What do I need to know about Unit Trust Investments? The Potential Risks What kind of risks am I taking? Managing Risks for the Balanced/Equity Funds Specific Risks Associated with the BOF Managing Risks for BOF What kind of risks am I taking? Any investment carries with an element of risk. The potential risks associated with balanced/equity fund can be analysed as follows: a) Market Risks   Any purchase of equities must represent a risk investment as unit trust fund principally invests in listed stocks, therefore, as market conditions change, the price of units fall as well as rise, and income produced by the fund may also fluctuate. Accordingly, the manager cannot guarantee any dividend or investment returns to the unitholders. However, by investing in a wide range of shares, the manager attempts to balance this risk with the investment rewards that can be made.     b) Particular Stock Risks   Any irregular fluctuation of a particular stock may affect the unit price. This impact is however minimised because the fund invests in a wide portfolio of investments, thus spreading the element of risk.     c) Returns Not Guaranteed   As a result of the above risks, the manager is not able to guarantee the dividends and capital appreciation of the fund.     d) Loan Financing Risk   If you obtain a loan to finance your purchase of units, you need to understand that: - borrowing increases the possiblility for gains as well as losses; - if the value of your investment falls below a certain level, you may be asked by the financial institution to top up the collateral or reduce the outstanding loan amount to the required level; - your ability to pay your loan instalments may be affected by unforseen circumstances in the future such as loss of employment.     e) Currency Fluctuation Risk   If a percentage of the value of the fund is invested overseas, the fund's assets and income will be denominated in a number of different currencies other than Ringgit Malaysia and thus fluctuations in foreign exchange rates which are unpredictable, may have an impact on the income and the variation of the assets of the fund.     f) Business Risks of Emerging Companies   Emerging companies may be more volatile and risky compared with mature and well-established companies.     g) Business Risks of Growth Companies   Some investments are focused on shares of companies that are still in the growing stages of their business life-cycles. While these companies offer higher potential for growth, the inherent business risks of these less matured companies are also higher, even though these risks are mitigated by diversification and our filtering exercise.     [Back to Top]   Managing Risks for the Balanced/Equity Funds The manager will take reasonable steps to ensure that the above potential risks are managed by: a) Compounding the returns on investments over the long term period and capitalising on the market cycles to manage short term fluctuations;     b) Constucting an efficient portfolio of assets as diversification reduces the risk significantly in comparison with investing in one or two counters only.     [Back to Top]   Specific Risks Associated with BOF a) Interest Rate Risk/Market Risk   Prices of bonds move in opposite directions with interest rates. When interest rates rise, prices of bond fall. This rise in interest rate would cause the investor to face the risk of capital loss. But when interest rates fall, prices of bond would increase, therefore, investors would see capital gains.     b) Credit/Default Risk   This refers to the creditworthiness of the bond issue and its expected ability to repay debt. Default happens when the issuer is not able to make timely payments of interest on the coupon payment date or principal repayment on the maturity date.     c) Liquidity Risk   Liquidity is the ability to convert an investment portfolio to cash without suffering a noticeable loss in value. The Malaysian bond market is not as liquid as the equity market and this may affect the price of any bond.     d) Manager's Risk   The performance of any unit trust fund also depends on the experience, knowledge, expertise and investment techniques adopted by investment manager.     e) Inflation/Purchasing Power Risk   Inflation can be defined as increases of price level of goods and services and is commonly reported using the Consumer Price Index as a measure. Inflation is one of the major risks to investors over the long term and results in uncertainty over the future value of the investments. Inflation reduces purchasing powers of money. In an inflationary environment, fixed rate securities are exposed to higher inflation risks than inflation linked securities.     [Back to Top]   Managing Risks for BOF The manager will take reasonable steps to ensure that the above potential risks are managed by: a) Lengthening or shortening the fund's average maturity (within the Fund's objective) in anticipation of changing interest rates;     b) Selecting investments that are bank or government guaranteed or secured against assets to mitigate default risk, if the securities carry ratings lower than "BBB";     c) Diversifying into an array of fixed-income securities to greatly reduce the risk compared to investing in a single class of asset or a single bond;     d) Channeling profits in excess of the average annual dividend into a reserve account which will be used in times when profits are insufficient to meet the average dividend payment.     [Back to Top] [Home]   [Login]   [FAQ]   [Contact Us]   [Disclaimer]   Warning Statement! BEFORE INVESTING, YOU ARE ADVISED TO READ AND UNDERSTAND THE CONTENTS OF THE MASTER PROSPECTUS DATED 29 APRIL 2000 AND THE INDEX-LINKED FUND PROSPECTUS DATED 8 JUNE 2000 (INCLUDING SUPPLEMENTARY PROSPECTUSES THERETO, IF ANY). SUCH PROSPECTUS HAS BEEN REGISTERED WITH THE SECURITIES COMMISSION WHICH TAKES NO RESPONSIBILITY FOR ITS CONTENTS AND IS OBTAINABLE AT ANY OF OUR OFFICES. YOU SHOULD CONSIDER THE FEES AND CHARGES INVOLVED AND CONSULT YOUR FINANCIAL OR OTHER PROFESSIONAL ADVISER IF YOU ARE IN DOUBT ABOUT ANY FEATURE OR NATURE OF THE FUNDS. THE PRICES OF UNITS AND DIVIDENDS PAYABLE, IF ANY, MAY GO DOWN AS WELL AS UP AND PAST PERFORMANCE OF THE FUND IS NO GUARANTEE OF ITS FUTURE PERFORMANCE. ANY ISSUE OF UNITS TO WHICH THE PROSPECTUS RELATES WILL ONLY BE MADE ON RECEIPT OF THE APPLICATION FORM REFERRED TO IN AND ACCOMPANYING THE PROSPECTUS. Copyright © 2001 BHLB Pacific Trust Management Berhad (209627-H). All rights reserved. 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