Additional Information for Hong Kong Investors. June 2014

Transcription

1 AllianceBernstein* > International Health Care Portfolio > International Technology Portfolio > Global Real Estate Securities Portfolio > Thematic Research Portfolio > India Growth Portfolio > Euro High Yield Portfolio > US Small and Mid-Cap Portfolio > Emerging Markets Multi-Asset Portfolio > Short Duration High Yield Portfolio > Real Asset Portfolio > Select US Equity Portfolio > Global Plus Fixed Income Portfolio > Emerging Market Local Currency Debt Portfolio > Asia-Pacific Income Portfolio > Emerging Market Corporate Debt Portfolio > Low Volatility Equity Portfolio > Asia Pacific Equity Income Portfolio > Asia Multi-Asset Income Portfolio Additional Information for Hong Kong Investors June 2014 *AllianceBernstein is the trading name of this open-ended investment company with variable capital (société d'investissement à capital variable) incorporated under the laws of the Grand Duchy of Luxembourg (the "Fund"). Purchase orders can be accepted only on the basis of the Prospectus of the Fund dated April 2014 (the "Prospectus") and this statement of additional information for Hong Kong investors (this "Hong Kong Supplement"), which together form the offering documents for the Fund for the purpose of marketing Shares of the Fund in the Hong Kong Special Administrative Region of the People's Republic of China ("Hong Kong"). If you are in any doubt about the contents of the Prospectus, this Hong Kong Supplement or the financial statements accompanying this document you should seek independent professional advice

2 Important Notice WARNING: Please note that the Prospectus is a global offering document and therefore also contains details of funds which are not authorised by the Securities and Futures Commission (the "SFC") for offering to the public in Hong Kong or share classes not available to Hong Kong investors. Investors should note that the Hong Kong Offering Document of the Fund is authorised on the condition that the Management Company shall ensure that only the share classes of the SFCauthorised funds listed on pages 4 and 5 of this Hong Kong Supplement which are specified as available to Hong Kong investors are and shall be offered to the public in Hong Kong. It is an offence to offer any of the following non-sfc authorised funds below to the public in Hong Kong unless an exemption under section 103 of the Securities and Futures Ordinance of Hong Kong (Cap. 571) ( SFO ) applies. Intermediaries should take note of this restriction. Investors should note that the following Portfolios and funds referred to in the Prospectus are not authorized by the SFC: European Flexible Equity Portfolio RMB Income Plus Portfolio Select Absolute Alpha Portfolio US High Yield Portfolio RMB Income Plus II Portfolio (USD) Market Neutral Portfolio Unconstrained Bond Portfolio Emerging Markets Equity Portfolio Emerging Consumer Portfolio Diversified Yield Plus Portfolio Global Equity Income Portfolio Concentrated US Equity Portfolio Concentrated Global Equity Portfolio Global Core Equity Portfolio ACM Institutional Series ACM Bernstein Value Investments AllianceBernstein Institutional Investments AllianceBernstein Fund AllianceBernstein Fund II AXA/AB Investments AllianceBernstein Allocations AllianceBernstein Investments China AB Institutional Strategies AB Institutional Series B - 2 -

3 Information for Hong Kong Investors The aim of this Hong Kong Supplement is to set out all the information relating to the Fund and each of its Portfolios that is particular to the offering of the Portfolios to investors in Hong Kong. All terms used in this Hong Kong Supplement shall bear the same meaning as in the Prospectus unless the context otherwise requires. The directors of the Fund (the "Directors") have taken all reasonable care to ensure that the facts stated herein are true and accurate in all material respects at the date hereof and that there are no other material facts the omission of which makes misleading any statement herein, whether of fact or opinion. The Directors accept responsibility accordingly. In the event of any inconsistency between the contents of the Prospectus and this Hong Kong Supplement, the information contained in the latter shall prevail. Investors should note that the Portfolios are generally entitled to use derivative instruments for hedging and risk management purposes, as well as investment purposes, including, for example, efficient portfolio management and as an alternative to investing directly in the underlying securities or instruments. The use of derivatives may involve additional risks. However other than Short Duration High Yield Portfolio, Emerging Markets Multi-Asset Portfolio, Real Asset Portfolio, Asia-Pacific Income Portfolio and Emerging Market Local Currency Debt Portfolio, the other Portfolios will not use derivative instruments extensively to achieve the relevant Portfolio's investment objectives or for investment purposes. The Short Duration High Yield Portfolio, Emerging Markets Multi-Asset Portfolio, Real Asset Portfolio, Asia-Pacific Income Portfolio and Emerging Market Local Currency Debt Portfolio may use derivative instruments extensively for investment purposes. The expected level of leverage of the Short Duration High Yield Portfolio, Emerging Markets Multi-Asset Portfolio, Real Asset Portfolio, Asia-Pacific Income Portfolio and Emerging Market Local Currency Debt Portfolio is estimated to be in the range of 20%- 300%, 0%-125%, 0%-125%, 100%-350% and 20%-300% of its net asset value, respectively. The expected level of leverage is calculated as the sum of the notionals of the financial derivative instruments held by the Portfolio, which neither takes into account the fact that a particular financial derivative instrument increases or decreases the Portfolio s investment risks nor permits to net financial derivative instruments with reverse positions. With this methodology, the use of derivatives for hedging purposes will automatically increase the level of leverage. In addition, the actual leverage of the relevant Portfolio may deviate from the above mentioned expected level of leverage. Investors should note that annual rates of the management fee, custodian fee, administration fee payable to the Administrator, transfer agent fee, distribution fee and administration fee payable to the Management Company are stated in the Prospectus as annualized percentage by reference to the average of daily Net Asset Value over the relevant fiscal year. Authorisation in Hong Kong Warning: In relation to the Portfolios as set out in the Prospectus, only the following Portfolios are authorized by the SFC pursuant to section 104 of the SFO and hence may be offered to the public of Hong Kong: 1. International Health Care Portfolio 2. International Technology Portfolio 3. Global Real Estate Securities Portfolio 4. Thematic Research Portfolio - 3 -

