Certified Annual Shareholder Report for Management Investment Companies (n-csr)
October 31 2022 - 12:45PM
Edgar (US Regulatory)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
CERTIFIED
SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT
COMPANIES
Investment Company
Act file number 811-04985
Templeton
Emerging Markets Fund
(Exact name of
registrant as specified in charter)
300 S.E.
2nd Street, Fort Lauderdale, FL 33301-1923
(Address of principal executive offices) (Zip code)
Alison Baur, One
Franklin Parkway, San Mateo, CA 94403-1906
(Name and address
of agent for service)
Registrant's
telephone number, including area code: 954 527-7500
Date of fiscal year
end: 8/31
Date of reporting
period: 8/31/22
Item 1. Reports
to Stockholders.
The following is a
copy of the report transmitted to shareholders pursuant to
Rule30e-1 under the Investment Company Act of 1940, as amended (the
“1940 Act”) (17 CFR 270.30e-1.)
Include a copy of
each notice transmitted to stockholders in reliance on Rule 30e-3
under the Act (17 CFR 270.30e-3) that contains disclosures
specified by paragraph (c)(3) of that rule.
Not
Applicable
.
Templeton
Emerging
Markets
Fund
August
31,
2022
Not
FDIC
Insured
May
Lose
Value
No
Bank
Guarantee
Contents
Annual
Report
Templeton
Emerging
Markets
Fund
2
Performance
Summary
6
Financial
Highlights
and
Schedule
of
Investments
9
Financial
Statements
14
Notes
to
Financial
Statements
17
Report
of
Independent
Registered
Public
Accounting
Firm
27
Tax
Information
28
Important
Information
to
Shareholders
29
Annual
Meeting
of
Shareholders
35
Dividend
Reinvestment
and
Cash
Purchase
Plan
36
Board
Members
and
Officers
38
Shareholder
Information
43
Visit
franklintempleton.com
for
fund
updates
and
documents,
or
to
find
helpful
financial
planning
tools.
ANNUAL
REPORT
Templeton
Emerging
Markets
Fund
Dear
Shareholder:
This
annual
report
for
Templeton
Emerging
Markets
Fund
covers
the
fiscal
year
ended
August
31,
2022
.
Your
Fund’s
Goal
and
Main
Investments
The
Fund
seeks
long-term
capital
appreciation
by
investing,
under
normal
market
conditions,
at
least
80%
of
its
net
assets
in
emerging
country
equity
securities.
Performance
Overview
The
Fund
posted
cumulative
total
returns
of
-29.18%
based
on
market
price
and
-27.44%
based
on
net
asset
value
for
the
12
months
under
review.
The
Fund’s
benchmark,
the
MSCI
Emerging
Markets
(EM)
Index-NR,
posted
a
-21.80%
cumulative
total
return
for
the
same
period.
1
You
can
find
the
Fund’s
long-term
performance
data
in
the
Performance
Summary
on
page
6
.
Performance
data
represent
past
performance,
which
does
not
guarantee
future
results.
Investment
return
and
principal
value
will
fluctuate,
and
you
may
have
a
gain
or
loss
when
you
sell
your
shares.
Current
performance
may
differ
from
figures
shown.
Economic
and
Market
Overview
Emerging
market
economies
mostly
grew
during
the
12
months
ended
August
31,
2022,
though
high
levels
of
inflation,
the
spread
of
COVID-19
variants
and
Russia’s
invasion
of
Ukraine
restrained
growth.
Most
emerging
market
central
banks
raised
their
benchmark
interest
rates
to
stem
inflation,
a
trend
also
seen
in
developed
market
countries.
During
the
period,
emerging
market
equities
were
hurt
by
investor
concerns
about
Russia’s
invasion
of
Ukraine,
rising
inflation
and
accompanying
interest-rate
hikes,
supply-chain
challenges,
and
Chinese
government
regulations
targeting
technology
companies.
Regarding
individual
countries,
China’s
year-on-year
economic
growth
rate
moderated
in
2021’s
second
half
due
to
supply-chain
issues,
domestic
COVID
outbreaks,
power
shortages
and
a
property
market
slowdown.
