The impact of initial charges

When writing for this column we spend a great deal of time talking about which investments we recommend and why. However, to give us all a break, this week we will concentrate on the actual structure that holds the investments that you have. There are many choices and alternatives available to suit most needs. However, the one thing that should be made clear now is that funds should not be used for short term gain. Very rarely will the cost of setting up the fund and having, in certain instances, to pay exit charges be paid for within a few months. As aid above, there are many different products that will cater for what people want. This usually depends on such things as the potential buyer’s personal situation, nationality, residence, age, tax situation and investment strategy as to which platform and provider should be used. However, we are finding more and more that the product that is most applicable and flexible for clients is the offshore Personal Portfolio Bond (PPB). This is because it fulfills what most people need.

What is a PPB? It is a flexible unit-linked whole life lump sum investment policy. It offers you the opportunity to take advantage of a wide range of investment opportunities, in most major asset classes and currencies.

The investment opportunities include stocks, shares traded on major stock exchanges and collective investment schemes (including Unit Trusts, UCITS, Investment Trusts, OEICs and SICAVs). You have the convenience of holding all the assets in one portfolio and can change your investment portfolio at any time.

With a PPB you can create a truly personalised portfolio and combine it with the potential benefits of a life policy. It provides a great opportunity to achieve capital growth with the minimum amount of administration for you and your family.

Different fund managers can allow for different investment strategies. With a more traditional structure, if a particular investment is underperforming, changing strategy or fund manager may mean you suffer not only exit penalties and new initial charges on a new investment, but also a possible tax liability as well.

By choosing a PPB, you avoid this problem and can also enjoy the following benefits:

* Access to collective investment funds, and other assets such as Eurobonds, stocks and shares.

* A choice of competitive charging structures to suit your needs.

* 100% of premiums invested.

* Unlimited switching between fund managers and funds, even those of different currencies (a charge of ฃ21 will be levied for a purchase or sale).

* Detailed quarterly valuation reports (plus NAV Global online) outlining your complete portfolio including information on investment movements, cash withdrawals and charges.

* Death benefit of 101% of the surrender value of the policy at no extra cost.

* Facility to invest additional lump sum premiums.

* Easy access to capital - total or part surrender at any time with the option to take regular withdrawals to provide an ‘income’ (an Early Withdrawal Charge may apply depending on the charging structure chosen).

* Choice of policy currency. Please note, if you nominate a Policy Currency other than that in which your premium is paid, you should be aware that a currency conversion will be required which could expose you to exchange rate fluctuations. Discretionary or blanket currency hedging available so that portfolios can be managed in or benchmarked against all tradable currencies, including Thai baht.

* Significant savings on some fund charges compared with investing directly in funds.

* Ability to transfer existing asset holdings into your bond (a tax liability may be incurred).

* Option to select your choice of custodian by using the selected custodian facility.

* Option to select third parties to help administer and manage your portfolio.

* Access to the leading global portfolio manager over 5 years to 2003, 2004, 2005 and 2006# to manage the investments in your portfolio.

# Ranked 1st by S&P Global Asset Allocation, Dynamic/Neutral 2003, 2004, 2005 & 2006

So, how does this affect your back pocket and how effective is it from a cost efficiency point of view?

There are a number of ways to use bargaining power to negotiate some of the best terms available from external fund management houses in order to minimise and as far as possible absolutely negate all initial charges when acquiring units in any investment funds. This is not only a consideration that can impact when an investment is made but because if the need to actively manage investments, this also applies when underlying investments are switched or altered.

To illustrate this we should consider 3 common scenarios:

Investor A regularly scours the market for investment opportunities and invests directly into the investment funds that he believes will offer him the greatest opportunities for return. Once this has changed - maybe the funds increase dramatically for a period and the economic outlook for that holding is no longer as positive as it previously was - he will sell this holding and transfer into whichever fund he now believes is best positioned to make a return at that time. Over time he repeats this process several times.