4 5. India Growth Portfolio 6. Euro High Yield Portfolio 7. US Small and Mid-Cap Portfolio 8. Emerging Markets Multi-Asset Portfolio 9. Short Duration High Yield Portfolio 10. Real Asset Portfolio 11. Select US Equity Portfolio 12. Global Plus Fixed Income Portfolio 13. Emerging Market Local Currency Debt Portfolio 14. Asia-Pacific Income Portfolio 15. Emerging Market Corporate Debt Portfolio 16. Low Volatility Equity Portfolio 17. Asia Pacific Equity Income Portfolio 18. Asia Multi-Asset Income Portfolio Please note that the Prospectus is a global offering document and therefore also contains information of the Portfolios and funds listed on page 2 of this Hong Kong Supplement which are not authorized by the SFC. No offer shall be made to the public of Hong Kong in respect of the funds listed on page 2 of this Hong Kong Supplement which are not authorized by the SFC. The issue of the Prospectus was authorized by the SFC only in relation to the offer of the above SFC-authorized funds to the public of Hong Kong. Intermediaries should take note of this restriction. SFC authorization is not a recommendation or endorsement of the Fund nor the Portfolios nor does it guarantee the commercial merits of the Fund or any Portfolio or its performance. It does not mean the Fund and the Portfolios are suitable for all investors nor is it an endorsement of its suitability for any particular investor or class of investors. Global Real Estate Securities Portfolio and Real Asset Portfolio are authorized under the Code on Unit Trusts and Mutual Funds and not under the Code of Real Estate Investment Trusts. The following classes of shares are offered to the public of Hong Kong: 1. International Health Care Portfolio (Class A, B and C Shares) 2. International Technology Portfolio (Class A, B and C Shares) 3. Global Real Estate Securities Portfolio (Class A, B, C, AD, AD AUD H, AD CAD H, AD SGD H, AD NZD H, BD, BD AUD H, BD CAD H, BD SGD H and BD NZD H Shares) - 4 -

5 4. Thematic Research Portfolio (Class A, A AUD H, A CAD H, A EUR H, A GBP H, A SGD H, B, B AUD H, B CAD H, B EUR H, B SGD H, C and C AUD H Shares) 5. India Growth Portfolio (Class AX+, A, A SGD H, BX+, B and B SGD H Shares) 6. Euro High Yield Portfolio (Class A, A2, AA, AA AUD H, AA USD H, AT, AT USD H, B, B2, BA, BA AUD H, BT, C, C2, CT USD H and IT USD H Shares) 7. US Small and Mid-Cap Portfolio (Class A, A EUR H, A SGD H, B, B EUR H, B SGD H, C and C EUR H Shares) 8. Emerging Markets Multi-Asset Portfolio (Class A, A SGD H, AD, AD SGD H, B, BD, BD SGD H, C, I, ID, A AUD H, AD AUD H, A CAD H, AD CAD H, A EUR H, AD EUR H, A GBP H, AD GBP H, I GBP H and I EUR H) 9. Short Duration High Yield Portfolio (Class A2, AA, AA AUD H, AT, B2, BA, BA AUD H, BT, C2, CT, AT AUD H, AT CAD H, A2 EUR H, AT EUR H, AT GBP H, AT SGD H, BT AUD H, BT CAD H, BT GBP H, BT SGD H, I2, I2 EUR H and IT Shares) 10. Real Asset Portfolio (Class A, B and C Shares) 11. Select US Equity Portfolio (Class A, A AUD H, C, A EUR H, A GBP H, A SGD H, I, I AUD H, I EUR H, I GBP H, and I SGD H Shares) 12. Global Plus Fixed Income Portfolio (Class A2, AT, B2, BT, AT AUD H, AT CAD H, AT EUR H, AT GBP H, AT SGD H, BT AUD H, BT CAD H, BT EUR H, BT GBP H and BT SGD H Shares) 13. Emerging Market Local Currency Debt Portfolio (Class A2, AT, B2, BT, A2 EUR H) 14. Asia-Pacific Income Portfolio (Class A2, AT, B2, BT, C2, C2 EUR H, CT, I2, I2 EUR H, I2 SGD H, IT, IT AUD H, IT EUR H, IT SGD H, A2 EUR H, A2 SGD H, AT AUD H, AT CAD H, AT EUR H, AT GBP H, AT SGD H, BT AUD H, BT CAD H, BT EUR H and BT GBP H Shares) 15. Emerging Market Corporate Debt Portfolio (Class A2, AA, AA AUD H, AT, B2, BA, BA AUD H, BT, C2, CT, I2, I2 EUR H, IT, A2 EUR H, AT EUR H, BT EUR H, AT AUD H, AT CAD H, BT AUD H, BT CAD H, A2 SGD H, AT SGD H, AT GBP H, BT GBP H, AT NZD H and BT NZD H Shares) 16. Low Volatility Equity Portfolio (Class A, AD, I, S #, S1 #, A EUR H, AD EUR H, I EUR H, S EUR H #, S1 EUR H #, A AUD H, AD AUD H, AD CAD H, AD GBP H, A SGD H, AD SGD H, A NZD H and AD NZD H Shares) 17. Asia Pacific Equity Income Portfolio (Class A, AD, B, BD, C, I, S #, S1 #, AD AUD H, BD AUD H, AD SGD H, BD SGD H, AD CAD H, BD CAD H, AD EUR H, BD EUR H, AD GBP H, BD GBP H, AD NZD H and BD NZD H Shares) 18. Asia Multi-Asset Income Portfolio (Class A, AD, B, BD, C, I, S #, S1 #, AD AUD H, BD AUD H, AD SGD H, BD SGD H, AD CAD H, BD CAD H, AD EUR H, BD EUR H, AD GBP H, BD GBP H, AD NZD H and BD NZD H Shares) - 5 -

