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2878124.1.1.ANZ.RTL SPDR ® ETFs Fixed Income Chart Pack Please see Appendix A for more information on investment terms used in this Chart Pack. Charts for the Latest Bond Market Insights and Analytics Q4 2019 1

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Page 1: SPDR ETFs Fixed Income Chart Pack - SSGA€¦ · 2878124.1.1.ANZ.RTL SPDR ® ETFs Fixed Income Chart Pack Please see Appendix A for more information on investment terms used in this

2878124.1.1.ANZ.RTL

SPDR®

ETFs

Fixed Income

Chart Pack

Please see Appendix A for more information on investment terms used in this Chart Pack.

Charts for the Latest Bond Market Insights and Analytics

Q4 2019

1

Page 2: SPDR ETFs Fixed Income Chart Pack - SSGA€¦ · 2878124.1.1.ANZ.RTL SPDR ® ETFs Fixed Income Chart Pack Please see Appendix A for more information on investment terms used in this

Source: Bloomberg Finance, L.P. As of September 30, 2019. Past performance is not a guarantee of future results. T-bills - Bloomberg Barclays U.S. Tr Bills: 1-3 Months Index,

US Aggregate - Bloomberg Barclays US Agg Index, US Treasury - Bloomberg Barclays US Treasury Index, US TIPS - Bloomberg Barclays Global Inflation-Linked: U.S. TIPS Index, US

MBS - Bloomberg Barclays US MBS Index, US IG Corporates - Bloomberg Barclays US Corporate Index, 1-10 YR IG Corporates - Bloomberg Barclays Intermediate Corporate Index,

10 Yr+ IG Corporates - Bloomberg Barclays Long U.S. Corporate Index, US High Yield - Bloomberg Barclays VLI: High Yield Index, Leveraged Loans - S&P/LSTA Leveraged Loan Index,

Developed Ex-US IG Corporates - Bloomberg Barclays Global Agg Corporate ex USD $1B+ Index, Developed Ex-US Sovereign Bonds - Bloomberg Barclays Global Treasury ex-U.S.

Index, EM Hard Currency Sovereign Bonds - J.P. Morgan EMBI Global Core Index, EM Local Sovereign Bonds - Bloomberg Barclays EM Local Currency Govt Diversified Index.

2878124.1.1.ANZ.RTL 2

Bond Market PerformanceWith interest rates rising modestly, rate sensitive sectors posted losses in

September. Below investment grade credit gained, however.

Bond Sector Performance

0.2%

-0.5% -0.8% -1.4%

0.1%

-0.7% -0.2%-1.4%

0.3% 0.5%

-1.5% -1.2%-0.6%

0.6%

-7%

-6%

-5%

-4%

-3%

-2%

-1%

0%

-5%

0%

5%

10%

15%

20%

25%

T-Bills USAggregate

USTreasury

US TIPS US MBS US IGCorporates

1-10 Yr IGCorporates

10 Yr+ IGCorporates

US HighYield

LeveragedLoans

DevelopedEx-US IG

Corporates

DevelopedEx-US

SovreignBonds

EM HardCurrencySovereign

Bonds

EM LocalCurrencySovereign

Bonds

1 Y

ear M

ax D

raw

dow

n (%

)R

etu

rns (

%)

September YTD 1 Year 1 Year Max Drawdown

Long-term IG Corporates have had the best returns year to date and over the

past year, but it has come with drawdowns similar to US High Yield

Page 3: SPDR ETFs Fixed Income Chart Pack - SSGA€¦ · 2878124.1.1.ANZ.RTL SPDR ® ETFs Fixed Income Chart Pack Please see Appendix A for more information on investment terms used in this

Source: Bloomberg Finance, L.P. As of September 30, 2019. Past performance is not a guarantee of future results.

2878124.1.1.ANZ.RTL 3

Yield CurveThe yield curve steepened in September, as the geopolitical unrest that pushed

yields to three year lows in August slightly abated and the Fed cut short term rates.

