Having business insurance is advantageous as it reduces your business’s liability in the event that an accident happens. Liability insurance will protect you if lawsuits are filed against you. Usually, this insurance will be for a specific amount of money. Any additional costs beyond this limit are the responsibility of the business. Therefore, it is important to make sure you get the appropriate amount of coverage.

Another reason to have business insurance is that is allows a business to recover lost goods. These goods can be lost due to a multitude of reasons, such as damage, vandalism, fire, theft and natural disasters. Without this insurance coverage, your business could significantly deplete their cash flow if goods need to be replaced.

Often, certain types of business insurance are legally mandated. Typically, the sort of insurance that is required is one that protects workers in the workplace. Even if a business just employs one person, they are legally required to have this insurance. In some situations, not having it can not only leave you vulnerable if an employee is injured on the job, but you can also face stiff fines which can be levied for failure to have this kind of business insurance.

In order to obtain business loans or investments, most businesses will need to have proof of current business insurance. Lenders and investors want to know that their money is safe. Businesses without insurance are just too risky in which to invest. In some situations, a loan can be obtained without insurance, however, due to the increased risk, the lender will offset this but charging an extremely high interest rate.

First and foremost, it is important that we stay in-touch with actual hard-copy written letters. A letter is much more personal when received in the mail, and it also adds a formal touch. Address labels help with this. There is no more worrying about chicken-scratch addresses hastily written on the corner of the envelope, no lost or returned mail because the postal carrier could not find the correct address. An address label is a quick way to add both a personal touch of flair, and a way to save time by simply sticking on a label instead of taking extra time to print the address. Just peel, stick, and mail!

Labels come in a variety of styles, colors, and themes. They allow each individual to choose which style characterizes their personality most, whether the label professional and formal for the businessman on-the-go, more relaxed and girlish for stay-at-home mom, or even festive holiday-themes for those mailing Christmas or birthday presents. They are easy to order, and even easier to use. Letters or packages that arrive with labels tell the receiver that the sender cares about him or her enough to send them an actual package, instead of a hastily written e-mail.

It is important that communication remain personal, and personalized labels are the way to keep it so.

The same holds true for teleconferencing online. Due to the recent popularity of companies offering free teleconferencing online, it seems everyone is doing it. Perhaps communicating virtually makes some people feel that since they aren’t really there, they don’t have to take the teleconference seriously. So here are just a few tips to keep your teleconference professional.

Just like in real meetings, don’t get distracted by your phone or email, set them aside for the duration of the teleconference. Also, it is very important that people be patient and don’t speak over each other during a conference call. In a face-to-face meeting, everyone is present and everyone can see who is talking. However, in a teleconference, it is very easy to lose the meaning when you don’t know who is doing the talking. So wait your turn and don’t interrupt.

Also, make extra sure that you are prepared. There is nothing worse than attending an online teleconference where someone doesn’t know how to use the technology or is clicking around trying to find that spreadsheet that was ‘here just a second ago’. Also, make a point to use people’s names and address them directly when speaking. It sounds strange, but others won’t know who you are talking to and this just leads to more confusion. Be clear.

Finally, many free teleconferencing online services allow you to record your meetings. This is a great advantage that allows you to review the minutes of the meeting, but remember, you might be recorded, so be careful what you say.

In the event they can be used to purchase goods and services. They also remove the burden of debt from the users and they can be very good for people that are having some credit rating problems in the first place. If one is intending to keep a lid on their personal finances then the prepaid credit cards can provide a ready made solution to their problems.

The user is able to utilize the funds that have been stored on the card through an agreed deposit system. It might carry the credit card brand with the different providers such as VISA, American Express and Discover. These sorts of cards differ from the debit cards because they do not require a PIN number to work.

Once the card has been purchased, the user can then load it with the money that they expect to use. However there are limits that are set which have to be followed or else the card might be withdrawn. The other advantage with the prepaid credit cards is that they can be given to minors over the age of thirteen given the fact that they do not involve a line of credit.