Growth
accelerated
in
2022’s
first
quarter
but
dropped
significantly
in
the
second
quarter
amid
continued
COVID
outbreaks,
weak
domestic
demand
and
tightening
monetary
policy
abroad.
Taiwan’s
year-on-year
growth
rate
moderated
in
2021’s
third
quarter
as
private
consumption
was
impacted
by
a
spike
in
COVID
infections,
but
accelerated
in
the
fourth
quarter
due
to
continued
solid
foreign
demand
for
electronics
and
a
recovery
in
private
spending.
Growth
moderated
in
2022’s
first
half
amid
weakness
in
private
and
government
spending
as
well
as
imports
outpacing
exports.
South
Korea’s
year-on-
year
growth
rate
moderated
in
2021’s
third
quarter,
in
part
due
to
new
restrictions
to
contain
the
Delta
variant
of
COVID,
then
accelerated
slightly
in
the
fourth
quarter
due
to
growth
in
private
and
government
spending.
Growth
moderated
in
2022’s
first
half,
as
investment
and
spending
weakened
amid
government
restrictions
to
slow
the
spread
of
COVID.
India’s
year-on-year
growth
rates
moderated
in
2021’s
second
half,
but
were
still
robust.
Economic
growth
was
supported
by
progress
in
vaccine
distribution,
which
eased
COVID-related
economic
disruptions,
and
by
government
stimulus
measures.
Growth
moderated
in
2022’s
first
quarter,
dragged
down
by
outbreaks
of
the
Omicron
variant,
high
energy
prices
and
supply-chain
disruptions,
before
accelerating
again
in
the
second
quarter.
Russia’s
year-on-
year
growth
rate
moderated
in
2021’s
third
quarter—though
still
above
pre-pandemic
levels—and
accelerated
in
the
fourth
quarter,
supported
by
high
energy
prices.
Growth
moderated
in
2022’s
first
quarter
and
contracted
in
the
second
quarter
as
domestic
spending
weakened
amid
Geographic
Composition
8/31/22
%
of
Total
Net
Assets
Asia
80.2%
Latin
Am
erica
&
Caribbean
12.9%
North
America
3.7%
Europe
2.4%
Middle East & Africa
1.2%
Short-Term
Investments
&
Other
Net
Assets
-0.4%
1.
Source:
Morningstar.
The
index
is
unmanaged
and
includes
reinvestment
of
any
income
distributions.
It
does
not
reflect
any
fees,
expenses
or
sales
charges.
One
cannot
invest
directly
in
an
index,
and
an
index
is
not
representative
of
the
Fund’s
portfolio.
Net
Returns
(NR)
include
income
net
of
tax
withholding
when
dividends
are
paid.
See
www.franklintempletondatasources.com
for
additional
data
provider
information.
The
dollar
value,
number
of
shares
or
principal
amount,
and
names
of
all
portfolio
holdings
are
listed
in
the
Fund’s
Schedule
of
Investments
(SOI).
The
SOI
begins
on
page
10
.
Templeton
Emerging
Markets
Fund
widespread
international
sanctions
imposed
in
response
to
Russia’s
invasion
of
Ukraine.
Brazil’s
year-on-year
growth
rate
moderated
in
2021’s
second
half
as
imports
outpaced
exports.
Growth
accelerated
in
2022’s
first
half,
in
part
due
to
an
increase
in
private
spending
spurred
by
the
lifting
of
COVID-related
restrictions.
Turning
to
specific
countries’
monetary
policies,
the
People’s
Bank
of
China
lowered
its
benchmark
loan
prime
rate
three
times
during
the
period
to
spur
growth
in
the
face
of
COVID-
related
headwinds,
high
commodity
prices
and
a
downturn
in
the
property
market.
In
contrast,
the
central
banks
of
Taiwan,
South
Korea
and
India
all
raised
their
benchmark
interest
rates
multiple
times
to
stem
rising
inflation.
Russia’s
central
bank
raised
its
benchmark
interest
rate
multiple
times
in
the
first
half
of
the
period,
initially
to
fight
inflation
and
then
to
offset
ruble
devaluation
caused
by
international
sanctions
following
Russia’s
invasion
of
Ukraine
in
February
2022.