US Treasury Curve US Treasury Active:

2.11 2.202.37

2.57

2.82 2.88 2.95 3.02 3.063.21

2.091.98

1.871.77

1.51 1.43 1.39 1.45 1.50

1.96

1.87 1.82 1.82 1.761.62 1.56 1.54 1.61 1.67

2.11

1.0

1.5

2.0

2.5

3.0

3.5

Yie

ld (

%)

9/30/2018 8/30/2019 9/30/2019

-24-38

-55

-81

-120-132

-141 -141 -140

-56-67

-78 -73-84

-95-104 -107

-135

-22 -17-5 -1

12 13 16 16 17

-150

-100

-50

0

50

1M 3M 6M 1Y 2Y 3Y 5Y 7Y 10Y

Change in B

ps

1 Year YTD September

Page 4: SPDR ETFs Fixed Income Chart Pack - SSGA€¦ · 2878124.1.1.ANZ.RTL SPDR ® ETFs Fixed Income Chart Pack Please see Appendix A for more information on investment terms used in this

-2%

-1%

0%

1%

2%

3%

4%

5%

Adrian Crump & Moench 10 Year Treasury Term Premium

US 10 Year Yield

US 2-Year Yield

US 10-Year and 2-Year Yield Spreads

Negative growth prospects have anchored term

premiums near historical lows this year

Source: Bloomberg Finance, L.P. As of September 30, 2019. Past performance is not a guarantee of future results. The term premium is the excess yield that investors require to

commit to holding a long-term bond instead of a series of shorter-term bonds. The copper-to-gold ratio indicates the potential of economic growth as gold is more of a defensive asset

while copper is more cyclical.

2878124.1.1.ANZ.RTL 4

Yield Curve (continued)While the yield curve steepened in September, it still remains flat as the long end

remains constrained by slow growth dynamics.

US Treasury Curve (10-and-2 Year Spreads) and Term Premium

3

4

5

6

1.3%

2.0%

2.7%

3.4%

Ratio

US 10 Year Yield (%) Copper to Gold Ratio

US 10 Year Yield versus the Copper to Gold Ratio

Page 5: SPDR ETFs Fixed Income Chart Pack - SSGA€¦ · 2878124.1.1.ANZ.RTL SPDR ® ETFs Fixed Income Chart Pack Please see Appendix A for more information on investment terms used in this

Source: Bloomberg Finance, L.P. As of September 30, 2019. Past performance is not a guarantee of future results.

2878124.1.1.ANZ.RTL 5

Low Rates & Rate UncertaintyGlobal rates are low and both the market as well as policy makers lack consensus

on the path for short term US rates for the remainder of 2019.

Market Implied Probability of Fed Actions by the end of 2019 Bloomberg Barclays Global Agg Index Allocation by Yield (%)

0

20

40

60

Jan-19 Mar-19 May-19 Jul-19 Sep-19

%

Two Cuts One Cut

0%

20%

40%

60%

80%

Sep-12 Dec-13 Mar-15 Jun-16 Sep-17 Dec-18

26.0

17.1

22.7

24.8

7.0

1.40.2 0.5 0.3 0.0 0.0

<0 0-1 1-2 2-3 3-4 4-5 5-6 6-7 7-8 8-9 9-10

Yield to Worst (%)

Yield By Market Cap Weight

% of Fed Members with Different 2019 Policy Rate Projections

than the Majority

26% of global bonds have a

negative yield, and over 60%

yield less the S&P 500

Page 6: SPDR ETFs Fixed Income Chart Pack - SSGA€¦ · 2878124.1.1.ANZ.RTL SPDR ® ETFs Fixed Income Chart Pack Please see Appendix A for more information on investment terms used in this

-5

-6

-20

-7

-35

1

-38

-46

-153

-128

-159

-45

IG Corporate

US BBB Rated

Broad High Yield

US High Yield BB Rated

US High Yield B Rated

US High Yield CCC & Lower

YTD September

Source: Bloomberg Finance, L.P. BofA Merrill Lynch, As of September 30, 2019. US High Yield CCC & Lower = BofA ML US High Yield CCC & Lower Rated Index. US High Yield B Rated = BofAML US High Yield B Rated Index. BBB Rated = BofA ML US Investment Grade BBB Rated Index. Broad high yield = Bloomberg Barclays US Corporate High Yield Index. IG Corporate = Bloomberg Barclays US Corporate Index. Past performance is not a guarantee of future results.