There is no interest on the prepaid cards but there could be a monthly fee or a loading fee depending on the company that is being used. One of the main advantage of Prepaid Credit Cards is that there are hidden fees that will need to be paid in order to keep the account going. You have to include these fees when making calculations about the possibility of owning some prepaid credit cards. Some people also find that they need the credit system given their pay schedules but this is not possible with the prepaid credit cards as the money has to be loaded.

Probably, some might not well aware that, the great thing of Prepaid Credit Cards is that it allows teenagers to purchase items and to get used to the financial systems that are available to them on the cards. This increases their financial literacy that is going to help them in their future. The lack of credit means that there is no risk of bankruptcy or other financial entrapment.

The Definition of Happiness

Happiness has been defined as, “The progressive achievement of a worthy ideal, or goal.” When you are working progressively, step-by-step toward something that is important to you, you generate within yourself a continuous feeling of success and achievement.

You feel more positive and motivated. You feel more in control of your own life. You feel happier and more fulfilled. You feel like a winner, and you soon develop the psychological momentum that enables you to overcome obstacles and slough through adversity as you move toward achieving the goals that are most important to you.

Determine Your Values

Personal strategic planning begins with your determining what it is you believe in and stand for your values. Your values lie at the very core of everything you are as a human being. Your values are the unifying principles and core beliefs of your personality and your character. The virtues and qualities that you stand for are what constitute the person you have become from the beginning of your life to this moment.

Your values, virtues and inner beliefs are the axle around which the wheel of your life turns. All improvement in your life begins with you clarifying your true values and then committing yourself to live consistent with them.

Fuzzy or Clear?

Successful people are successful because they are very clear about their values. Unsuccessful people are fuzzy or unsure. Complete failures have no real values at all.

Build Self-Confidence and Self-Esteem Values clarification is the beginning exercise in building self-confidence, self-esteem and personal character.

When you take the time to think through your fundamental values, and then commit yourself to living your life consistent with them, you feel a surge of mental strength and well-being. You feel stronger and more capable. You feel more centered in the universe and more competent of accomplishing the goals you set for yourself.

Action Exercises

Here are two things you can do imme­diately to put these ideas into action. First, decide for yourself what makes you truly happy and then organize your life around it. Write down your goals and make plans to achieve them. Second, begin with your values by deciding what it is you stand for and believe in. Commit yourself to live consistent with your inner most convictions – and you’ll never make another mistake.

United States of American – New York

The American economy returned to growth during 2009′S third quarter, a welcome departure from an extended period of painful economic contrac­tion. While the return to growth is obviously a positive development, it does not suggest that problems with housing, commercial real estate, rising unemployment and continuing job losses are behind us.

The 3.5% real annual growth pace during July to September compared to a 6.4% real annual rate of decline during 2009′s first quarter and a 0.7% real annual rate of decline during the second quarter. The six-month swing from the first quar­ter decline was the largest six-month turnaround since 1980. The U.S. economy shrank 3.8% after inflation in the 12-months ended in June, the most painful decline since the Great Depression.

When all is said and done, the official scorekeeper for the economy, the National Bureau of Economic Research, will likely make a call next year that the U.S. recession officially ended this past summer. Even so, the U.S. economy is not off to the races. The economy is expected to maintain a modest growth pace during the fourth quarter, as well as during 2010 and 2011. A key to sustainable growth will be how the private sector rebounds consumers and businesses with the government then (hopefully) reining in its enormous expansionist ambitions.

Japan – Tokyo

Japan remains the world’s second largest economy. Rapid Chinese growth will eventually reverse that order. Japan’s massive economic growth in the 45 years following WWII gave way to “the lost decade” of the 199os. Some would argue it has now lost two decades, with anemic growth during the current decade as well.

The Japanese economy plunged at nearly a 14% annual rate during the six months ending in March 2009, tied to major weakness in the global economy and a severe decline in Japanese exports. However, the economy staged a rebound during the two subsequent quarters, led in part by massive government stimulus. Japan’s 4.8% annual growth rate during the third quarter exceeded expectations.