In
subsequent
months,
the
central
bank
cut
its
benchmark
rate
multiple
times,
though
the
rate
still
ended
the
period
higher
than
where
it
started.
The
central
bank
of
Brazil
raised
its
benchmark
interest
rate
at
each
of
its
policy
meetings
during
the
period,
bringing
the
number
of
consecutive
raises
to
12
as
the
country
battles
persistent
high
inflation.
In
this
environment,
emerging
market
stocks,
as
measured
by
the
MSCI
EM
Index-NR,
posted
a
-21.80%
total
return
for
the
12
months
ended
August
31,
2022.
1
Chinese
equities
declined
significantly
during
the
period
due
to
regulatory
pressure
on
technology
companies,
a
slowdown
in
the
property
market
and
new
COVID-19
outbreaks.
Equities
in
Taiwan
also
fell
significantly
during
the
period
on
expectations
of
weakening
global
demand
for
consumer
electronics,
and
a
broader
selloff
of
growth
stocks.
Russian
equities
declined
significantly
during
the
first
half
of
the
reporting
period
in
the
run-up
to
Russia’s
invasion
of
Ukraine.
In
March
2022,
major
index
providers
MSCI
and
FTSE
Russell
zero-valued
Russian
equities
and
dropped
them
from
their
benchmarks
following
the
Russian
government
closing
access
to
its
stock
markets.
Brazilian
equities
declined
during
a
volatile
12-month
period.
Valuations
fell
in
late
2021
due
to
tightening
monetary
policy
and
rising
inflation,
but
then
shot
up
in
2022’s
first
quarter
due
to
high
foreign
inflows—attracted
by
low
equity
prices—
and
high
commodity
prices.
Most
of
those
gains
were
given
back
in
the
second
quarter
as
commodity
prices
fell
from
their
peaks
and
rising
fuel
costs
and
inflation
heightened
the
risk
of
social
unrest.
Investment
Strategy
Our
investment
strategy
employs
a
fundamental,
value-
oriented,
long-term
approach.
We
focus
on
the
market
price
of
a
company’s
securities
relative
to
our
evaluation
of
the
company’s
long-term
earnings,
asset
value
and
cash
flow
potential.
As
we
look
for
investments,
we
focus
on
specific
companies
and
undertake
in-depth
research
to
construct
an
action
list
from
which
we
make
our
buy
decisions.
Before
we
make
a
purchase,
we
look
at
the
company’s
potential
for
earnings
and
growth
over
a
five-year
horizon.
During
our
analysis,
we
also
consider
the
company’s
position
in
its
sector,
the
economic
framework
and
political
environment.
Top
10
Countries
8/31/22
a
%
of
Total
Net
Assets
a
a
China
28.2%
South
Korea
18.2%
Taiwan
15.7%
India
12.6%
Brazil
10.2%
United
States
3.7%
Thailand
2.5%
Mexico
2.1%
Hong
Kong
1.6%
United
Kingdom
1.5%
Top
10
Holdings
8/31/22
Company
Industry,
Country
%
of
Total
Net
Assets
a
a
Taiwan
Semiconductor
Manufacturing
Co.
Ltd.
11.2%
Semiconductors
&
Semiconductor
Equipment,
Taiwan
ICICI
Bank
Ltd.
7.0%
Banks,
India
Samsung
Electronics
Co.
Ltd.
6.1%
Technology
Hardware,
Storage
&
Peripherals,
South
Korea
Alibaba
Group
Holding
Ltd.
5.8%
Internet
&
Direct
Marketing
Retail,
China
Tencent
Holdings
Ltd.
4.1%
Interactive
Media
&
Services,
China
MediaTek,
Inc.
3.7%
Semiconductors
&
Semiconductor
Equipment,
Taiwan
NAVER
Corp.
3.0%
Interactive
Media
&
Services,
South
Korea
Petroleo
Brasileiro
SA
2.9%
Oil,
Gas
&
Consumable
Fuels,
Brazil
LG
Corp.
2.8%
Industrial
Conglomerates,
South
Korea
Banco
Bradesco
SA
2.6%
Banks,
Brazil
Templeton
Emerging
Markets
Fund
Manager’s
Discussion
During
the
12
months
under
review,
key
contributors
to
the
Fund’s
absolute
performance
included
Petroleo
Brasileiro
(Petrobras),
Astra
International
and
Longshine
Technology
Group.
