purchase of A-shares through Stock Connect may only be subsequently sold through Stock Connect and is not otherwise transferable. Stock Connect utilizes an omnibus clearing structure, and a Fund’s shares will be registered in its custodian’s name on the Hong Kong Central Clearing and Settlement System. This may limit the ability to effectively manage a Fund’s holdings, including the potential enforcement of equity owner rights.

In China, ownership of companies in certain sectors by foreign individuals and entities is prohibited. In order to facilitate investment in these companies by foreign individuals, many Chinese companies have created variable interest entities (“VIEs”) that provide exposure to the Chinese company through contractual arrangements instead of equity ownership. VIE structures are subject to risks associated with breach of the contractual arrangements, including difficulty in enforcing any judgments outside of the U.S., and do not offer the same level of investor protection as direct ownership. Additionally, while VIEs are a longstanding industry practice, they have not been approved by Chinese regulators. Chinese regulators could prohibit Chinese companies from accessing foreign investment through VIEs or sever their ability to transmit economic and governance rights to foreign individuals and entities. Such actions would significantly reduce, and possibly permanently eliminate, the market value of VIEs held by a Fund.

China has implemented a number of tax reforms in recent years and may amend or revise its existing tax laws and/or procedures in the future, possibly with retroactive effect. Changes in applicable Chinese tax law could reduce the after-tax profits of a Fund, directly or indirectly, including by reducing the after-tax profits of companies in China in which the Fund invests. Uncertainties in Chinese tax rules could result in unexpected tax liabilities for a Fund.

Hedging. Hedging transactions are intended to reduce specific risks. For example, to protect a Fund against circumstances that would normally cause the Fund’s securities to decline in value, the Fund may buy or sell a derivatives contract that would normally increase in value under the same circumstances. A Fund may also attempt to hedge by using combinations of different derivatives contracts, or derivatives contracts and securities. A Fund’s ability to hedge may be limited by the costs of the derivatives contracts. A Fund may attempt to lower the cost of hedging by entering into transactions that provide only limited protection, including transactions that (1) hedge only a portion of the Fund, (2) use derivatives contracts that cover a narrow range of circumstances, or (3) involve the sale of derivatives contracts with different terms. Consequently, hedging transactions will not eliminate risk even if they work as intended. In addition, hedging strategies are not always successful, and could result in increased expenses and losses to a Fund.

Illiquid Investments. The term “illiquid investment” generally means a security that a Fund (other than the Empower Government Money Market Fund) reasonably expects cannot be sold or disposed of in-then current market conditions within seven days or less without the sale or disposition significantly changing the value of the investment used in determining a Fund’s net asset value. With respect to the Empower Government Money Market Fund, illiquid investment means a security that cannot be sold or disposed of in the ordinary course of business within seven calendar days at approximately the value ascribed to it by the Fund. Certain types of investments may be considered generally to be illiquid. Included among these are “restricted securities” which are securities whose public resale is subject to legal restrictions. However, certain types of restricted securities (commonly known as “Rule 144A securities”) that can be resold to qualified institutional buyers may be treated as liquid if they are determined to be readily marketable pursuant to policies and guidelines adopted by the Board. See “Restricted Securities and Rule 144A Securities” below.

A Fund may acquire illiquid investments so long as immediately after the acquisition the Fund would not have invested more than 15% of its net assets in illiquid investments (5% of “total assets”, as that term is defined in Rule 2a-7 under the 1940 Act, for the Empower Government Money Market Fund). A Fund will take measures to reduce its holdings of illiquid investments if they exceed the percentage limitation as a result of changes in the values of the investments or if liquid investments have become illiquid.

Rule 22e-4 under the 1940 Act requires, among other things, that the Funds (other than the Empower Government Money Market Fund) establish a liquidity risk management program (“LRMP”) that is reasonably designed to assess and manage liquidity risk. Rule 22e-4 defines “liquidity risk” as the risk that a fund could not meet requests to redeem shares issued by the fund without significant dilution of the remaining investors’ interests in the fund. The Funds have implemented a LRMP to meet the relevant requirements. Additionally, the Board has approved the designation of ECM as the Funds’ LRMP administrator, and will review no less frequently than annually a written report prepared by ECM that addresses the operation of the LRMP and assesses its adequacy and effectiveness of implementation. The liquidity classification of each investment will be made after reasonable

inquiry and taking into account, among other things, market, trading and investment-specific considerations deemed to be relevant to the liquidity classification of each Fund’s investments in accordance with the LRMP. There is no guarantee the LRMP will be effective in its operations, and complying with Rule 22e-4, including bearing related costs, could impact a Fund’s performance and its ability to meet its investment objective.

A Fund may be unable to sell illiquid investments when desirable or may be forced to sell them at a price that is lower than the price at which they are valued or that could be obtained if the investments were more liquid. In addition, sales of illiquid investments may require more time and may result in higher dealer discounts and other selling expenses than do sales of investments that are not illiquid. Illiquid investments may also be more difficult to value due to the unavailability of reliable market quotations for such investments.

Inflation Risk. Inflation risk is the uncertainty over the future real value (after inflation) of an investment. Inflation rates may change frequently and drastically as a result of various factors, including unexpected shifts in the domestic or global economy, and a Fund’s investments may not keep pace with inflation, which may result in losses to Fund investors. Inflation, and investors’ expectation of future inflation, can impact the current value of a Fund’s portfolio, resulting in lower asset values and losses to shareholders. This risk may be elevated due to monetary policy measures or a changing interest rate environment.

Investment Companies. Each Fund may invest in shares of other investment companies within the limitations of the 1940 Act and any orders issued by the SEC. Such investments may include, but are not limited to, open-end investment companies, closed-end investment companies and ETFs. Section 12(d)(1) of the 1940 Act generally precludes a Fund from acquiring: (1) more than 3% of the outstanding voting stock of another investment company; (2) shares of another investment company having an aggregate value in excess of 5% of the value of the total assets of the Fund; or (3) shares of another registered investment company and all other investment companies having an aggregate value in excess of 10% of the value of the total assets of the Fund.

However, a Fund may invest in securities issued by other registered investment companies beyond the above percentage maximums pursuant to rules promulgated by the SEC, including Rule 12d1-4 under the 1940 Act. The Lifetime Funds and the SecureFoundation Balanced Fund may rely on Rule 12d1-4 in purchasing shares of Underlying Funds that are not affiliated with Empower Funds. Rule 12d1-4 allows a Fund to acquire shares of another investment company in excess of the limitations currently imposed by the 1940 Act. A Fund relying on Rule 12d1-4 is subject to several conditions, certain of which are specific to the Fund’s position in the arrangement (i.e., as an acquiring or acquired fund). Notable conditions include those relating to: (1) control and voting that prohibit a Fund, ECM or a Sub-Adviser and their respective affiliates from controlling or voting more than 25% of the voting securities of an open-end unaffiliated acquired fund; (2) certain required findings by ECM relating to complexity, fees and undue influence (among other things); (3) entry into a fund of funds investment agreement for unaffiliated fund investments; and (4) general limitations on an acquired fund’s investments in other investment companies and private funds to no more than 10% of the acquired fund’s assets. These restrictions may limit a Fund’s ability to invest in other investment companies to the extent desired. In addition, other unaffiliated investment companies may impose other investment limitations or redemption restrictions which may also limit a Fund’s flexibility with respect to making investments in those unaffiliated investment companies. To the extent that a Fund invests in another investment company, because other investment companies pay advisory, administrative and service fees that are borne indirectly by investors, such as the Fund, there may be duplication of investment management and other fees.

Lending of Fund Securities. Subject to applicable investment limitations, each Fund from time-to-time may lend securities from its portfolio to approved brokers, dealers and financial institutions, to the extent permitted under the 1940 Act, including the rules, regulations and exemptions thereunder, which currently limit such activities to one-third (33 1/3%) of the value of a Fund’s total assets (including the value of collateral received). Securities lending allows a Fund to retain ownership of the securities loaned and, at the same time, to earn additional income.

ECM understands that it is the current view of the SEC staff that a Fund may engage in loan transactions only under the following conditions: (1) the Fund must receive collateral that is at least 102% of the market value of domestic securities and 105% of the market value of foreign securities, in the form of cash or cash equivalents (e.g., U.S. Treasury bills or notes) from the borrower; (2) the borrower must increase the collateral whenever the market value of the securities loaned (determined on a daily basis) rises above the value of the collateral; (3) after giving notice, the Fund must be able to terminate the loan at any time; (4) the Fund must receive reasonable interest on the loan from the borrower, as well as amounts equivalent to any dividends, interest, or other distributions on the securities loaned and to any increase in market value; (5) the Fund may pay only reasonable custodian fees in connection with the loan; and (6) the Fund must be able to vote proxies on the securities loaned, by terminating the loan. In the event the borrower defaults in its obligation to a Fund, the Fund bears the risk of delay in the recovery of the loaned securities and the risk of loss of rights in the collateral.

Cash received through loan transactions may be invested in other eligible securities. Investing this cash subjects that investment, as well as the securities loaned, to market forces (i.e., capital appreciation or depreciation).

Market Events Risk. Economies and financial markets through the world are becoming increasingly interconnected. Economic, financial or political events, trading and tariff arrangements, terrorism, geopolitical conflicts and other circumstances in one country or region could have profound impacts on global economies or markets.

Unpredictable events such as environmental or natural disasters, pandemics, outbreaks of infectious diseases, and similar public health threats may significantly affect the global economy, the economy in certain geographic regions or countries, or the markets and issuers in which a Fund invests. Certain events may exacerbate pre-existing political, social, and economic risks. These types of events may also cause widespread fear and uncertainty, and result in, among other things: quarantines and travel restrictions, including border closings; disruptions to business operations and supply chains; exchange trading suspensions and closures, and overall reduced liquidity of securities, derivatives, and commodities trading markets; reductions in consumer demand and economic output; and significant challenges in healthcare service preparation and delivery. In addition, the operations of the Funds, ECM, the Funds’ Sub-Advisers and the Funds’ service providers may be significantly impacted, or even temporarily halted, as a result of extensive employee illnesses or unavailability, government quarantine measures, and restrictions on travel or meetings and other factors related to public emergencies.

Recent events are impacting the securities markets. For example, Russia’s invasion of Ukraine in 2022 has resulted in sanctions being levied by the U.S., EU, and other countries against Russia and Belarus. Russia’s military actions and the resulting sanctions could adversely affect global energy and financial markets and, thus, could affect the value of a Fund’s investments, even beyond any direct exposure the Fund may have to Russian issuers or the adjoining geographic regions. The extent and duration of the military action, sanctions, and resulting market disruptions could be substantial.

Governmental and quasi-governmental authorities and regulators throughout the world, such as the Federal Reserve, have in the past responded to major economic disruptions with a variety of significant fiscal and monetary policy changes, including but not limited to, direct capital infusions into companies, new monetary programs, and dramatic changes to interest rates. An unexpected or quick reversal of these policies, or the ineffectiveness of these policies, could negatively impact overall investor sentiment and further increase volatility in securities markets.

Operational Risk. The Funds are exposed to operational risks arising from a number of factors, including, but not limited to, processing errors and human errors, inadequate or failed internal or external processes, failures in systems and technology, changes in personnel, and errors caused by third-party service providers or trading counterparties. Although each Fund attempts to minimize such failures through controls and oversight, it is not possible to identify all of the operational risks that may affect the Funds or to develop processes and controls that completely eliminate or mitigate the occurrence of such failures. Therefore, each Fund and its shareholders could be negatively impacted as a result.

Other Investment Limitations. Regulatory and other restrictions may limit a Fund’s investment activities in various ways. For example, regulations regarding certain industries and markets, such as emerging or international markets, and certain transactions, such as those involving certain futures and derivatives as well as restrictions applicable to certain issuers (e.g., poison pills), may impose limits on the aggregate amount of investments that may be made by affiliated investors, including amounts owned or managed by the same or affiliated managers, in the aggregate or in individual issuers. In these circumstances, ECM or a Sub-Adviser may be prevented from acquiring securities for a Fund that it might otherwise prefer to acquire if the acquisition would cause the Fund and its affiliated investors to exceed an applicable limit. These types of regulatory and other applicable limits are complex and vary significantly in different contexts including, among others, from country to country, industry to industry and issuer to issuer. ECM has procedures in place designed to monitor potential conflicts arising from regulatory and other limits. Nonetheless, given the complexity of these limits, ECM and its affiliates may inadvertently breach these limits, and a Fund may therefore be required to sell securities that it might otherwise prefer to hold in order to comply with such limits. The internal policies and procedures of ECM and its affiliates covering these types of restrictions and addressing similar issues also may at times restrict a Fund’s investment activities.