Japan today is a nation expecting only modest economic growth during 2010, ongoing deflation, record high unemployment approaching 6.0%, and the budget implications of an aging and declining population. Japan’s government debt is by far the highest of all Western nations, likely to reach 227% of gross domestic prod­uct in 2010, according to the Interna­tional Monetary Fund. Confidence in new political leadership is lagging.

China – Beijing

Economic growth picked up speed in recent months, following a sharp slowing late last year and during 2009′s first quarter. A powerful 9.0% growth pace seems likely during 2010, again leading the world’s major players.

China felt less impact from the global downturn of the past year than did other major economies. A solid recov­ery in manufacturing output and exports is now in place.

Even as strong economic growth has returned, major challenges remain. The Chinese followed many nations with its own $586 billion stimulus program. Efforts to unwind such stimulus will be challenging.

In addition, Chinese efforts to keep the currency, Ren Min Bi, largely fixed to the dollar have led to nearly a 3o% rise in the money supply this year, resulting in rising inflation concerns and enormous flows of outside funds into Chinese assets. Record prices for apartments and a sharp rise in the primary stock index have led to rising concerns about an asset bubble.

The Chinese leadership will remain under intense global pressure to allow the undervalued RMB to rise in value, in part to reduce the level of exports and help build domestic demand. Even so, the Chinese will make such adjustments on their own timetable.

India – New Delhi

A return to the powerful 9.0% annual growth pace recorded prior to the global downturn is the goal of Indian leadership in coming years. While such rapid growth may not occur soon, the nation’s potential to challenge China for Asian economic leadership remains valid.

India joined China and Indonesia as the only Asian economies to escape severe recession during the past year. Most forecasters see India growing roughly 7.0% in 2010, followed by slightly stronger performance in 2011, in part based upon expectations for a wetter monsoon season.

A greater share of Indian economic performance is comprised of internal demand—consumer and business spending—than is found in neighbor­ing China. As a result, the Indian economy is less dependent upon exports than is the Chinese economy.

Like so many major nations, much of recent growth has been fueled by massive government spending and highly accommodating monetary policy. As with other nations, India will need to “exit” such aggressive strategies before debt levels and inflation pressures become burden­some.

Europe

The most painful recession since WWII is over. A modest 1.5% annual economic growth pace returned in the third quarter for the 16 nations who use the euro currency. As with its counterparts around the globe, a revival from serious recession was fueled in part by rising exports and major stimulus programs across various European nations.

While European economic growth has returned, its fragile and limited nature will keep consumer spending at modest levels. Increased govern­ment spending and aggressive monetary stimulus provided by the European Central Bank will need to be ratcheted back in due time.

European economic growth tradition­ally trails that of the U.S. and Asia. No exception is likely this time around the economic cycle. One constraint to European growth will be the stronger euro versus the U.S. dollar (and by pegging, versus the Chinese’s RMB as well…see China above). German exporters, in particular, are fearful that euro strength will limit the ability of export industries to contribute to a return to economic growth.

The neighboring United Kingdom remains mired in recession, with only modest growth prospects in coming quarters. Former euro sector top performers Ireland and Spain, who saw home values skyrocket in recent years, remain stuck in recession as well.

What the TeAM members knew then was, without real support and financial assistance; many promising techno-preneurs would not be able to develop their ideas sufficiently to reach commercialization. Without the generation of new technology ideas, Malaysia’s drive towards the New Economy and high-technology space was bound to stagnate due to the lack of access to funding in the marketplace, despite a strong push for the development of local talent to spearhead the growth of the Multimedia Super Corridor (MSC) project by then Prime Minister, Tun Dr. Mahathir Mohamad.