Brazil’s
Petrobras
was
a
significant
contributor
to
performance,
boosted
by
rising
energy
prices
and
a
proactive
policy
of
returning
cash
to
shareholders.
During
2022’s
second
quarter,
the
company
paid
almost
100%
of
free
cash
flow
to
shareholders
as
dividends.
A
disciplined
approach
to
investment
has
increased
the
attractiveness
of
the
company
in
the
eyes
of
investors,
even
though
there
is
an
acknowledgement
that
growth
in
the
demand
for
fossil
fuels
is
peaking.
A
disciplined
approach
to
investment
implies
returns
to
shareholders
are
likely
to
remain
elevated
in
the
coming
years,
in
our
view.
Astra
International,
an
Indonesian
mining,
automobile
manufacturing
and
agribusiness
company,
performed
well
over
the
past
12
months,
despite
a
pull
back
from
June
through
August
of
2022.
The
company
has
raised
its
capital
expenditure
plans
for
2022
to
levels
close
to
those
prevailing
prior
to
COVID-19,
reflecting
renewed
optimism
over
growth
opportunities
identified
in
Indonesia.
Management
launched
a
new
financial
services
business
in
late
2021
focused
on
mobile
payment,
with
the
goal
of
reaching
15
million
users
within
12
months.
In
May
2022,
the
company
unveiled
its
environmental,
social
and
governance
(ESG)
framework
with
a
focus
on
the
environment.
Astra
aims
to
cut
greenhouse
gas
emissions
by
30%
by
2030
and
grow
its
non-coal
businesses
to
88%
of
group
revenue
over
the
same
period.
China-based
Longshine
Technology
is
an
information
technology
business
that
provides
customized
software
for
the
state
grid,
as
well
as
public
utilities
payment
solutions
and
internet
television
services
for
consumers.
The
company
has
performed
well
over
the
past
12
months,
notwithstanding
a
dip
in
performance
between
December
2021
and
April
2022.
A
growth
driver
for
the
company
is
its
platform
for
electric
vehicle
(EV)
charging
stations
in
China,
from
which
it
earns
a
service
fee
on
each
charge.
Given
the
rising
adoption
of
EVs
in
China,
we
believe
this
is
a
growing
business
with
economies
of
scale.
Conversely,
major
detractors
from
absolute
performance
included
Americanas,
NAVER
and
several
Russian
holdings,
including
Sberbank
of
Russia,
LUKOIL
and
Yandex.
Americanas
is
a
Brazilian
e-commerce
company
and
operator
of
convenience
stores.
The
company’s
share
price
declined
over
the
past
12
months
as
e-commerce
sales
have
slowed,
and
increased
sales
from
reopened
off-line
stores
failed
to
compensate.
The
company
has
a
new
CEO,
Sergio
Rial,
who
is
expected
to
bring
fresh
ideas
and
perspectives
to
the
business.
Americanas
acquired
food
retailer
Hortifruti
Natural
da
Terra
(not
a
Fund
holding
prior
to
acquisition)
during
the
period
as
it
seeks
to
grow
the
grocery
retail
market.
The
company
also
entered
a
joint
venture
with
Vibra
(not
a
Fund
holding)
to
launch
Vem,
a
new
brand
for
its
network
of
1,250
convenience
stores
at
gas
stations
in
Brazil.
NAVER
operates
South
Korea’s
largest
search
engine,
and
offers
e-commerce,
financial
technology
and
digital
content
services.
Its
share
price
has
fallen
sharply
over
the
past
12
months
due
to
slower
growth
in
the
post-COVID-19
environment.
Market
sentiment
was
negatively
impacted
by
concerns
over
expansion
into
unprofitable
new
businesses
in
an
uncertain
macroeconomic
environment.
However,
we
believe
that
NAVER
is
in
a
good
position
to
build
a
thriving
ecosystem,
integrating
e-commerce,
payments
and
digital
content
based
on
its
solid
foundation
in
search
and
advertising.