Pooled Investment Vehicles. A Fund may invest in the securities of pooled vehicles that are not investment companies and, thus, not required to comply with the provisions of the 1940 Act. As a result, as a shareholder of such pooled vehicles, a Fund will not have all of the investor protections afforded by the 1940 Act. Such pooled vehicles may, however, be required to comply with the provisions of other federal securities laws, such as the Securities Act of 1933 (the “Securities Act”). These pooled vehicles typically hold commodities, such as gold or oil, currency, or other property that is itself not a security. If a Fund invests in, and thus, is a shareholder of, a pooled vehicle, the Fund’s shareholders will indirectly bear the Fund’s proportionate share of the fees and expenses paid by the pooled vehicle, including any applicable advisory fees, in addition to both the management fees payable directly by the Fund to the Fund’s own investment adviser and other expenses that the Fund bears directly in connection with its own operations. The requirements for qualification as a regulated investment company under the Code may limit the extent to which a Fund may invest in certain pooled vehicles. In addition, a Fund’s investment in pooled investment vehicles may be considered illiquid and subject to the Fund’s restrictions on illiquid investments.

Repurchase Agreements. Repurchase agreements involve an agreement to purchase a security and to sell that security back to the original seller at an agreed-upon price and date (generally less than seven days). Such agreements may be considered to be loans by the Funds for purposes of the 1940 Act. Each repurchase agreement must be collateralized fully, in accordance with the provisions of Rule 5b-3 under the 1940 Act. The resale price reflects the purchase price plus an agreed-upon incremental amount which is unrelated to the coupon rate or maturity of the purchased security. As protection against the risk that the original seller will not fulfill its obligation, the securities are held in a separate account at a bank, marked-to-market daily, and maintained at a value at least equal to the sale price plus the accrued incremental amount, and ECM or the Sub-Advisers will monitor the value of the collateral. The value of the security purchased may be more or less than the price at which the counterparty has agreed to purchase the security. In addition, delays or losses could result if the other party to the agreement defaults or becomes insolvent. A Fund will engage in repurchase agreement transactions with parties whose creditworthiness has been reviewed and found satisfactory by ECM or the Sub-Adviser, as applicable.

Restricted Securities and Rule 144A Securities. A Fund may invest in restricted securities that are not registered under the Securities Act. Restricted securities may be sold in private placement transactions between issuers and their purchasers and may be neither listed on an exchange nor traded in other established markets. In many cases, privately placed securities may not be freely transferable under the laws of the applicable jurisdiction or due to contractual restrictions on resale. As a result of the absence of a public trading market, privately placed securities may be less liquid and more difficult to value than publicly traded securities. To the extent that privately placed securities may be resold in privately negotiated transactions, the prices realized from the sales, due to illiquidity, could be less than those originally paid by a Fund or less than their fair market value. In addition, issuers whose securities are not publicly traded may not be subject to the disclosure and other investor protection requirements that may be applicable if their securities were publicly traded. If any privately placed securities held by a Fund are required to be registered under the securities laws of one or more jurisdictions before being resold, the Fund may be required to bear the expenses of registration. Certain of a Fund’s investments in private placements may consist of direct investments and may include investments in smaller, less seasoned issuers, which may involve greater risks. These issuers may have limited product lines, markets or financial resources or they may be dependent on a limited management group. In making investments in such securities, a Fund may obtain access to material nonpublic information, which may restrict the Fund’s ability to conduct portfolio transactions in such securities.

Rule 144A securities are restricted securities that can be resold to qualified institutional buyers but not to the general public. Securities purchased in accordance with Rule 144A under the Securities Act and determined to be liquid in accordance with the Funds’ LRMP are deemed to be liquid investments for purposes of a Fund’s investment strategy. Subject to liquidity limitations, the Funds may invest in certain unregistered securities which may be sold under Rule 144A and which otherwise comply with the investment restrictions and policies regarding investing in illiquid investments for such applicable Fund. Due to changing market or other factors, Rule 144A securities may be subject to a greater possibility of becoming illiquid than securities that have been registered with the SEC for sale. In addition, a Fund’s purchase of a Rule 144A security may increase the level of the security’s illiquidity, as some institutional buyers may become uninterested in purchasing such securities after a Fund has purchased them.

ECM, in accordance with the Funds’ LRMP, will determine whether securities purchased under Rule 144A are illiquid. ECM will also monitor the liquidity of restricted and Rule 144A securities and, if as a result of changes in market, trading, and investment-specific considerations, ECM determines that such securities are no longer liquid, ECM will review a Fund’s holdings of illiquid investments to determine what, if any, action is required to assure that such Fund complies with its restriction on illiquid investments.

Reverse Repurchase Agreements. Reverse repurchase agreements involve the sale of securities held by the seller, with an agreement to repurchase the securities at an agreed upon price, date and interest payment. The seller will use the proceeds of the reverse repurchase agreements to purchase other money market securities either maturing, or under an agreement to resell, at a date simultaneous with or prior to the expiration of the reverse repurchase agreement. The seller will utilize reverse repurchase agreements when the interest income to be earned from the investment of the proceeds from the transaction is greater than the interest expense of the reverse repurchase transaction.

Reverse repurchase agreements involve the risk that the market value of securities sold by a Fund may decline below the price at which it is obligated to repurchase the securities. Such transactions may increase fluctuations in a Fund’s net asset value and may be viewed as a form of leverage. Reverse repurchase agreements involve the risk that the buyer of the securities sold might be unable to deliver them when a Fund seeks to repurchase the securities. If the buyer files for bankruptcy or becomes insolvent, a Fund may be delayed or prevented from recovering the security that it sold. A Fund may be unable to sell the instruments subject to the reverse repurchase agreement at a time when it would be advantageous to do so, or may be required to liquidate portfolio securities at a time when it would be disadvantageous to do so in order to make payments with respect to its obligations under a reverse repurchase agreement. This could adversely affect a Fund’s strategy and result in lower Fund returns. Additionally, reverse repurchase agreements entail many of the same risks as OTC derivatives. These include the risk that the counterparty to the reverse repurchase agreement may not be able to fulfill its obligations, that the parties may disagree as to the meaning or

application of contractual terms, or that the instrument may not perform as expected. To minimize such risks, a Fund will enter into reverse repurchase agreements with parties whose creditworthiness has been reviewed and found satisfactory by ECM or a Sub-Adviser.

Reverse repurchase agreements have characteristics similar to borrowings. A Fund may enter into reverse repurchase agreements, notwithstanding the requirements of Sections 18(c) and 18(f)(1) of the 1940 Act, if the Fund, (1) treats such transactions as borrowings and complies with the asset coverage requirements of Section 18, and combines the aggregate amount of indebtedness associated with all reverse repurchase agreements with the aggregate amount of any other senior securities representing indebtedness when calculating the asset coverage ratio; or (2) treats all reverse repurchase agreements as “derivatives transactions” as defined in Rule 18f-4 and complies with all requirements of Rule 18f-4. See “Derivative Instruments” above.

Short Sales “Against the Box.” Short sales “against the box” are short sales of securities that a Fund owns or has the right to obtain (equivalent in kind or amount to the securities sold short). If a Fund enters into a short sale “against the box”, it will be required to set aside securities equivalent in kind and amount to the securities sold short (or securities convertible or exchangeable into such securities) and will be required to hold such securities while the short sale is outstanding. A Fund will incur transaction costs, including interest expenses, in connection with opening, maintaining, and closing short sales “against the box.”

A Fund’s decision to make a short sale “against the box” may be a technique to hedge against market risks when the portfolio manager believes that the price of a security may decline, causing a decline in the value of a security owned by the Fund or a security convertible into or exchangeable for such security. In such case, any future losses in a Fund’s long position would be reduced by a gain in the short position. The extent to which such gains or losses in the long position are reduced will depend upon the amount of securities sold short relative to the amount of the securities a Fund owns, either directly or indirectly, and in the case where the Fund owns convertible securities, changes in the investment values or conversion premiums of such securities. Uncertainty regarding the tax effects of short sales of appreciated investments may limit the extent to which a Fund may enter into short sales “against the box.” A Fund must comply with Rule 18f-4 with respect to short sales, which are considered derivatives transactions under Rule 18f-4. See “Derivatives Instruments” above.

When-Issued and Delayed Delivery Transactions. A when-issued security is one whose terms are available and for which a market exists, but which has not been issued. Delayed delivery refers to securities transactions on the secondary market where settlement occurs in the future. In both transactions, the parties fix the payment obligation and the interest rate that they will receive on the securities at the time the parties enter the commitment; however, they do not pay money or deliver securities until a later date. Typically, no income accrues on securities a Fund has committed to purchase before the securities are delivered, although the Fund may earn income on securities it has in a segregated account to cover its position. While a Fund generally purchases securities on a when-issued basis with the intention of acquiring the securities, the Fund may sell the securities before the settlement date if the portfolio manager deems it advisable.

A Fund may use when-issued and delayed delivery transactions to secure what it considers an advantageous price and yield at the time of purchase. When a Fund engages in when-issued and delayed delivery transactions, it relies on the other party to consummate the sale. If the other party fails to complete the sale, a Fund may miss the opportunity to obtain the security at a favorable price or yield.

When purchasing a security on a when-issued or delayed delivery basis, a Fund assumes the rights and risks of ownership of the security, including the risk of price and yield changes. At the time of settlement, the market value of the security may be more or less than the purchase price. The yield available in the market when the delivery takes place also may be higher than those obtained in the transaction itself. Because a Fund does not pay for the security until the delivery date, these risks are in addition to the risks associated with its other investments.

Rule 18f-4 permits a Fund to enter into when-issued or delayed delivery securities notwithstanding the limitation on the issuance of senior securities in Section 18 of the 1940 Act, provided that the Fund intends to physically settle the transaction and the transaction will settle within 35 days of its trade date. If a when-issued or delayed delivery basis security entered into by a Fund does not satisfy those requirements, the Fund would need to comply with Rule 18f-4 with respect to its when-issued or delayed delivery transactions, which are considered derivatives transactions under Rule 18f-4. See “Derivative Instruments” above.

Fund Policies

Fundamental Policies

Empower Funds has adopted limitations on the investment activity of the Funds which are fundamental policies and may not be changed without the approval of the holders of a majority of the outstanding voting shares of the affected Fund. These limitations apply to each of the Funds. If changes to the fundamental policies of only one Fund are being sought, only shares of that Fund are entitled to vote. “Majority” for this purpose and under the 1940 Act, means the lesser of (1) 67% of the shares represented at a meeting at which more than 50% of the outstanding shares are represented or (2) more than 50% of the outstanding shares. A complete statement of all such limitations is set forth below.

1. BORROWING. No Fund will borrow money except that a Fund may (1) borrow for non-leveraging, temporary, or emergency purposes; and (2) engage in reverse repurchase agreements and make other investments or engage in other transactions, which may involve borrowing, in a manner consistent with such Fund’s investment objective and program, provided that any such borrowings comply with applicable regulatory requirements. The 1940 Act generally permits a fund to borrow money in amounts of up to 33 1∕3% of its total assets from banks for any purpose. The 1940 Act requires that after any borrowing from a bank a fund shall maintain an asset coverage of at least 300% for all of the fund’s borrowings, and, in the event that such asset coverage shall at any time fall below 300%, the fund must, within three days thereafter (not including Sundays and holidays), reduce the amount of its borrowings to an extent that the asset coverage of all of the fund’s borrowings shall be at least 300%. In addition, a fund may borrow up to 5% of its total assets from banks or other lenders for temporary purposes (a loan is presumed to be for temporary purposes if it is repaid within 60 days and is not extended or renewed).

2. COMMODITIES, FUTURES, AND OPTIONS THEREON. No Fund will purchase or sell physical commodities; except that it may purchase and sell derivatives (including, but not limited to, futures contracts and options on futures contracts). Empower Funds does not consider currency contracts or hybrid investments to be commodities.

3. INDUSTRY CONCENTRATION. No Fund will purchase the securities of any issuer if, as a result, more than 25% of the value of such Fund’s net assets would be invested in the securities of issuers having their principal business activities in the same industry; provided there shall be no limitation on the purchase of obligations issued or guaranteed by the U.S. government, or its agencies or instrumentalities, or of certificates of deposit or bankers acceptances. It is the current position of the staff of the SEC that each foreign government is considered to be a separate industry for purposes of this restriction. Notwithstanding the foregoing, each of the Empower International Index, Empower Real Estate Index, Empower S&P 500 Index, Empower S&P Mid Cap 400 Index, and Empower S&P Small Cap 600 Index Funds (the “Equity Index Fund(s)” or each an “Equity Index Fund”) and Empower Bond Index Fund will concentrate its investments in a particular industry or group of industries to approximately the same extent as its benchmark index if its benchmark index (as described within the current prospectus) is so concentrated; for purposes of this limitation, whether an Equity Index Fund or the Empower Bond Index Fund is concentrated in an industry or group of industries shall be determined in accordance with the 1940 Act and as interpreted or modified from time to time by any regulatory or judicial authority having jurisdiction.

