Common use of Currency Risk Clause in Contracts

Currency Risk. The Net Asset Value of each Sub-Fund is determined in the base currency of the relevant Sub-Fund as set out in Annex A, whereas the Sub-Fund’s investments may be acquired in a wide range of currencies, some of which may be volatile and some of which may not be freely convertible. It may not be possible or practicable to hedge against the consequent currency risk exposure and in certain instances the Management Company may consider it desirable not to hedge against such risk, so that exchange rate fluctuations could cause the value of such investments to increase or decrease. Emerging Markets Risk. Certain Sub-Funds may invest in securities of companies in emerging markets. Such securities may involve a high degree of risk and may be considered speculative. Risks include (i) greater risk of expropriation, confiscatory taxation, nationalization, privatization, corruption, organised crime and social, political and economic instability; (ii) the small current size of the markets for securities of emerging markets issuers and the currently low or non-existent volume of trading, resulting in lack of liquidity and in price volatility, (iii) certain national policies which may restrict a Sub-Fund’s investment opportunities including restrictions on investing in issuers or industries deemed sensitive to relevant national interests, (iv) lack of independence and effective government supervision of company registrars and (v) the absence of developed legal structures governing private or foreign investment and private property. Counterparty and Settlement Risk. When the Management Company enters into a contract with other parties on behalf of the UCITS and its Sub-Funds, the Sub-Funds bear the risk that the counterparties will not carry out their obligations. To the extent that such contracts involve over-the-counter derivatives or other over-the-counter transactions, they may be exposed to the risk of default by a counterparty or to settlement difficulties. This risk may be substantially higher than the default or settlement risks involved in standardized and exchange-traded transactions. The latter are generally backed by clearing organizations' guarantees, are generally marked to market daily and intermediaries are generally subject to settlement and segregation and minimum capital requirements. Transactions directly with a counterparty generally do not benefit from those protections and expose each party to a higher risk of the other's default. For example, although a broker or dealer or other counterparty may collateralize its obligations to a particular party by segregating its assets and identifying them on its records as assets dedicated to that party, those or similar arrangements may not always be adequate to protect the party if the counterparty were to become insolvent and, even if they are, the party could expect delays in receiving the benefit of the derivative or other contract. Custody Risk. There are risks involved in dealing with the custodians or brokers who hold or settle a Sub- Fund’s trades. It is possible that, in the event of the insolvency or bankruptcy of a custodian or broker, a Sub-Fund would be delayed or prevented from recovering its assets from the custodian or broker, or its estate and may have only a general unsecured claim against the custodian or broker for those assets. The Depositary will hold assets in compliance with applicable laws and such specific provisions as agreed in the Depositary Agreement. These requirements are designed to protect the assets against the insolvency in bankruptcy of the Depositary but there is no guarantee they will successfully do so. In addition, as the Fund may invest in markets where custodial and/or settlement systems and regulations are not fully developed, including emerging markets, the assets of the Sub-Funds which are traded in such markets and which have been entrusted to sub-custodians, in circumstances where the use of sub-custodians is necessary, may be exposed to risk in circumstances where the Depositary will have no liability.