Before
Russia’s
invasion
of
Ukraine,
we
had
maintained
our
position
in
Russian
stocks
including
Sberbank,
one
of
the
biggest
banks
in
the
country,
LUKOIL,
a
major
Russian
oil
producer,
and
Yandex,
Russia’s
largest
search
engine,
given
the
belief
that
diplomacy
could
resolve
the
issue.
After
the
invasion,
stock
prices
declined
significantly.
We
trimmed
the
Fund’s
holding
in
Sberbank
as
a
risk
mitigation
measure.
At
the
time
of
writing,
trading
in
Russian
companies
whose
shares
are
traded
using
American
and
Global
Depositary
Receipts
(ADRs/GDRs)
listed
on
international
exchanges
are
suspended.
Given
these
facts,
on
March
4,
2022,
the
Russian
company
securities
that
are
halted
on
all
tradeable
exchanges
were
fair
valued
at
zero
by
the
Franklin
Templeton
Valuation
Committee.
In
concluding
upon
a
zero
value,
we
took
into
account
the
continued
uncertainty
in
the
market,
restrictions
to
trade
the
shares
both
onshore
and
offshore,
and
a
lack
of
any
price
discovery
mechanism
to
provide
indications
of
residual
value.
In
the
past
12
months,
we
increased
the
Fund’s
holdings
in
Brazil,
China
and
South
Korea
due
to
the
availability
of
what
we
believed
to
be
attractive
investment
opportunities.
In
terms
of
sectors,
additions
were
made
in
financials,
materials
and
consumer
discretionary.
We
initiated
exposure
to
several
new
investments
as
we
continued
to
identify
companies
with
sustainable
earnings
power
trading
at
a
discount
to
their
intrinsic
worth.
Key
additions
included
Genpact,
a
U.S.-listed
technology
services
company
that
derives
much
of
its
earnings
from
services
provided
in
India,
Techtronic
Industries,
a
Hong
Kong-listed
manufacturer
of
power
tools,
and
the
previously
mentioned
Petrobras.
We
also
added
Templeton
Emerging
Markets
Fund
HDFC
Bank,
an
India-based
retail
bank.
Additionally,
we
added
to
our
existing
high-conviction
portfolio
holdings
with
purchases
in
Guangzhou
Tinci
Materials
Technology,
which
produces
electrolytes
for
EV
batteries,
Banco
Bradesco,
a
Brazilian
bank,
and
China
Merchants
Bank,
a
Chinese
bank
specializing
in
lending
to
small
and
medium
private
enterprises.
In
contrast,
the
Fund
reduced
its
investments
in
Taiwan
and
Brazil
in
favor
of
opportunities
we
found
more
compelling.
Sectors
which
experienced
the
largest
sales
were
information
technology
and
consumer
discretionary.
In
terms
of
key
sales,
we
reduced
holdings
in
Asian
semiconductor
companies,
including
Taiwan
Semiconductor
Manufacturing
Co.
and
Samsung
Electronics.
We
also
reduced
exposure
to
Tencent
Holdings,
a
China-based
gaming
company,
to
realign
the
portfolio
and
raise
funds
for
new
opportunities.
For
the
12
months
ended
August
31,
2022,
the
U.S.
dollar
rose
in
value
relative
to
most
currencies.
As
a
result,
the
Fund’s
performance
was
negatively
affected
by
the
portfolio’s
investment
in
securities
with
non-U.S.
currency
exposure.
Thank
you
for
your
continued
participation
in
Templeton
Emerging
Markets
Fund.
We
look
forward
to
serving
your
future
investment
needs.
Sincerely,
Chetan
Sehgal,
CFA
Andrew
Ness,
ASIP
Portfolio
Management
Team
The
foregoing
information
reflects
our
analysis,
opinions
and
portfolio
holdings
as
of
August
31,
2022,
the
end
of
the
reporting
period.
The
way
we
implement
our
main
investment
strategies
and
the
resulting
portfolio
holdings
may
change
depending
on
factors
such
as
market
and
economic
conditions.
These
opinions
may
not
be
relied
upon
as
investment
advice
or
an
offer
for
a
particular
security.
The
information
is
not
a
complete
analysis
of
every
aspect
of
any
market,
country,
industry,
security
or
the
Fund.