4. LOANS. No Fund will make loans, although a Fund may (1) lend portfolio securities; (2) enter into repurchase agreements; (3) acquire debt securities, bank loan participation interests, bank certificates of deposit, bankers’ acceptances, debentures or other securities, whether or not the purchase is made upon the original issuance of the securities; and (4) purchase debt.

5. DIVERSIFICATION. No Fund will, with respect to 75% of the value of the Fund’s total assets, purchase a security if, as a result (1) more than 5% of the value of the Fund’s total assets would be invested in the securities of a single issuer (other than the U.S. government or any of its agencies or instrumentalities or repurchase agreements collateralized by U.S. government securities, and other investment companies) or (2) more than 10% of the outstanding voting securities of any issuer would be held by the Fund (other than obligations issued or guaranteed by the U.S. government, its agencies or instrumentalities or by other investment companies). This investment restriction does not apply to the Empower Global Bond Fund, Empower Real Estate Index Fund, the Profile Funds, the Lifetime Funds or the SecureFoundation Balanced Fund as these funds are considered non-diversified for purposes of the 1940 Act.

6. REAL ESTATE. No Fund will purchase or sell real estate, including limited partnership interests therein, unless acquired as a result of ownership of securities or other instruments (but this shall not prevent a Fund from investing in securities or other instruments backed by real estate or securities of companies engaged in the real estate business).

7. SENIOR SECURITIES. No Fund will issue senior securities except in compliance with the 1940 Act.

8. UNDERWRITING. No Fund will underwrite securities issued by other persons, except to the extent such Fund may be deemed to be an underwriter under applicable law in connection with the sale of its portfolio securities in the ordinary course of pursuing its investment program.

All swap agreements and other derivative instruments that were not classified as commodities or commodity contracts prior to July 21, 2010 are not deemed to be commodities or commodity contracts for purposes of restriction No. 2 above.

The 1940 Act prohibits a Fund from issuing any senior securities, except for certain borrowings. Rule 18f-4 under the 1940 Act provides an exemption from certain limitations on the issuance of senior securities for transactions in derivatives instruments where a Fund complies with the requirements of the rule.

Non-Fundamental Policies

In accordance with the requirements of Rule 35d-1 under the 1940 Act, it is a non-fundamental policy of each of the following Funds to normally invest at least 80% of the value of its net assets plus the amount of any borrowings for investment purposes in the particular type of investments suggested by the applicable Fund’s name. If the Board determines to change the 80% non-fundamental policy for any of these Funds, that Fund will provide no less than 60 days prior written notice of such change to the shareholders before implementing the change of investment policy. More information regarding how each Fund meets this 80% policy is included in its prospectus.

Empower Ariel Mid Cap Value Fund	Empower Multi-Sector Bond Fund
Empower Bond Index Fund	Empower Real Estate Index Fund
Empower Core Bond Fund	Empower S&P 500 Index Fund
Empower Emerging Markets Equity Fund	Empower S&P Mid Cap 400 Index Fund
Empower Global Bond Fund	Empower S&P Small Cap 600 Index Fund
Empower Government Money Market Fund	Empower Short Duration Bond Fund
Empower High Yield Bond Fund	Empower Small Cap Growth Fund
Empower Inflation-Protected Securities Fund	Empower Small Cap Value Fund
Empower Large Cap Growth Fund	Empower T. Rowe Price Mid Cap Growth Fund
Empower Large Cap Value Fund	Empower U.S. Government Securities Fund
Empower Mid Cap Value Fund

The Empower Government Money Market Fund is a government money market fund that operates in compliance with Rule 2a-7 and other rules governing money market funds under the 1940 Act. Accordingly, in addition to the 80% policy described above, it is a non-fundamental investment policy of the Empower Government Money Market Fund to invest 99.5% or more of its total assets in cash, government securities, and/or repurchase agreements that are collateralized fully by cash and/or government securities.

Operating Policies

Empower Funds has also adopted the following additional operating restrictions that are not fundamental and may be changed by the Board without shareholder approval.

Under these policies, the Funds will not:

1. Enter into commodity futures or commodity options contracts, or swaps, if, with respect to positions in commodity futures or commodity options contracts, or swaps, which do not represent bona fide hedging, the aggregate initial margin and premiums required to establish such positions would exceed 5% of a Fund’s liquidation value, after taking into account unrealized profits and unrealized losses on any such contracts it has entered into;

2. Purchase securities of open-end or closed-end investment companies except in compliance with the 1940 Act, the rules thereunder and any orders issued by the SEC;

3. Purchase participations or other direct interest in, or enter into leases with respect to oil, gas, or other mineral exploration or development programs if, as a result thereof, more than 5% of the value of the total assets of a Fund would be invested in such programs, except that a Fund may purchase securities of issuers which invest or deal in the above.

Temporary Defensive Position

Although the Empower Government Money Market Fund invests primarily in money market instruments, each of the other Funds (except the passively-managed Funds that are designed to track the returns of a benchmark index) may hold cash or cash equivalents and may invest in short-term, high-quality debt instruments (that is in “money market instruments”) as deemed appropriate by ECM or the applicable Sub-Adviser, or may invest any or all of their assets in money market instruments as deemed necessary by ECM or the applicable Sub-Adviser for temporary defensive purposes.

The types of money market instruments in which the Funds, excluding the Empower Government Money Market Fund, may invest include, but are not limited to: (1) bankers’ acceptances; (2) obligations of U.S. and non-U.S. governments and their agencies and instrumentalities, including agency discount notes; (3) short-term corporate obligations, including commercial paper, notes, and bonds; (4) obligations of U.S. banks, non-U.S. branches of such banks (Eurodollars), U.S. branches and agencies of non-U.S. banks (Yankee dollars), and non-U.S. branches of non-U.S. banks (including certificates of deposit and time deposits); (5) asset-backed securities; (6) repurchase agreements; and (7) shares of money market funds (see “Investment Companies” under the Investment Strategies and Risks section above).

Portfolio Turnover

The turnover rate for each Fund is calculated by dividing (a) the lesser of purchases or sales of portfolio securities for the fiscal year by (b) the monthly average value of portfolio securities owned by the Fund during the fiscal year. In computing the portfolio turnover rate, certain U.S. government securities (long-term for periods before 1986 and short-term for all periods) and all other securities, the maturities or expiration dates of which at the time of acquisition are one year or less, are excluded.

There are no fixed limitations regarding the portfolio turnover of the Funds. Portfolio turnover rates are expected to fluctuate under constantly changing economic conditions and market circumstances. Securities initially satisfying the basic policies and objectives of each Fund may be disposed of when appropriate in ECM’s or a Sub-Adviser’s judgment.

With respect to any Fund, a higher portfolio turnover rate may involve correspondingly greater brokerage commissions and other expenses which might be borne by the Fund and, thus, indirectly by its shareholders. The Empower Emerging Markets Equity, Empower Inflation-Protected Securities and Empower International Growth Funds experienced significant variation in portfolio turnover during the fiscal period ended December 31, 2022, as compared to the fiscal year ended December 31, 2023. The higher turnover rate for the Empower Emerging Markets Equity Fund in 2022 as compared to 2023 was due to a sub-adviser change as well as increased assets as a result of positive absolute performance and net inflows; the higher turnover rate for the Empower Inflation-Protected Securities and Empower International Growth Funds in 2022 as compared to 2023 was due to assets increasing as a result of positive absolute performance and net inflows.

Portfolio Holdings Disclosure

Empower Funds has adopted policies and procedures governing the disclosure of information regarding each Fund’s portfolio holdings. As a general matter, it is Empower Funds’ policy that the public disclosure of information concerning a Fund’s portfolio holdings should be made at times and in circumstances under which it may promptly become generally available to the brokerage community and the investing public. The policies and procedures provide that: (1) information about a Fund’s portfolio holdings may not be disclosed until it is either filed with the SEC, mailed out to shareholders, or otherwise made available on the Empower Funds’ website (www.empower.com/investments/empower-funds/fund-documents), which filing, mailing, or posting will not be made sooner than 15 days after the quarter's end, (2) Fund holdings information that is solely available in other regulatory reports or filings may not be disclosed, unless expressly authorized by Empower Funds’ President or Chief Compliance Officer (“CCO”), or where applicable, at least three days after mailing, one day after EDGAR filing, or one day after posting on the Empower Funds’ website, (3) Fund holdings may be regularly provided to Empower Funds’ affiliated and unaffiliated service providers, including service providers of ECM or Sub-Advisers, in connection with the provision of services to or on behalf of Empower Funds, and (4) Fund holdings information that is more current than that in reports or other filings filed electronically with the SEC or as posted on the Empower Funds’ website may be disclosed not sooner than 15 days after the relevant reporting period.

Public Disclosures

Information regarding each Fund’s portfolio holdings will be disclosed to the public as required or permitted by applicable laws, rules or regulations, such as in annual and semi-annual shareholder reports and other reports or filings with the SEC or as posted on the Empower Funds’ website. Such reports shall be released not sooner than 15 days after the end of the relevant reporting period or after such period required under applicable law.

Empower Funds and Empower Financial Services, Inc., Empower Funds’ principal underwriter and distributor (“EFSI” or the “Distributor”), may disclose a Fund’s ten largest portfolio holdings in monthly performance updates provided to broker-dealers in connection with the distribution of Fund shares. The monthly performance updates may not be released earlier than five days after the end of the relevant month and shall not be provided to any broker-dealer or other intermediary on a preferential basis.

A Fund may disclose its portfolio holdings to mutual fund databases and rating services such as Lipper and Morningstar, at such time as they request, for the purpose of obtaining ratings for the Fund and enabling such services to provide such portfolio holdings information to the public as they typically provide for rated funds. Any disclosure to mutual fund databases and rating services shall be made subject to a confidentiality agreement limiting the use of such information to the approved purposes and is not deemed disclosure of portfolio holdings otherwise generally made available to the public. Under such agreements these mutual fund databases and rating services agree not to use information provided by a Fund regarding the Fund’s portfolio holdings for trading purposes.

Other Disclosures

Portfolio holdings information may not be disclosed to the media, brokers or other members of the public if that information has not previously been made publicly available. Information in reports or other documents that are mailed to shareholders may be discussed three days (or later) after mailing. Information that is filed on the SEC’s EDGAR system or posted on the Empower Funds’ website may be discussed one day (or later) after filing. Information available in other regulatory reports or filings may not be discussed without authorization by Empower Funds’ President or CCO. Empower Funds may also disclose portfolio holdings information to any regulator in response to any regulatory requirement not involving public disclosure, or any regulatory inquiry or proceeding and to any person, to the extent required by order or other judicial process.

Empower Funds may also disclose portfolio holdings information to any person who expressly agrees in writing to keep the disclosed information in confidence, and to use it only for purposes expressly authorized by Empower Funds. Furthermore, as authorized by the President or CCO of Empower Funds in writing and upon his or her determination that such disclosure would be in the interests of the relevant Fund and its shareholders, a Fund may disclose portfolio holdings information. These agreements state that the recipients may not use information provided by the Fund regarding the Fund’s portfolio holdings for trading purposes.

Any exceptions authorized by the President or CCO are reported to the Board. The Board also receives reports at least annually concerning the operation of these policies and procedures. The Board may amend these policies and procedures from time to time, as it may deem appropriate in the interests of Empower Funds and its shareholders.

As authorized by the Board, the CCO has established and administers guidelines found by the Board to be in the best interests of shareholders concerning the dissemination of Fund holdings information, and resolution of conflicts of interest in connection with such disclosure, if any. The CCO reviews and decides on each information request and, if granted, how and by whom that information will be disseminated. The CCO reports to the Board periodically. Any modifications to the guidelines require prior Board approval.

At this time, Empower Funds has not entered into any ongoing arrangements to make available public and/or non-public information about Empower Funds’ portfolio holdings. If, in the future, Empower Funds desired to make such an arrangement, it would seek prior Board approval and any such arrangements would be disclosed in the SAI. Empower Funds’ portfolio holdings information may not be disseminated for compensation. There is no assurance that Empower Funds’ policies on holdings information will protect the Funds from the potential misuse of holdings by individuals or firms in possession of that information.