Investor B invests into a unit-linked investment plan that acquired mirror funds - mirror funds are institutional copies of investment funds licensed by fund management companies (such as Fidelity, Templeton, New Star, Vanguard, etc.) to financial institutions (such as Friends Provident, Zurich, Hansard, etc.). The benefit of these is that they generally offer access to investment or re-investment with no initial charge (i.e., there is no one time cost to pay when you invest or when you switch funds). The downside, however, is that to feed the extra mouth that comes to the table, that of the financial institution, ongoing management charges will be higher.

Investor C invests into a Personalised Portfolio Bond - with this structure he has open access to almost any tradable investment and there is generally no switching or investment costs (other than nominal dealing/broking fees of around US$22.50, or the currency equivalent thereof per trade). Furthermore, the management fees that he pays would either be the same as Investor A or in many cases lower because of institutional dealing terms and certainly lower than Investor B.

To illustrate the impact of initial charges for actively managed portfolios, we have used the following examples:

Investor A and Investor B choose identical investment funds and make 1 (one) switch each year on the same date at the same price into the same funds. However, Investor B incurs a 2% initial charge on each fund switch. Investor C invests via a personalised bond and incurs only nominal dealing charges. We have assumed that he pays the regular, non-institutional fund management charges for the sake of simplicity, although in reality his management charges would certainly be lower and his actual returns higher than those stated below.

Funds shown below have been selected purely randomly.

What would be the impact on final returns, ignoring any other product wrapper fees?

In this particular example, there is an almost 28% difference in returns between the best and worst structures, ignoring the impact of any other wrapper charges. This demonstrates the compounding impact of initial charges over time when regular fund switching occurs. Please note that other fund switching examples used will demonstrate either smaller or larger differentials in final valuations. However, this does emphasise the need for selection of the correct investment platform as well as the most appropriate investment funds.

The three key elements that comprise return are:

Costs (at both the fund management and platform level)

Tax implications

Investment growth

All of these aspects are important - there is no point getting 2 out of 3 right but losing out badly on the remaining one, especially if it eats into all the gains you may have made. It takes experience to recognise what the optimum charging schedule is for a particular set of circumstances and accurately assess all 3 of these aspects and to be able to make suitable, impartial recommendations for clients of all nationalities and with every kind of background or requirement.
 

The above data and research was compiled from sources believed to be reliable. However, neither MBMG International Ltd nor its officers can accept any liability for any errors or omissions in the above article nor bear any responsibility for any losses achieved as a result of any actions taken or not taken as a consequence of reading the above article. For more information please contact Graham Macdonald on [email protected]@mbmg-international.com.com

Snap Shots: by Harry Flashman

Holiday photographic encounters

In all the flurry of activity when packing for the overseas trip, it is easy to forget to pack a camera (or two if you are a real enthusiast). However, everyone wants a photographic record of the trip, the event, the new experiences. After all, you saved for 11 months for this, don’t let it just become a casual conversation on your return!

Now before you add “Pack Camera” to the To Do list, there’s a little bit of photographic preparation to be done too. The first, and should be most obvious, is just to make sure the camera works. If you haven’t used the camera for some time, buy new batteries for it and put a roll of film through it before you go away. There’s nothing worse than finding out that the camera had a problem after you get back! If you are a digital person, then you should also take a few shots and look at them critically to make sure it is really working properly. Squinting at the small screen on the rear of the camera body does not truly show you what the camera has recorded.

Now, no matter where you go these days, someone has been there before you. And they’ve written a guide book about it too, so your next move is to actually plan some shots before you even leave Thailand. Research your destination properly and you should know what is likely to be a significant place, monument, castle, lake, waterfall, etc., in the area you will be visiting. When you read the Lonely Planet Guide or whatever, use a highlighter pen to remind you of photo opportunities.

Thinking about and anticipating “how” you should take any landmark will produce much better results when you finally arrive to take the picture. You will not be so over-awed that you just stand there and go “click”. You will be ready to try to show this segment of your trip with some photographic flair. It works, believe me!