Statements
of
fact
are
from
sources
considered
reliable,
but
the
investment
manager
makes
no
representation
or
warranty
as
to
their
completeness
or
accuracy.
Although
historical
performance
is
no
guarantee
of
future
results,
these
insights
may
help
you
understand
our
investment
management
philosophy.
CFA
®
is
a
trademark
owned
by
CFA
Institute.
ASIP
stands
for
Associate
of
the
United
Kingdom
Society
for
Investment
Professionals
(now
CFA
Society
of
the
United
Kingdom).
Performance
Summary
as
of
August
31,
2022
Templeton
Emerging
Markets
Fund
Total
return
reflects
reinvestment
of
the
Fund’s
dividends
and
capital
gain
distributions,
if
any,
and
any
unrealized
gains
or
losses.
Total
returns
do
not
reflect
any
sales
charges
paid
at
inception
or
brokerage
commissions
paid
on
secondary
market
purchases.
The
performance
table
and
graph
do
not
reflect
any
taxes
that
a
shareholder
would
pay
on
Fund
dividends,
capital
gain
distributions,
if
any,
or
any
realized
gains
on
the
sale
of
Fund
shares.
Your
dividend
income
will
vary
depending
on
dividends
or
interest
paid
by
securities
in
the
Fund’s
portfolio,
adjusted
for
operating
expenses.
Capital
gain
distributions
are
net
profits
realized
from
the
sale
of
portfolio
securities.
Performance
as
of
8/31/22
1
Performance
data
represent
past
performance,
which
does
not
guarantee
future
results.
Investment
return
and
principal
value
will
fluctuate,
and
you
may
have
a
gain
or
loss
when
you
sell
your
shares.
Current
performance
may
differ
from
figures
shown.
Cumulative
Total
Return
2
Average
Annual
Total
Return
2
Based
on
NAV
3
Based
on
market
price
4
Based
on
NAV
3
Based
on
market
price
4
1-Year
-27.44%
-29.18%
-27.44%
-29.18%
5-Year
-2.19%
-3.17%
-0.44%
-0.64%
10-Year
+25.76%
+26.04%
+2.32%
+2.34%
See
page
8
for
Performance
Summary
footnotes.
Templeton
Emerging
Markets
Fund
Performance
Summary
See
page
8
for
Performance
Summary
footnotes.
Total
Return
Index
Comparison
for
a
Hypothetical
$10,000
Investment
1
Total
return
represents
the
change
in
value
of
an
investment
over
the
periods
shown.
It
includes
any
applicable
maximum
sales
charge,
Fund
expenses,
account
fees
and
reinvested
distributions.
The
unmanaged
index
includes
reinvestment
of
any
income
or
distributions.
It
differs
from
the
Fund
in
composition
and
does
not
pay
management
fees
or
expenses.
One
cannot
invest
directly
in
an
index.
9/1/12–8/31/22
Templeton
Emerging
Markets
Fund
Performance
Summary
All
investments
involve
risks,
including
possible
loss
of
principal.
Special
risks
are
associated
with
foreign
investing,
including
currency
volatility,
economic
instability,
and
social
and
political
developments
of
countries
where
the
Fund
invests.
Emerging
markets,
of
which
frontier
markets
are
a
subset,
are
subject
to
all
of
the
risks
of
foreign
investing
generally
and
have
additional
heightened
risks
due
to
these
markets'
smaller
size
and
lesser
liquidity,
and
lack
of
established
legal,
political,
business
and
social
frameworks
to
support
securities
markets.
The
risks
of
investing
in
traditional
emerging
markets
are
magnified
in
frontier
markets
countries
because
they
generally
have
smaller
economies
and
even
less
developed
capital
markets
than
in
traditional
emerging
markets.
Some
of
these
heightened
risks
may
include
political
and
social
uncertainty
(for
example,
regional
conflicts
and
risk
of
war);
pervasiveness
of
corruption
and
crime
in
these
countries’
economic
systems;
delays
in
settling
portfolio
securities
transactions;
risk
of
loss
arising
out
of
the
system
of
share
registration
and
custody
used
in
these
countries;
greater
sensitivity
to
interest-rate
changes;
currency
and
capital
controls;
currency
exchange
rate
volatility;
and
inflation,
deflation
or
currency
devaluation.