MANAGEMENT OF EMPOWER FUNDS

Management Information

Empower Funds is organized under Maryland law, and is governed by the Board. The Board, which is responsible for overall management of Empower Funds’ business affairs, meets at least four times during the year to, among other things, review a wide variety of matters affecting Empower Funds, including performance, compliance matters, advisory fees and expenses, service providers, and other business affairs. Information pertaining to the directors and officers of the Funds are set forth in the table below.

Directors and Officers

Independent Directors*
Name, Address, and Age	Position(s) Held with Empower Funds	Term of Office and Length of Time Served**	Principal Occupation(s) During Past 5 Years	Number of Funds in Fund Complex Overseen by Director	Other Directorships Held by Director
Gail H. Klapper 8515 East Orchard Road, Greenwood Village, CO 80111 80	Chair & Independent Director	Since 2016 (as Chair) Since 2007 (as Independent Director)	Managing Attorney, Klapper Law Firm; Member/Director, The Colorado Forum; Director, Gold, Inc.; Member, Colorado State Fair Board Authority; Manager, 6K Ranch, LLC; and former Director, Guaranty Bancorp	45	Director, Gold, Inc.
James A. Hillary*** 8515 East Orchard Road, Greenwood Village, CO 80111 61	Independent Director	Since 2017	Principal and Founding Partner, Fios Partners LLC; Member, Fios Capital, LLC, Fios Holdings LLC; Sole Member, Independence Capital Asset Partners, LLC, Fios Companies LLC, Resolute Capital Asset Partners LLC; Manager, Applejack Holdings, LLC; and Manager and Member, Prestige Land Holdings, LLC	45	N/A
R. Timothy Hudner**** 8515 East Orchard Road, Greenwood Village, CO 80111 64	Independent Director	Since 2017	Former Director, Colorado State Housing Board, Grand Junction Housing Authority and Counseling and Education Center	45	N/A
Steven A. Lake 8515 East Orchard Road, Greenwood Village, CO 80111 69	Independent Director	Since 2017	Managing Member, Lake Advisors, LLC; Member, Gart Capital Partners, LLC; and Executive Member, Sage Enterprise Holdings, LLC	45	N/A
Stephen G. McConahey 8515 East Orchard Road, Greenwood Village, CO 80111 80	Independent Director & Audit Committee Chair	Since 2011 (as Independent Director) Since 2015 (as Audit Committee Chair)	Chairman, SGM Capital, LLC; Partner, Iron Gate Capital, LLC; Director, IMA Financial Group, Inc.; Chairman, Board of Trustees, Denver Museum of Nature and Science; and former Director, Guaranty Bancorp	45	Director, IMA Financial Group, Inc.; Chairman, Board of Trustees, Denver Museum of Nature and Science

Interested Director*****
Name, Address, and Age	Position(s) Held with Empower Funds	Term of Office and Length of Time Served	Principal Occupation(s) During Past 5 Years	Number of Funds in Fund Complex Overseen by Director	Other Directorships Held by Director
Jonathan D. Kreider 8515 East Orchard Road, Greenwood Village, CO 80111 41	Director, President & Chief Executive Officer	Since 2020	Executive Vice President & Head of Empower Investments, Empower; Senior Vice President & Head of Empower Investments, Empower of America and Empower Life & Annuity Insurance Company of New York (“Empower of NY”); President, Chief Executive Officer & Manager, ECM; formerly, Vice President, Great-West Funds Investment Products and Empower Advisory Group, LLC (“EAG”)	45	N/A

Officers
Name, Address, and Age	Position(s) Held with Empower Funds	Term of Office and Length of Time Served	Principal Occupation(s) During Past 5 Years	Number of Funds in Fund Complex Overseen by Director	Other Directorships Held by Director
Jonathan D. Kreider 8515 East Orchard Road, Greenwood Village, CO 80111 41	Director, President & Chief Executive Officer	Since 2020	Executive Vice President & Head of Empower Investments, Empower; Senior Vice President & Head of Empower Investments, Empower of America and Empower of NY; President, Chief Executive Officer & Manager, ECM; formerly, Vice President, Great-West Funds Investment Products and EAG	45	N/A
Katherine Stoner 8515 East Orchard Road, Greenwood Village, CO 80111 67	Chief Compliance Officer	Since 2016	Vice President, Compliance Empower Investments, Empower; Chief Compliance Officer, ECM and EAG; Interim Chief Compliance Officer, Empower of America and Empower of NY	N/A	N/A
Ryan L. Logsdon 8515 East Orchard Road, Greenwood Village, CO 80111 50	Chief Legal Officer & Secretary	Since 2010 (as Secretary) Since 2021 (as Chief Legal Officer)	Deputy General Counsel & Corporate Secretary, Empower, Empower of America & Empower of NY; Vice President & Counsel, ECM; formerly, Vice President & Counsel, Empower Funds; Vice President, Counsel & Secretary, EAG & EFSI	N/A	N/A

Officers
Name, Address, and Age	Position(s) Held with Empower Funds	Term of Office and Length of Time Served	Principal Occupation(s) During Past 5 Years	Number of Funds in Fund Complex Overseen by Director	Other Directorships Held by Director
Kelly B. New 8515 East Orchard Road, Greenwood Village, CO 80111 48	Chief Financial Officer & Treasurer	Since 2021	Vice President, Fund Administration, Empower; Chief Financial Officer & Treasurer, ECM; Vice President & Treasurer, CITs, Empower Trust Company, LLC (“ETC”); formerly, Assistant Treasurer Empower Funds, ECM & ETC	N/A	N/A
John A. Clouthier 8515 East Orchard Road, Greenwood Village, CO 80111 56	Assistant Treasurer	Since 2007	Vice President, Fund Administration, Empower; Assistant Treasurer, ECM; Assistant Vice President and Assistant Treasurer, ETC	N/A	N/A
Abhijit Dande 8515 East Orchard Road, Greenwood Village, CO 80111 43	Derivatives Risk Manager	Since 2022	Vice President, Financial Risk Management, Empower; Derivatives Risk Manager, ECM	N/A	N/A

* A director who is not an “interested person” of Empower Funds (as defined in the 1940 Act) is referred to as an “Independent Director.”

** Each director serves until the next shareholders’ meeting (and until the election and qualification of a successor), or until death, resignation, removal or retirement which takes effect no later than May 1 following his or her 75th birthday unless otherwise determined by the remaining directors. The remaining Independent Directors determined that Ms. Klapper and Mr. McConahey should continue on the Board until at least May 1, 2025. Officers are elected by the Board on an annual basis to serve until their successors have been elected and qualified.

*** Mr. Hillary is the sole member of Resolute Capital Asset Partners LLC, which is the general partner for Resolute Capital Asset Partners Fund I LP. Goldman Sachs & Co. LLC, the clearing agent and custodian for Resolute Capital Asset Partners Fund I LP, is the parent company of Goldman Sachs Asset Management, LP, the Sub-Adviser of the Empower Inflation-Protected Securities and Empower Mid Cap Value Funds and other series of Empower Funds; and a Sub-Adviser of the Empower Core Bond Fund. Mr. Hillary has personal banking accounts with an affiliate of J.P. Morgan Investment Management Inc., a Sub-Adviser of the Empower International Growth and Empower Large Cap Growth Funds and other series of Empower Funds. Mr. Hillary receives no special treatment due to the relationship.

**** Mr. Hudner has personal investments in a mutual fund advised by Massachusetts Financial Services Company, a Sub-Adviser of the Empower International Value Fund. Mr. Hudner receives no special treatment due to his ownership of such mutual fund.

***** An “Interested Director” refers to a director who is an “interested person” of Empower Funds (as defined in the 1940 Act) by virtue of their affiliation with ECM.

There are no arrangements or understandings between any director or officer and any other person(s) pursuant to which s/he was elected as director or officer.

Board of Directors Leadership Structure

The Board is responsible for overseeing the management of the business and affairs of Empower Funds and each Fund. The Board currently consists of five Independent Directors and one Interested Director. The Independent Directors have retained outside independent legal counsel and meet at least quarterly with that counsel in an executive session without the Interested Director and management.

The chair of the Board is Gail Klapper, an Independent Director. The chair presides at all meetings of the Board at which the chair is present. The chair exercises such powers as are assigned to her by the Board, which may include acting as a liaison with service providers, Empower Funds officers, attorneys and other directors between meetings. Except for any duties specified herein or pursuant to Empower Funds’ charter document, the designation of chair does not impose on such director any duties, obligations or liability that are greater than the duties, obligations or liability imposed on such person as a member of the Board generally.

Empower Funds has determined that the Board’s leadership structure is appropriate given the characteristics and circumstances of Empower Funds including, without limitation, the number of Funds that comprise Empower Funds, the net assets of Empower Funds and Empower Funds’ business and structure, because it allows the Board to exercise oversight in an orderly and efficient manner. The leadership structure of the Board may be changed, at any time and in the discretion of the Board, including in response to changes in circumstances or the characteristics of Empower Funds.

Qualifications and Experience of the Board of Directors

The Board formally evaluates itself and its committees at least annually. This evaluation involves, among other things, review of such matters as each director’s specific experience, qualifications, attributes, skills, or areas of expertise in light of Empower Funds’ business and structure and the Board’s overall composition. Below is a brief discussion of the particular factors referred to above that led to the conclusion that each director should serve as a director. The Board monitors its conclusions in light of information subsequently received throughout the year and considers its conclusions to have continuing validity until the Board makes a contrary determination. In reaching their conclusions, the directors considered various facts and circumstances and did not identify any factor as controlling, and individual directors may have considered additional factors or weighed the same factors differently.

Gail Klapper. Ms. Klapper is Managing Attorney at the Klapper Law Firm, a firm emphasizing real estate, intellectual property, transactional work and public policy advocacy. She is also the managing director of the Colorado Forum, a statewide, bipartisan organization of chief executive officers and leading professionals who work on public policy issues related to Colorado; a director of Gold, Inc., a distributor of children’s clothing, and health and safety products; a member of the Colorado State Fair Board Authority; and Manager of 6K Ranch, LLC a ranch for reining horses. Ms. Klapper was the chair of the authority board that obtained financing, built, owns and operates the Convention Center Hotel in Denver, CO. She has served as chair of the board of the Denver Metro Chamber and the Downtown Denver Partnership. She previously served on the board of directors of ETC, Guaranty Bancorp, Houghton Mifflin, a Boston-based publishing company, the Denver Museum of Nature and Science, the Colorado Conservation Trust, and the board of Wellesley College, including seven years as chair of the board. Ms. Klapper received a bachelor’s degree in political science from Wellesley College and a juris doctor law degree at the University of Colorado Law School. Ms. Klapper is the chair of the Board, a member of the Audit and Independent Directors Committees of the Board, and has been designated as the chair of the Independent Directors Committee. Ms. Klapper has served as a director since 2007 and chair of the Board since 2016.

The Board considered Ms. Klapper’s legal training and practice, her executive experience, her board experience with other financial companies, her academic background, and her experience as director of Empower Funds since 2007.

James A. Hillary. Mr. Hillary is the principal and founding partner of Fios Partners LLC a pool of private capital seeking investments in operating companies across a broad range of industries. Additionally, Mr. Hillary is a member of Fios Capital, LLC and Fios Holdings LLC; and sole member of Fios Companies LLC. Mr. Hillary is also the founder and principal of Resolute Capital Asset Partners LLC (“Resolute”), a registered investment adviser. Resolute is the general partner for the Resolute Capital Asset Partners Fund I L.P., a long-short equity hedge fund which Mr. Hillary is the portfolio manager of. Prior to that, Mr. Hillary was the founder, Chairman and Chief Executive Officer of ICAP, a long-short equity fund that managed capital for pensions, endowments, hospitals, universities and high net-worth individuals. Prior to founding ICAP, Mr. Hillary served as an investment analyst and portfolio manager at Marsico Capital Management, LLC. Mr. Hillary has also worked at Pricewaterhouse Coopers in tax, auditing, and consulting as well as at W.H. Reaves & Co., an investment management firm based in Jersey City, New Jersey. Mr. Hillary received a bachelor’s degree in economics from Rutgers University, a juris doctor law degree from Fordham University School of Law in New York and is a certified public accountant. Mr. Hillary is active in the community, supporting the Colorado

Ballet, The Mizel Institute, John Lynch Foundation, and Judi’s House. Mr. Hillary is a member of the Audit and Independent Directors Committees of the Board. Mr. Hillary has served as a director since 2017.

The Board considered Mr. Hillary’s portfolio management experience in the financial services industry, leadership and executive experience, and his academic experience.

