Global Fund Prospectus - Jupiter Asset Management

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THE JUPITER GLOBAL FUNDInvestment Restrictions■■Investment RestrictionsFinancial Techniques and Instruments continuedc. Credit default swapsThe Company may, at the discretion of the Investment Manager,use credit default swaps. A credit default swap is a bilateralfinancial contract in which one counterparty (the protection buyer)pays a periodic fee in return for a contingent payment by theprotection seller following a credit event of a reference issuer or abasket of reference issuers or a reference index. The protectionbuyer must either sell particular obligations issued by the referenceissuer for its par value (or some other designated reference orstrike price) when a credit event occurs or receive a cashsettlement based on the difference between the market priceand such reference price. A credit event is commonly definedas bankruptcy, insolvency, receivership, material adverserestructuring of debt, or failure to meet payment obligations whendue. The International Swaps and Derivatives Association (‘ISDA’)has produced standardised documentation for these transactionsunder the umbrella of its ISDA Master Agreement.• Credit default swaps for hedging purposesFor the purposes of efficient portfolio management, theCompany may use credit default swaps in order to hedgethe specific credit risk of some of the issuers in its portfolioby buying protection.• Credit default swaps for buying protection for the FundIn addition, the Company may, provided it is in its exclusiveinterest, buy protection under credit default swaps withoutholding the underlying assets provided that the aggregatepremiums paid together with the present value of theaggregate premiums still payable in connection with the creditdefault swap purchased together with the amount of theaggregate of premiums paid relating to the purchase ofoptions on Transferable Securities or on financial instrumentsfor a purpose other than hedging, may not, at any time,exceed 15% of the net assets of the Fund to which they relate.• Credit default swaps for acquiring credit exposureProvided it is in its exclusive interest, the Company may alsosell protection under credit default swaps in order to acquirea specific credit exposure. In addition, the aggregatecommitments in connection with such credit default swapsold together with the amount of the commitments relating tothe purchase and sale of futures and option contracts on anykind of financial instruments and the commitments relatingto the sale of call and put options on transferable securitiesmay not, at any time, exceed the value of the net assets ofthe Fund to which they relate.The Company will only enter into credit default swaptransactions with institutions specialised in this type oftransaction and only in accordance with the standard termslaid down by the relevant ISDA. Each Fund may invest incredit default swaps, provided at all times that the use ofcredit default swaps will not result in a Fund diverging fromits investment strategy.4. Maximum exposure to financial derivative instrumentsThe total commitment of each Fund arising from (1) the use ofswaps, (2) the purchase and sale transactions of futurescontracts and options on any kind of financial instruments and(3) with the amount of commitments relating to the writing of calland put options on Transferable Securities may not exceed atany time the value of the net assets of the relevant Fund.The writing of call options on Transferable Securities for whichthe Fund has adequate coverage are not considered for thecalculation of the aggregate amount of the commitments referredto above. All such permitted transactions must be effectedsubject to the limits set out in the section headed ‘InvestmentRestrictions’ above and subject also to any further limitsidentified in the Information Sheet for each Fund.5. Risks associated with the use of financial techniques andinstrumentsUse of the aforesaid financial techniques and instruments involvesadditional risks and there can be no assurance that the objectivesought from such use will be achieved. Further details if the risksinvolved are set out under the heading ‘Risks Related to the Useof Financial Derivative Instruments’ on page 22 below.If any Fund intends to make use of aforesaid financial techniquesand instruments, on a regular and ongoing, rather than on anoccasional basis, this policy will be disclosed accordingly in thecorresponding Information Sheet for the Fund concerned.6. Securities lending transactions or repurchase agreementsUnless otherwise provided in the Information Sheet for a givenFund, the Company will not enter into securities lendingtransactions or repurchase agreements.Use of the aforesaid techniques and instruments involves certain risksand there can be no assurance that the objective sought to be obtainedfrom such use will be achieved.21
THE JUPITER GLOBAL FUNDRisk Factors■■Risk FactorsInvestors should note the following risk considerations beforemaking any decision to invest in the Funds. It should be noted thatthe risk factors set out below do not purport to be a completeexplanation of the risks involved in investing in the Funds.Prospective investors should read the entire document and consultwith their legal, tax and financial advisers before making anyinvestment decision.GeneralAn investment in the Company is suitable only for investors who arecapable of evaluating the risks and merits of such investment and whohave sufficient resources to bear any loss which might result from suchinvestment. Potential investors should consult their stockbroker, bankmanager, solicitor, accountant or their independent financial adviserbefore investing.Investment in the Company should be regarded as long term in nature.There can be no guarantee that any appreciation in the value of theCompany’s investments will occur and investors may not get back thefull value of their investment. Although it will be the policy of