2878124.1.1.ANZ.RTL 6

Credit Trends The dovish tone among global central banks drove risk-on sentiment in credit

markets, with high yield spreads tightening further below long-term averages.

Credit Spreads Credit Spread Changes in Basis Points

Credit Spread Current vs. 20-Yr Averages

1059

450

239

373

162

115

1175

568

383

550

163

157

US High Yield CCC & Lower

US High Yield B Rated

US High Yield BB Rated

Broad High Yield

US BBB Rated

IG Corporate

20-Yr Avg

As of 9/30/2019

0%

5%

10%

15%

20%

Bloomberg Barclays US Corporate High Yield Index

Bloomberg Barclays US Corporate Index

Bloomberg Barclays High Yield Energy Index

HY spreads are 32%

below their

20-year averages

Given the Middle East tensions impact on

oil, HY energy spreads widened recently

Page 7: SPDR ETFs Fixed Income Chart Pack - SSGA€¦ · 2878124.1.1.ANZ.RTL SPDR ® ETFs Fixed Income Chart Pack Please see Appendix A for more information on investment terms used in this

Source: Bloomberg Finance, L.P. As of September 30, 2019. Past performance is not a guarantee of future results. Senior loans: S&P Leveraged Loan 100 Index; High Yield Bonds:

Bloomberg Barclays U.S. Corporate High Yield Index.

2878124.1.1.ANZ.RTL 7

Credit Trends (Continued)Due to the sizeable spread compression for fixed rate high yield, it now trades at the

most negatively convex level ever. Loans, however, yield more than fixed rate HY.

High Yield Bond Convexity

-0.4

-0.3

-0.2

-0.1

0

0.1

0.2

0.3

Effective Convexity

1.85

1.95

2.05

2.15

2.25

2.35

2.45

2.55

5.0

5.5

6.0

6.5

7.0

7.5

8.0

8.5

Fed F

unds U

pper B

ound (%

)

Yie

lds (

%)

High Yield - Yield to Worst (%)Loans - Yield to Maturity (%)Fed Funds Upper Bound

Yields on High Yield versus Loans

Last time HY was this convex, the

market sold off

Page 8: SPDR ETFs Fixed Income Chart Pack - SSGA€¦ · 2878124.1.1.ANZ.RTL SPDR ® ETFs Fixed Income Chart Pack Please see Appendix A for more information on investment terms used in this

-2

0

2

4

6

8

10

12

14

Year to Date Q3 September

%

Curve Change Curve Carry Spread Return

Source: Bloomberg Finance, L.P. As of September 30, 2019. Past performance is not a guarantee of future results. US IG Corporates - Bloomberg Barclays US Corporate Index,

US High Yield - Bloomberg Barclays VLI: High Yield Index.

2878124.1.1.ANZ.RTL 8

Credit AttributionHigh yield credit registered a gain in September as the positive spread return

offset the negative impact from the curve change. IG, however, was not as lucky.

US High Yield Attribution

Spread tightening has driven 60% of

the return for HY in 2019

-4

-2

0

2

4

6

8

10

12

14

Year to Date Q3 September

%

Curve Change Curve Carry Spread Return

US IG Corporate Attribution

13.19

3.05

-0.64

12.21

1.250.27

The change in the curve has driven 60%

of the return for IG credit in 2019

Page 9: SPDR ETFs Fixed Income Chart Pack - SSGA€¦ · 2878124.1.1.ANZ.RTL SPDR ® ETFs Fixed Income Chart Pack Please see Appendix A for more information on investment terms used in this

Source: Bloomberg Finance, L.P. As of September 30, 2019. Past performance is not a guarantee of future results.