6 + # Class AX and Class BX Shares are no longer open for subscription by new investors, and are only offered to existing shareholders of these respective classes of Shares. Class S and Class S1 Shares are reserved for institutional investors. Hong Kong Representative The Hong Kong Representative of the Fund (the "Hong Kong Representative") is AllianceBernstein Hong Kong Limited of Suite 3401, One International Finance Centre, 1 Harbour View Street, Central, Hong Kong (Tel: and Fax: ). Investment Restrictions Securities Lending Transactions: The Fund may enter into securities lending transactions. The Fund, however, will not enter into such transactions with the affiliates of the Management Company or the Investment Manager. No securities lending agent will be an affiliate of the Management Company or the Investment Manager. All incremental income generated from such transactions will be accrued to the relevant Portfolios of the Fund. No securities lending may be made for more than 50% of the value of the securities of the relevant Portfolio and the Investment Manager may choose to terminate any securities lending transaction at any time. All securities lending transactions entered into by a Portfolio are collateralised with cash or securities issued by governments of member states of the OECD with value equal to 105% of the reference security. The lending agent independently selects counterparties based on its own credit and business analysis and shares them with the Investment Manager. The Investment Manager, through its dedicated counterparty risk management team, independently conducts credit reviews and approves counterparties from this list, and monitors the counterparties on an ongoing basis. The Investment Manager also takes comfort in the additional counterparty protection afforded in the securities lending program through overcollateralization: counterparties post minimum collateral equal to 105% of the value of each loaned security, marked-to-market daily. Repurchase/Reverse Repurchase Agreements or Similar Over the Counter Transactions: The Fund may enter into repurchase/reverse repurchase agreements or similar over-the-counter transactions. The Fund, however, will not enter into repurchase/reverse repurchase agreements or similar over-thecounter transactions with the affiliates of the Management Company or the Investment Manager. The maximum level of the Fund's assets available for such transactions is 100% of its net asset value. Should the Fund enter into reverse repurchase agreements or similar over-the-counter transactions, all incremental income generated from such transactions will be accrued to the relevant Portfolios of the Fund. All repurchase/reverse repurchase agreement transactions entered into by the Fund are collateralised with OECD member state government securities with value at least equal to the cash received from/delivered to the counterparty. Taking into account factors including the types of transactions, exposure, concentration to a particular counterparty and credit rating, the Investment Manager conducts initial and on-going counterparty reviews with a view to evaluating the creditworthiness of its proposed and existing counterparties. The Investment Manager maintains a list of approved counterparties which provides the names of the entities and the types of transactions for which each entity has been approved. Risk in investing in securities issued by or guaranteed by a single sovereign issuer with a credit rating below Investment Grade Each of the Asia-Pacific Income Portfolio and Emerging Market Local Currency Debt Portfolio may invest in debt securities issued and/or guaranteed by a country (including such country's government and any public or local authority of that country) with a credit rating below Investment Grade in excess - 6 -

