A unit trust is a collective investment scheme in which investors’ contributions are pooled together to purchase a portfolio of financial securities, such as equities (shares), bonds, cash, bank deposits etc. The portfolio is managed by professional fund managers.

Each unit trust fund or portfolio has a specific investment objective - income, growth or a combination of the two. The investment objective of a particular unit trust will determine the proportion of the fund invested in a particular security such as company shares.

As the name suggests, a unit trust has a trust framework, with the investments held by an independent trustee. Unit trusts are regulated by the Capital Markets Authority to ensure that they are safe and that only registered professionals are involved with the affairs of the unit trusts.

Unit trusts and other collective investment schemes such as mutual funds have been around the world since the 1930s and have become very popular as the ideal alternative in providing cost effective access to stock markets and fixed income investments, and diversifying one’s portfolio of investments.

Your contributions to a unit trust are used to purchase units. Each unit represents an equal fraction of the total value of the pool of invested money.Units in the British-American Unit Trusts are brought from the fund manager, British-American Asset Managers Limited, and sold back to them in the event unitholders need to redeem their units.

When you invest in a British-American Unit Trusts, the number of units you are allocated is calculated by dividing the amount you invest by the offer price at the time. As an example, if the offer price for each unit is Kshs 100, an investment of Kshs 250,000 will buy 2,500 units.
The value of units moves in accordance with the performance of the unit trust’s assets.

Before considering investing into a unit trust, the following should be ascertained:

-Your risk profile;
-Your time horizon for the investment;
-and whether you require regular income from the investment or purely looking for capital growth.

Unit trusts are considered appropriate investment vehicles for individual investors wanting to gain long-term exposure to financial markets.However, the value of a unit trust depends on the value of the underlying assets within the portfolio. Therefore, the value of the unit trust will fluctuate as the values of the underlying assets fluctuate.

You can invest at any time.

However, it is very difficult for an investor to predict market conditions i.e. to buy units at the lowest price and sell them at the highest price. Our knowledge and insight into the workings of the financial markets enables us to provide the investor with expertise which takes into account market fluctuations. and applies an effective investment strategy.

One of the most common mistakes made by investors is to switch in and out of unit trusts based on short-term performance figures. Periodic switching between funds can lead to increase in the cost of transactions, which can reduce the return on your investment.

It is important to note that portfolio managers do not manage funds on a short- term basis. Most portfolios, particularly equity funds, are managed to generate consistently good returns over a period of five years and above.

A good strategy is to buy unit trusts on a regular basis - termed shilling cost averaging. This method allows you to avoid the risk of poor timing, which may result in buying when the market is high and selling when the market is low.

You gain several benefits from pooling your money in a trust with other investors.

Potentially superior returns:
Unit trusts provide potentially superior returns to fixed deposits over the longer term, providing investors with the opportunity to build real wealth.

Easy and affordable investment:
unit trusts are a convenient and low-cost way of investing in financial markets. They enable investors to invest in a wide variety of diversified portfolios of shares, bonds and other financial instruments they would not necessarily be able to afford as individuals.

Investor can share in the rewards of the stock exchange without without the risks of direct investment.Unit trusts offer investors the choice of switching their portfolios when their needs and risk profile changes and the choice of increasing, stopping or decreasing stop orders without penalties.

Diversification of risks:
With a relatively small investment, a collective investment provides access to a broad spread of different shares and investments.
This diversification helps to reduce your risks because it makes you less dependant on the performance of one company.

Expertise in Professional Management:
British-American Unit Trusts are managed by highly qualified investment managers and investment specialists whose full-time job is to make investment decisions.

Few people have the time, skills or experience to actively manage their investments and research the best way of making money.
By investing in the British-American unit trusts, experts experienced in investments are managing your money on a daily basis and ensuring your peace of mind.

Value for money:
British-Americanunittrustsaredesignedtogiveinvestorsgood value for money. The pooling of money increases the buying power by enabling the payment of lower dealing and administration costs than if the investor had invested directly in a selection of investments.

The pooling of investments also enables the fund manager to buy shares, money market instruments such as treasury bills, bonds and other investments which would be beyond the reach of the average investors.

Flexible investment options:
British-American unit trusts provide investors with the following investment options:

Lump sum investments:
A lump sum investment can be made at any time during the life of the investment, resulting in the entire investment benefiting from the growth and income potential of the chosen unit trust.

Following the opening of your account, you are able to invest any additional amounts to top up your account.