2878124.1.1.ANZ.RTL 9

Convertibles AttributionAs a result of increased issuance after high levels of equity sensitivity in 2018,

convertibles now have more bond-like characteristics — despite a 13% return in

2019.US Convertibles Liquid Bond Index – Average Stock Delta US Convertibles Liquid Bond Index – Premium to Parity

15

25

35

45

55

65

75

Jul-09 Sep-11 Nov-13 Jan-16 Mar-18

% Prem. Median Bottom Quintile Top Quintile

Given this profile, and US equities near all-time highs,

converts may be a low volatility way to buy the rally

45

50

55

60

65

70

75

80

85

Jul-09 Sep-11 Nov-13 Jan-16 Mar-18

Delta Median Bottom Quintile Top Quintile

A low delta and high premium indicates convertible

securities are more bond-like than stock-like

Page 10: SPDR ETFs Fixed Income Chart Pack - SSGA€¦ · 2878124.1.1.ANZ.RTL SPDR ® ETFs Fixed Income Chart Pack Please see Appendix A for more information on investment terms used in this

-10%

-7%

-4%

-1%

2%

5%

-10% -5% 0% 5%

EM

Curr

ency M

onth

ly

Retu

rns

EM Local Sovreign Debt Monthly Returns

Source: Bloomberg Finance, L.P. As of September 30, 2019

EM Local – Bloomberg Barclays EM Local Sovereign Bond Index.

Past performance is not a guarantee of future results.

2878124.1.1.ANZ.RTL 10

EM Debt AttributionA softening of trade tensions and a Federal Reserve rate cut boosted emerging

market (“EM”) currencies in September, benefiting EM local debt returns.

EM Local Sovereign Debt Attribution

-8

-6

-4

-2

0

2

4

6

8

10

12

Year to Date Q3 September

%

Curve Change Curve Carry

Spread Return Currency Return

EM Local Sovereign Debt Return Correlation to EM Currencies (2009–2019)

0%

2%

4%

6%

8%

10%

12%

14%

0% 5% 10% 15% 20%

EM

Curr

ency 1

Year

Sta

ndard

Devia

tion R

etu

rns

EM Local Sovereign 1 Year Standard Deviation of Returns

80% of the Sept. return was from

strengthening EM currencies

-0.55

5.24

Correlation: 94%

Correlation: 90%

0.50

Page 11: SPDR ETFs Fixed Income Chart Pack - SSGA€¦ · 2878124.1.1.ANZ.RTL SPDR ® ETFs Fixed Income Chart Pack Please see Appendix A for more information on investment terms used in this

$14

($15)

($10)

($5)

$0

$5

$10

$15

2009 2011 2013 2015 2017 2019

$104

$112

$0

$20

$40

$60

$80

$100

$120

2006 2008 2010 2012 2014 2016 2018

Source: Bloomberg Finance, L.P. As of September 30, 2019. All figures are in USD. Past performance is not a guarantee of future results.

2878124.1.1.ANZ.RTL 11

ETF Fund Flow Trends Fixed Income ETF flows are 8% ahead of 2017’s record setting pace, and one

year after posting their first year of outflows HY ETFs have a record inflow total.

Yearly US-Listed FI ETF Fund Flows Through September ($ Billions) High Yield Yearly Fund Flows ($ Billions)

Investors’ search for yield has led to outsized HY ETF

fund flows, pushing AUM to a record high as well

Page 12: SPDR ETFs Fixed Income Chart Pack - SSGA€¦ · 2878124.1.1.ANZ.RTL SPDR ® ETFs Fixed Income Chart Pack Please see Appendix A for more information on investment terms used in this

Source: Bloomberg Finance, L.P. As of September 30, 2019. All figures are in USD. Past performance is not a guarantee of future results.

2878124.1.1.ANZ.RTL 12

ETF Fund Flow Trends (continued)With rates falling, the demand for higher levels of income has led to renewed

interest in preferred securities.