7 of 10% (but not in excess of 35%) of the relevant Portfolio s net assets. This will allow the Investment Manager to have the flexibility to take advantage of investment opportunities based upon market conditions at the time or to take advantage of favourable opportunities in terms of price, or to increase exposures to certain countries. In particular, as at the date of this Hong Kong Supplement, the Asia-Pacific Income Portfolio may invest in debt securities issued and/or guaranteed by Indonesia (which is a non-investment Grade country) in excess of 10% (but not in excess of 35%) of the Portfolio's net assets depending on market conditions and investment opportunities. Also the Emerging Market Local Currency Debt Portfolio may invest in debt securities issued by each of Indonesia and Turkey (which are non- Investment Grade countries), in excess of 10% (but not in excess of 35%) of the Portfolio's net assets depending on market conditions and investment opportunities. Due to market movements or the Investment Manager's view on investment opportunities, the relevant Portfolio's exposure to certain countries may change over time, and the credit ratings of particular countries also may change from time to time. The above-mentioned countries are only for reference and may change without prior notice to investors. Information on the relevant Portfolio's investments, including those securities issued by such countries rated below Investment Grade in excess of 10% of the relevant Portfolio's net assets, is available on the following website and may be obtained from the Hong Kong Representative, and is updated on a monthly basis. As a result, each of the Asia-Pacific Income Portfolio's and Emerging Market Local Currency Debt Portfolio's investments may potentially be concentrated in a particular country or geographic region and thus exposed to the direct or indirect consequences of political, social and economic changes in such country or geographic region. The relevant Portfolio may also have higher volatility and risks than a portfolio investing in a more diversified geographic region. Investments in below Investment Grade sovereign debt securities may present higher risks for investors as set forth under "Credit Risk- Sovereign Debt Obligations" and "Fixed Income Securities Risk-Lower Rated and Unrated Instruments" in the Prospectus (pages II-27 and II-28). The relevant Portfolio may suffer significant losses when there is a default of country issuers. With respect to Short Duration High Yield Portfolio, Real Asset Portfolio, Select US Equity Portfolio, Global Plus Fixed Income Portfolio, Emerging Markets Multi-Asset Portfolio, Emerging Market Corporate Debt Portfolio, Low Volatility Equity Portfolio, Asia Pacific Equity Income Portfolio and Asia Multi-Asset Income Portfolio, these Portfolios' respective investments in securities issued by or guaranteed by a country (including such country's government and any public or local authority of that country) with a credit rating below Investment Grade will not exceed 10% of the relevant Portfolio's net asset value. Investment Types Each Portfolio of the Fund may invest in certain types of investments as illustrated in the chart commencing on page II-8 of the Prospectus (which should however not be construed as limiting a Portfolio's ability to invest in other types of securities). Debt Securities Notwithstanding the disclosure in the chart on page II-8 of the Prospectus, Global Real Estate Securities Portfolio, Euro High Yield Portfolio, Emerging Markets Multi-Assets Portfolio and Short Duration High Yield Portfolio may also invest in other debt securities such as non-agency (i.e. privately issued) mortgage-backed securities, adjustable-rate mortgage securities, collateralized mortgage obligations, asset-backed securities, commercial mortgage-backed securities, collateralized debt obligations or related financial derivative instruments and currencies (as applicable), as disclosed under "Investment Objective and Policies" of the respective Portfolios in the Prospectus

8 Notwithstanding the disclosure in the chart on page II-8 of the Prospectus, Thematic Research Portfolio may invest in zero coupon bonds, convertible notes or convertible bonds. Please refer to the section "Investment Types" of the Prospectus for a description and further detail on collateralized mortgage obligations, commercial mortgage-backed securities, adjustable rate mortgage securities, asset-backed securities, "zero coupon" treasury securities and convertible securities. Collateralized debt obligations ( CDOs ) include collateralized bond obligations ( CBOs ), collateralized loan obligations ( CLOs ), and other similarly structured securities. CBOs and CLOs are types of asset-backed securities. A CBO is a trust that is backed by a diversified pool of 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. Debt securities such as collateralized mortgage obligations, mortgage-backed securities and CDOs are subject to risks associated with changes in interest rate, prepayment of underlying obligations and defaults similar to the risks of investment in mortgage-related securities described in Section II under "Investment Types Debt Securities Types" of the Prospectus. Derivatives and Other Debt Securities Investors should note that the Portfolios are generally entitled to use derivative instruments for hedging and risk management purposes, as well as investment purposes, including, for example, efficient portfolio management and as an alternative to investing directly in the underlying securities or instruments. The use of derivatives may involve additional risks. In adverse situations, the Portfolio's use of derivative instruments may become ineffective in hedging, risk management or efficient portfolio management and the Portfolio may suffer significant losses. Other than the Short Duration High Yield Portfolio, Emerging Markets Multi-Asset Portfolio, Real Asset Portfolio, Asia-Pacific Income Portfolio and Emerging Market Local Currency Debt Portfolio, the other Portfolios will not use derivative instruments extensively to achieve the relevant Portfolio's investment objectives or for investment purposes. Each of the Emerging Markets Multi-Asset Portfolio, Short Duration High Yield Portfolio, Real Asset Portfolio, Asia-Pacific Income Portfolio and Emerging Market Local Currency Debt Portfolio may use derivative instruments extensively for investment purposes and invest in a wide array of derivative products when implementing its investment strategy. It is important to note that the use of derivatives by each of the above Portfolios does not alter their existing guidelines with respect to credit quality, duration and currency exposures, nor does it alter the acceptable ranges for some of the Portfolios' other key risk parameters, including interest rate risk, credit risk, foreign exchange risk and liquidity risk. Such derivatives may be exchange-traded and over the counter ("OTC") financial derivative instruments and may include options (including for example, options on securities and options on securities indices), futures, forwards and swaps, forward foreign currency exchange contracts, currency futures, currency options, options on currency futures and currency swaps and credit default swaps. Short Duration High Yield Portfolio, Real Asset Portfolio, Euro High Yield Portfolio, Emerging Markets Multi-Assets Portfolio, Global Plus Fixed Income Portfolio, Asia-Pacific Income Portfolio, Emerging Market Local Currency Debt, Emerging Market Corporate Debt Portfolio and Asia Multi-Asset Income Portfolio may invest in structured securities (both Investment Grade and non-investment Grade) originated by a wide range of originators and sponsors. Each Portfolio s investments in these structured securities will not exceed 20% of its net assets

