Prospectus - April 2013 - Pictet Funds Hong Kong

10. PICTET – Environmental Megatrend Selection11. PICTET – High Dividend Selection12. PICTET – Emerging Markets High DividendThe use of FDIs may have leverage effect. Investors should note that the leverage of all “active” compartmentsas stated in the Prospectus and respective KFSs will be higher than expected in situations such as where theManagers decide to use FDIs to take an active exposure or to expose the compartment to the market beforeproceeding with equities or bonds investment or during times of heightened market uncertainty where theManagers may deem it appropriate to increase the compartment’s use of FDIs in order to manage risk withinthe portfolio.With the exception of PICTET – Global Emerging Debt and PICTET – Latin American Local Currency Debt, the“active” compartments as identified above will not use FDIs extensively for investment purposes.The Risk Management unit of the Management Company uses other quantitative measures such as theValue-at-Risk (VaR) of the portfolio, coupled with ad hoc stress tests and regular back test programs in orderto validate the VaR model.The current VaR model is based on one-month time horizon and at the confidence level of 99%. Compartmentsadopting relative VaR model are provided in the table below. The relative VaR level of these compartmentscannot exceed twice that of the relevant benchmark portfolio as provided in the table. For compartmentsadopting absolute VaR model (including Pictet - Global Emerging Debt and Pictet - Latin American LocalCurrency Debt), the VaR level would be limited to 20% of the NAV of the compartment concerned.Compartments that adopt relative VaR modelPICTET – AgriculturePICTET – Asian Equities Ex JapanPICTET – Clean EnergyPICTET – Digital CommunicationBenchmark PortfolioMSCI WorldMSCI AC Asia Ex JapanMSCI WorldMSCI WorldPICTET – Eastern Europe MSCI Emerging Markets Europe 10/40PICTET – Emerging MarketsPICTET – Emerging Markets High DividendPICTET – Environmental Megatrend SelectionPICTET – European Equity SelectionPICTET – Global Megatrend SelectionPICTET – High Dividend SelectionPICTET – Japanese Equity SelectionPICTET – Premium BrandsMSCI Emerging MarketsMSCI Emerging MarketsMSCI WorldMSCI AC EuropeMSCI WorldMSCI WorldMSCI JapanMSCI WorldPICTET – Russian Equities MSCI Russia 10/40PICTET – SecurityPICTET – TimberPICTET – US Equity Growth SelectionPICTET – WaterMSCI WorldMSCI WorldRussell 1000 GrowthMSCI WorldPractically, the Risk Management unit of the Management Company monitors the VaR figures on a daily basisin regard to the various limits required by the local circular (CSSF 11/512) and performs further in-depthanalysis should any limit be exceeded.The quantitative results of exposure coming from the calculation engines system are compared to the variouslimits set out for the funds (either relative or absolute) and any breach is further investigated and passed out tothe fund manager and the day-to-day managers of the Management Company for action.Monthly ad hoc stress tests are run, depending on the nature of each compartment investments, in order toassess the impacts of low-probability events on each compartment. The results of these stress tests scenariosare reported to the day-to-day managers of the fund.Finally, in order to validate the VaR model used, back test programs are run on a quarterly basis and theresults are also reported to day-to-day managers of the fund.There is no specific leverage limit in relation to the use of FDIs for a compartment.19