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Investment And Trading Risks
All securities, commodities, derivatives and other investments
risk the loss of capital. The Investment Manager believes
that the investment program and research techniques will moderate
this risk through a careful selection of securities, commodities,
and through skillful hedging or arbitrage techniques. However,
no guarantee or representation is made Provin’s investment
program will be successful. The investment programs may utilize
such investment techniques as trading options and derivatives,
margin transactions, short sales and forward contracts. The
use of these techniques and instruments can increase the adverse
impact to which the fund may be subject to.
Economic
Conditions
The success of any investment activity is affected by general
economic conditions that affect the level and volatility of
prices as well as the liquidity of the markets. The prices
of many securities and derivative instruments are highly volatile.
The Company's investment's are influenced by, among other
things, interest rates, changing supply and demand relationships,
the trade, fiscal, monetary and exchange control programs
and policies of governments, and national and international
political and economic events. Governments from time to time
intervene, directly and by regulation, in certain markets,
particularly those in currencies and interest rates, disrupting
strategies focusing on these sectors. Unexpected changes (in
either direction) in the volatility or liquidity of the markets
in which the Company invests could cause significant losses.
Lack
of Operating History
The fund has limited operating history and while PROVIN believes
that its techniques and track record will allow to perform
successfully under any market conditions, unforseen market
circumstances may adversely affect the fund's performance.
Limited
Liquidity
An investment in the Company is illiquid for several factors
and bears significant risks for investors. Redemptions of
Shares are subject to certain limitations. In addition, Shares
are not transferable without the consent of the Company’s
Board of Directors. It is also possible that an
exchange may suspend trading in a particular contract or security,
order immediate liquidation and settlement of a particular
contract, or order that trading in a particular contract be
conducted for liquidation only. Consequently, investors may
not be able to redeem Shares at an opportune time and an investment
in the fund should be considered only by persons and entities
aware of the specific risk factors associated with the limited
liquidity in the fund’s shares.
Substantial
Redemptions
In the event that there are substantial redemptions it may
be more difficult for the Company to generate returns, as
it will be operating on a smaller asset base. If there are
substantial redemptions within a limited period of time, it
may be difficult for the Company to provide sufficient funds
to meet such redemptions without liquidating or causing the
liquidation of positions prematurely, at an inappropriate
time or on unfavorable terms.
Restrictions
on Transfer
Investors should be fully aware of the restrictions on transfer
of their Shares in the Company. The Shares are not registered
under the securities laws of any jurisdiction and there will
be no ready market for them. The Shares are not readily transferable
and a transfer of Shares may not be registered where it is
to a person of whom the Directors do not approve or where
it may lead to contravention of any applicable laws.
Certain
Risks With Respect To Incentive Fee
The Investment Manager receives compensation based on
unrealized appreciation as well as realized appreciation in
fund’s Net Asset Value. Such incentive fee compensation
may be an incentive for the Investment Manager that are riskier
or more speculative than would be the case absent an incentive
fee. Also, the fees charged by the Investment Manager may
be higher than those charged by others offering similar services.
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Commodity Interests
The prices of commodities contracts and all derivatives instruments,
including futures and options, held by the fund may are highly
volatile and expose an investment into the fund to risk.
Securities
Trading
Trading in securities may involve substantial risks and may
be subject to wide and sudden fluctuations in market value
with resulting fluctuations in the amount of profits and losses.
Securities trading may be illiquid. It is not always possible
to execute a buy or sell order at the desired price or to
close out an open position due to illiquid market conditions.
Such illiquid circumstances can be caused by intrinsic market
conditions, the interrelationship between the securities and
commodities markets, or extrinsic factors like the imposition
of daily price fluctuation limits. At various times, the markets
for securities purchased or sold may be “thin”
or illiquid, making the purchase or sale of securities at
desired prices or in desired quantities difficult or impossible.
Short
Sales
A short sale involves the sale of a security that the Company
does not own in the expectation of purchasing the same security
at a later date at a lower price. To make delivery to the
buyer, the the Company must borrow the security and later
purchase the security to return to the lender. A short sale
involves a risk of a theoretically unlimited increase in the
market price of the security. If short sales are
effected on other exchanges, such transactions will be governed
by local law. A short sale involves the risk of a theoretically
unlimited increase in the market price of the security that
would result in a theoretically unlimited loss.
Leverage,
Interest Rates and Margin
The Company may borrow funds from brokerage firms and banks
in order to increase the amount of capital available for investment.
Consequently, the level of interest rates at which such borrowing
can be made may adversely affect the operating results of
the Company. In addition, the Company may borrow funds through
entry into repurchase agreements and may "leverage"
its investment return with options, commodity futures contracts,
swaps, forwards and other derivative instruments. The
Company’s portfolio may be required to deposit margin
in connection with its trading and investment activities.
This results in certain additional risks to the Company. For
example, should the cash or securities pledged to secure the
Company’s portfolio decline in value, the Company could
be subject to a “margin call”, pursuant to which
the Company must either deposit additional funds or suffer
mandatory liquidation of the pledged securities to compensate
for the decline in value. In the event of a sudden precipitous
drop in the value of the portfolio, the Company might not
be able to liquidate assets quickly enough to payoff its margin
debts. In addition, leveraged investment increases the loss
to investors of any depreciation in value of investments.
In the futures markets, margin deposits are typically low.
Low margin deposits mean that a relatively small price movement
in a futures contract may result in immediate and substantial
losses. For example, if at the time of purchase 10% of the
price of a futures contract is deposited as margin, a 10%
decrease in the price of the futures contract would, if the
contract is then closed out, result in a total loss of the
margin deposit before any deduction for the brokerage commission.
Trading
On Non-U.S. Exchanges And Markets
The Company may allocate a portion of its portfolio equity
and commodity markets traded on exchanges and markets where
regulations that are common in more regulated jurisdictions
do not apply. The Company’s positions may be at greater
risk in these markets because the regulatory framework within
which non-U.S. exchanges and markets operate may be less stringent
than their U.S. counterparts in areas such as minimum financial
requirements, size of margin levels, the extent to which segregation
of customer funds is required, the types of rules governing
trading, and the extent of monitoring to ensure compliance
with rules.
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