It is always tempting to take photographs from the plane. There is one classic shot you should always attempt on every trip. That is the aerial. Shooting out of plane windows is not really all that difficult with today’s cameras, but there are a couple of catches. Firstly, pick a porthole where you can see a little of the engine intake in the shot. Adds drama and shows how you got up there! Shoot from the side of the plane opposite from the sun. This way you won’t see the scratches on the plane window. Use a wide-angle lens if you’ve got one, set the camera on auto and get as close to the window as possible, but not touching it (otherwise you get vibrations coming through to give you fuzzy photos).

Shooting the locals. Your research of the places you are going to will soon tell you if there are interesting “locals” which would make good photographs. Priests, tribes folk, indigenous people, policemen in uniform and the like all make for good shots and gives the “atmosphere” of your holiday. It’s OK to shoot when they are unaware of your presence, but if you want a formal photograph, always ask. Just wave the camera and smile if you can’t speak the local lingo. It usually works. If not, wave money! That always does.

If you are going to well known destination like London, Paris, or New York, then you will always be able to buy fresh film over there, but if you are going to the Mongolian Steppes, you may need to bring your own supplies. I also suggest that the digital folk take along some spare memory cards and download their precious images back here, where you know that everything (should) work correctly and not delete images unexpectedly.

Finally, you should think about how you are going to present the results. It is always a huge temptation to bring out folders of photos as soon as you get back. Wait! Sort them, keep the good, throw away the bad. Show only your best shots and everyone will be amazed at your superb photographs!

Modern Medicine: by Dr. Iain Corness, Consultant

Just what is ‘healthy’ exercise?

There seems to be a train of thought out there, that everyone should attend a gymnasium to get ‘fit’. I too have attended a gymnasium – twice! Once was for three months, after I promised the gymnasium instructor that I would try it for the proscribed period. I have to admit that pedaling an exercise bicycle to nowhere I found a giant bore. I was glad when the three months were up. I did not feel any “fitter” either. The second time was at the end of last year before the Four Hour race at the Bira Circuit, to tone up my neck, back and arm muscles. That I found a giant bore as well, but I did feel that the muscles were stronger and did last the race without a problem.

Probably the commonest advice a doctor gives out at the end of the year is to lose weight and get some exercise. Was that part of the advice after your annual physical check-up? Very likely.

Unfortunately, there seems to be very little real understanding of what exercise should consist of, how often, what type, how long and what about sex? However, getting a little serious, exercise will be good for you, provided that you pick a form of exercise that is not harmful for you!

Now I know that looks as if I have put my money on both horses in the race, but take that sentence at its face value. Enough research has been done to show that regular exercise is beneficial for everybody, in both the physical and psychological aspects, but, and it is a big ‘but’, all forms of exercise have relative bodily risks, and this has to be taken into account before you buy a pair of expensive jogging shoes and tackle a 10 km trot in the middle of the day. True stories – a medical colleague in Australia took up playing squash when he turned 50 and dropped dead on the court of a heart attack, and another acquaintance of mine turned 40, decided he wasn’t fit, bought a bicycle to ride to work each day and was run over by a bus.

I read an article that advised non-slippery shoes for the novice exerciser and suggested you choose appropriate exercise according to your ability. Never exceed your limit. Remember that it is not the harder the better. If you have acute medical problems (such as fever, or pain), stop exercising. If you have chronic medical conditions (such as hypertension, diabetes, ischemic heart disease and arthritis), seek advice from your doctor or physiotherapist beforehand. All of these I agree with. If you are happy to take your body to your medical advisor when it is sick, take it back to your doctor for advice on how to tone it up as well.

The form of exercise should be one that you enjoy, and it may be gymnasium work, or jogging, or walking, or swimming or something else reasonably vigorous. It should be such that you raise a sweat, but not to the point of dehydration! Do not wait until you are thirsty. Take appropriate breaks. Do not over-exert yourself. Forget about “powering through the pain barrier”. Leave that for drug-fuelled cyclists in France.