9 The risk of investment in structured securities described in Section II under "Structured Instruments Risk" at page II-26 of the Prospectus is applicable to Short Duration High Yield Portfolio, Real Asset Portfolio, Euro High Yield Portfolio, Emerging Markets Multi-Assets Portfolio, Global Plus Fixed Income Portfolio, Asia-Pacific Income Portfolio, Emerging Market Local Currency Debt, Emerging Market Corporate Debt Portfolio and Asia Multi-Asset Income Portfolio. While the judicious use of derivatives can be beneficial, derivative instruments and strategies may carry different risks from those presented by more traditional investments and may expose the fund to significant losses. These risks include, for example, counterparty default risk (risk that the direct counterparty of an OTC derivative does not make timely interest or principal payments as contracted) or insolvency risk (risk that the counterparty may not have sufficient funds and files for bankruptcy), risk involved with effective management of derivative strategies (risk that the underlying investments in the derivatives-based investment strategy do not perform as expected), risk of mispricing or improper valuation of derivatives (operational risk that the derivative is not priced properly), risk of higher volatility, risk of illiquidity in the market for certain derivative strategies (risk that certain OTC derivatives may not be as easily exchangeable as others). Derivatives may give rise to leverage and the risk of loss may be greater than the amount invested in the derivative and may expose the Portfolios to significant losses. Please also refer to Section II of the Prospectus for greater details and in particular the section entitled "Derivatives Risk". Euro High Yield Portfolio Notwithstanding the disclosure in the chart on page II-8 of the Prospectus, as mentioned, Euro High Yield Portfolio may invest in derivatives including those set out above and credit derivatives, such as single-name CDS (credit default swap), CDS index products and CDS sub-index products and index managed by the CDS Index Company, as well as options on CDS and on CDS indices to obtain long and covered short exposure to the relevant underlying assets. The buyer in a credit default swap contract is obligated to pay the seller a periodic stream of payments over the term of the contract in return for a contingent payment upon the occurrence of a credit event with respect to an underlying reference obligation. Generally, a credit event means bankruptcy, failure to pay, obligation acceleration or modified restructuring. A Portfolio may be either the buyer or seller in the transaction. If a Portfolio is a seller, the Portfolio receives a fixed rate of income throughout the term of the contract, which typically is between one month and five years, provided that no credit event occurs. If a credit event occurs, a Portfolio typically must pay the contingent payment to the buyer, which is typically the par value (full notional value) of the reference obligation. The contingent payment may be a cash settlement or by physical delivery of the reference obligation in return for payment of the face amount of the obligation. The value of the reference obligation received by a Portfolio coupled with the periodic payments previously received may be less than the full notional value it pays to the buyer, resulting in a loss of value to the Portfolio. If the reference obligation is a defaulted security, physical delivery of the security will cause a Portfolio to hold a defaulted security. If a Portfolio is a buyer and no credit event occurs, the Portfolio will lose its periodic stream of payments over the term of the contract. However, if a credit event occurs, the buyer typically receives full notional value for a reference obligation that may have little or no value. Credit default swaps may involve greater risks than if a Portfolio had invested in the reference obligation directly. A credit default option is similar to a credit default swap except that there is only an initial payment at the inception of the option (as opposed to a periodic stream of payments over the term of the credit default swap). A credit default swap index is a credit derivative used to hedge credit risk or to take a position on a basket of credit entities. Unlike a credit default swap, which is an over the counter credit derivative, a credit default swap index is a standardised credit security and may therefore be more liquid. A credit default swap index enables investors to gain access to a pool of bonds. The protection seller in a credit default swap index takes on the credit exposure to the bonds and is exposed to the default risks - 9 -