After two years of intensive lobbying, the Development Funding idea was presented to Tun Dr Mahathir at the Budget Dialogue 2004 in May 2003. As a result of this, the Ministry of Finance allocated RM100 million for a programme, now famously known as Cradle Investment Program (CIP), to implement pre-seed funding to techno-preneurs under the national stimulus package in May 2003. Tun Dr Mahathir Mohamad officially launched CIP on 18th July 2003, where Malaysia Venture Capital Management Berhad (MAVCAP) managed it. Cradle Fund Sdn Bhd (Cradle) took over the management of CIP beginning 17 July 2007.

Guiding Malaysia’s Future Entrepreneurs

For a program that had started less than 7 years ago, Cradle has achieved tremendous success. To date, the company has funded 372 ideas under the CIP programme. A total of RM30million has been disbursed to fund these ideas.

Fortunately, for Nazrin Hassan and his entire team, the fruits of their labor have certainly been quite sweet. In his current position as CEO of Cradle, he admits that these budding entrepreneurs would need to be responsible to get their ideas into the next stage of

Nazrin Hassan

development and eventual commercialization with the leg up from the CIP. -”At the end of the day, there should be some commercialization behind it. We found that if we provided the eco-system and the mentoring, it would help them raise their next round of funding, secure their first round of contracts or allow them to sell or license their IP’s”, adds Nazrin.

The method has since worked. The commercialization rate for CIP is at 48%, which is the highest in the country. Although the CIP started with funds of just RM50, 000 per tranche per idea, it can now go up to as much as three times that figure for innovative technology ideas with good commercialization potential, submitted by aspiring groups of techno-preneurs.

Today Cradle has ventures with several parties to exemplify talents in various areas. One such arrangement is the Celcom League of Extraordinary Developers Challenge (LEDC) – an arrangement made originally between Celcom, Cradle and Microsoft, which aims to put forward talents within the mobile content development industry in Malaysia.

“With this league, there is this mechanism called the conveyor belt where Celcom guides prospective applicants at Cradle on what are the hot areas that they can develop their applications, Cradle funds those applications and at the end of the day Celcom helps them commercialize their applications on its platforms”, Nazrin explains.

Besides this, Cradle has ventures with other companies such as Nokia and Creative Advances Technology Sdn Bhd (CAT), among others.

The venture with Nokia is provides support to techno-preneurs and developers in the mobile services and applications space in Malaysia through an open developer ecosystem where Cradle provides the funds. Nokia on its part provides development and go-to-market support to help developers complete and deploy their mobile content and applications through its Ovi Store, through the Forum Nokia organization.

The CAT venture is a collaboration based on CAT’s Standard Online Tourism Architecture (SOTA), a consolidated tourism e-business platform that unites government agencies, various sectors of the travel industry, and consumers. Cradle’s participation here is via screening through the applications and providing the funds, while CAT will provide the SOTA platform on which techno-preneurs can build upon.

The Next Stage Beckons
By the time you read this article, Cradle would have launched its next stage of its funding strategy, or “seed funding”. This stage applies for those who have done their prototype, done their proof of concept and wish to bring their concepts to the market place. It is essentially the stage dominated by Venture Capital (VC) companies.

However, many VC’s in Malaysia are unwilling to take the risk of funding ventures without a business track potential. Because of this failure in the chain, it has severely stunted the growth and development of new technology start¬ups in Malaysia, as well as faith in VC’s.

“Cradle’s offering is different from the rest in that we do not ask for equity or seats on the board of a company, in return for the funding”, says Nazrin.

However, Nazrin admits that, the challenge is not just about funding, but to ensure that these techno-preneurs have with them the right talent to take on the management of their start-ups and eventually lead it towards becoming a full-fledged business entity.

“What we want to do at Cradle is not just about funding, but it is about catalyzing sustainable techno-preneurs. They need to be trained to know enough about their environment, their ability to develop their business and find and generate suitable business ventures, as well as manage their business well beyond the initial three year period”, adds Nazrin.

