imaxx™ Guaranteed Investment Funds - Transamerica Life Canada

Emerging Markets RiskInvestments in emerging market countries are generally considered topose greater risks than foreign investments in established markets. Ingeneral, securities markets in emerging countries may be smaller thanin more developed countries, making it more difficult to sell securitiesin order to take profits or avoid losses. Companies in these marketsmay have limited product lines, markets or resources, making it difficultto measure the value of the company. In general, emerging marketcountries have more fragile economies due to higher levels of inflation,higher government debt loads, and/or dependence on a relativelynarrow industrial base. Political instability and possible corruption,as well as lower standards of regulation for business practicesincrease the possibility of fraud and other legal problems. The value ofinvestments in these countries may rise and fall substantially.Equity RiskThe price of equity securities – also called stocks or shares – areaffected by stock market conditions and by general economic andfinancial conditions in those countries where the investments arelisted for trading or elsewhere. The price of equity securities ofcertain companies or companies within a particular industry sectormay also fluctuate differently than the stock market due to changesin the outlook for the company or the industry in which it operates.Historically, equity prices have been more volatile than prices forfixed income securities such as bonds. Accordingly, the value of fundswhose assets are weighted towards equities may be more volatile thanthe value of funds whose assets are weighted towards fixed incomesecurities.ETF RiskCertain funds may invest in exchange-traded funds (ETFs) which qualifyas index participation units. ETFs seek to provide returns similar to theperformance of a particular market index or industry sector index. ETFsmay not achieve the same return as their benchmark market or industrysector indices due to differences in the actual weights of securitiesheld in the ETF versus the weights in the relative index and due to theoperating and management expenses of the ETFs.Foreign Currency RiskThe value of securities issued in foreign currencies, or of securities thatpay income in foreign currencies, is affected by changes in the valueof the Canadian dollar relative to those currencies. For example, if theU.S. dollar rises relative to the Canadian dollar, U.S. shares will beworth more in Canadian dollars. On the other hand, if the U.S. dollarfalls, U.S. shares will be worth less in Canadian dollars.Foreign Investment RiskThere are some significant reasons to consider investing abroad.The economies of foreign countries may be growing much fasterthan Canada’s economy and this can mean that investments in thosecountries may grow more quickly too. Foreign investments alsogive you diversification because all of your money isn’t staying inCanada alone. However, foreign investments may involve risks notusually associated with investing in the Canadian market. BesidesForeign Currency Risk, foreign investments also involve the followingadditional risks:The value of foreign securities and, hence the value of funds whoseportfolios include such securities may be influenced by worldeconomic and political factors and foreign market conditions.Many foreign companies and countries do not have the sameaccounting, auditing and financial reporting standards that apply toNorth American companies.They may be less publicly available information about foreigncompanies and governments and the quality of the information maybe less reliable.Some foreign stock markets may be smaller and less regulated thanCanadian and U.S. exchanges. As a result of these and other factors,foreign markets may be more volatile and less liquid than NorthAmerican markets.Trading large orders in foreign countries may cause the price tofluctuate more than it would in North America.A country may impose withholding or other taxes that could reducethe return on investment or foreign currency exchange controls,whether already in existence in a country or newly imposed, thatmay make it difficult to sell an investment.Political and social instability, restrictions on the movement ofcapital and the threat of expropriation or nationalization can affectthe value of investments in less developed countries.Fixed-income securities bought on foreign markets- even somegovernment bonds – are often quite risky as there is the danger thatthe issuer will not pay off the debt or that the price of the securitieswill drop rapidly.The amount of risk also varies a lot from country to country. Securitiesin developed markets like Western Europe, for example, have lowerforeign investment risk because they are generally well regulatedand are relatively stable. Securities of governments and companies inemerging or developing markets of Southeast Asia and Latin America,for example, can have significant foreign investment risk. For moreinformation, please refer to the Emerging Markets Risk section.Income Trust and Limited Partnership RiskIncome trusts generally hold debt or equity securities in, or areentitled to receive royalties from, an underlying active business.Income trusts generally fall into four sectors: business trusts, powerand pipeline trusts, resource-based royalty trusts and real estateinvestment trusts. Investments in income trusts will have varyingdegrees of risk depending upon the sector and the underlyingassets. In general, income trusts face the same risks as describedin the Equity Risk section. They will also be subject to general risksassociated with business cycles, commodity prices, interest rates andother economic factors.32