The
Fund
is
actively
managed
but
there
is
no
guarantee
that
the
manager’s
investment
decisions
will
produce
the
desired
results.
The
Fund
may
invest
in
eligible
China
A
shares
(“Stock
Connect
Securities”)
listed
and
traded
on
the
Shanghai
Stock
Exchange
through
the
Shanghai-Hong
Kong
Stock
Connect
program,
as
well
as
eligible
China
A
shares
listed
and
traded
on
the
Shenzhen
Stock
Exchange
through
the
Shenzhen-Hong
Kong
Stock
Connect
program
(collectively,
“Stock
Connect”)
and
may
invest
in
China
Interbank
bonds
traded
on
the
China
Interbank
Bond
Market
(“CIBM”)
through
the
China-Hong
Kong
Bond
Connect
program
(“Bond
Connect”).
Trading
through
Stock
Connect
is
subject
to
a
number
of
restrictions
that
may
affect
the
Fund’s
investments
and
returns.
For
example,
investors
in
Stock
Connect
Securities
are
generally
subject
to
Chinese
securities
regulations
and
the
listing
rules
of
the
respective
Exchange,
among
other
restrictions.
In
addition,
Stock
Connect
Securities
generally
may
not
be
sold,
purchased
or
otherwise
transferred
other
than
through
Stock
Connect
in
accordance
with
applicable
rules.
While
Stock
Connect
is
not
subject
to
individual
investment
quotas,
daily
and
aggregate
investment
quotas
apply
to
all
Stock
Connect
participants,
which
may
restrict
or
preclude
the
Fund’s
ability
to
invest
in
Stock
Connect
Securities.
Trading
in
the
Stock
Connect
program
is
subject
to
trading,
clearance
and
settle-
ment
procedures
that
are
untested
in
China,
which
could
pose
risks
to
the
Fund.
Finally,
the
withholding
tax
treatment
of
dividends
and
capital
gains
payable
to
overseas
investors
currently
is
unsettled.
In
China,
the
Hong
Kong
Monetary
Authority
Central
Money
Markets
Unit
holds
Bond
Connect
securities
on
behalf
of
ultimate
investors
(such
as
the
Fund)
in
accounts
maintained
with
a
China-based
custodian
(either
the
China
Central
Depository
&
Clearing
Co.
or
the
Shanghai
Clearing
House).
This
recordkeeping
system
subjects
the
Fund
to
various
risks,
including
the
risk
that
the
Fund
may
have
a
limited
ability
to
enforce
rights
as
a
bondholder
and
the
risks
of
settlement
delays
and
counterparty
default
of
the
Hong
Kong
sub-custodian.
In
addition,
enforcing
the
ownership
rights
of
a
beneficial
holder
of
Bond
Connect
securities
is
untested
and
courts
in
China
have
limited
experience
in
applying
the
concept
of
beneficial
ownership.
Bond
Connect
uses
the
trading
infrastructure
of
both
Hong
Kong
and
China
and
is
not
available
on
trading
holidays
in
Hong
Kong.
As
a
result,
prices
of
securities
purchased
through
Bond
Connect
may
fluctuate
at
times
when
a
Fund
is
unable
to
add
to
or
exit
its
position.
Securities
offered
through
Bond
Connect
may
lose
their
eligibility
for
trading
through
the
program
at
any
time.
If
Bond
Connect
securities
lose
their
eligibility
for
trading
through
the
program,
they
may
be
sold
but
can
no
longer
be
purchased
through
Bond
Connect.
The
application
and
interpretation
of
the
laws
and
regulations
of
Hong
Kong
and
China,
and
the
rules,
policies
or
guidelines
published
or
applied
by
relevant
regulators
and
exchanges
in
respect
of
the
Stock
Connect
and
Bond
Connect
programs,
are
uncertain,
and
they
may
have
a
detrimental
effect
on
the
Fund’s
investments
and
returns.
Russia’s
regional
conflicts,
the
resulting
responses
by
the
United
States
and
other
countries,
and
the
potential
for
wider
conflict
could