As well as the form of exercise, there is the frequency. At least three times per week, 20-30 minutes (or more) is necessary each time, to derive the maximum benefit. But always remember, if there is dizziness, fainting, shortness of breath, chest pain, vomiting, nausea or severe pain during exercise, stop exercising immediately and seek medical advice as soon as possible.

Now I did mention horizontal folk dancing and some of you have been impatiently reading, while nervously fiddling with your expensive packet of Viagras, Kanagras, Cialis and other lead-in-your-pencil medications (I draw the line at tiger willy). OK, what about sex? The advisability of this form of exercise when you have some chronic complaint (such as hypertension, diabetes, ischemic heart disease, etc.), should be part of the advice you get from your doctor beforehand. The danger of over the counter willy stiffeners is that you don’t get advice with them.

A fitter body means better sex. OK?

Doc English, the Language Doctor: Using Dialogue to make great English Speakers - part 1

Hello! If you have been following this column, I sincerely hope that some of the ideas I have talked about have been successful and that your child is been able to make steady progress in English. Remember, a little bit of focused practice every day goes a long way!

Last week we looked at ways of ways of improving your child’s listening skills. We talked about the need to provide listening practice on a daily basis and the importance of asking your child questions (and encouraging them to ask questions too). If you buy your child a new toy you might try playing this little game to challenge your child:

Hide the toy (book, or object) in a bag. Reveal the toy slowly, asking questions such as ‘What is it?’, ‘Where does it come from?’ If it’s a moving toy or game you can ask ‘How does it work?’ Play the game a few times and then encourage your child to ask the questions instead, or even reveal the object themselves. This game also works well if the child ‘feels’ the toy whilst it’s still in the bag, without looking at it. This game works well with kinesthetic learners (children who have a preference for learning by touching things, rather than listening (auditory learners) or seeing (visual learners).

This week we look at more ways to develop Speaking Skills. Speaking is often seen as a major obstacle and learning to speak in a foreign language gets harder as children grow older, so start them very young! If you live in a bilingual household where two or more languages are spoken, make sure your child gets plenty of exposure to both languages and is encouraged to speak in two (or more) languages. Many Thais also speak Laos, Cambodian and many other languages and dialects besides, so make sure these are represented too in some way if you can. We don’t want our native languages here in Thailand dying out. Children have an innate ability to acquire language at a very early age, so don’t be too afraid that they’ll become confused.

This week’s lesson is designed primarily for young children learning English for the first time, but some of the ideas would also work with adult beginners.

One way of the best ways to develop speaking skills is to practice English using simple Dialogue. Dialogues work much better if they are meaningful, so choose a subject or scenario that you would both recognise and understand, such as ‘going shopping’ (don’t just pull a dialogue out of a text book). Dialogues should contain a small, useful exchange with a few words that might be encountered in every day life. The exchange should be as natural as possible. Try not to make the dialogue too formal or informal.

It seems to me that everyone in Thailand is familiar with the following Dialogue:

T. Hello.

S. Hello.

T. How are you today?

S. OK, fine thanks.

This dialogue appears to work well as fortunately most people are ‘fine’ all the time and even if they are not, they are usually too polite to say so. However, students can run into trouble if they don’t know how to react to new situations or questions. Children need to be encouraged to speak without being afraid of making ‘errors’ when speaking. To do this they need a relaxed environment and lots of opportunities to practice and be creative with the dialogue. Grammar and pronunciation should come second to ‘getting the message across’. If you want to encourage fluency in English, don’t over correct. Accept and praise any response your child makes using English language. Pay attention to the content of the message, not the way that it is being spoken. You can provide instruction later, perhaps at the start of the next session.

Rather than repeating a few polite phrases, it is more useful for your child (or partner) to be able to elaborate on or alter their response depending on their mood or situation. To become really fluent, children need to be encouraged to think creatively and to make and practice dialogue of their own, so this should be your long term aim.

