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Part E – Information on risks and related risk management policies
UniCredit S.p.A., some of its subsidiaries, and some of its employees or former employees were
subpoenaed, or may be subpoenaed in the future, in the proceedings and/or investigations of the Madoff
case in various countries, including the United States, Austria, and Chile.
As at the date of Bernard L. Madoff’s arrest, the Alternative Investments division of Pioneer, a subsidiary
of the UniCredit S.p.A. (“PAI”), acted as investment manager and/or investment adviser for some funds
that had invested in other funds with accounts at BMIS. Specifically, PAI acted as investment manager
and/or investment adviser for the Primeo funds and AllWeather funds. PAI acted as the investment
adviser for the Primeo funds from April 2007, after having been sold to BA Worldwide Fund Management
(“BAWFM”), an indirect subsidiary of BA. The Primeo and AllWeather invested in other funds, which held
accounts managed by BMIS. Certain documents prepared by these funds showed assets managed by
the UniCredit S.p.A.'s subsidiaries on behalf of fund administrators of �805 million in November 2008.
Based on these documents, the amount includes invested capital and proceeds from the investment.
Given Bernard L. Madoff’s admission of guilt and the facts that emerged following the fraud committed by
BMIS, it is clear that the amounts indicated in the aforementioned documents do not accurately reflect the
investments made and the proceeds from these investments. As a result, the above amounts should not
be considered indicative of the amount of losses incurred by final investors of the funds involved.
Speculative funds established under Italian law and managed by PAI do not have any exposure to funds
that invested in accounts managed by BMIS.
HVB issued various tranches of debt securities whose potential yield was calculated based on the yield of
a hypothetical structured investment (synthetic investment) in the Primeo funds. The notional value of the
debt securities issued in reference to Primeo funds was �27 million. Some legal proceedings were
brought in Germany regarding debt securities issued by HVB and connected to Primeo funds, citing HVB
as the defendant.
BAWFM, a subsidiary of BA, acted as investment adviser for Primeo funds until the beginning of April
2007. Some BA customers purchased shares in Primeo funds that were held on their accounts with BA.
UniCredit S.p.A. and its BA and PAI subsidiaries were named as part of the 50 defendants in three
putative class actions suits filed with the United States District Court for the Southern District of New York,
in which the petitioners claim to represent the investors of three funds in which assets were invested in
BMIS, directly or indirectly. The defendants were accused of having omitted pertinent information from, or
including false information in, prospectuses and related appendices used for the securities offer. The
petitioners of the class action allege that the investors were misled, for example, as to the lack of
diversification of the investments, on the fact that the funds were invested in BMIS and on the level of due
diligence performed by the defendants. Furthermore, the petitioners allege that the defendants did not
give adequate attention to "red flags" that were identified and would have made them aware of Bernard L.
Madoff’s fraud. The three class actions claim compensation for damages with related interest,
reimbursement of expenses, costs, legal consultancy fees and the recognition of equitable/injunctive
relief. One of the class actions specifically seeks a sentence finding the defendants liable for an amount
equivalent to the amount of the initial investments of the collective parties together with interest and
proceeds that the parties would have received if their money had been invested wisely. This suit also
specifically requests compensation for punitive damages and that the Court prohibits the defendants from
using assets of the funds to defend themselves or to indemnify themselves.
Proceedings were initiated in Austria related to Bernard L. Madoff’s fraud in which BA and BANKPRIVAT
AG (a former subsidiary of BA, with which it merged on October 29, 2009), among others, were named as
defendants. The parties invested in funds that, in turn, invested directly or indirectly in BMIS. BA is also
the subject of proceedings in Austria following the complaint filed by the Supervisory Authority for Austrian
financial markets with the Austrian Attorney's Office and complaints filed to said Attorney's Office by
private parties that invested in funds which, in turn, invested directly or indirectly in BMIS. The parties
that filed said complaints maintain that BA violated the terms of the Austrian Consolidated Investment Act
that governs the role of BA as “auditor of the prospectus” of Primeo funds.