R. Timothy Hudner. Mr. Hudner is a former board member for ALPS Fund Services, a provider of back-office administration and distribution services to the investment management industry, and for Prima Capital Holdings, a company providing research and technology solutions for the wealth management industry. Prior to his board service, Mr. Hudner was Senior Vice President for Operations & Technology and member of the executive committee at Janus Capital Group. During his tenure at Janus, Mr. Hudner held a number of positions including Chief Operations Officer, Chief Technology Officer, President of Janus Service Company as well as Chairman and Chief Executive Officer of Capital Group Partners, Inc. Prior to his time at Janus, Mr. Hudner was Vice President of Information Technology at T. Rowe Price Associates and Director of Information Technology for John Hancock Financial Services. He obtained his bachelor’s degree from Dartmouth and a master’s degree in business administration from Boston College. Mr. Hudner has served on the board of commissioners for the Grand Junction Housing Authority; on the board of directors for the Mental Health Center of Denver; the Colorado State Housing Board; and was part of the Regional Center Task Force and Colorado Developmental Disabilities Council. Mr. Hudner is a member of the Audit and Independent Directors Committees of the Board. Mr. Hudner has served as a director since 2017.

The Board considered Mr. Hudner’s financial experience, leadership and executive experience, his board experience on other financial companies, and his academic experience.

Steven A. Lake. Mr. Lake is a managing member of Lake Advisors, LLC, a firm focused on hospitality and consumer products industries, and high net worth families. In addition to his role at Lake Advisors, LLC, Mr. Lake is a member of Gart Capital Partners, LLC and executive member of Sage Investments Holdings, LLC. Prior to positions with his current firms, Mr. Lake was Senior Managing Director at CBIZ MHM, LLC, a national publicly traded professional service firm in the Rocky Mountain region. Prior to that, he founded and was Managing Partner of Lake & Associates, LLC. Prior to founding his firm, he was a tax manager at Fox & Company and a tax senior at Becker, Weinstein & Kaufman in Washington D.C. Mr. Lake received a bachelor’s degree in accounting from the University of Maryland and a master’s degree in taxation from the University of Denver. He is a certified public accountant and has earned the accredited Financial Planning Specialist designation. He is a member of the American Institute of Certified Public Accountants, Financial Planning Specialists, and Colorado Society of Certified Public Accountants. He has served as an instructor at the University of Denver graduate tax program, and authored publications on partnership tax planning, consolidated entities tax planning, individual tax planning, and corporate tax planning. He is involved in the community through Colorado Succeeds, Concert for Kids, Dress for Success, and the Rose Foundation. Mr. Lake is a member of the Audit and Independent Directors Committees of the Board and is the Audit Committee financial expert. Mr. Lake has served as a director since 2017.

The Board considered Mr. Lake’s financial experience, leadership and executive experience, and his academic experience.

Stephen G. McConahey. Mr. McConahey is Chairman of SGM Capital, LLC, a firm focused on private equity investments and management advisory services. He is also a partner of Iron Gate Capital, LLC, a private equity and debt financing firm; a director of IMA Financial Group, Inc.; Chairman of the Board of Trustees at the Denver Museum of Nature and Science; and a member of the Colorado Forum, a statewide, bipartisan organization of chief executive officers and leading professionals who work on public policy issues related to Colorado. Prior to forming this firm in 1999, Mr. McConahey was a co-founder, President and Chief Operating Officer of EVEREN Capital Corporation and EVEREN Securities, Inc., a securities brokerage firm. Prior to his position with EVEREN, Mr. McConahey had been Senior Vice President for Corporate and International Development at Kemper Corporation and Kemper Financial Services. Prior to that, he was Chairman and Chief Executive Officer of Boettcher and Company, a regional investment banking firm. During his time with Boettcher, Mr. McConahey was a member of the Securities Industry Association and served on the regional firm advisory committee of the New York Stock Exchange. Upon graduation from Harvard Business School, he joined the consulting firm of McKinsey and Company. He later joined the White House staff becoming President Ford’s special assistant for intergovernmental affairs. He has served on the boards of the Downtown Denver Partnership, Guaranty Bancorp and the Metro Denver Chamber of Commerce. He served as a trustee of the AMLI real estate investment trust and served on the corporate boards of IQ Navigator, Macquarie Pro Logis Management Limited Trust, and First Western Trust Bank. In the late 1980s, Mr. McConahey became the first chairman of the Greater Denver Corporation, which was established to lead business efforts to support new infrastructure investments such as the Denver International Airport and the Convention Center and to stimulate business and job development in the Denver metro area. Mr. McConahey received a bachelor’s degree in political science from the University of Wisconsin and master’s degree in business administration from Harvard Business School. Mr. McConahey is a member of the Audit and Independent Directors Committees of the Board, and has been designated as the chair of the Audit Committee. Mr. McConahey has served as a director since 2011.

The Board considered Mr. McConahey’s financial experience, his academic background, his leadership and executive experience, his board experience with other financial companies, and his experience as director of Empower Funds since 2011.

Jonathan D. Kreider. Mr. Kreider is Executive Vice President and Head of Empower Investments, Empower, and holds executive positions at various Empower affiliates, including as Chairman, President and Chief Executive Officer of ECM. Prior to his role at Empower Investments, Mr. Kreider worked as a consultant with JDL Consultants, LLC, a boutique management consulting firm specializing in strategic and analytical work for mutual fund boards. Before that, Mr. Kreider served as a senior research analyst at Lipper, Inc. Mr. Kreider holds a bachelor’s degree from the University of Colorado and a master’s degree in business administration from the University of Colorado. He is a member of the CFA Society of Colorado and is a chartered financial analyst charterholder. Mr. Kreider has served as a director since 2020.

The Board considered Mr. Kreider’s various roles and executive experience with Empower and its affiliates, his role as Chairman, President and Chief Executive Officer of ECM, his leadership and business experience in the asset management industry, and his academic experience.

Risk Oversight

Consistent with its responsibility for oversight of Empower Funds, the Board, among other things, oversees risk management of each Fund’s investment program and business affairs directly and through its committees. Empower Funds, ECM, the Distributor, Sub-Advisers, and other Empower Funds service providers have implemented a variety of processes, procedures and controls to address these risks.

The Board’s administration of its risk oversight includes adoption and periodic review of policies and procedures designed to address risk, and monitoring efforts to assess the effectiveness and implementation of the policies and procedures in addressing risks. It is possible that, despite the Board’s oversight of risk, not all risks will be identified, mitigated or addressed. Further, certain risks may arise that were unforeseen.

The Board receives reports from senior officers of Empower Funds at regular and special meetings of the Board on a variety of matters, including those relating to risk management and valuation. The Board also receives reports on a periodic or regular basis from ECM and Empower Funds’ other primary service providers, and meets with Sub-Advisers on a rotating basis at regular quarterly meetings.

The Board meets with Empower Funds’ CCO at least quarterly to discuss compliance issues, and the Board receives a written report from the CCO at least annually that addresses the policies and procedures of Empower Funds, ECM, each Sub-Adviser, the Distributor, and SS&C Global Investor & Distribution Solutions, Inc., Empower Funds’ transfer agent. Additionally, the Independent Directors meet with the CCO at least annually in executive session.

The Board and the Audit Committee receive regular reports from Empower Funds’ Treasurer regarding internal controls and accounting and financial reporting policies, practices, and procedures. In addition, Empower Funds’ independent registered public accounting firm reports regularly to the Audit Committee on internal control and accounting and financial reporting matters.

Standing Committees

The Board has two standing committees: an Audit Committee and an Independent Directors Committee.

As set out in the Empower Funds’ Audit Committee Charter, the basic purpose of the Audit Committee is to enhance the quality of Empower Funds’ financial accountability and financial reporting by providing a means for Empower Funds’ Independent Directors to be directly informed as to, and participate in the review of, Empower Funds’ audit functions. Another objective is to ensure the independence and accountability of Empower Funds’ outside auditors and provide an added level of independent evaluation of Empower Funds’ internal accounting controls. Finally, the Audit Committee reviews the extent and quality of the auditing efforts. The function of the Audit Committee is oversight. It is management’s responsibility to maintain appropriate systems for accounting and internal control, and the auditor’s responsibility to plan and carry out a proper audit. Mr. McConahey is the chair of the Audit Committee, and Ms. Klapper, Mr. Lake, Mr. Hudner and Mr. Hillary are the other members of the Audit Committee. The Audit Committee held two meetings during the Funds’ most recently completed fiscal year.

As set forth in the Empower Funds’ Independent Directors Committee Charter, the primary purposes of the Independent Directors Committee is (1) to identify and recommend individuals for membership on the Board; (2) to review the arrangements between Empower Funds and its service providers, including the review of Empower Funds’ advisory and distribution arrangements in accordance with Section 15 of the 1940 Act; (3) to carry out the responsibilities of Independent Directors pursuant to Rule 38a-1 under the 1940 Act; and (4) to oversee issues related to Empower Funds’ Independent Directors that are not specifically delegated to another Board committee. Ms. Klapper is the chair of the Committee, and Mr. McConahey, Mr. Lake, Mr. Hudner and Mr.

Hillary are the other members of the Independent Directors Committee. The Independent Directors Committee held six meetings during the Funds’ most recently completed fiscal year.

The Independent Directors Committee does not have a formal process for considering nominees whose names are submitted to it by shareholders because, in its view, a shareholder that desires to nominate a person for election to the Board may do so directly by following the requirements set forth in Rule 14a-8 under the Securities Exchange Act of 1934 (the “1934 Act”). Nevertheless, the Independent Directors Committee will consider candidates recommended by shareholders. Shareholders who wish to have their recommendations considered by the Board shall direct the recommendation in writing to the Secretary of Empower Funds, for the attention of the chair of the Independent Directors Committee, at 8525 East Orchard Road, Greenwood Village, Colorado 80111. The factors used by the Independent Directors Committee for evaluating and identifying candidates for the Board, which are the same for any candidate regardless of whether the candidate was recommended by a shareholder or by the Independent Directors Committee, include but are not limited to: whether the Board collectively represents a broad cross section of backgrounds, functional disciplines, and experience; whether a candidate’s stature is commensurate with the responsibility of representing shareholders; whether a candidate represents the best choice available; and whether the candidate has the ability to assume the responsibilities incumbent on a director. The Independent Directors Committee does not evaluate proposed nominees differently based upon who made the proposal.

Ownership

As of December 31, 2023, the members of the Board had beneficial ownership in the Empower Funds and/or any other investment companies overseen by the director as follows:

Name of Director	Dollar Range of Equity Securities in the Funds	Aggregate Dollar Range of Equity Securities in All Registered Investment Companies Overseen by Director in Family of Investment Companies
Independent Directors
James A. Hillary	$0	$0
R. Timothy Hudner	$0	$0
Gail H. Klapper	$0	$0
Steven A. Lake	$0	$50,001 - $100,000
Stephen G. McConahey	$0	$0
Interested Director
Jonathan D. Kreider	Empower Aggressive Profile Fund - Over $100,000 Empower Moderate Profile Fund - Over $100,000	Over $100,000

As of December 31, 2023, none of the Independent Directors had beneficial ownership in any investment adviser, sub-investment adviser, principal underwriter or sponsoring insurance company of Empower Funds or any person (other than a registered investment company) directly or indirectly controlling, controlled by or under common control with any investment adviser, sub-investment adviser, principal underwriter or sponsoring insurance company of Empower Funds. Since shares of the Funds may only be sold to Permitted Accounts, members of the Board are only able to invest in the Funds if they invest through a Permitted Account that makes one or more of the Funds available for investment.

Compensation

Empower Funds pays no salaries or compensation to any of its officers or directors affiliated with Empower Funds or ECM. The table below sets forth the annual compensation paid to the Independent Directors and certain other information.

Name of Independent Director	Aggregate Compensation from Empower Funds	Pension or Retirement Benefits Accrued as Part of Fund Expenses	Estimated Annual Benefits Upon Retirement	Total Compensation from Empower Funds Paid to Directors
Gail H. Klapper	$271,500	$0	$0	$271,500
James A. Hillary	$233,500	$0	$0	$233,500
R. Timothy Hudner	$233,500	$0	$0	$233,500

Name of Independent Director	Aggregate Compensation from Empower Funds	Pension or Retirement Benefits Accrued as Part of Fund Expenses	Estimated Annual Benefits Upon Retirement	Total Compensation from Empower Funds Paid to Directors
Steven A. Lake	$233,500	$0	$0	$233,500
Stephen G. McConahey	$251,500	$0	$0	$251,500

As of December 31, 2023, there were 45 funds for which the directors served as directors, all of which were Funds of Empower Funds. The total compensation paid is comprised of the amount paid by Empower Funds during its most recently completed fiscal year ended December 31, 2023.

