Risk Disclosure

Investors in the Scheme are advised that all investments in mutual funds and securities are subject to market risks. Risks include but are not limited to:

1.1.1    Reinvestment Risk

Since the Scheme shall have a weighted average maturity of only six (6) months therefore in declining interest rates scenario the Scheme may not be able to reinvest the amount coming from maturing securities at the same rate.

1.1.2    Interest Rate Risk

As interest rates rise, the values of fixed income securities held by the Scheme are likely to decrease and reduce the value of the Scheme’s portfolio. The Scheme shall be invested in short duration securities (maximum maturity of 6 months) to mitigate this risk.

1.1.3    Credit Risk

The issuer or guarantor of a security owned by the Scheme could default on its payment obligations, become insolvent or its credit rating could be downgraded. Investments team shall carefully evaluate the instruments and the issuers before making any commitments for investment. The Scheme shall not invest in any security that has a rating lower than ‘AA’.

1.1.4    Foreign Securities Risk

Prices of the Scheme’s foreign securities holdings may go down because of unfavorable foreign government actions, political instability or the more limited availability of accurate information about foreign issuers.

1.1.5    Government Regulation Risk

Government policies or regulations are more prevalent in some sectors than in others. Schemes that invest in these sectors may be affected due to change in these regulations or policies, which directly or indirectly affect the earnings and / or the cash flows and / or any governmental or court orders restraining payment of capital, principal or income.

1.1.6    Voluminous Purchase / Redemption of the Scheme Units Risk

Any significant transaction made by an investor could significantly impact the Scheme’s cash flow. If the investor(s) buys a large number of Units of the Scheme, the Scheme may temporarily have a high cash balance. Conversely, if the Unit Holder(s) redeems a large number of Units, the Scheme may be required to fund the redemption by selling securities at an inopportune price. This unexpected sale may have a negative impact on the performance of the Investment.

1.1.7    Other Risks Involved

  1. Mismanagement of the investee company, third party liability whether through class action or otherwise or occurrence of other events such as strikes, fraud etc., in the company in which the investment is made.
  2. Breakdown of law and order, war, terrorist activity, natural disasters etc.
  3. Senior rights of some creditors over other creditors in the event of winding up.

The Management Company shall adopt a risk management framework under which it can, among other things, diversify the Scheme’s portfolio and alter the various types of Investments depending on market conditions. The Management Company shall introduce adequate safeguards for controlling the risks in security selection and portfolio construction process.

The Units of the Scheme are not Bank deposits and are neither issued by, or insured by, obligations of, nor otherwise supported by the Commission, any Government agency, the Trustee (except to the extent specified herein or in the Trust Deed) or any of the shareholders of the Management Company or any of the Core Investors or any other Bank or Financial Institution.