Trust management strategy
Expected return 10%
Investment horizon from 6 months
Acceptable risk 10%
Description of acceptable risk: the acceptable risk of the client's investment portfolio over an investment horizon should not exceed 10 percent of the value of the client's investment portfolio, determined as of the beginning of this investment horizon.
Information about manager's remuneration: success fee - 25% of income
Information about the expenses of the trustee: necessary and documented expenses related to the performance of the trustee’s duties.
Risk description of the standard management strategy "Basic - 1"
1. General Provisions
In general terms, risk is the possibility of losses in financial transactions due to the possible adverse effects of various factors. Below are the main risks that your operations in the securities market will involve.
1.1. Systemic risk
This risk affects several financial institutions and manifests itself in a decline in its ability to perform their functions. Due to the high degree of interaction and interdependence of financial institutions with themselves, the assessment of systemic risk is complex, but its realization can affect all the financial market participants.
1.2. Market risk
This risk manifests itself in an unfavorable change in the prices (value) of financial instruments owned by you, as well as due to an unfavorable change in the political situation, a sharp devaluation of the national currency, a crisis in the government debt market, banking and currency crises, force majeure circumstances (mainly natural and of a military nature), and consequently, leads to a decrease in profitability or even losses. Depending on the chosen strategy, the market (price) risk will consist of an increase (decrease) in the price of financial instruments. You should be aware that the value of the financial instruments can both rise and fall, and past growth does not mean it will rise in the future.
The following market risked should be especially highlighted:
1.2.1. Currency risk
Currency risk manifests itself in unfavorable changes in the exchange rate of the ruble against a foreign currency, whereby your income from holding financial instruments may be subject to inflation (a decrease in real purchasing power), as a result of which you can lose part of your income, as well as incur losses. Currency risk may also lead to a change in the amount of liabilities on financial instruments related to foreign currencies or foreign financial instruments, which may lead to losses or make it difficult to settle them.
1.2.2. Interest rate risk
It manifests itself in unfavorable changes in the interest rate that affects the market value of fixed income bonds. Interest risk can arise from the mismatch between the demand of claims and obligations, as well as from the varying degree of change in interest rates on claims and obligations.
1.2.3. Share issuer bankruptcy risk
It manifests itself in a sharp fall in the share price of a joint stock company that has been declared insolvent or in the anticipation of such insolvency.
In order to reduce market risk, you should carefully select and diversify financial instruments. In addition, it is important to carefully review the terms and conditions of your interaction with your manager to evaluate the costs associated with owning and dealing with financial instruments and ensure that they are acceptable to you and do not deprive you of the expected income.
1.3. Liquidity risk
This risk is manifested in the reduced ability to realize financial instruments at the required price due to a decrease in demand for them. This risk can manifest itself if it is necessary to sell financial instruments quickly, in losses due to a significant decrease in their value.
1.4. Credit risk
This risk lies in the possibility of non-fulfillment of contractual and other obligations undertaken by others in connection with your transactions.
Credit risks include the following risks:
1.4.1. Default risk on bonds and other debt securities
It concludes in the possibility of insolvency of the issuer of the debt securities, making it impossible or less probable to repay it on time and in full.
1.4.2. Counterparty risk
Third party counterparty risk is the risk that counterparties will not fulfil their obligations to you or your manager. Your manager must take measures to minimize counterparty risk but cannot eliminate it entirely. The counterparty risk is particularly high when performing transactions performed on the unorganized market, without the participation of clearing organizations that assume the risks of default.
You should be aware that although the manager is acting on your behalf, the risks he or she assumes as a result of such actions, including the risk of non-performance or improper performance of obligations of third parties to your manager, are borne by you. You should bear in mind that in all cases the customer's funds are held in a bank account and you bear the risk of bankruptcy of the bank where they are held. Evaluate where exactly the assets transferred by you to the Manager will be stored and whether you are ready to conduct transactions outside the centralized clearing infrastructure.
1.4.3. The risk of your manager defaulting on his obligations to you
The risk of your manager not fulfilling certain obligations to you is a type of counterparty risk.
The general duty of the manager is to act in good faith and in your best interest. Otherwise - the relationship between the client and the manager is of a trusting way, which means that the risk of choosing the manager, including the assessment of his professionalism, lies with you.
The agreement may determine the range of financial instruments to be transacted and the transactions themselves and may require additional consent from your side in certain cases, thus limiting the powers of the manager. You should be aware that if the contract does not contain these or other restrictions, the trustee has broad rights in relation to the property transferred to him - similar to your rights as an owner. Read the contract carefully in order to assess what powers your trustee will have over the use of your property, what are the rules for its storage, as well as its return.
1.5. Legal risk
Related to the possible negative consequences of the adoption of laws or regulations, standards of self-regulatory organizations that regulate the securities market, or other sectors of the economy, which could lead to negative consequences for you.
Legal risk also includes the possibility of changes in tax calculation rules, tax rates, cancellation of tax deductions and other changes in tax laws that may lead to negative consequences for you.
