potentially
leading to military conflict. In addition, many Asian countries are subject to
social and labor risks associated with demands for improved
political, economic and social conditions. These risks, among others, may
adversely affect the value of a Fund’s investments with exposure to
Asia.
Asset
Class Risk. The securities
and other assets in a Fund’s portfolio or, if applicable, its Underlying Index
may underperform in comparison to
indexes that track, or assets that represent, other countries or geographic
units, industries, markets, market segments, or asset classes.
Various types of securities, other assets and indexes may experience cycles of
outperformance and underperformance in comparison to
financial markets generally. This divergence may be due to a number of factors
including, among other things, inflation, interest rates,
productivity, global demand for local products or resources, and regulation and
governmental controls. This may cause a Fund to underperform
other investment vehicles that invest in different asset
classes.
Australasian
Economic Risk. The economies of
Australasia, which include Australia and New Zealand, depend on exports from the
energy, agricultural and
mining sectors and, as a result, are susceptible to fluctuations in the
commodity markets. These economies also increasingly depend on their
growing service industries. The Australasian economies depend on the economies
of their key trading partners, which include China,
Japan, South Korea, the U.S. and certain European countries. Reduced spending by
any of these trading partners on Australasian
products and services, or negative changes in any of these economies, may have
an adverse impact on some or all of the Australasian
economies. Economic events in key trading countries can have a significant
effect on the Australasian economies.
Other risks to
Australasian countries include natural disasters that may occur in the region
(e.g., droughts, earthquakes, fires, tsunamis) and national or
regional security concerns (e.g., terrorism, war, strained international
relations). Any such event may adversely affect the Australasian
economies, financial markets or issuers of securities, causing an adverse impact
on the value of a Fund’s investments.
Authorized
Participant Concentration Risk. Only an Authorized
Participant may engage in creation or redemption transactions directly
with
a Fund. There are a limited number of institutions that may act as Authorized
Participants for the Fund, including on an agency basis on behalf of other
market participants. No Authorized Participant is obligated to engage in
creation or redemption transactions. To the extent that Authorized
Participants exit the business or do not place creation or redemption orders for
a Fund and no other Authorized Participant places orders,
Fund shares are more likely to trade at a premium or discount to NAV and
possibly face trading halts or delisting. Authorized Participant
concentration risk may be heightened for a Fund that invests in securities
issued by non-U.S. issuers or instruments with lower trading volume.
Such assets often entail greater settlement and operational complexity and
higher capital costs for Authorized Participants, which may limit
the number of Authorized Participants that engage with the
Fund.
Borrowing
Risk.
Borrowing may exaggerate changes in a Fund’s NAV and in the return on its
portfolio. A Fund that borrows will incur interest expenses
and other fees, which may reduce the Fund’s return. Borrowing may also cause a
Fund to liquidate positions when it may not be
advantageous to do so to satisfy its obligations.
Central
and South American Economic Risk. Certain Central
and South American countries have experienced high interest rates, economic
volatility, high levels of inflation, currency devaluations, regime changes,
government defaults and high unemployment rates. Additionally,
commodities such as oil and gas, minerals and metals represent a significant
percentage of the region’s exports, and the economies of
countries in the region are particularly sensitive to fluctuations in commodity
prices as a result. Central and South American countries depend
on the economies of their key trading partners, which include China, the U.S.,
other countries in the region and certain European
countries. Reduced spending by any of these trading partners on products and
services, or negative changes in any of these economies, may
have an adverse impact on some or all of the economies in the region. The impact
of any of the foregoing events in one country could have
a significant effect on the entire region.
Other risks to
Central and South American countries include natural disasters that may occur in
the region (e.g., floods, hurricanes, earthquakes) and
national or regional security concerns (e.g., terrorism, war, strained
international relations). Any such event may adversely affect Central and
South American economies, financial markets or issuers of securities, causing an
adverse impact on the value of a Fund’s investments.
Close-Out
Risk for Qualified Financial Contracts. Regulations
adopted by global prudential regulators require counterparties that are part
of
U.S. or foreign global systemically important banking organizations to include
contractual restrictions on close-out and cross-default in agreements
relating to qualified financial contracts. Qualified financial contracts include
agreements relating to swaps, currency forwards and other
derivatives as well as repurchase agreements and securities lending agreements.
The restrictions prevent a Fund from closing out a qualified
financial contract during a specified time period if the counterparty is subject
to resolution proceedings and also prohibit a Fund from exercising
default rights due to a receivership or similar proceeding of an affiliate of
the counterparty. These requirements may increase credit risk and
other risks to a Fund.
Commercial
and Professional Services Industry Risk. The success of
commercial and professional service providers is tied closely to the
performance of
domestic and international economies, interest rates, exchange rates,
competition, availability of qualified personnel and corporate demand.
The commercial and professional services industry depends heavily on corporate
spending. Companies in the commercial and professional
services industry may be subject to severe competition, which may also have an
adverse impact on their profitability.
Commodity
Risk. Companies whose
performance is reflected in the Fund’s portfolio or Underlying Index may be
adversely affected by changes or trends
in commodity prices. Commodity prices may be influenced or characterized by
unpredictable factors, including, where applicable, high
volatility, changes in supply and demand relationships, weather, agriculture,
trade, pestilence, political instability, war,