10 of the underlying investments or credit entities. This can be a more cost efficient way to hedge a Portfolio of credit default swaps or bonds with a CDS index than it would be to buy many single name CDS to achieve a similar effect. The credit default swap indices trade at a fixed coupon, which is generally paid quarterly by the protection buyer on the index. Generally, the credit default swap index will vary in price and a payment is usually made upfront and at the close of the trade or the settlement date. Investment in credit default swaps, credit default options and credit default swap indices are subject to general market risk, liquidity risk and credit risk, among other risks. As a result, investment in Euro High Yield Portfolio will be subject to additional risks associated with derivatives notwithstanding the disclosure in the table on page II-20 of the Prospectus. Strategies Using Derivative Instruments Extensively For Investment Purposes Short Duration High Yield Portfolio The Portfolio is generally entitled to use derivative instruments for hedging and risk management purposes, as well as investment purposes, including, for example, efficient portfolio management and as an alternative to investing directly in the underlying securities or instruments. The Portfolio may use financial derivative instruments extensively for investment purposes. The Investment Manager may use derivatives such as swaps (including interest rate swaps, swaptions, total rate of return swaps and credit default swaps), options, futures and currency transactions (including forward currency contracts). This enables the Investment Manager to efficiently gain exposure and manage the overall Portfolio exposures such as duration, overall interest rate risk and currency exposures within the Portfolio. The Investment Manager can frequently use the derivatives market as an efficient alternative to purchasing the underlying investments. This enables the Investment Manager to efficiently pursue the Portfolio's investment objective to achieve high risk-adjusted returns through investing in a diversified portfolio of high yielding securities and related derivatives, with an average Portfolio duration of less than four years. Emerging Markets Multi-Asset Portfolio The Portfolio is generally entitled to use derivative instruments for hedging and risk management purposes, as well as investment purposes, including, for example, efficient portfolio management and as an alternative to investing directly in the underlying securities or instruments. The Portfolio may use financial derivative instruments extensively for investment purposes. The Investment Manager may use derivatives such as swaps (including interest rate swaps, total rate of return swaps and credit default swaps), swaptions, fixed income and equity options, futures and currency transactions (including forward currency contracts and currency options). This enables the Investment Manager to efficiently gain exposure and hedge against interest rate, credit and currency fluctuations. The Investment Manager can frequently use the derivatives market as an efficient alternative to purchasing the underlying investments. This also enables the Investment Manager to efficiently pursue the Portfolio's investment objective to maximize total return through asset allocation among stocks and bonds of emerging market issuers, sector and security analysis, interest rate management, country and currency selection. With respect to Emerging Markets Multi-Asset Portfolio derivatives are used predominantly for efficient portfolio management or hedging purposes; for example, the Investment Manager uses derivatives when the Investment Manager wants to shift from equity to fixed income exposure. Derivatives are generally not used to create additional exposure for this Portfolio. Real Asset Portfolio The Portfolio is generally entitled to use derivative instruments for hedging and risk management purposes, as well as investment purposes, including, for example, efficient portfolio management and as an alternative to investing directly in the underlying securities or instruments. The Portfolio may use

11 financial derivative instruments extensively for investment purposes. The Investment Manager may use derivatives such as swaps (including interest rate swaps, swaptions, total return swaps and credit default swaps), options, futures and forwards (including forward currency contracts). This enables the Investment Manager to efficiently gain exposure and manage the overall Portfolio exposures such as duration, overall interest rate risk and currency exposures within the Portfolio. This also enables the Investment Manager to efficiently pursue the Portfolio's investment objective to maximize long-term total return and investment strategy, which seeks to maximize the Portfolio s real return by allocating the Portfolio s investments primarily among an investment portfolio of real assets which the Investment Manager expects to outperform global equities during periods of rising inflation. Exposure to real assets, as well as those other assets, including currencies, described in the Prospectus, may be obtained through the Portfolio s purchase of securities or synthetically through the Investment Manager s use of financial derivative instruments and strategies. Asia-Pacific Income Portfolio The Portfolio is generally entitled to use derivative instruments for hedging and risk management purposes, as well as investment purposes, including, for example, efficient portfolio management and as an alternative to investing directly in the underlying securities or instruments. The Portfolio may also use financial derivative instruments extensively for investment purposes. The Investment Manager may use derivatives (for investment purposes) such as forward contracts (including nondeliverable forwards), swaps including credit default swaps, total return swaps and interest rate swaps, credit-linked notes, options and futures. This enables the Investment Manager to efficiently gain exposure and hedge against interest rate, credit and currency fluctuations. The Investment Manager can frequently use the derivatives market as an efficient alternative to purchasing the underlying investments. This also enables the Investment Manager to efficiently pursue the Portfolio's investment objective to achieve high total returns through current income and long-term capital appreciation by investing in fixed income securities issued by Asia-Pacific issuers and related derivatives, or in fixed income securities denominated in Asia-Pacific currencies. With respect to Asia-Pacific Income Portfolio, derivatives are used predominantly for efficient portfolio management or hedging purposes; for example, the Investment Manager uses derivatives when the Investment Manager wants to gain fixed income exposure. Derivatives are generally not used to create additional exposure for this Portfolio. Emerging Market Local Currency Debt Portfolio The Portfolio is generally entitled to use derivative instruments for hedging and risk management purposes, as well as investment purposes, including, for example, efficient portfolio management and as an alternative to investing directly in the underlying securities or instruments. The Portfolio may use financial derivative instruments extensively for investment purposes. The Investment Manager may use derivatives such as forward contracts, non-deliverable forward contracts, creditlinked notes, swaps (including interest rate swaps, total rate of return swaps and credit default swaps), swaptions, options, futures and currency transactions (including forward currency contracts). This enables the Investment Manager to efficiently gain exposure and hedge against interest rate, credit and currency fluctuations. The Investment Manager can frequently use the derivatives market as an efficient alternative to purchasing the underlying investments. This also enables the Investment Manager to efficiently pursue the Portfolio's investment objective to maximize total return through current income and long-term capital appreciation