Monthly Investment Plan:
A regular monthly investment can be made into your account resulting in an easier way of building capital. A monthly investment has the benefit of shilling cost averaging, where additional investments can be made during times of market weakness. A Monthly Investment Plan would also allow you to invest in a long term savings plan to meet your desired financial goals.

Switching:
Investors are able to switch their investments between different portfolios.

Cash Withdrawal Facility:
The Cash Withdrawal Facility allows you to take regular withdrawals from your British-American unit trusts. The facility is useful if you are investing for a specific event in the near future where you will require a regular flow of cash -to pay for school fees, fund your children’s further education or to supplement a regular income. The Cash Withdrawal Facility is flexible, simple and tax-efficient way of taking withdrawals from your investments.

Liquidity: British-American unit trusts are flexible and easily accessible. You can sell all or part of your investment at any time. However, we recommend that investments in the Balanced Fund and the Equity Fund should be viewed as medium to longer term of 3 to 5 years or more in order to benefit from market cycles.

Tax efficient: Unit trusts are highly tax efficient investment. A unit trust fund does not pay tax on its income, either from dividends or interest. In addition, unit trusts do not pay tax on capital gains.

Safe and Transparent:
Unit trusts are strictly controlled the Capital Markets Authority under the Capital Markets (Collective Investment Schemes) Regulations, 2001. The regulations impose duties and responsibilities on the key functionaries of the fund including fund manager, custodian and trustee.

The fees and charges are transparent and are published in the Information Memorandum. Information on the investment performance is provided in a report audited by external auditors. Each unit trust has a Trust Deed, the legal document establishing the trust, and an Information Memorandum, of which a copy are available by email.

Investment returns on a unit trust fund depend on the following:

-Returns from the financial markets;
-The type of assets within the unit trust portfolio; and
-The management skills of the portfolio managers.

The value of shares, bonds and other asset classes are determined by financial markets and can rise or fall over time.
In general, equity-based unit trusts provide the highest potential return, followed by bond or income funds and finally money market funds. In addition, the level of investment return is generally related to the level of risk incurred i.e. the higher the potential risk, the greater the potential return.

Before investing, it is useful to follow the following steps to ensure success:

1. Identify your goal for investing

This could be meeting future education expenses, retirement, payment of a deposit for a house or a savings plans

2. Establish a time-frame for your investment

Be realistic about the time commitment for your investment. It is recommended that investments in unit trusts be medium to long-term investments.

3. Identify the level of risk

It is important to understand the level of risk associated with different types of investments

4. Select a unit trust fund which best meets your requirements above.

MoneyMarketFund:
The fund aims to obtain a high level of current income while protecting investor’s capital. The Fund will invest in money market securities with a maturity of less than 12 months which are usually available to the wholesale or institutional investors. Potential investments include: interest-bearing securities such as bank deposits, bank acceptances and other short-term money market instruments including short- dated treasury bills and commercial paper.

The Fund is designed for investors who require a low risk investment which offers a high income yield, capital stability and immediate liquidity.The Fund is a good parking place or safe haven for investors who wish to switch from a higher risk portfolio to a low risk, high interest portfolio, especially during times of high stock market volatility.

It is also ideal for investors who wish to make a lump sum investment and wish to reduce timing risk by regularly transferring amounts to other more aggressive portfolios.This is a low risk fund with zero initial charge.

Income Fund:
The objective of the Income Fund is to achieve a reasonable level of current income and maximum stability for the capital invested.The fund will invest in interest-bearing securities including financially sound preference shares, treasury bills, treasury bonds, corporate bonds, loan stock, debenture stock, debenture bonds, approved securities, notes and liquid assets and any other securities which are consistent with the portfolio’s investment policy.

The Fund is suitable for investors are seeking a regular income from their investment, including those who intend to secure a safe haven for their investments in times of stock market instability.

The Fund can be used a means of drip-feeding investments into the Equity Fund over a long period of time.

BalancedFund:
The investment objective of the Balanced Fund is to offer investors a reasonable level of current income and long term capital growth. This would be achieved by investing in a diversified spread of equities and fixed income securities.The Fund is suited to investors who seek to invest in a balanced portfolio offering exposure to all sectors of the market.

It is also suitable for Individual Pensions Plans, Occupational pension schemes, treasury portfolios of institutional clients, co-operatives and high-net worth individuals amongst others.The Fund is a medium risk fund and has a lower risk profile than pure Equity Funds.

Equity Fund:
The fund aims to offer superior returns over the medium to longer term by maximizing long term capital growth.To achieve this, the fund will invest primarily in listed companies on the Stock Exchanges of Kenya, Uganda and Tanzania, which shows above average prospects for future growth.