Codes of Ethics

Empower Funds, ECM, EFSI, and the Sub-Advisers each have adopted a Code of Ethics addressing investing by their personnel pursuant to Rule 17j-1 under the 1940 Act. Each Code of Ethics permits personnel to invest in securities, including securities that may be purchased or held by Empower Funds under certain circumstances and places appropriate restrictions on all such investments.

Proxy Voting Policies

Proxies will be voted in accordance with the proxy policies and procedures or summaries thereof that are attached hereto as Appendix B. Proxy voting information for Empower Funds will be provided upon request, without charge. A copy of the applicable proxy voting record may be requested by calling (866) 831-7129, or writing to: Secretary, Empower Funds, Inc., 8525 East Orchard Road, Greenwood Village, Colorado 80111. Information regarding how Empower Funds voted proxies relating to the Funds for the most recent 12-month period ended June 30 is also available on the SEC’s website at www.sec.gov.

CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES

As of April 1, 2024, the outstanding shares of Empower Funds were held of record by Empower of America, Empower of NY, and New England Life Insurance Company (collectively, the “Insurance Companies”), by certain retirement plans, by IRA custodians and trustees, and by Funds of Empower Funds organized as funds-of-funds. The Insurance Companies hold shares principally in their separate accounts: Maxim Series Account, Pinnacle Series Account, Retirement Plan Series Account, FutureFunds Series Account, FutureFunds II Series Account, Qualified Series Account, COLI VUL-2 Series Account, COLI VUL-4 Series Account, COLI VUL-7 Series Account, COLI VUL-10 Series Account, DB-1 Series Account, Variable Annuity-1 Series Account, Variable Annuity-2 Series Account, Variable Annuity-8 Series Account, Variable Annuity-9 Series Account, and Trillium Variable Annuity Series Account of Empower of America; TNE Series (k) Account of New England Life Insurance Company; and COLI VUL-1 Series Account, COLI VUL-2 Series Account, FutureFunds II Series Account, Variable Annuity-1 Series Account, Variable Annuity-2 Series Account, Variable Annuity-8 Series Account and Variable Annuity-9 Series Account of Empower of NY. Investments by ECM consist of initial capitalization.

For purposes of the 1940 Act, any person who owns “beneficially” more than 25% of the outstanding voting securities of a Fund is presumed to “control” the Fund. Shares are generally deemed to be beneficially owned by a person who has the power to vote or dispose of the shares. A control person could control the outcome of proposals presented to shareholders for approval.

To the best knowledge of Empower Funds, as of April 1, 2024, the names and addresses of the record holders of 5% or more of the outstanding shares of each Fund’s equity securities and the percentage of the outstanding voting shares held by such holders are set forth in Appendix C. Other than as indicated in the table, Empower Funds is not aware of any shareholder who beneficially owns more than 25% of a Fund’s total outstanding voting securities.

As a group, the directors and officers of Empower Funds owned less than 1% of the outstanding shares of each of the Funds.

INVESTMENT ADVISORY AND OTHER SERVICES

Investment Adviser

ECM, a Colorado limited liability company with its principal business address at 8515 East Orchard Road, Greenwood Village, Colorado 80111, is registered as an investment adviser pursuant to the Investment Advisers Act of 1940 (“Advisers Act”). ECM serves as investment adviser to Empower Funds pursuant to an amended and restated investment advisory agreement (the “Investment Advisory Agreement”) dated May 1, 2017, as amended. ECM is a wholly-owned subsidiary of Empower Services Holdings US, LLC. Empower Services Holdings US, LLC is a wholly-owned subsidiary of Empower of America, which is a

wholly-owned subsidiary of Empower Holdings, LLC, a Delaware holding company. Empower Holdings, LLC is an indirectly owned subsidiary of Great-West Lifeco Inc., which is a Canadian financial services holding company with operations in Canada, the U.S. and Europe, and is a member of the Power Financial Corporation group of companies. Power Financial Corporation is a wholly-owned subsidiary of Power Corporation of Canada, a Canadian holding and management company. The Desmarais Family Residuary Trust, a trust established pursuant to the Last Will and Testament of the Honourable Paul G. Desmarais, directly and indirectly controls a majority of the voting shares of Power Corporation of Canada.

Investment Advisory Agreement

Under the terms of the Investment Advisory Agreement, ECM acts as investment adviser and, subject to the supervision of the Board, directs the investments of each Fund in accordance with its investment objective, policies and limitations. ECM also assists in supervising Empower Funds’ operations and provides all necessary office facilities and personnel for servicing the Funds’ investments.

In addition, ECM, subject to the supervision of the Board, provides the management and administrative services necessary for the operation of Empower Funds. These services include providing facilities for maintaining Empower Funds’ organization; supervising relations with custodians, transfer and pricing agents, accountants, underwriters and other persons dealing with Empower Funds; preparing all general shareholder communications and conducting shareholder relations; maintaining Empower Funds’ records and the registration of Empower Funds’ shares under federal securities laws and making necessary filings under state securities laws; developing management and shareholder services for Empower Funds; and furnishing reports, evaluations and analyses on a variety of subjects to the directors. With respect to Service Class shares of the Lifetime Funds and SecureFoundation Balanced Fund, and Class L shares of each Class L Fund, ECM is responsible for all expenses incurred in performing the services set forth in the Investment Advisory Agreement and all other expenses, except that the Funds shall pay all distribution and other expenses incurred under a plan adopted pursuant to Rule 12b-1 under the 1940 Act with respect to Service Class and Class L shares, all shareholder services fees pursuant to the Shareholder Services Agreement between Empower Funds and Empower (“Shareholder Services Fees”) with respect to Investor Class, Investor II Class, Service Class and Class L shares, and any extraordinary expenses, including litigation costs. Each class will pay all expenses incurred under any Rule 12b-1 plan pertaining to that class, any Shareholder Services Fees incurred by such class, and its allocable share of any extraordinary expenses.

Subject to the supervision of the Board, ECM may select and contract at its own expense with Sub-Advisers to invest and reinvest the securities and cash and other assets held by a Fund, which include making decisions to purchase, retain or dispose of the holdings of each Fund other than any Fund that is part of a master-feeder arrangement. ECM continues to have responsibility for all investment advisory services furnished pursuant to any sub-advisory agreement. For any Fund advised by one or more sub-advisers, ECM manages the Fund in a “manager-of-managers” style, which contemplates that ECM, among other things, is responsible for reviewing and recommending prospective sub-advisers for each Fund; monitoring and supervising each sub-adviser’s performance, including each sub-adviser’s practices in placing orders and selecting brokers and dealers to execute the Funds’ transactions and in negotiating commission rates; providing investment management evaluation services including quantitative and qualitative analysis as well as periodic in-person, telephonic, and written consultations with the sub-advisers; communicating performance expectations and evaluations to each sub-adviser; determining whether each sub-advisory agreement should be renewed, modified, or terminated; and providing reports to the Board covering the results of its evaluation, monitoring functions and determinations with respect to each sub-adviser.

The Investment Advisory Agreement became effective on May 1, 2017. The Investment Advisory Agreement will continue in effect from year to year if approved annually by the Board including the vote of a majority of the Independent Directors or interested persons of any such party, or by vote of a majority of the outstanding shares of the affected Fund. Any material amendment to the Investment Advisory Agreement becomes effective with respect to the affected Fund upon approval by vote of a majority of the outstanding voting securities of that Fund. The Investment Advisory Agreement is not assignable and may be terminated without penalty with respect to any Fund either by the Board or by vote of a majority of the outstanding voting securities of such Fund or by ECM, each on 60 days’ notice to the other party.

Payment of Expenses

Under the Investment Advisory Agreement, each Fund, with the exception of the Profile Funds, Lifetime Funds and SecureFoundation Balanced Fund, pays all expenses incurred in its operation and all of its general administrative expenses, including, but not limited to, redemption expenses, expenses of portfolio transactions, pricing costs, interest, charges of the custodian and transfer agent, if any, cost of auditing and tax services, Independent Directors’ fees and expenses, fund and Independent Director legal expenses, industry association membership expenses, state franchise and other taxes, expenses of registering the shares under federal and state securities laws, SEC fees, insurance premiums, costs of maintenance of corporate existence, costs of printing and mailing regulatory documents to current shareholders, stock certificates, costs of corporate

meetings, Shareholder Services Fees, distribution and other expenses incurred under a plan adopted pursuant to Rule 12b-1 under the 1940 Act, and any extraordinary expenses, including litigation costs.

ECM is responsible for all of its expenses incurred in performing the services set forth in Article I of the Investment Advisory Agreement. Such expenses include, but are not limited to, costs incurred in providing investment advisory services, fund operations, and accounting services; compensating and furnishing office space for officers and employees of ECM connected with investment and economic research, trading, and investment management of Empower Funds; and paying all fees of all directors of Empower Funds who are affiliated persons of ECM or any of its subsidiaries.

The Lifetime Funds, Profile Funds and SecureFoundation Balanced Fund do not pay their own operating expenses. For these Funds, ECM is responsible for all expenses incurred in performing the services set forth in Article I of the Investment Advisory Agreement, including investment advisory services, fund operations, accounting services, and all operating expenses of the Funds, except that the Funds pay for all Shareholder Services Fees, distribution and other expenses incurred under a plan adopted pursuant to Rule 12b-1 under the 1940 Act, and any extraordinary expenses, including litigation costs.

Management Fees

Each Fund pays a management fee to ECM for managing its investments and business affairs. ECM is paid monthly at an annual rate of each Fund’s average net assets as set forth below:

Fund	Management Fee
Empower Aggressive Profile Fund	0.10% of the average daily net assets
Empower Ariel Mid Cap Value Fund	0.67% of the average daily net assets
Empower Bond Index Fund	0.13% of the average daily net assets on assets up to $3 billion and 0.09% of the average daily net assets on assets over $3 billion
Empower Conservative Profile Fund	0.10% of the average daily net assets
Empower Core Bond Fund	0.32% of the average daily net assets
Empower Emerging Markets Equity Fund	0.93% of the average daily net assets on assets up to $1 billion, 0.88% of the average daily net assets on assets over $1 billion, and 0.83% of the average daily net assets on assets over $2 billion
Empower Global Bond Fund	0.57% of the average daily net assets on assets up to $1 billion, 0.52% of the average daily net assets on assets over $1 billion, and 0.47% of the average daily net assets on assets over $2 billion
Empower Government Money Market Fund	0.10% of the average daily net assets
Empower High Yield Bond Fund	0.60% of the average daily net assets on assets up to $1 billion, 0.55% of the average daily net assets on assets over $1 billion, and 0.50% of the average daily net assets on assets over $2 billion
Empower Inflation-Protected Securities Fund	0.33% of the average daily net assets on assets up to $1 billion, 0.28% of the average daily net assets on assets over $1 billion, and 0.23% of the average daily net assets on assets over $2 billion
Empower International Growth Fund	0.82% of the average daily net assets on assets up to $1 billion, 0.77% of the average daily net assets on assets over $1 billion, and 0.72% of the average daily net assets on assets over $2 billion
Empower International Index Fund	0.25% of the average daily net assets on assets up to $1 billion, 0.20% of the average daily net assets on assets over $1 billion, and 0.15% of the average daily net assets on assets over $2 billion
Empower International Value Fund	0.67% of the average daily net assets
Empower Large Cap Growth Fund	0.62% of the average daily net assets on assets up to $1 billion, 0.57% of the average daily net assets on assets over $1 billion, and 0.52% of the average daily net assets on assets over $2 billion