Preferred ETFs Net Flows vs. Real 10 Year Yields Ultra-Short/Short Term Treasury Minus Interm./Long Term Flows

-1.0

-0.5

0.0

0.5

1.0

1.5

-$1.5

-$1.0

-$0.5

$0.0

$0.5

$1.0

$1.5

Aug-18 Oct-18 Dec-18 Feb-19 Apr-19 Jun-19 Aug-19

Yie

ld (%

)

Net

Flo

ws (

$)

Preferreds Real 10 Year Yield

($3.2)

($0.2)

$2.6

($0.8)

($1.3)

($5.5)($6)

($5)

($4)

($3)

($2)

($1)

$0

$1

$2

$3

$4

Apr-19 May-19 Jun-19 Jul-19 Aug-19 Sep-19

More

Flo

ws I

nto

Short

Te

rmM

ore

Flo

ws I

nto

Long T

erm

With the yield curve flattening, flows have

skewed more towards the long end of the curve

Page 13: SPDR ETFs Fixed Income Chart Pack - SSGA€¦ · 2878124.1.1.ANZ.RTL SPDR ® ETFs Fixed Income Chart Pack Please see Appendix A for more information on investment terms used in this

Source: Bloomberg Finance, L.P. As of September 30, 2019. Past performance is not a guarantee of future results. Past performance is not a guarantee of future results. Index returns

are unmanaged and do not reflect the deduction of any fees or expenses High Yield Bonds: Bloomberg Barclays U.S. Corporate High Yield Index; Emerging Market Bonds: Bloomberg

Barclays Emerging Markets Hard Currency Aggregate Index; High Dividend Large Cap Equities: S&P 500 High Dividend Index; Crossover High Yield Bonds: ICE BofAML Crossover

Corporate Bond Index. Correlation analysis from 09/30/2009 to 09/30/2019 based on monthly frequency of returns. Past performance is not a guarantee of future results.

2878124.1.1.ANZ.RTL 13

Bond Market OutlookStriking a balance between yield and duration is a daunting task within the core of

portfolios with investment grade global fixed income sectors.

Bond Market Yield and Duration Profiles

5.7% 5.5%5.0%

4.7%

3.8%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

0%

1%

2%

3%

4%

5%

6%

High YieldBonds

PreferredSecurities

EmergingMarketBonds

HighDividend

Large CapEquities

CrossoverHigh Yield

Bonds

10 Y

ear C

orre

latio

n (%

)

Yie

ld (

%)

Yield 10 Year Correlation to S&P 500 Index

Yield and Equity Sensitivity for High Income Opportunities

2.5 2.32.9

1.7

3.6

0.4

4.3

5.8

7.8

6.6

14.5

5.8

0.59

0.390.37

0.26 0.25

0.07

0.00

0.10

0.20

0.30

0.40

0.50

0.60

0.70

0

2

4

6

8

10

12

14

16

BloombergBarclays

IntermediateCorporate

Index

BloombergBarclays USAggregateBond Index

BloombergBarclays USCorporate

Bond Index

BloombergBarclays US

TreasuryIndex

BloombergBarclays

Long U.S.Corporate

Index

BloombergBarclays

Global AggCorporate exUSD Index

Yie

ld P

er U

nit o

f Dura

tion

Yie

ld (

%)

Yield to Worst (%) Option Adjusted Duration (Years)

Yield Per Unit of Duration

Page 14: SPDR ETFs Fixed Income Chart Pack - SSGA€¦ · 2878124.1.1.ANZ.RTL SPDR ® ETFs Fixed Income Chart Pack Please see Appendix A for more information on investment terms used in this

Basis Point: One hundredth of one percent, or 0.01%.

The Bloomberg Barclays US Treasury Bill Index tracks the market for treasury bills

issued by the US government. US Treasury bills are issued in fixed maturity terms of 4-,

13-, 26- and 52-weeks. The US Treasury Bill Index is a component of the US Short

Treasury Index along with US Treasury notes and bonds that have fallen below one year

to maturity.

