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Risk Warning

Risk Factors

The following list of risk factors is provided as an indication of the variety of risks which exist with investment in Aberdeen funds detailed on this Aberdeen UK web site. The material on this site is directed only at persons in the UK. It is not an offer or invitation to buy or sell the funds to persons in any other jurisdiction other than the UK. These risks are not extensive and not all risks will apply to each investment. Investors attention is, however, drawn to these risks as investment in Aberdeen's range of products may not be suitable for all investors. In order to assist investors risks have been grouped in different categories.

You should note that investment in any Aberdeen fund should ONLY be made on the basis of reading the full Fund Documentation - Brochure, Fund Scheme Particulars, Prospectus or Offer Documents and Disclosure Documentation (Key Features / Simplified Prospectus and Terms & Conditions). Copies of the documentation for all funds are contained within this web site. Links to these documents are clearly indicated on web pages and full disclosure literature is provided before you invest online.

If investors are in any doubt of the suitability of an investment given their individual circumstances, they are recommended to contact an independent financial adviser who will be able to provide tailored advice. Aberdeen Asset Management is not authorised and consequently unable to provide investment advice to individual customers. The information contained on this web site is made available for information only. Opinions expressed whether in general or both on the performance of individual funds and in a wider economic context represent the views of the contributor at the time of preparation. They are subject to change and should not be interpreted as investment advice.

All Funds:

  • The value of shares and the income from them can go down as well as up. You may not get back the amount invested.
  • Past performance is not a guide to the future.
  • Derivatives may be used to hedge against various risks for the purposes of Efficient Portfolio Management as permitted by relevant statutory regulations (which may vary between different fund groups in different jurisdictions). The use of derivatives for hedging in a rising market may restrict potential gains.
  • When cancellation rights are applicable and you exercise them, you may not get back the full amount you invested if the share price falls between the initial investment and when we receive written confirmation that you wish to cancel the contract.

Charges:

  • Where the Manager's periodic charge is to be taken from the income generated by the fund and there is insufficient income within the fund to meet that charge, the balance will be deducted from the fund's capital and to that extent this will constrain capital growth.
  • Where the Manager's periodic charge is wholly taken out of the fund's capital, distributable income will be increased at the expense of capital, and to that extent, capital will be eroded or future growth constrained.

Foreign Exchange:

Changes in exchange rates could affect the value of your investments. Movements in foreign exchange rates can impact both on the level of income received and the capital value of the investment. For example, if Sterling strengthens against the currency in which the underlying investments of the fund are made, the value of your holding will reduce and vice versa.

Bond and fixed interest funds:

  • Unlike income from a single bond, the level of income from a OEIC is not fixed and may fluctuate. Yields are estimated figures and may fluctuate.
  • Interest rate fluctuations affect the capital value of investments. Where long term interest rates rise the capital value of shares is likely to fall, and vice versa.
  • The value of a bond will fall in the event of the default or reduced credit rating of the issuer (or if credit spreads widen, relative to gilts), similarly an increase in credit rating (or narrowing of credit spreads) can lead to capital appreciation. Generally the higher the rate of interest on any bond, the higher the perceived credit risk of the issuer. The yield (and hence market price) at any given time will depend on the market environment. However, the impact of any default is reduced by diversifying the portfolio across a wide spread of issuers and sectors.
  • In risk terms, corporate bond funds are often considered to be a "half way house" between equity funds and building society accounts. However, unlike a bank or building society account where your capital is secure, corporate bond funds are not risk free. In view of the special risks associated with investment in funds containing investments which are below investment grade, such funds should be considered a greater risk than investment in equity funds and it is recommended that investment in such funds should not constitute the sole or principal component of any investors portfolio. Investments in such funds may not be appropriate for all investors.
  • Bond yields (and as a consequence bond prices) are determined by market perception as to the appropriate level of yields given the economic background. Key determinants include economic growth prospects, inflation, the government's fiscal position, short-term interest rates and international market comparisons. Returns from bonds are fixed - as at the time of purchase, the fixed coupon payments are known, as is the final redemption proceeds. This means that if a bond is held until its redemption date, the total return achieved is unaltered from its purchase date. However, over the life of a bond, the yield (and hence market price) at any given time will depend on the market environment at that time. Therefore, a bond sold before its redemption date is likely to have a different price to its purchase level and a profit or loss may be incurred.
  • The underlying investments of high yield bond funds are exposed to credit risk which reflects the ability of the borrower (i.e. bond issuer) to meet its obligations (i.e. pay the interest on a bond and return the capital on the redemption date). Generally the higher the quality of issuer, the lower the interest rate at which they can borrow money. Issuers of a lower quality will tend to have to pay more to borrow money to compensate the lender (the purchaser of a bond) for the extra risk taken.

Emerging markets:

Investment in emerging markets tends to be more volatile than more mature markets and the value of your investments could in some circumstances move sharply either up or down. In some circumstances the underlying investments may become illiquid which may constrain the investment managers ability to realise some or all of the portfolio. The registration and settlement arrangements in emerging markets may be less developed than in more mature markets so the operational risks of investing are higher. Political risks and adverse economic circumstances are more likely to arise putting the value of your investment at risk. The fund may also invest indirectly in emerging markets via ADRs or GDRs. Though operational risks here are significantly reduced, the value of these securities will also be impacted by political and economic developments in the underlying markets.