each Fundto diversify its investment portfolio, a Fund may at certain times holdrelatively few investments. The Fund could be subject to significantlosses if it holds a large position in a particular investment that declinesin value or is otherwise adversely affected, including default of the issuer.There can be no guarantee that the investment objectives of theCompany will be met.The Company and its Funds have limited operating histories. The pastperformance of assets managed by the Jupiter Group are not necessarilyguides to the future performance of any particular Fund.Regulatory RisksThe Company is domiciled in Luxembourg and investors should notethat all the regulatory protections provided by their local regulatoryauthorities may not apply. Investors should consult their financial or otherprofessional adviser for further information in this area.General Investment RisksIn addition to the opportunities for price gains and earnings, investmentin securities also involves risks because the prices could fall below thepurchase price paid. Factors affecting the value of securities in somemarkets and under certain situations cannot easily be determined andthe value of such investments may decline or be reduced to zero.The Company employs a risk management process that enables it tomonitor and measure at any time the risk of the positions and theircontribution to the overall risk profile of each Fund. The Company will alsoemploy, if applicable, a process for accurate and independent assessmentof the value of any OTC derivative instruments. Further information is setout under ‘Risk Management Process’ on page 46 below.Risks Related to the use of Financial Derivatives InstrumentsUnless otherwise stipulated in the relevant Information Sheet, theFunds may invest in derivative financial instruments, comprisingoptions, futures, index futures and currency forward contracts forhedging and efficient portfolio management. The risks associated withusing derivative financial instruments (whether for hedging, efficientportfolio management and investment purposes) are set out in theparagraphs titled ‘Risks Related to Investments in Equity RelatedSecurities’, ‘Options’, ‘Financial Futures Contracts’, ‘Swaps’, ‘Portfolioswaps and Participation Notes’ and ‘Possible Losses in SecuritiesOption Transactions, Financial Futures Contracts, Option Transactionson Financial Futures Contracts and Securities Index Options’ below.Funds using financial derivative instruments for investment purposesare generally associated with greater risk than Funds which usefinancial derivative instruments only for efficient portfolio managementor hedging purposes. These significant additional risks include, forexample, market counterparty risk, leverage risk, liquidity risk andoperational risk. Losses incurred as a consequence of the use offinancial derivative instruments for investment purposes may besubstantial and could lead to total capital loss for investors in theFund(s) concerned.Risks Related to Investments in Equities (including ordinary andpreference shares)Experience has shown that equities and securities of a share-likecharacter are subject to strong price fluctuations. That is why they offerthe possibility of considerable price gains, but also involve thecorresponding risks. Share prices are influenced above all by theprofits or otherwise of individual enterprises and sectors as well asmacro-economic developments and political perspectives whichdetermine the expectations of the securities markets and thus themovement of prices.Risks Related to Investments in Fixed-Interest Securities(including convertible debt securities)Price changes in fixed-interest securities are influenced predominantlyby interest rate developments in the capital markets, which in turn areinfluenced by macro-economic factors. Fixed-interest securities couldsuffer when capital market interest rates rise, while they could increasein value when capital market interest rates fall. The price changes alsodepend on the term or residual time to maturity of the fixed-interestsecurities. In general, fixed-interest securities with shorter terms haveless price risks than fixed-interest securities with longer terms.However, they generally have lower returns and, because of themore frequent due dates of the securities portfolios, involve higherre-investment costs.Risks Related to Investments in WarrantsIn addition to the above risks involved with securities and exchangerate changes, warrants carry the risk, but also the opportunity, of whatis known as leverage. This leverage is produced, for example, with callwarrants through the lower capital investment when the warrants arepurchased compared with a direct purchase of the underlying assets.The same applies for put warrants. The greater the leverage, thegreater the change of price of the warrant in the event of a change inthe prices of the underlying assets (in comparison to the subscriptionprice set forth in the option conditions). The opportunities and risks ofwarrants increase as the leverage increases. Since warrants aregenerally issued only for a limited term, it cannot be ruled out that theywill be valueless at the date of maturity if the price of the underlyingassets falls below the subscription price fixed when the call warrantswere issued or exceeds the subscription price fixed when the putwarrants were issued.Risks Related to Investments in Fixed-Interest Securities WithoutRegular Interest Payments and Zero BondsParticular attention must be paid to observing the credit worthiness andassessing the issuer of interest-bearing securities without regularinterest payments and zero bonds. In times of climbing capital marketinterest rates, it may be difficult to trade in such bonds, particularlybecause of their comparatively long term and the absence of continualinterest payments.22
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Global Fund Prospectus - Jupiter Asset Management

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