WHAT IS AN OPEN-END INVESTMENT FUND?

Open-end investment fund is established with purpose of collecting money through public offer, i.e. by issuing and selling fund shares. The assets are then invested in different financial instruments (stocks, bonds, treasury bills, deposits, etc.) according to certain principles such as safety of the funds assets, profitability, liquidity, and risk diversification. The fund is managed by the Fund management company in accordance with the Fund Statute and Prospectus, and the legal regulations. The open-end investment fund gives an opportunity to investors (owners of fund shares) to allocate their money (or getting exposure) in markets and instruments that are usually not available for them, as well as using the knowledge and techniques of the Fund management company. The establishment and the beginning of the Fund’s operating activities are approved by the Securities and Exchange Commission.

The Fund assets are divided in equal parts (shares), and each share represents a proportional part of the Fund net asset value. The open-end investment fund is composed from the assets collected through public offer for issuing and selling shares, or in other words, assets acquired through investment of the money paid-in by the clients, including the revenues and the rights which arise from the Fund assets. The fund assets are collective property of the owner’s of all shares.

The term “open-end” emphasizes the obligation of the Fund management company to every single owner of shares, at any time, to repurchase part or all shares upon his request with buyout price calculated according to the terms and conditions stipulated in the Fund Statute and Prospectus. The value or price of the Fund single share is changing on a daily basis, and it is affected by the changes in asset prices that are part of the Fund portfolio. The value or price of the Fund single share is calculated every working day until 16.00 hours by dividing the Fund net asset value with the number of issued shares.

The information about the value or the price of single share for all funds managed by KB Publikum invest AD Skopje can be obtained at the company office or web page, the entire branch network of Komercijalna Banka AD Skopje, or through a phone call.

BASIC TYPES AND CHARACTERISTICS OF INVESTMENT FUNDS

Most open-end investment funds are investing in one or more types of financial instruments (stocks, bonds, deposits, money market instruments, etc.). Overall, there are few basic types of open-end investment funds, a classification based on the instruments (or asset classes) in which they are investing in:

• Cash funds (money market, cash)
• Fixed income funds, or funds that are investing in bonds (bond funds)
• Mixed or balanced funds (mixed, balanced), and
• Stock funds, or funds that are investing in equities (equity funds)

The different types of financial instruments in which the fund assets are invested are carrying different types of risks, while at the same time offering different possibilities for return. Historically (and theoretically), there has been a positive correlation between the risk and the return. Higher the risk (market volatility) grater the possibility for achieving higher rate of return (stock funds, balanced funds). The funds that are investing in securities with smaller fluctuations or volatility (i.e. securities with lower level of risk) typically achieve lower rates of return in the long run. However, at the same time they are offering better safety and stability of investment (cash funds, funds that invest in long term bonds, etc.).

Money market funds are mainly investing in bank deposits, money market instruments, and short term fixed income securities issued by entities with highest credit quality. The growth of the fund assets is lower but continuous, while fluctuation in the value of shares practically does not exist. The main objective of this fund is to protect the investment from market fluctuations and to ensure high level of liquidity accompanied with continuous growth in the price of shares (providing stable return). The rate of return is usually higher than the interest rate on sight deposits offered by the commercial banks, while the clients are usually using them as a way for short term investment (cash management).

Fixed income funds are mainly investing in bonds (and other fixed income securities), which are characterized by smaller risk of changes in the value of shares. The main objective of this fund is to keep and maintain a stable value of the shares by investing in government and corporate bonds. Bearing in mind this portfolio structure, the optimal (recommended) investment period in this type of funds is at least 6 months or longer.

In the case of “stock” funds, a significant part of their assets are invested in equities with intention to achieve higher return over longer period of time. Although these funds are qualified as more risky than the ones mentioned above, through historical perspective, the stocks funds brought higher rate of return for investors when compared with all other types of open-end investment funds (stocks outperformed all other types of securities). Achieving higher rate of return is not possible without significant risk exposure (or without the possibility for large changes in the price of shares). However, as the investment horizon increases, the influence of market fluctuations on the value of single share is getting smaller. Consequently, the optimal (recommended) investment period in this type of funds is more than 3 years.

According to its structure and characteristics, the mixed or the balanced funds are combination of stocks funds and fixed income funds. The main objective is to provide stability (by investing part of the fund’s assets in fixed income securities) while at same time gives an opportunity for achieving higher returns by investing part of the fund’s assets in equities. Bearing in mind that the assets of this type of open-end investment fund are combination of equity and fixed income securities, the optimal investment period is usually between 2 and 3 years.

ADVANTAGES OF INVESTING IN OPEN-END INVESTMENT FUNDS

Professionally managed assets by following the basic principles of profitability, safety and liquidity

By investing in open-end funds managed by KB Publikum invest AD Skopje, you entrust your assets in the hands of experienced professionals, who on your behalf, are investing in domestic and foreign capital markets.

Diversification of investments through buying shares in the found

The fund assets are invested in different types of securities, companies, industries, sectors, markets and currencies. If there is a negative market effect on certain security, this effect can be neutralized by increase in price of other security in the portfolio. The clients can further diversify the risk by investing in different types of investment funds, each of them having a distinctive objectives.

Accessibility

You don’t need significant amount of money in order to participate in this type of investment vehicle. The payments can be done on multiple occasions; depending on the client’s current situation and his/her ability for making the payments (programmed payments, unequal payments in certain period, investment plan). By conducting the payments, the clients can achieve better average price for the fund shares (so called cost averaging – given the amount of payment, the clients will be able to buy more shares when price is low and vice versa).

Liquidity

Through guaranteed liquidity, at any moment the fund’s shares are at disposal of the clients.

Higher yield

Through indirect access to domestic and foreign capital markets, the fund gives an opportunity to investors to achieve higher return in short, medium and long-term, compared with the alternative forms of saving.

Simple and easy process of buying and selling fund shares

By filling a Request for buying shares (and paying the amount stated in the Request), or by filling a Request for buyout of shares, and handing over the documents directly in the Company’s business premises, internet site, as well as the entire branch network of Komercijalna Banka AD Skopje.

Legal protection of the investors

Through regular supervision form Securities and Exchange Commission of the Republic of Macedonia, and the control from the Custody bank (Komercijalna Banka AD Skopje). According to the provisions from the Law, the Company is preparing audited financial statements (for itself and for each Fund that is under management).

Access to information

All information regarding the funds managed by the KB Publikum invest AD Skopje can be obtained:

• Company’s business premises,
• Internet site,
• Media,
• On-line notice,
• Written notice,
• Phone call.

FIND OUT WHAT KIND OF INVESTOR YOU ARE?

Fill up this questionnaire and find out what kind of investor you are.

HOW TO MAKE THE RIGHT CHOICE?

The amount that is reasonable to invest in the fund primarily depends on the personal preferences and the possibility of each investor. Before making any decision for investing in the fund, every potential client is advised to take into account his/her wealth, current and future needs for cash, as well as propensity for risk associated with certain investment. At the same time, it is important to diversify your assets in order not be exposed to investment risk arising only from one security, or investment fund.