Etica Special Multi-Asset Fund is a high risk fund

Investing in Etica Special Multi-Asset Fund may not be suitable for all types of investors. Before making an investment decision, investors should carefully consider whether Etica Special Multi-Asset is suitable in light   of   their   financial position, investment objectives, experiences, risk tolerance and other relevant circumstances. The fund invests in a wide range of asset classes including equities, fixed income instruments, currencies, derivatives as well as offshore markets. While these asset classes present investors with potential for capital gains, and higher long-term return potential, they also expose the investor to price swings due to market volatility during some economic cycles and thus suitable for investors seeking medium- to long-term returns and able to tolerate periodic fluctuations in portfolio value.

The fund Manager maintains strategic asset allocation limits to balance risk between volatile equities and interest-rate-sensitive fixed income, diversifying across sectors, issuers and maturities to reduce concentration and credit risks. Risk is however an ingredient in every investment opportunity for financial gain. The likelihood of adverse events occurring varies in severity and the extent of exposure and preparedness to manage such risks. Risk management strategies and mitigation measures are in place to reduce the potential for loss and increase the opportunity for gain.

Business Risk

The Fund is exposed to business risk due to variability of revenue, which may impair its ability to provide its unitholders with adequate returns. Business risk may result from economic recession in the sectors within which the Fund invests in, changes in regulations, pessimistic capital market conditions and convulsions of nature. To mitigate this risk, the Fund has a diversified portfolio with different income lines. This lowers the deviation of earned profits from the expected profits.

Liquidity Risk

Liquidity risk relates to the Fund’s inability to meet its short-term financial obligations where the fund may be unable to sell securities quickly or at a fair price to meet investor redemptions or rebalance the portfolio, especially during stressed market conditions without suffering a loss. To mitigate this risk, the Fund Manager shall maintain a well-diversified portfolio that includes a portion of highly liquid instruments. The fund manager shall also implement clear liquidity management policies such as staggered maturities, limits on exposure to illiquid fixed income instruments or small-cap stocks, and regular stress testing, to anticipate redemption pressures to ensure availability of sufficient liquidity as anticipated.

Interest Rate Risk

Interest rate risk results to changes in the value of investment as the absolute levels of interest rates vary. The Fund manager shall mitigate the interest rates risk through periodical duration analysis, which will be guided by the Fund Managers Outlook on Interest rates.

Foreign Exchange Risk

Foreign Exchange Risk maybe faced by Unitholders who have a base currency other than the Kenya Shilling. Such Unitholders will be subject to fluctuating exchange rates between the Kenya Shilling and any other currency into which they might wish to convert any payments received by way of interest or otherwise from the Fund. Adverse movement in exchange rates results in foreign exchange loss and also affects clients return.

Credit Risk

Credit risk is the risk of default where the institutions that the fund has invested in are not able to pay back the investment and interest accrued. This risk mainly affects cash deposits, cash equivalents, derivative financial instruments and other fixed income instruments. The Fund Manager shall mitigate this risk by screening all the investment opportunities and only those with strong fundamentals are allowed to get admission in the investment universe

Compliance and Regulatory Risk

Compliance and regulatory risks include the risk of non-compliance with legal and regulatory requirements including laws, rules, regulations, prescribed practice, or ethical standards. To mitigate this risk, the Fund Manager has in place a compliance function which is responsible for establishing and maintaining an appropriate framework of compliance policies and procedures that ensures at all times, the fund remains compliant with all relevant laws, regulations and market standards. The Compliance officer carries out periodic regulatory compliance audits to provide an appropriate level of assurance on full compliance.

Operational risk

Operational risk is associated with human error, an inadequate information system, technology failures, breach in internal controls, fraud, inadequate training, unforeseen catastrophes and other operational problems that may be encountered within the operating system. The Fund Manager mitigate this risk by implementing an effective, integrated operational risk management framework, with proper maker checker processes.

Inflation Risk

Inflation risk refers to the possibility of a reduction in the value of the income or assets. Inflation risk arises when it decreases the purchasing power of a currency. Inflation also weakens the purchasing power of consumers. A mitigant to inflation risk is a portfolio of various asset classes that add value to a portfolio over time and has capacity to outperform inflation rates. The holdings of this portfolio are rebalanced to adjust to the economic circumstances that exist. The Fund’s portfolio is well diversified and includes assets that add value to the portfolio over time.

I/WE CONFIRM THAT I/WE FULLY UNDERSTAND THE RISKS IN RESPECT OF INVESTING IN THE FUND AND HAVE CAREFULLY READ THE RELEVANT OFFERING DOCUMENTS. I/WE   HAVE   MADE MY/OUR OWN DECISION AS TO WHETHER TO INVEST IN THE ETICA SPECIAL MULTI-ASSET FUND AND SHOULD TAKE PROFESSIONAL ADVICE IF I/WE AM/ARE UNCERTAIN OF OR HAVE NOT UNDERSTOOD ANY ASPECT OF THIS RISK DISCLOSURE STATEMENT, INFORMATION CONTAINED IN THE OFFERING DOCUMENTS OR THE NATURE AND RISK INVOLVED OR AS APPROPRIATE. I HEREBY ACKNOWLEDGE THAT I UNDERSTAND THE CONTENTS OF THE RISK DISCLOSURE STATEMENT