FPA Funds Risks

Investments, including investments in mutual funds and other investment funds, carry risks and investors may lose principal value. Capital markets are volatile and can decline significantly in response to adverse issuer, industry, political, regulatory, market, economic, or other developments. Focus on a particular style or on small, medium, or large-sized companies may enhance that risk.

Foreign securities, including American Depository Receipts (ADRs) and other depository receipts, are subject to interest rate, currency exchange rate, economic and political risks, greater volatility and differences in tax and accounting methods; these risks may be enhanced when investing in emerging markets. Short-selling involves increased risks and transaction costs. You risk paying more for a security than you received from its sale.

The return of principal in a fixed income investment is not guaranteed. Fixed income investments have issuer, interest rate, inflation and credit risks. Interest rate risk is when interest rates go up, the value of fixed income securities, such as bonds, typically go down and investors may lose principal value. Credit risk is the risk of loss of principal due to the issuer’s failure to repay a loan. Generally, the lower the quality rating of a security, the greater the risk that the issuer will fail to pay interest fully and return principal in a timely manner. Lower rated or high yield securities can be more volatile and are subject to higher instances of default. If an issuer defaults the security may lose some or all its value.

Derivatives may magnify a Fund’s gains or losses, causing it to make or lose substantially more than it invested. Derivatives have a risk of default by the counterparty to a contract.

Private securities and limited partnerships are not registered under the federal securities laws, and are generally eligible for sale only to certain eligible investors. As such, they may be illiquid, and thus more difficult to sell, because there may be relatively few potential purchasers for such investments, and the sale of such investments may also be restricted under securities laws.

Mortgage-related and other asset-backed securities including collateralized securities (such as collateralized mortgage obligations (CMO), collateralized debt obligations (CDO), which include collateralized loan (CLO) and collateralized bond obligations (CBO), and similarly structured securities) are subject to interest rate, prepayment, and default risks on the underlying mortgages, loans, bonds or other assets; such securities may increase volatility.

Investing in small capitalization companies involves special risks including, but not limited to, the following: smaller companies typically have more risk and their company stock prices are more volatile than that of large companies; their securities may be less liquid and may be thinly traded which makes it more difficult to dispose of them at prevailing market prices; these companies may be more adversely affected by poor economic or market conditions; they may have limited product lines, limited access to financial resources, and may be dependent on a limited management group; and small cap stocks may fluctuate independently of large cap stocks.

Value style investing presents the risk that the holdings or securities may never reach their full market value because the market fails to recognize what the portfolio management team considers the true business value or because the portfolio management team has misjudged those values.  In addition, value style investing may fall out of favor and underperform growth or other styles of investing during given periods.

Each specific FPA Fund carries unique risks and certain of the above risks apply more principally to one or more FPA Funds than other FPA Funds. You should review a Fund’s Prospectus and First Pacific Advisors, LP’s  Form ADV Part 2A (“Brochure”) carefully to obtain a comprehensive explanation of specific risks for each Fund, including risks that are not mentioned here.