Practice dialogue every day and switch roles regularly, varying your questions and your answers, so that your child gets to understand how the language patterns can be changed. For example, you can go through all the emotions and be ‘happy’, ‘sad’, ‘surprised’, ‘relaxed’, etc. The next week you can be ‘cool’, ‘hot’, ‘burnt’, ‘wet’, depending on the weather. Encourage your child to vary their response too. You can record or video your sessions so that your children can view their dialogue at a later stage, self correct and learn to appreciate the progress they have made.

You can build a few new words into your Dialogue every day. Don’t include more than a handful of new words each week (10-20) and don’t expect your child to understand them the first time round. Longer syllable words may be harder to remember so try to use shorter words at first.

To be continued next week…

Remember, you can send your questions or suggestions to me via email at [email protected]. Happy talking.

Let’s go to the movies: by Mark Gernpy

Now playing in Pattaya

Aliens vs. Predator: Requiem: US Action/Horror/Sci-Fi – I saw this on Christmas Day, and it is just what you would expect it to be, a comic book brought to life, loudly. One reviewer writes: “A vile, joyless, murky, moronic, amateurish, contemptuous, numbing, unintentionally hilarious, and thoroughly diseased motion picture.” Sounds like he’s unacquainted with Thai horror films.

I found it an exciting and confusing blood bath and gore fest, with an excess of bodily fluids – blood from the humans and lord knows what translucent slime from the non-humans. Pretty mindless, and with truly banal dialogue. Rated NC17 in Thailand, R in the US for violence, gore, and language. Generally negative reviews.

National Treasure: Book of Secrets: US Action/Adventure – The movie is absolutely preposterous and utterly implausible, but I thought it a lot of fun – but then I like very much Nicholas Cage’s persona and sense of humor. If you liked the first film, I think you will enjoy this one, also. For my money, Helen Mirren was a pure delight! Mixed or average reviews.

I Am Legend: US Action/Drama – Will Smith as a brilliant scientist responsible for releasing a virus that apparently cured cancer but then went on to kill billions of people as well, and proved unstoppable and incurable.

I think the first two-thirds is fascinating and a fine movie, with a superb Will Smith, surprising in the depth and the range of his acting; then it degenerates into a typical zombie flick. But, after all, that was the story they had. See it, for Will Smith and for the technological marvels of a dead and overgrown New York City, with lions hunting deer on Fifth Avenue! Generally favorable reviews.

His Dark Materials: The Golden Compass: US/UK Adventure/Fantasy - I just saw it again, and again was quite captivated by it, even more than before. In a parallel universe, a young girl journeys to the far North to save her best friend and other kidnapped children from terrible experiments by a mysterious and evil organization. The film is a grand, rich fantasy, beautifully done, remarkably detailed. Strangely, it has gotten only mixed or average reviews. But see it anyway — it’s very enjoyable, and eye-popping!

Alvin and the Chipmunks: US Animation/Comedy/Family – The reviews pretty much agree that it’s mediocre and immediately forgettable: the characters are underwhelming in their appeal, and lack the charm of their previous incarnations. Mixed or average reviews.

The Warlords: Hong Kong Action/War – A heroic tale of the breakdown of the friendship between three blood brothers when one kills another to steal his wife, and the third seeks revenge. Starring Jet Li and Andy Lau, it’s one of the most solid Chinese films I’ve seen in some time. Beautifully photographed and directed, fine performances, a wide sweeping story. Unfortunately, here it’s in a Thai-dubbed version only.

Konbai The Movie: Thai Romance/Comedy – Usual low-class Thai comedy with the usual stars, mostly from television.

Yen Pe Le Semakute (Three Cripples): Thai Low Comedy/Action – With Jaturong Mokjok. Just an ordinary, very low-class Thai comedy with well-known television and movie stars.

Pong Lang Amazing Theatre: Thai Low Comedy – A theatre owner tries to rescue his theater from oblivion. Crude and crass, it’s only for those who like such things.