1.6. Operational risk
It consists of the possibility of you incurring losses as a result of violation of your manager’s internal procedures, errors and unfair actions of his employees, malfunctions in the technical means operations of your manager, his partners, infrastructure organizations, including trading organizers, clearing organizations, as well as other organizations. Operational risk may preclude or hinder transactions and lead to losses.
Read the contract carefully in order to assess which risks, including the risks of which technical failures, your manager bears, and which of the risks you bear.
1.7. Powers of the manager
The contract that you conclude, limits the powers of the manager. In this regard, the manager should not take measures to reduce your losses in case of an unfavorable change in the value of your portfolio. Therefore, you will not be able to claim any compensation from your manager for such inaction. Assess whether the proposed management method is in your best interests and your willingness to bear the corresponding risks.
2. Risks associated with the acquisition of foreign securities
The purpose of this Declaration is to provide the client with information about the risks associated with the acquisition of foreign securities. Foreign securities can be purchased abroad or on the Uzbek stock market, including the organized one.
Operations with foreign securities are subject to the general risks associated with operations in the securities market with the following features.
2.1. Systemic risks
Regarding foreign securities, the systemic risks inherent in the Uzbek stock market are supplemented by similar systemic risks inherent in the country where the relevant foreign securities are issued or traded. The main factors affecting the level of systemic risk in general include the political situation, the specifics of national legislation, currency regulation and the likelihood of their change, the state of public finances, the existence and degree of development of the financial system of the country where the obligator of the foreign security is located.
The level of systemic risk can also be influenced by many other factors, including the likelihood of restrictions on investment in certain sectors of the economy or the likelihood of a one-time devaluation of the national currency. The generally accepted integral measure of the systemic risk of investments in a foreign security is the “sovereign rating” in foreign or national currency assigned to the country in which the issuer is registered by the international rating agencies MOODY'S, STANDARD & POOR'S, FITCH IBCA, however, it should be borne in mind that the ratings are only benchmarks and may not correspond to the actual situation at a particular moment.
As for transactions with foreign depositary receipts, in addition to the risks associated with the issuer of the receipts themselves, the risks associated with the issuer of the foreign securities represented by those receipts must also be considered.
Meanwhile, there are risks of changes in regulatory approaches to ownership and operations, as well as to accounting for rights to foreign financial instruments, which may result in the necessity to alienate from them contrary to your plans.
2.2. Legal risks
When purchasing foreign securities, it is necessary to be aware that they are not always analogues of Uzbek securities. In some case, the rights conferred by them and the rules for exercising them may differ significantly from those of the Republic of Uzbekistan.
The possibilities to enforce your rights with respect to foreign securities may be significantly limited by the need to apply to foreign judicial and law enforcement agencies under established rules, which may differ significantly from those in force in the Republic of Uzbekistan. In addition, in most cases while dealing with foreign securities, you will not be able to rely on the competent authorities of the Republic of Uzbekistan in terms of protection of your rights and legitimate interests.
2.3. Information disclosure
The legislation of the Republic of Uzbekistan allows disclosure of information with respect to foreign securities under the rules applicable abroad and in English. Assess your willingness to analyze information in English, and whether you understand the differences between the financial reporting rules adopted in the Republic of Uzbekistan, International Financial Reporting Standards, or the financial reporting rules, according to which information is published by an issuer of foreign securities.
Besides, Uzbek trade organizers and/or brokers can translate some documents (information) disclosed by a foreign issuer for your convenience. In this case, the translation can be perceived as supporting information to the officially disclosed documents (information) in a foreign language. Please always bear in mind the possibility of translator's errors, including those related to the possible different translation of the same foreign words and phrases or the lack of a commonly accepted equivalent.
3. Risks associated with individual investment accounts
If the trust management agreement that you conclude is related to the maintenance of an individual investment account, then such an agreement enables you to receive an investment tax deduction. All the risks mentioned in this description are also relevant for individual investment accounts, however, there are peculiarities that you should be aware of in order to take advantage of the tax advantages that such accounts provide, and to eliminate the risk of losing such advantages.
There are two options for investment tax deductions:
1) “per contribution”, under which you can apply for an annual refund of income tax paid on the amount of the contribution you made, but you will have to pay income tax on income calculated when you close the the individual investment account;
2) “for withdrawal of funds from the account”, under which you will not be able to receive an annual tax refund but will be exempt from income tax on withdrawing funds from an individual investment account.
Please note that you will only be able to use one of the investment tax deduction options, which means that if you use the “contribution” investment deduction at least once, you will not be able to use the “withdrawal” investment deduction, which could deprive you of all the benefits of this option. Determine your preferred option and discuss the advantages and disadvantages of each option with your manager and/or a specialized adviser.
You should also be aware that if you terminate your contract earlier than three years, you will not be able to take advantage of the described investment tax deductions, and if you have used the “contribution-based” deduction, you will be obliged to return all of the tax refunded to the state.
Foreign Enterprise Limited Liability Company "GENEZIX CAPITAL" (Abbreviated name: FE LLC "GENEZIX CAPITAL")
Taxpayer Identification Number (TIN): 308686604
Address: Republic of Uzbekistan, Tashkent 100000, Mirzo-Ulugbek district, Mustakillik avenue, 75.
Telegram /WhatsApp +998900495777