The Fund will also take advantage of initial public offerings (IPOs) of companies currently owned or controlled by private investors and/or the Governments of Kenya, Uganda and Tanzania the neighbouring countries. The Fund aims to achieve its performance objectives through well-researched and superior share selection. The fund will have some exposure to offshore listed companies, denominated in Euro, Sterling or Dollar.

This fund is designed for investors seeking medium to long term capital growth in their portfolio and who want to gain exposure to equity investments.The fund is suited to investors who want to invest their money over a period of at least 5 years.The Fund is a medium to high risk fund. Risk will be reduced through holding a diversified portfolio of shares across most sectors.

An insurance policy is vital for the purpose of transferring insurable risk from oneself to a risk carrier i.e. an insurance company. All of us are exposed to risk in our day to day lives, however, our level of awareness regarding our situation and the method of managing risk is generally low.

Risk of hospitalization costs, accidents at home or in motor vehicle, damage to our homes, burglary and loss of property, income interruption for the family as a result of demise of breadwinner(s) are common insurable risks to which individuals are exposed. Businesses are exposed to fire and related perils risks, income interruption as a result of fire, damage to property among others.

If a risk is not transferred to an insurance company then the individual or firm assumes the risk themselves deliberately or by default and in the absence of setting aside sufficient funds to deal with the eventuality of the risk there would be danger of detrimental financial consequences arising.

There is a wide array of policy options available structured to insure against different types of risk i.e. risk on the person, on property or on income. Policies taken to insure against risk on the person or on income are varied and differ from one insurance company to the other. However, individual product composition can include several risk factors such as hospital expenses, disability and funeral expenses depending on what the insured is able to purchase. One can also have a policy to assist in financial planning or savings for future eventualities such as meeting a child’s education costs.

Policies taken to insure against risk on property are structured to ensure that the insured is able to operate as normal as possible in the event the eventuality they are insured against does occur e.g. policies taken against fire, motor accidents and theft

At British-American, we are able to offer our clients different types of policies to meet their insurance needs be they for life or general insurance.

Some of the insurance policies available are legislated and mandated by law e.g. motor insurance and work injury benefits. However, it is important to insure oneself and property against risk as early as possible to mitigate the effects of adverse occurrences such as accidents, loss of income due to injury, burglary e.t.c. especially since it is impossible to forecast them.

The importance of safeguarding your children’s future by planning and saving for their education as early as possible can also not be overemphasized.

Simply defined, a pension scheme or a provident fund is a long-term investment vehicle whose principal objective is to provide you with a decent and reliable income in retirement. Retirement is said to be the longest holiday you will ever have. It therefore makes a lot of sense to start preparing for it early enough and join the few who look forward to retirement with a smile!

British-American offers (1) individual pension plan for the self employed or for those employed in firms that do not operate a scheme (2) Umbrella Pension Scheme for SME’s (3) Occupational Pension Schemes for big employers, to help you make regular monthly contributions towards your retirement fund.

Once you contribute, the funds are invested prudently and you receive periodical fund value statement over the period of engagement. Individual Pension Plans are particularly flexible in that you can vary your contributions depending on the economic fortunes of the day.

Unique benefits accrue to members of a registered pension or provident fund e.g. income tax exemption on contributions and investment income, tax free benefits on early withdrawal or on attainment of retirement age (up-to prescribed limits) and compound interest accrual hence faster growth of savings.

In addition, members can now use their pension savings as an additional security for mortgage loans thereby securing better mortgage loan terms from the approved financiers. This way, you do not have to wait until retirement in order to own a house – you now have an opportunity to leverage on your savings way before retirement age!

Investing in education is the most important gift you can give your child. Insurance can indeed assist you to save efficiently for future school fees requirements.
Elimu Bora education plan from British-American is a combination of insurance protection and savings that allows you save for the best quality education your child deserves.

The plan has been specifically designed to provide funds for your child’s fees while in secondary school and a lump sum amount for joining university. Under this unique plan, your child is the insured person.

Elimu Bora education plan also has benefits such as guaranteed cash bonuses, child hospitalization benefit and tax relief amongst others.

Because life doesn’t always go as planned, it is important to plan for future unforeseen circumstances that could interfere with your family’s well-being. Accidents in particular are debilitating and can leave you without an income and hefty hospital bills to pay.

The Accishield policy from British-American is a Personal Accident policy that provides cover for medical expenses, permanent or total disability, death, artificial limbs and funeral expenses due to accidental injury. This gives you peace of mind to go on with your everyday activities.

The Accishield policy covers you and upto 4 members of your family