The Bloomberg Barclays Global Aggregate Index is a measure of global investment

grade debt from 24 local currency markets. This multi- currency benchmark includes

treasury, government-related, corporate and securitized fixed-rate bonds from both

developed and emerging markets issuers.

The Bloomberg Barclays US Mortgage Backed Securities (MBS) Index tracks agency

mortgage pass-through securities (no longer incorporates hybrid ARM) guaranteed by

Ginnie Mae (GNMA), Mae (FNMA), and Freddie Mac (FHLMC). The index is constructed

by grouping individual TBA- deliverable MBS pools into aggregates or generics based on

program, coupon and vintage.

Bloomberg Barclays US Aggregate Index: A benchmark that provides a measure of the

performance of the US dollar denominated investment grade bond market, which includes

investment grade government bonds, investment grade corporate bonds, mortgage pass

through securities, commercial mortgage backed securities and asset backed securities

that are publicly for sale in the US.

Bloomberg Barclays US Corporate 1–3 Year Index: The Index includes publicly issued

US dollar denominated corporate issues that have a remaining maturity of greater than or

equal to 1 year and less than 3 years, are rated investment grade.

Bloomberg Barclays US Corporate Bond Index: The Bloomberg Barclays US Corporate

Bond Index measures the investment grade, US dollar-denominated, fixed-rate, taxable

corporate and government related bond markets. It is composed of the US Corporate

Index and a non-corporate component that includes foreign agencies, sovereigns,

supranationals and local authorities.

The Bloomberg Barclays Emerging Markets Local Currency Liquid Government

Index is a country-constrained, more liquid version of the flagship Emerging Markets Local

Currency Government Index, which is designed to provide a broad measure of the

performance of local currency Emerging Markets (EM)

Bloomberg US Treasury Index: The Bloomberg US Treasury Bond Index is a rules-

based, market-value weighted index engineered to measure the performance and

characteristics of fixed rate coupon US Treasuries which have a maturity greater

than 12 months.

The Bloomberg Barclays US Convertible Liquid Bond Index is designed to represent

the market of U.S. convertible securities, such as convertible bonds.

Credit Spread: A credit spread is the difference in yield between a US Treasury bond

and a debt security with the same maturity but of lesser quality.

Parity The value of the underlying equity if the convertible is converted. It is equal

to the current stock price multiplied by the number of shares for which the bond may

be exchanged.

S&P/LSTA US Leveraged Loan 100 Index: The S&P/LSTA US Leveraged Loan 100

Index is designed to reflect the largest facilities in the leveraged loan market.

Delta: The sensitivity of one asset to an underlying deriviative

Spread Changes: Changes in the spread between Treasury securities and non-Treasury

securities that are identical in all respects except for quality rating.

Parity The value of the underlying equity if the convertible is converted. It is equal to

the current stock price multiplied by the number of shares for which the bond may

be exchanged.

Standard Deviation: Measures the historical dispersion of a security, fund or index

around an average. Investors use standard deviation to measure expected risk or

volatility, and a higher standard deviation means the security has tended to show higher

volatility or price swings in the past.

Yield: The income produced by an investment, typically calculated as the interest received

annually divided by the investment’s price.

Yield Curve: A graph or line that plots the interest rates or yields of bonds with similar

credit quality but different durations, typically from shortest to longest duration. When the

yield curve is said to be flat, it means the difference in yields between bonds with shorter

and longer durations is relatively narrow. When the yield curve is said to be steepened, it

means the difference in yields between short term and long term bonds increases.

Yield to Worst: Yield to worst is an estimate of the lowest yield that you can expect to

earn from a bond when holding to maturity, absent a default. It is a measure that is used in

place of yield to maturity with callable bonds.

Appendix A

Definitions

142878124.1.1.ANZ.RTL

Page 15: SPDR ETFs Fixed Income Chart Pack - SSGA€¦ · 2878124.1.1.ANZ.RTL SPDR ® ETFs Fixed Income Chart Pack Please see Appendix A for more information on investment terms used in this

Issued by State Street Global Advisors, Australia, Limited (ABN 42 003 914 225) (“SSGA

Australia”) the holder of an Australian Financial Services Licence (AFSL Number 238276).