Slightly more than one year later, the exercise seems to have met its objectives. Today the bank has received the best commendation of its success, deep from within its loyal customers that have been banking with them over the long haul. These customers have noticed improvements in service quality, banking speed of transactions and efficiency comparable with the best International standards. That is certainly not bad for a bank once known only for its hire purchase financing of Proton cars!

EON Bank has certainly changed – for the better, that is! Gone are the long queues at the transaction counters. Instead, customers are greeted with better service quality from the increased amount of customer service personnel.

In total, the bank has introduced more than 150 process changes across 60 activity groups to eliminate and simplify back office activities by eliminating non-value added processes and duplication of work. Requirements of processing work have also been simplified reducing documentation and process time.

Michael Lor, Group CEO of EON Bank Group, explained this process to us in simpler terms, “In fact from the beginning of last year, we started implementing our Project Quantum Leap Transformation Initiative under our previous CEO, covering a total of 60 business and enabler initiatives that we implemented with an aim to improving our support, our systems, our processes, our operational structure, people, technology, channels and so on. I am glad to say that after the last 12 months or so, we are on track with results such as encouraging growth in the bank, as well as market perception.”

Michael also explained that the bank had managed to shake away its image as a higher purchase (HP) bank for local cars, with a clever re-branding exercise that has put them in the limelight among customers and investors alike.

“In terms of branding, we have actually moved from a non-descript player in the market (as a HP financier) to being one of the most talked about banks in town today. We have enjoyed extensive media attention, very positive analyst recommendations and in the area of consumer banking and consumer banking related expertise and often approached to give our comments and views on this area,” Michael added.

The process change began in early 2008 with the bank embarking on its Branch Improvement Project (BIP) that involved process changes explained earlier. These plus improvements in efficiency of information flow and clarification of scope of duties between branches and HQ-units/center, allowed the transformation process to take shape within each branch that underwent the process.

In addition to this, the bank introduced standard sales management process and tools with proper training held for employees and the improvisation of frontline customer service efficiency. The latter was achieved by reducing waiting time at tellers by over 50% through simpler account opening processes and faster Over-The-Counter (OTC) transactions.

Essentially, BIP engaged everyone from the security guards to the top management on a concerted effort to completely overhaul the branches in order to make banking a delightful experience for customers under four pillar principals, namely people, processes, sales and services.

“What many did not know that before we embarked on the BIP, there was almost 9 months of processes transformation within the branch, where we looked at quality and how customers were served, fine tuned the processes, and moved resource from the backroom to the front line? Only after completing this painful exercise in all 139 branches, did we allow the re-branding exercise to take place. In the process, we have managed to transform our branches, which 14 months ago was primarily transaction centers, to sales and service centers currently,” Michael reiterated.

Michael added that on the people front, the process involved the re-deployment of more than 200 employees from the back room operation into the front line, re-assigned as personal banking officers, which sit in the consultancy areas to explain the banking processes better to customers. This has helped develop the consumer products segment of EON Bank with an expectation of a 9-10% growth this year, despite the slow global and domestic economy.

“I would credit a significant amount of success of this organization to the people that we have. I have been in the banking industry for more than 20 years, and I believe that the ability of EON Bank employees to adapt to change cannot be found elsewhere in the industry, whether in Malaysia or elsewhere. Largely, we were able to achieve a lot because our people were able to assume these changes and make it work,” Michael said confidently.

However having the right people alone cannot guarantee the success of any bank. Having a suitable product range certainly helps. EON Bank launched several products to entice customers to bank with them. One such product was the “Earn Now Fixed Deposit” launched at the beginning of 2009. With this account, customers enjoyed the benefit of advanced crediting of their interest rates upon placing their money on the terms of the fixed deposit account.

This helped customers to save their deposits and enjoy the interest earned immediately, without waiting for the term of the fixed deposit to mature.

Another account that received much prominence was its “Save Monthly Account” savings account launched this year that guaranteed interest rates regularly as long as money is deposited on a monthly basis.

