Verkaufsprospekt

'emerging' or 'developing' markets entail risks which
include the possibility of political or social instability,
adverse changes in investment or exchange control
regulations, expropriation and withholding of dividends
at source. In addition, such securities may trade with
less frequency and volume than securities of companies
and governments of developed, stable nations and
there is also a possibility that redemption of Units following
a redemption request may be delayed due to the
illiquid nature of such investments.
Political and Economic Risk - Russia: Investments in
companies organised in or who principally do business
in the independent states that were once part of the
Soviet Union, including the Russian Federation pose
special risks, including economic and political unrest
and may lack a transparent and reliable legal system
for enforcing the rights of creditors and Unitholders of
the Sub-Fund. The standard of corporate governance
and investor protection in Russia may not be equivalent
to those provided in more regulated jurisdictions. While
the Russian Federation has returned to positive growth,
is generating fiscal and current account surpluses, and
is current on its obligations to bondholders, uncertainty
remains with regard to structural reforms (e.g. banking
sector, land reform and property rights), the economy's
heavy reliance on oil, unfavourable political developments
and / or government policies, and other economic
issues. Investment in Russian stock exchanges
is restricted to MICEX and the RTS stock exchange.
Evidence of legal title to shares in a Russian company
is maintained in book entry form. In order to register an
interest of the company’s shares an individual must
travel to the company’s registrar and open an account
with the registrar. The individual will be provided with an
extract of the share register detailing his interests but
the only document recognised as conclusive evidence
of title is the register itself. Registrars are not subject to
effective government supervision. There is a possibility
that the Sub-Fund could lose its registration through
fraud, negligence, oversight or catastrophe such as a
fire. Registrars are not required to maintain insurance
against these occurrences and are unlikely to have
sufficient assets to compensate the Sub-Fund in the
event of loss.
Below Investment Grade Debt Securities: An investment
in high yield securities, or below investment
grade debt securities, meaning securities rated below
Baa3 by Moody’s or below BBB- by Standard and
Poor’s, sometimes referred to as "junk bonds", or low
credit quality securities involves a higher degree of risk
than investment in investment grade debt securities.
Issuers of these securities are often highly leveraged,
so that their ability to service debt obligations during an
economic downturn may be impaired. The lower ratings
of securities reflect a greater possibility of adverse
changes in the financial condition of the issuer, which
may impair the ability of the issuer to make payments of
interest and principal. The risk of loss due to default in
payment of interest or principal by such issuers is significantly
greater than in the case of investment grade
securities because such securities frequently are subordinated
to the prior payment of senior indebtedness.
In the case of default or winding up of an issuer of below
investment grade securities, there is a greater risk
that the capital / assets of the issuer will be insufficient
to meet all of its liabilities and the holders of below
investment grade securities, (who rank as unsecured
PineBridge Merger Arbitrage Fund
creditors) could in such circumstances lose their entire
investment. An economic downturn or a period of rising
interest rates could adversely affect the market for
these securities and reduce the Sub-Fund’s ability to
sell these securities (liquidity risk).
The market for below investment grade rated securities
may be thinner and less active than that for higher
quality securities which can adversely affect the price at
which securities can be sold. To the extent that there is
no regular secondary market trading for certain lower
rated securities, the investment manager may experience
difficulty in valuing such securities and in turn the
Sub-Fund’s assets.
Credit Risk: There can be no assurance that the issuers
of securities or other instruments in which a Sub-
Fund may invest will not be subject to credit difficulties,
leading to either the downgrading of such securities or
instruments, or to the loss of some or all of the sums
invested in such securities or instruments or payments
due on such securities or instruments. Sub-Funds may
also be exposed to a credit risk in relation to the counterparties
with whom they transact or place margin or
collateral in respect of transactions in FDI and may bear
the risk of counterparty default. When a Sub-Fund invests
in an security or other instrument which is guaranteed
by a bank or other type of financial institution there
can be no assurance that such guarantor will not itself
be subject to credit difficulties, which may lead to the
downgrading of such securities or instruments, or to the
loss of some or all of the sums invested in such securities
or instruments, or payments due on such securities
or instruments.
Financial Derivative Instruments: The prices of derivative
instruments, including futures and options, are
highly volatile. Price movements of forward contracts,
futures contracts and other derivative contracts are
influenced by, among other things, interest rates,
changing supply and demand relationships, trade, fiscal,
monetary and exchange control programs and
policies of governments, and national and international
political and economic events and policies. In addition,
governments from time to time intervene, directly and
by regulation, in certain markets, particularly markets in
currencies and interest rate related futures and options.
Such intervention is often intended directly to influence
prices and may, together with other factors, cause all of
such markets to move rapidly in the same direction
because of, among other things, interest rate fluctuations.
The use of FDI also involves certain special risks, including:-
(1) dependence on the ability to predict
movements in the prices of securities being hedged and
movements in interest rates, (2) imperfect correlation
between the price movements of the derivatives and
price movements of related investments, (3) the fact
that skills needed to use these instruments are different
from those needed to select the Sub-Fund’s securities,
(4) the possible absence of a liquid market for any particular
instrument at any particular time, (5) possible
impediments to effective portfolio management or the
ability to meet redemptions, (6) possible legal risks
arising in relation to derivative contract documentation,
particularly issues arising relating to enforceability of
contracts and limitations thereto, (7) settlement risk as
when dealing with futures, forwards, swaps, contracts
for differences the Sub-Fund’s liability may be poten-
| 263