12 Other Types of Investments Pooled Vehicles The Investment Manager may not (for its own benefit) obtain a rebate on any fees or charges levied by a collective investment scheme (or its management company) in which a Portfolio invested in, and any such rebates will be for the benefit of the Fund. REITs Certain Portfolios (such as Global Real Estate Portfolio, Thematic Research Portfolio, Emerging Markets Multi-Asset Portfolio, Real Asset Portfolio, Asia Pacific Equity Income Portfolio and Asia Multi- Asset Income Portfolio) may invest in real estate investment trusts ("REITs"). Investors should note that the underlying REITs which a Portfolio may invest in may not necessarily be authorized by the SFC and their dividend or payout policies will not be representative of the dividend or payout policy of a Portfolio. Commodity Related Securities The Emerging Markets Multi-Asset Portfolio, Real Asset Portfolio and Asia Multi-Asset Income Portfolio may invest in commodity related securities, which include securities of companies whose businesses are reliant upon or may be heavily impacted by commodity prices. There are numerous events and circumstances that can impact commodities markets and commodity-related companies, including but not limited to, general economic and political conditions; war, other armed conflicts, acts of terrorism and criminality; fire, flood and other natural disasters; actions by governmental authorities, such as increased regulation, enforcement or restraints on trade; actions by a major producer or producers, such as Organization of the Petroleum Exporting Countries; significant changes in supply and demand, which may be sudden and unforeseen; commodity speculation or other disruptive market effects; disruptions in the delivery of commodities and related raw materials; changes in laws affecting energy companies or other commodity-related businesses; and environmental laws and regulation. High Yield Securities With respect to Portfolios with Share Classes that pay dividends and may invest in high yield securities, the investment in high yield securities by the relevant Portfolio does not necessarily represent high dividend distributions of an investment in the Shares of the relevant Portfolio. Risk Management Procedures As set forth in Appendix A: Investment Restrictions in the Prospectus, the Fund must employ a riskmanagement process which enables it to monitor and measure at any time the risk of the positions and their contribution to the overall risk profile of each Portfolio; it must employ a process for accurate and independent assessment of the value of OTC derivative instruments. To assist with the monitoring carried out for the Portfolios, VaR analysis along with backtesting and stress testing are created by the UCITS Risk Committee, which is a committee established solely for the purpose of implementing a UCITS risk management function. The UCITS Risk Committee uses risk measurement analytical platforms to quantify and analyze market risk as appropriate for such Portfolios. The Management Company possesses primary responsibility (and the Board of Managers of the Management Company remain ultimately responsible) for the oversight of the risk management process (including performance of those third-party service providers to whom various of the oversight / risk management functions have been delegated)

13 The Management Company has delegated the market risk reporting function to a third-party who is independent of the management activities of the relevant Portfolios. The investment risk team at the third-party risk reporting service is responsible for the day-to-day calculation of risk based measures and performs appropriate calculations for the relevant Portfolios that use derivatives for investment and for hedging or efficient portfolio management purposes. An overall UCITS risk management framework which fulfils the various requirements set out in the Law of 17 December 2010 has been put in place, of which the Board of Managers of the Management Company will ensure compliance. The Market risk report (utilizing a VaR model) is produced by the third-party risk reporting service provider on a daily basis. The daily market risk report also includes a "green"/"amber"/"red" methodology formulated by the UCITS Risk Committee in consultation with the Managing Managers of the Management Company and relevant portfolio managers. Escalation procedures are in place in the events of observed "amber"/"red" levels in accordance with the Management Company's UCITS Risk Management Process with respect to the use of financial derivative instruments ("UCITS Risk Management Process"). The daily market risk report also provides the UCITS Risk Committee with quantitative information that monitors and measures risk exposures from the aggregate level down to the security level of the Portfolios. The daily market risk report assists in measuring and evaluating the following risk dimensions:- Counterparty/credit risk; Market risk; Interest rate risk; Spread risk; Currency/foreign exchange risk; Volatility risk; Settlement risk; Liquidity risk; Legal and documentation risk. A regular quarterly report is prepared by the Managing Managers of the Management Company, who are actively engaged in the UCITS Risk Management function, and is provided to the Board of Managers of the Management Company. In addition, the Management Company has adopted an investment restriction checking system to monitor trade execution. This system enables checking on pre-trade orders and post-trade Portfolio holdings to ensure compliance with the relevant Management Regulations and investment restrictions as set out in the Prospectus. Additional Risk Factors Risk of Early Termination The Portfolio and certain classes of Shares may be terminated by the Board of Directors under certain conditions and in the manner as specified under the paragraph headed Liquidation of the Fund, Termination of Portfolios and Classes of Shares" in the section "Additional Information" of the Prospectus. It is possible that, at the time of such termination, investors have to realise their investment loss and will not be able to receive an amount equal to their capital originally invested

