Etica Capital Ltd

Contact: +254-769-999-666  |  [email protected]

Etica Money Market Fund (KES) Effective Annual Yield 18.25% | Etica Money Market Fund (USD) Effective Annual Yield 7.56% | Etica Fixed Income Fund (KES) Effective Annual Yield 15.53% | Etica Shariah Fund (KES) Effective Annual Profit 10.17% | Etica Shariah Fund (USD) Effective Annual Profit 4.54% | Etica Wealth Fund - Class A (KES) Effective Annual Yield 17.32% Class B (KES) Effective Annual Yield 17.56% Class C (KES) Effective Annual Yield 17.80%

RISK DISCLOSURE STATEMENT

RISK DISCLOSURE STATEMENT FOR ETICA WEALTH FUND

BEFORE MAKING AN INVESTMENT DECISION, INVESTORS SHOULD CAREFULLY CONSIDER WHETHER ETICA WEALTH FUND IS SUITABLE IN LIGHT OF THEIR FINANCIAL POSITION, INVESTMENT OBJECTIVES, EXPERIENCES, RISK TOLERANCE AND OTHER RELEVANT CIRCUMSTANCES. RISK IS AN INGREDIENT IN EVERY INVESTMENT OPPORTUNITY FOR FINANCIAL GAIN AND INVESTORS SHOULD UNDERSTAND THE RISKS ASSOCIATED WITH THE INVESTMENT PRODUCT THEY INVEST IN.

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. Below are the risk factors to consider

1) 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 sector within which the Fund operates, 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.

2) Liquidity Risk
Liquidity risk relates to the Fund’s inability to meet its short-term financial obligations. It stems from investments in valuable assets that cannot easily be traded at market value. To mitigate this risk, the Fund Manager shall periodically undertake liquidity gap analysis and other liquidity stress tests to ensure availability of sufficient liquidity as anticipated. In addition, the asset allocation will be more skewed towards government securities which can be liquidated within 24 to 48 hours.

3) 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.

4) 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 dividend or otherwise from the Fund. Adverse movement in exchange rates results in foreign exchange loss and also affects clients, return. To mitigate this risk, the fund manager shall make arrangement for forward currency transaction to book a conversion rate proceeds that are expected foreign currencies and hence mitigating the effects of adverse movement of currency on the funds’ performance

5) 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.

6) 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.

7) 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.

8) 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 UNDERSTAND THAT THIS PRODUCT IS ONLY ELIGIBLE FOR SOPHISTICATED INVESTORS WHO CAN ANALYZE ALL RISKS INVOLVED AND MAKE INFORMED DECISIONS AND THAT ITS ONLY ELIGIBLE TO INVESTORS INVESTING KSHS 1 MILLION AND ABOVE. I/WE HAVE MADE MY/OUR OWN DECISION AS TO WHETHER TO INVEST IN THE ETICA WEALTH 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 HAVE RECEIVED AND UNDERSTAND THE CONTENTS OF THE OFFER DOCUMENTS AS WELL AS THE RISK DISCLOSURE STATEMENT

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