SSGA Australia’s Responsible Entity, State Street Global Advisors, Australia Services

Limited (ABN 16 108 671 441) (“SSGA, ASL”) holds an Australian Financial Services

Licence (AFSL Number 274900) pursuant to Section 913B of the Corporations Act 2001.

Registered office: Level 17, 420 George Street, Sydney, NSW 2000, Australia •

Telephone: 612 9240-7600 • Facsimile: 612 9240-7611 • Web: www.ssga.com.

The views expressed in this material are the views of SPDR Americas Research Team

and are subject to change based on market and other conditions. This document contains

certain statements that may be deemed forward-looking statements. Please note that any

such statements are not guarantees of any future performance and actual results or

developments may differ materially from those projected.

The information provided does not constitute investment advice and it should not be relied

on as such. It should not be considered a solicitation to buy or an offer to sell a security.

It does not take into account any investor’s particular investment objectives, strategies, tax

status or investment horizon. You should consult your tax and financial advisor.

All material has been obtained from sources believed to be reliable. There is no

representation or warranty as to the accuracy of the information and State Street shall

have no liability for decisions based on such information.

All the index performance results referred to are provided exclusively for comparison

purposes only. It should not be assumed that they represent the performance of any

particular investment.

Bonds generally present less short-term risk and volatility than stocks, but contain interest

rate risk (as interest rates rise, bond prices usually fall); issuer default risk; issuer credit

risk; liquidity risk; and inflation risk. These effects are usually pronounced for longer-term

securities. Any fixed income security sold or redeemed prior to maturity may be subject to

a substantial gain or loss.

The values of debt securities may decrease as a result of many factors, including, by

way of example, general market fluctuations; increases in interest rates; actual or

perceived inability or unwillingness of issuers, guarantors or liquidity providers to make

scheduled principal or interest payments; illiquidity in debt securities markets; and

prepayments of principal, which often must be reinvested in obligations paying interest at

lower rates.

Equity securities may fluctuate in value in response to the activities of individual

companies and general market and economic conditions.

Investments in small-sized companies may involve greater risks than in those of larger,

better known companies.

Investments in mid-sized companies may involve greater risks than in those of larger,

better known companies, but may be less volatile than investments in smaller companies.

Companies with large market capitalizations go in and out of favor based on market and

economic conditions. Larger companies tend to be less volatile than companies with

smaller market capitalizations. In exchange for this potentially lower risk, the value of the

security may not rise as much as companies with smaller market capitalizations.

Value stocks can perform differently from the market as a whole. They can remain

undervalued by the market for long periods of time.

Foreign investments involve greater risks than US investments, including political and

economic risks and the risk of currency fluctuations, all of which may be magnified in

emerging markets.

Because of their narrow focus, sector funds tend to be more volatile.

Commodities investing entail significant risk as commodity prices can be extremely

volatile due to wide range of factors Bond funds contain interest rate risk (as interest rates

rise bond prices usually fall); the risk of issuer default; issuer credit risk; liquidity risk; and

inflation risk.

Exchange traded funds (ETFs) trade like stocks, are subject to investment risk and will

fluctuate in market value. The value of the investment can go down as well as up and the

return upon the investment will therefore be variable. Changes in exchange rates may

have an adverse effect on the value, price or income of an investment. Further, there is no

guarantee an ETF will achieve its investment objective.

Investing involves risk including the risk of loss of principal.

The information provided does not constitute investment advice and it should not be relied

on as such. It should not be considered a solicitation to buy or an offer to sell a security. It

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have no liability for decisions based on such information.

Appendix B

Important Disclosures

152878124.1.1.ANZ.RTL

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Tracking Code: 2878124.1.1.ANZ.RTL

Expiration Date: September 30, 2020

Appendix B

Important Disclosures

162878124.1.1.ANZ.RTL