Specialist sectors/small markets:

  • Funds which invest in a small market sector, are likely to be more volatile than a more diversified fund.
  • Funds which invest in a specialist market sector, may at times, experience difficulties in realising some of the underlying holdings due to the specialist nature of those investments.
  • Funds which include collective investment schemes investing in specialist market sectors within the portfolio, are likely to be more volatile than a more diversified portfolio.
  • Funds which are specialist country specific funds, carry a greater risk due to their concentration than a fund diversified across more countries of investment, in return for higher potential rewards.
  • Funds which invest in a specialised geographical region, carry a greater risk due to their concentration than a fund diversified across more regions, in return for higher potential rewards.
  • Funds which invest in smaller and/or medium sized companies are specialist funds and as such are likely to carry higher risks than a more widely invested fund.

Technology:

Investment in technology related stocks can be more volatile than investments in more traditional or longer established companies. Above average price movements can be expected.

OEICs & Umbrella Structures:

OEICs are corporate vehicles. An OEIC may have very many 'sub-funds'. Each sub-fund of the Aberdeen OEIC is open to direct investment or ISA investment. You should be aware of the potential for cross-liability risk with OEIC investment. A creditor of the Company may look to all the assets of the OEIC for payment, regardless of the sub-fund in respect of which that creditor's debt has arisen. Assets may be re-allocated to and from any other funds if it is necessary to do so to satisfy any creditor proceeding against the OEIC.

The same cross-liability risks apply to some offshore fund umbrella structures e.g. Aberdeen International Funds. Although each fund is invested independently and will be treated as bearing its own liabilities, you should note that the company as a whole will remain liable to third parties and hence, it is possible that a deficit arising in one fund could affect the assets of other funds which would be available to discharge any outstanding liabilities in the fund with the deficit. This is commonly referred to as 'cross liability'.

ISAs

  • The value of tax benefits depends on individual circumstances and the favourable tax treatment for ISAs may not be maintained.
  • In the case of dividend distributions on ISA holdings, a 10% tax credit will be reclaimed until April 2004, when the tax credit will be abolished. In the case of interest distributions on ISA holdings, income tax (currently 20%) will be reclaimed in full.
  • If you exercise your right to cancel the purchase of shares following an ISA transfer the cancellation proceeds will be paid direct to you and you will irrevocably lose any favourable tax treatment associated with an ISA holding.
  • For ISA transfers, there is potential for a loss of income, or growth following a rise in the markets, whilst the ISA transfer remains pending.
  • The Aberdeen ISA does not meet the Government "CAT" standards defining Costs, Access and Terms.
  • The tax benefits of ISAs could change in the future. These tax benefits also vary between investors;
  • If you transfer into the Aberdeen ISA you should appreciate that during a part of the period of transfer your investment will be in cash. This means that until your cash is reinvested into the Aberdeen Fund(s) of your choice you will not be exposed to any gains or falls in stock markets. Please note that the transfer can take up to 30 days;
  • If you exercise your right to cancel an ISA, the proceeds will be paid to you, but you will lose the tax advantages of the ISA;
  • Transferring your ISA from another manager may incur dealing expenses or other fees.

Offshore Funds

Certain funds on the Aberdeen web site are 'offshore' funds, e.g. domiciled in Dublin, but are recognised by the UK's Financial Services Authority for distribution in the UK. Investors should be aware that unlike UK based funds, the full protections of the Investors Compensation Scheme may not be available.

Venture Capital Funds

Potential investors in VCTs are strongly advised to seek independent professional advice when considering investment in a VCT. Share values and income from them may go down as well as up and you may not get back the amount originally invested. Existing tax levels and reliefs may change and the value of reliefs depends on personal circumstances. An investment in a VCT carries a higher risk than many other forms of investment. A VCT's shares, though listed, are likely to be difficult to realise. Prospective investors should regard an investment in a VCT as a long term investment, particularly as regards a VCT's investment objective and policy and the three year period for which shareholders must hold their ordinary shares to retain their initial income tax relief. The investments made by VCTs will normally be in companies whose securities are not publicly traded or freely marketable and may, therefore, be difficult to realise and investments in such companies are substantially riskier than in larger companies. If a VCT loses its Inland Revenue approval, tax reliefs previously obtained may be lost.

Shares with preferred entitlement

Some Aberdeen investment trusts have a variety of share classes with different rights attached to them. Investment in ANY Aberdeen investment trust must be made solely on the basis of the Fund's Prospectus and Key Features / Simplified Prospectus document. Investment in investment trusts may not be suitable for all investors.

The web site contains details of some "split capital investment trusts". The nature of these funds is fully explained on the Aberdeen web site. Investors should refer to the most up-to-date information contained within the web site.

If you have any concerns about the relative risks of any of the Aberdeen investment trusts or the suitability of an investment trust ISA then you should contact an independent financial adviser.