Fund	Management Fee
Empower Large Cap Value Fund	0.61% of the average daily net assets on assets up to $1 billion, 0.56% of the average daily net on assets over $1 billion, and 0.51% of the average daily net assets on assets over $2 billion
Empower Lifetime 2015 Fund	0.12% of the average daily net assets
Empower Lifetime 2020 Fund	0.12% of the average daily net assets
Empower Lifetime 2025 Fund	0.12% of the average daily net assets
Empower Lifetime 2030 Fund	0.12% of the average daily net assets
Empower Lifetime 2035 Fund	0.12% of the average daily net assets
Empower Lifetime 2040 Fund	0.12% of the average daily net assets
Empower Lifetime 2045 Fund	0.12% of the average daily net assets
Empower Lifetime 2050 Fund	0.12% of the average daily net assets
Empower Lifetime 2055 Fund	0.12% of the average daily net assets
Empower Lifetime 2060 Fund	0.12% of the average daily net assets
Empower Mid Cap Value Fund	0.78% of the average daily net assets on assets up to $1 billion, 0.73% of the average daily net assets on assets over $1 billion, and 0.68% of the average daily net assets on assets over $2 billion
Empower Moderate Profile Fund	0.10% of the average daily net assets
Empower Moderately Aggressive Profile Fund	0.10% of the average daily net assets
Empower Moderately Conservative Profile Fund	0.10% of the average daily net assets
Empower Multi-Sector Bond Fund	0.52% of the average daily net assets on assets up to $1 billion, 0.47% of the average daily net assets on assets over $1 billion, and 0.42% of the average daily net assets on assets over $2 billion
Empower Real Estate Index Fund	0.29% of the average daily net assets on assets up to $1 billion, 0.24% of the average daily net assets on assets over $1 billion, and 0.19% of the average daily net assets on assets over $2 billion
Empower S&P 500 Index Fund	0.21% of the average daily net assets on assets up to $1 billion, 0.16% of the average daily net assets on assets over $1 billion, 0.11% of the average daily net assets on assets over $2 billion, and 0.09% of the average daily net assets on assets over $3 billion
Empower S&P Mid Cap 400 Index Fund	0.18% of the average daily net assets on assets up to $1 billion, 0.13% of the average daily net assets on assets over $1 billion, and 0.08% of the average daily net assets on assets over $2 billion
Empower S&P Small Cap 600 Index Fund	0.19% of the average daily net assets on assets up to $1 billion, 0.14% of the average daily net assets on assets over $1 billion, and 0.09% of the average daily net assets on assets over $2 billion
Empower SecureFoundation Balanced Fund	0.10% of the average daily net assets
Empower Short Duration Bond Fund	0.23% of the average daily net assets
Empower Small Cap Growth Fund	0.83% of the average daily net assets on assets up to $1 billion, 0.78% of the average daily net assets on assets over $1 billion, and 0.73% of the average daily net assets on assets over $2 billion
Empower Small Cap Value Fund	0.71% of the average daily net assets
Empower T. Rowe Price Mid Cap Growth Fund	0.65% of the average daily net assets
Empower U.S. Government Securities Fund	0.23% of the average daily net assets

For the past three fiscal years ended December 31, 2021, 2022 and 2023, ECM was paid a fee for its services to the Funds as follows:

Fund	2023	2022	2021
Empower Aggressive Profile Fund	$614,232	$606,531	$719,472
Empower Ariel Mid Cap Value Fund	$778,451	$967,243	$1,326,520
Empower Bond Index Fund	$4,289,634	$2,948,793	$2,207,528
Empower Conservative Profile Fund	$982,094	$953,597	$1,028,582
Empower Core Bond Fund	$1,398,018	$1,518,152	$1,771,505
Empower Emerging Markets Equity Fund	$5,935,734	$5,952,091	$4,875,764
Empower Global Bond Fund	$2,622,973	$2,711,662	$3,010,829
Empower Government Money Market Fund	$624,448	$666,084	$972,944
Empower High Yield Bond Fund	$2,738,536	$3,872,790	$2,627,269
Empower Inflation-Protected Securities Fund	$1,288,962	$1,399,116	$1,552,953
Empower International Growth Fund	$3,605,756	$3,609,807	$4,177,584
Empower International Index Fund	$3,671,480	$3,319,060	$2,683,177
Empower International Value Fund	$9,281,434	$8,217,732	$8,177,294
Empower Large Cap Growth Fund	$6,981,698	$4,892,663	$5,469,093
Empower Large Cap Value Fund	$9,227,807	$9,358,738	$8,974,531
Empower Lifetime 2015 Fund	$622,100	$751,330	$920,045
Empower Lifetime 2020 Fund	$439,163	$481,627	$479,449
Empower Lifetime 2025 Fund	$1,476,763	$1,668,283	$1,976,250
Empower Lifetime 2030 Fund	$566,193	$537,897	$510,496
Empower Lifetime 2035 Fund	$1,561,195	$1,651,523	$1,937,734
Empower Lifetime 2040 Fund	$435,636	$390,783	$368,716
Empower Lifetime 2045 Fund	$1,082,804	$1,082,440	$1,232,991
Empower Lifetime 2050 Fund	$300,674	$235,889	$202,996
Empower Lifetime 2055 Fund	$534,491	$518,879	$589,285
Empower Lifetime 2060 Fund	$45,056	$24,311	$14,660
Empower Mid Cap Value Fund	$4,250,054	$5,187,122	$6,080,521
Empower Moderate Profile Fund	$1,492,992	$1,603,654	$1,823,387
Empower Moderately Aggressive Profile Fund	$780,525	$767,248	$827,833
Empower Moderately Conservative Profile Fund	$552,003	$554,141	$602,216
Empower Multi-Sector Bond Fund	$3,732,309	$3,262,872	$3,499,526
Empower Real Estate Index Fund	$1,864,259	$1,690,605	$1,408,801
Empower S&P 500 Index Fund	$5,490,149	$5,533,131	$5,080,866
Empower S&P Mid Cap 400 Index Fund	$2,094,257	$2,013,229	$1,535,968
Empower S&P Small Cap 600 Index Fund	$1,545,358	$1,625,400	$1,608,343
Empower SecureFoundation Balanced Fund	$874,381	$946,814	$1,033,169
Empower Short Duration Bond Fund	$805,637	$790,756	$824,287
Empower Small Cap Growth Fund	$943,467	$945,655	$1,084,545
Empower Small Cap Value Fund	$3,377,444	$2,885,566	$3,262,639
Empower T. Rowe Price Mid Cap Growth Fund	$11,247,440	$10,609,148	$13,302,165
Empower U.S. Government Securities Fund	$1,501,693	$1,529,998	$961,012

Expense Reimbursement Relating to Certain Funds

Pursuant to an expense limitation agreement (the “Expense Limitation Agreement”) dated May 1, 2017, as amended, ECM contractually agreed to waive advisory fees or reimburse expenses if total annual fund operating expenses of certain Funds exceed an annual rate as set forth below of the average daily net assets attributable to each Class, excluding Rule 12b-1 fees, Shareholder Services Fees, brokerage expenses, taxes, dividend interest on short sales, interest expenses, and any extraordinary expenses, including litigation costs (the “Expense Limit”). The Expense Limitation Agreement’s current term ends on April 30, 2025 and automatically renews for one-year terms unless it is terminated upon termination of the investment advisory agreement or by Empower Funds or ECM upon written notice within 90 days of the end of the current term. Under the Expense Limitation Agreement, ECM may recoup, subject to Board approval, these waivers and reimbursements in future periods, not exceeding three years following the particular waiver/reimbursement, provided total annual fund operating expenses of the Class plus such recoupment do not exceed the lesser of the Expense Limit that was in place at the time of the waiver/reimbursement or the Expense Limit in place at the time of recoupment.

Fund	Expense Limit
Empower Ariel Mid Cap Value Fund	0.70% of the average daily net assets
Empower Bond Index Fund	0.15% of the average daily net assets
Empower Core Bond Fund	0.35% of the average daily net assets
Empower Emerging Markets Equity Fund	0.91% of the average daily net assets
Empower Global Bond Fund	0.65% of the average daily net assets
Empower High Yield Bond Fund	0.63% of the average daily net assets
Empower Inflation-Protected Securities Fund	0.35% of the average daily net assets
Empower International Growth Fund	0.85% of the average daily net assets
Empower International Index Fund	0.32% of the average daily net assets
Empower International Value Fund	0.72% of the average daily net assets
Empower Large Cap Growth Fund	0.63% of the average daily net assets
Empower Mid Cap Value Fund	0.80% of the average daily net assets
Empower Multi-Sector Bond Fund	0.55% of the average daily net assets
Empower Real Estate Index Fund	0.30% of the average daily net assets
Empower S&P 500 Index Fund	0.23% of the average daily net assets
Empower S&P Mid Cap 400 Index Fund	0.20% of the average daily net assets
Empower S&P Small Cap 600 Index Fund	0.21% of the average daily net assets
Empower Short Duration Bond Fund*	0.24% of the average daily net assets
Empower Small Cap Growth Fund	0.84% of the average daily net assets
Empower Small Cap Value Fund	0.74% of the average daily net assets
Empower T. Rowe Price Mid Cap Growth Fund	0.67% of the average daily net assets
Empower U.S. Government Securities Fund*	0.24% of the average daily net assets

* ECM has agreed to a 0.01% reduction in the Expense Limit through April 30, 2026 for the Empower Short Duration Bond and Empower U.S. Government Securities Funds.

For the past three fiscal years ended December 31, 2021, 2022 and 2023, the amounts of such expense reimbursements pursuant to the Expense Limitation Agreement were:

Fund	2023	2022	2021
Empower Ariel Mid Cap Value Fund	$97,890	$122,678	$52,011
Empower Bond Index Fund	$0	$85,260	$49,911
Empower Core Bond Fund	$306,834	$286,764	$160,576
Empower Emerging Markets Equity Fund	$927,371	$1,124,036	$791,665
Empower Global Bond Fund	$118,808	$44,245	$23,309
Empower High Yield Bond Fund	$184,048	$227,011	$156,428
Empower Inflation-Protected Securities Fund	$192,962	$199,067	$103,562
Empower International Growth Fund	$141,113	$149,953	$80,917
Empower International Index Fund	$0	$0	$0
Empower International Value Fund	$0	$63,952	$4,090
Empower Large Cap Growth Fund	$99,296	$138,651	$71,480
Empower Mid Cap Value Fund	$83,119	$83,564	$80,764
Empower Multi-Sector Bond Fund	$376,837	$383,937	$151,895
Empower Real Estate Index Fund	$174,566	$204,188	$117,418
Empower S&P 500 Index Fund	$0	$1,186	$1,708
Empower S&P Mid Cap 400 Index Fund	$15,559	$49,011	$33,593
Empower S&P Small Cap 600 Index Fund	$74,765	$95,525	$18,348
Empower Short Duration Bond Fund	$124,724	$130,390	$64,608
Empower Small Cap Growth Fund	$149,900	$155,131	$120,127
Empower Small Cap Value Fund	$113,843	$42,066	$19,949
Empower T. Rowe Price Mid Cap Growth Fund	$1,157	$68,704	$24,073
Empower U.S. Government Securities Fund	$162,765	$153,752	$102,379

Expense Reimbursement for Empower Government Money Market Fund

Effective May 1, 2017, ECM contractually agreed to waive advisory fees or reimburse expenses if total annual Fund operating expenses of any Class exceed 0.11% of the Class’s average daily net assets, excluding Shareholder Services Fees, brokerage expenses, taxes, dividend interest on short sales, interest expenses, and any extraordinary expenses, including litigation costs (the “MMF Expense Limit”). The MMF Expense Limit will remain in effect indefinitely and will be discontinued only upon termination or amendment of the Investment Advisory Agreement. The MMF Expense Limit cannot be increased without shareholder approval. Under the agreement, ECM may recoup, subject to Board approval, these waivers and reimbursements in future periods, not exceeding three years following the particular waiver/reimbursement, provided total annual fund operating expenses of the Class plus such recoupment do not exceed the the lesser of the MMF Expense Limit that was in place at the time of the waiver/reimbursement or the MMF Expense Limit in place at the time of recoupment. For the fiscal year ended December 31, 2023, the amount of such expense reimbursements for the Empower Government Money Market Fund was $119,534.

Expense Reimbursement and Yield Maintenance for Empower Government Money Market Fund

Effective April 29, 2022, ECM and Empower contractually agreed to temporarily waive advisory fees and Shareholder Services Fees, as applicable, and to absorb any Fund expenses that, based on the average daily net assets of each share class of the Fund, would collectively result in the annual yield of each share class of the Fund to be less than 0.01%. This agreement shall terminate upon termination of the Investment Advisory Agreement, or at any time upon written notice by ECM and Empower. Under the agreement, ECM and Empower may recoup, subject to Board approval, these waivers, reimbursements and payments in future periods, not exceeding three years following the particular waiver/reimbursement/payment, provided total annual Fund operating expenses of a share class plus such recoupment do not exceed the lesser of the expense limitation that was in place at the time of the waiver/reimbursement/payment or the expense limitation in place at the time of recoupment. The amount of management fees waived together with the actual expenses incurred in excess of the expense limitation by ECM for the fiscal year ended December 31, 2023 was $3,869. The amount of Shareholder Services Fees waived by Empower for the fiscal year ended December 31, 2023 was $9,696.

