INDEX OF DEFINED TERMS - Banca di Legnano

Level: 2 – From: 2 – Wednesday, July 21, 2010 – 11:55 – eprint6 – 4247 Section 02
Risk Factors
may result in delays in payment, or non-payment of interest or principal when due.
Furthermore, the net asset value of fixed income securities may also fluctuate with changes in
prevailing interest rates and/or in the creditworthiness of the issuer, and these fluctuations
may result in a loss of capital by a fund.
• Risks of collective investment schemes: Some funds may invest in other collective
investment schemes. Investment in schemes of this type may afford the investor less
transparency in respect of the ultimate assets of the scheme.
• Large transactions: Large subscriptions and redemptions may result in the liquidation or
dilution of fund assets that may affect the net asset value of such fund.
• Emerging markets: A fund may invest in securities of governments of, or companies
domiciled in, less-developed or emerging markets. See “Risks relating to Notes which are
linked to emerging market Underlying Asset(s)”. Custody arrangements in such countries
may also present enhanced risk.
• Risks of repos: A fund may use repurchase agreements. Under a repurchase agreement, a
security is sold to a buyer and at the same time the seller of the security agrees to buy back
the security at a later date at a higher net asset value. In the event of a bankruptcy or other
default of the transferor of securities in a repurchase agreement, a fund could experience
delays in liquidating the underlying securities and losses, including possible declines in the
value of the collateral during the period while it seeks to enforce its rights thereto; possible
subnormal levels of income and lack of access to income during this period and the expenses
of enforcing its rights. In the case of a default by the transferee of securities in a repurchase
agreement, the management company bears the risk that the transferee may not deliver the
securities when required.
• Risks of currency speculation: A fund may engage in exchange rate speculation. Foreign
exchange rates have been highly volatile in recent years. The combination of volatility and
leverage gives rise to the possibility of large profit but also carries a high risk of loss. In
addition, there is counterparty credit risk since foreign exchange trading is done on a
principal to principal basis.
• Risks of commodity futures: Commodity futures prices can be highly volatile. As a result of
the low margin deposits normally required in futures trading, an extremely high degree of
leverage is typical of a futures trading account. As a result, a relatively small price movement
in a futures contract may result in substantial losses to the investor. Like other leveraged
investments, a futures transaction may result in losses in excess of the amount invested.
• Risks of derivative instruments: A fund may use derivative instruments, such as
collateralized debt obligations, stripped mortgage-backed securities, options and swaps.
There are uncertainties as to how the derivatives market will perform during periods of
unusual price volatility or instability, market illiquidity or credit distress. Substantial risks are
also involved in borrowing and lending against such instruments. The prices of these
instruments are volatile, market movements are difficult to predict and financing sources and
related interest rates are subject to rapid change. One or more markets may move against the
positions held by a fund, thereby causing substantial losses. Most of these instruments are not
traded on exchanges but rather through an informal network of banks and dealers. These
banks and dealers have no obligation to make markets in these instruments and may apply
essentially discretionary margin and credit requirements (and thus, in effect, force a fund to
close out its relevant positions). In addition, such instruments carry the additional risk of
failure to perform by the counterparty to the transaction. Government policies, especially
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