14 Eurozone Risk Certain Portfolios may invest in European securities where the issuers have their registered office or exercise the predominant part of their economic activities in Europe. The value of the Portfolio's investment in European securities may be affected by the market, currency, economic, and political conditions in Europe. Certain European countries, particularly Portugal, Italy, Ireland, Greece, Cyprus and Spain, are currently experiencing varying degrees of financial distress. Risks from the debt crisis in Europe could result in a disruption of the financial markets, which could have a detrimental impact on global economic conditions. In light of the current fiscal conditions and concerns over the sovereign debt risk of certain European countries, there is an increased amount of volatility, liquidity, price and foreign exchange risk associated with investments in Europe. There remains considerable uncertainty as to future developments in the European debt crisis and the impact on global financial markets. There is the possibility that the economic and financial difficulties in Europe may continue to get worse or spread within and outside Europe and that the measures taken by the governments of the European countries, central banks and other authorities to address the economic and financial problems, such as austerity measures and reforms, may not work and may have adverse consequences. Also there is the possibility of the break-up of the Eurozone and the use of Euros, and the possibility of simultaneous redemption of shares of the relevant Portfolio by a large number of investors. The increased risks of investing in European securities may also limit the relevant Portfolio's ability to find suitable investments and thus affecting the relevant Portfolio's ability to implement its investment policy. A significant deterioration of the European debt crisis could result in material reductions in the value of sovereign debt and other asset classes, disruptions in capital markets, widening of credit spreads, loss of investor confidence in the financial services industry, a slowdown in global economic activity, political instability, and other adverse developments that could have a significant adverse impact on some of the relevant Portfolio s investments and thus adversely affect the overall value of the relevant Portfolio. Risks associated with payment of dividends out of capital The Management Company has the sole and absolute discretion to amend the dividend policy of the Portfolios, subject to the SFC s prior approval and by giving no less than one month s prior notice to investors. Dividend yield is not indicative of return of the Portfolios. Dividends may be paid from capital or effectively out of the capital of certain Portfolios at the discretion of the Management Company, which may amount to a partial return or withdrawal of an investor s original investment or from any capital gains attributable to that original investment and such dividends may result in an immediate decrease of the Net Asset Value per Share. The compositions of the distributions (i.e. the relative amounts paid from (i) net distributable income and (ii) capital) (if any) for the last 12 months from the date on which payment of dividend is made by the Portfolio after 8 November 2012 are available from the Investment Manager or the Hong Kong Representative on request and also available at: Additional Information on the Investment Strategies of Certain Portfolios Unrated Securities Each of the Emerging Markets Multi-Asset Portfolio, Real Asset Portfolio, Asia-Pacific Income Portfolio, Global Plus Fixed Income Portfolio, Emerging Market Corporate Debt Portfolio, Euro High Yield Portfolio, Short Duration High Yield Portfolio, Emerging Market Local Currency Debt Portfolio and Asia Multi-Asset Income Portfolio may invest in unrated securities as detailed in the Prospectus. Short Duration High Yield Portfolio The Portfolio will employ strategies to manage volatility relative to the broad global high yield market, as measured by the Barclays Global High Yield Corporate Bond Index. Such strategies may include, among others, shortening the duration of the Portfolio, adding higher rated investments to the

15 Portfolio, adding higher yielding investments with lower correlations from various fixed income sectors to the existing Portfolio, and implementing hedging strategies that seek to provide tail risk or downside protection. Duration is the weighted average time to receive the present value of cash flows from a specific security and is a measure of the sensitivity of the price of a fixed-income investment to a change in interest rates. Typically, fixed-income securities with shorter duration have less price fluctuations in case of interest rate changes and thus subject to a lower interest rate risk. Real Asset Portfolio The Portfolio may invest in real estate equity securities which may consist of real estate related common stock and securities with common stock characteristics (such as preferred stock or convertible securities) and beneficial interest of real estate investment trusts. With respect to the Portfolio's investment strategy, the term "global equities" mean one or more leading published broad-based indices and "rising inflation" is measured by changes in one or more leading published broad-based consumer price indices, as determined in the Investment Manager s discretion. Such leading published broad-based indices for global equities could be, but not limited to, MSCI All-Country World Index, MSCI ACWI Commodity Producers Index, or FTSE EPRA/NAREIT Global Index. In addition, leading published broad-based consumer prices indices could be a single or combination of the official consumer price index for a variety of countries. Asia-Pacific Income Portfolio The Portfolio s assets may be invested in both Investment Grade and below-investment Grade securities. However, the Portfolio will not hold any securities rated CCC or below at time of purchase. In the event that a security is downgraded to or below CCC rating after its acquisition, the Investment Manager will review the security to determine, in the best interest of the shareholders, whether to continue holding or dispose of such security. Emerging Market Corporate Debt Portfolio In seeking to achieve the Portfolio's investment objective, under normal market conditions, the Portfolio will invest at least 80% of its assets in fixed income securities issued by emerging market corporate issuers and related derivatives, predominately denominated in USD where the Investment Manager expects that no more than 25% of the Portfolio's net assets will be exposed to non-usd currencies, including any emerging market currencies. With respect to the Portfolio's investment discipline and processes, the term emerging market issuers refers to "(i) those issuers domiciled in countries not classified as "High income: OECD" by the World Bank, (ii) all countries represented in the JP Morgan CEMBI Broad Diversified Index, or (iii) those issuers not listed in (i) or (ii) but in the Investment Manager's discretion can be viewed as emerging market issuers due to their business model (e.g. companies located in developed markets but whose businesses depend upon or are primarily located in emerging markets). Emerging Market Local Currency Debt Portfolio With respect to the Portfolio's investment discipline and processes, the term emerging market issuers refers to "(i) those issuers domiciled in countries not classified as "High income: OECD" by the World Bank, (ii) all countries represented in the JPMorgan GBI-EM Global Diversified Index, or (iii) those issuers not listed in (i) or (ii) but in the Investment Manager's discretion can be viewed as emerging market issuers due to their business model (e.g. companies located in developed markets but whose businesses depend upon or are primarily located in emerging markets). Select US Equity Portfolio