Expense Reimbursement for Empower Large Cap Value Fund

Effective October 25, 2019, ECM contractually agreed to waive advisory fees or reimburse expenses if total annual Fund operating expenses of any Class exceed 0.61% of the Class’s average daily net assets, excluding Shareholder Services Fees, brokerage expenses, taxes, dividend interest on short sales, interest expenses, and any extraordinary expenses, including litigation costs (the “Empower Large Cap Value Fund’s Expense Limit”). The agreement’s current term ends on April 30, 2025 and automatically renews for one-year terms unless it is terminated upon termination of the Investment Advisory Agreement or by ECM or Empower Funds upon written notice within 90 days of the end of the current term. Under the agreement, ECM may recoup, subject to Board approval, these waivers and reimbursements in future periods, not exceeding three years following the particular waiver/reimbursement, provided total annual Fund operating expenses of the Class plus such recoupment do not exceed the lesser of Empower Large Cap Value Fund’s Expense Limit that was in place at the time of the waiver/reimbursement or Empower Large Cap Value Fund’s Expense Limit in place at the time of recoupment. For the fiscal year ended December 31, 2023, the amount of such expense reimbursements for the Empower Large Cap Value Fund was $80,780.

In addition, ECM has contractually agreed to reimburse the Investor II Class shares to the extent necessary to maintain a total operating expense ratio that does not exceed 0.81% of the average Investor II Class’s daily net assets (“Expense Cap”). ECM is not entitled to recoup expense reimbursements remitted by ECM related to the Expense Cap. Under the terms of the expense limitation agreement, the Expense Cap survives the termination of the expense limitation agreement. It may be terminated only upon termination of the Fund’s advisory agreement with ECM or by the Board. For the fiscal year ended December 31, 2023, the amount of such expense reimbursements for the Empower Large Cap Value Fund Investor II Class shares was $204,586.

Expense Reimbursement Relating to Certain Funds and the Empower of America Contract

Empower Lifetime, Profile, and SecureFoundation Balanced Funds may invest in a fixed interest rate contract issued and guaranteed by Empower of America (the “Empower of America Contract”). ECM has contractually agreed to reduce the management fee of each such Fund by 0.35% of the amount such Fund is allocated to the Empower of America Contract.

The amounts of such expense reimbursements for the Funds’ fiscal years ended December 31, 2021, 2022 and 2023 were:

Fund	2023	2022	2021
Empower Conservative Profile Fund	$769,610	$755,754	$809,819
Empower Lifetime 2015 Fund	$238,078	$267,732	$309,864
Empower Lifetime 2020 Fund	$138,330	$139,244	$130,160

Fund	2023	2022	2021
Empower Lifetime 2025 Fund	$363,440	$372,080	$406,772
Empower Lifetime 2030 Fund	$100,296	$84,153	$71,670
Empower Lifetime 2035 Fund	$172,894	$155,709	$158,123
Empower Lifetime 2040 Fund	$25,817	$19,038	$15,097
Empower Lifetime 2045 Fund	$30,542	$24,692	$23,579
Empower Lifetime 2050 Fund	$4,276	$2,753	$2,023
Empower Lifetime 2055 Fund	$5,484	$4,758	$5,156
Empower Lifetime 2060 Fund	$437	$215	$124
Empower Moderate Profile Fund	$833,078	$902,371	$1,015,533
Empower Moderately Aggressive Profile Fund	$243,963	$242,721	$259,932
Empower Moderately Conservative Profile Fund	$423,395	$428,160	$462,866
Empower SecureFoundation Balanced Fund	$151,799	$166,080	$180,856

Expense Reimbursement Relating to Certain Funds and Compensation from Unaffiliated Funds

Empower Lifetime, Profile, and SecureFoundation Balanced Funds may invest in registered open-end management investment companies that are not part of the same “group of investment companies” (within the meaning of Section 12(d)(1)(G)(ii) of the 1940 Act) as the Empower Funds (“Unaffiliated Fund(s)”). Prior to May 1, 2021, ECM contractually agreed to reduce the management fee in an amount at least equal to any compensation (including Rule 12b-1 fees) received from Unaffiliated Fund(s) by ECM, or an affiliated person of ECM, in connection with investment by such in the Unaffiliated Fund.

The amounts of such expense reimbursements paid for the Funds’ fiscal year ended December 31, 2021, 2022 and 2023 were:

Fund	2023	2022	2021
Empower Lifetime 2015 Fund	$0	$0	$402
Empower Lifetime 2020 Fund	$0	$0	$212
Empower Lifetime 2025 Fund	$0	$0	$1,290
Empower Lifetime 2030 Fund	$0	$0	$349
Empower Lifetime 2035 Fund	$0	$0	$2,038
Empower Lifetime 2040 Fund	$0	$0	$385
Empower Lifetime 2045 Fund	$0	$0	$1,743
Empower Lifetime 2050 Fund	$0	$0	$262
Empower Lifetime 2055 Fund	$0	$0	$967
Empower Lifetime 2060 Fund	$0	$0	$12
Empower SecureFoundation Balanced Fund	$0	$0	$1,852

Expense Reimbursement Relating to Certain Funds and the Difference Between Shareholder Services Fee Charged by Empower of America and Compensation from Unaffiliated Funds

Prior to May 1, 2021, ECM contractually agreed to reduce the management fee of any applicable Funds by an amount commensurate with the difference between the Shareholder Services Fees charged by Empower of America (under the Shareholder Services Agreement with Empower of America) and any compensation received from Unaffiliated Fund(s) by ECM, or an affiliated person of ECM, in connection with investment by such Fund in the Unaffiliated Fund.

The amounts of such expense reimbursements paid for the Funds’ fiscal year ended December 31, 2021, 2022 and 2023 were:

Fund	2023	2022	2021
Empower SecureFoundation Balanced Fund	$0	$0	$1,425

Underlying Funds

With respect to the Profile Funds, Lifetime Funds and SecureFoundation Balanced Fund investing in funds advised by an entity other than ECM (“Non-Affiliated Underlying Funds”), ECM will arrange for Empower Funds to be included within a class of investors entitled not to pay sales loads by purchasing shares of the Non-Affiliated Underlying Funds. All other charges, including redemption fees, exchange fees, administrative fees and distribution fees, associated with a particular class are born by the Profile

Funds, Lifetime Funds and SecureFoundation Balanced Fund and will not be waived. You may indirectly bear a proportionate share of the fees and expenses, including Rule 12b-1 distribution fees, for Non-Affiliated Underlying Funds.

A redemption fee may be imposed by a Non-Affiliated Underlying Fund upon a request to redeem shares of such within a certain period of time. Accordingly, if you were to invest indirectly in a Non-Affiliated Underlying Fund through a Profile Fund, Lifetime Fund or SecureFoundation Balanced Fund and request a redemption from the Profile Fund, Lifetime Fund or SecureFoundation Balanced Fund before the expiration of the redemption fee period in the Non-Affiliated Underlying Fund, the Profile Fund, Lifetime Fund or SecureFoundation Balanced Fund may bear a redemption fee.

Sub-Advisers & Sub-Advisory Agreements

ECM and Empower Funds have engaged the services of one or more Sub-Advisers to provide sub-advisory services to certain Funds and, pursuant to a sub-advisory agreement (“Sub-Advisory Agreement”), has delegated certain investment management responsibilities to each Sub-Adviser. ECM monitors and evaluates the performance of each Sub-Adviser.

Each Sub-Adviser provides, subject to the supervision of the Board and ECM, a continuous investment program for each Fund and determines the composition of the assets of each Fund, including determination of the purchase, retention, or sale of the securities, cash and other investments for the Fund, in accordance with the Fund’s investment objectives, policies and restrictions and applicable laws and regulations. Each Sub-Adviser bears all expenses in connection with the performance of its services, such as compensating and furnishing office space for its officers and employees connected with investment and economic research, trading, and investment management of a Fund. ECM, in turn, pays sub-advisory fees to each Sub-Adviser for its services.

As approved, the Sub-Advisory Agreements will remain in effect until April 30, 2025, and from year to year if approved annually by the Board including a vote of a majority of the directors who are not parties to the Sub-Advisory Agreement or interested persons of any such party, or by vote of a majority of the outstanding shares of the affected Fund. Additional information regarding each Sub-Adviser and its respective Sub-Advisory Agreement is provided in the “Portfolio Managers” section below.

Sub-Advisory Fees

For the fiscal years ended December 31, 2021, 2022 and 2023, the Sub-Advisers were paid fees for their services to the Funds as follows:

Fund	2023	2022	2021
Empower Ariel Mid Cap Value Fund	$472,069	$555,463	$719,394
Empower Core Bond Fund	$560,417	$602,215	$719,612
Empower Emerging Markets Equity Fund	$2,861,480	$2,912,150	$2,436,890
Empower Global Bond Fund	$1,025,362	$1,056,186	$1,205,231
Empower High Yield Bond Fund	$1,502,332	$1,911,069	$1,277,112
Empower Inflation-Protected Securities Fund	$380,157	$410,168	$453,597
Empower International Growth Fund	$1,509,369	$1,508,309	$1,752,127
Empower International Index Fund	$315,980	$280,649	$218,546
Empower International Value Fund	$5,531,334	$4,883,919	$4,883,351
Empower Large Cap Growth Fund	$3,214,446	$2,462,152	$2,772,897
Empower Large Cap Value Fund	$4,408,142	$4,500,252	$4,340,625
Empower Mid Cap Value Fund	$1,886,745	$2,290,623	$2,659,108
Empower Multi-Sector Bond Fund	$1,593,880	$1,398,649	$1,513,555
Empower Real Estate Index Fund	$128,031	$109,477	$82,999
Empower S&P 500 Index Fund	$281,450	$284,978	$249,175
Empower S&P Mid Cap 400 Index Fund	$183,462	$173,832	$128,884
Empower S&P Small Cap 600 Index Fund	$105,410	$110,731	$110,117
Empower Small Cap Growth Fund	$632,735	$632,835	$729,281
Empower Small Cap Value Fund	$1,737,246	$1,512,010	$1,707,748
Empower T. Rowe Price Mid Cap Growth Fund	$7,329,191	$7,118,242	$10,076,601

Partner Payments to Empower

Empower may receive payments from registered investment advisers and/or their affiliates (“Partner(s)”), including current and potential sub-advisers to Empower Funds, as applicable, for providing services to Partners and Partner products offered through Empower’s retirement platforms. Program services include but are not limited to: (1) consideration for inclusion in Empower products developed for some segments of the retirement and IRA market, (2) inclusion on the Empower Select investment platform, which is available in the small plan recordkeeping market, (3) a waiver of the connectivity fee, (4) enhanced marketing opportunities, (5) additional reporting capabilities, (6) collaboration in thought leadership opportunities, (7) access to meetings with Empower leadership, Empower staff, and the third-party advisory and brokerage firms through which Empower distributes its services, and (8) access to conferences put on by Empower. The level of payments made by Partners may be based on differing levels or types of services provided by Empower, among other considerations.

PORTFOLIO MANAGERS

The following section provides information regarding each portfolio manager’s other accounts managed, material conflicts of interest, compensation, and any ownership of securities in the Fund(s) managed. Each portfolio manager is referred to in this section as a “portfolio manager.”

EMPOWER CAPITAL MANAGEMENT, LLC

The Empower Government Money Market Fund is managed by an internal investment management team comprised of Darrin Clough, CFA and Jason Harubin, CFA, who have both managed the Fund since 2022.

The Profile Funds, Lifetime Funds and SecureFoundation Balanced Fund are managed by the ECM Asset Allocation Committee (“AAC”) comprised of Andrew Corwin, CFA and Maria Mendelsberg, CFA. The AAC reviews the asset class allocations, Underlying Fund allocations, and the Underlying Funds on a quarterly basis, or more frequently as deemed necessary. In addition, the AAC determines whether to add or delete asset classes, add or delete Underlying Funds, or change the target allocations.

The AAC is also responsible for maintaining a strategic asset allocation of the multi-managed Empower Funds’ assets with each Sub-Adviser and among asset classes. The AAC reviews the asset class allocations and target allocations among Sub-Advisers on a quarterly basis or more frequently, as deemed necessary and determines whether to add or delete asset classes or change the target allocations.

Other Accounts Managed

The following table provides information regarding registered investment companies other than the Empower Government Money Market Fund, other pooled investment vehicles and other accounts over which the portfolio managers also have day-to-day management responsibilities. The table provides the numbers of such accounts, the total assets in such accounts and the number of accounts and total assets whose fees are based on performance. The information is provided as of the Fund’s fiscal year ended December 31, 2023.

AUM Based Fees

Performance Based Fees

Registered

Investment

Companies

Other Pooled

Investment

Vehicles

Other Accounts

Registered

Investment

Companies

Other Pooled

Investment

Vehicles