By launching these products and other interesting secured and unsecured loan based products, EON Bank managed to attract new customers to its branches. With its tremendous effort to change and re-brand itself to make it relevant in the industry, EON Bank has managed to position itself well to ensure its future remains buoyant.

On how its success today can be gauged against the best International banking standards and practices, Michael remained with two feet on the ground realizing that being big and glamorous might not be the best solution for a successfully re-engineered bank such as EON Bank.

“We would like to think of ourselves as a Perodua – MyVi, a car built with the best International expertise and quality control from Japan, produced locally. Therefore, the standards and expectations of this particular car are there and it is within reach of an average person because it is using a local brand. Therefore similarly, we want EON Bank to have a world-class status that locally, people can compare against a foreign bank at a level that is affordable and convenient enough for all Malaysians.”

The company then works with engineers and planners to get the land approved for building and developing. Once the land is ready to be developed, it is sold to the developers. Although this may often take several years for the value to be increased higher enough to warrant a profit, the investors usually walk away with a profit of 15% to 20%.

Canada is very popular place for investors interested in land banking. Certain parts of Canada, such as Alberta and Ontario, many acres of raw land is being bought up by companies offering land banking, with an almost guaranteed profit margin. In spite of the rising and falling markets, investors are still able to have guaranteed returns. The important thing to understand and realize about land banking is that the investors have got to be willing and able to “ride it out” and hold to the land until such time as they will get a nice profit.

Getting Rich From Land Banking

One of the main reasons why people invest today in land banking is for their future or the future of their family. They invest in land that has a low value, knowing or believing that it will increase in value through the years. To make a noticeable and worthwhile profit, the land has to be kept for several years. Many parents are now investing in land banking as a future investment for their children and their future.

Although the goal of land banking is not to get rich, many self-made millionaires have made a ton of money from land banking investment. Millionaire Donald Trump has very successfully practiced land banking and made a lot of money from the land. Right now he owns a 100-acre plot that is one of Manhattan’s last remaining large land parcels. It will be called Trump Place when it’s full developed. This is one of many land banking investments made by Trump. Other famous people that have made millions off of land banking investment include

Bob Hope, Roy Sakioka, Howard Hughes and Li Ka-Shing. If they can do it, you can do it too.

Many people choose companies that specialize in land banking investment for help and investment opportunities. As reassuring as this may be to the novice, it’s even more important to do your research before investing. Specifically research the company that you’re relying on to represent you in your land banking investment. Do your due diligence; go to United States & Canada Better Business Bureau and make sure that they are a trustworthy and profitable company, in bad times as well as good times.

The best investment on earth, is earth

Land banking is NOT a new concept. In fact, it’s been around for many years. Many well known people like Donald Trump, the Mori family, the Rockefellers, Li-Ka Shing, and even in Malaysia – Penang, the late Tan Sri Loh Boon Siew have made solid and secure profits from land banking.

Not only do private individuals practice land banking but many large commercial companies often participate in land banking in areas where repossessed or dilapidated homes are located. These homes tend to depreciate the value of the entire neighborhood. When the value of the homes get low enough, many of these companies swoop in and purchase the properties with the intent of redeveloping them. When the value of the entire neighborhood goes up, they’re able to sell their investment with a huge profit.

Because of the constant trend land has to increase in value, land banking investment is a proven concept for making money. Unlike stocks and bonds which rely on the interest rates, land continues to increase in value. While it may occasionally decrease for a bit, it always comes back up. This is particularly true with large undeveloped land, especially large acreages.

While it may be worth a certain amount as a 20-acred parcel, its worth a lot more when broken into 20 1-acre parcels, ready to have homes built on them. As important as it is to buy the land, it’s even more important to know when to buy it.

Although land banking was traditionally reserved to the super rich (game of the rich and famous); today, with land banking companies, especially those from Canada, land ownership has been made affordable and within the means of ordinary folks.

But there are others still doing well, whose assets continue to grow. People are still buying houses and cars and clothes and trinkets and college educations for their children. Someone’s doing well out there. Maybe, if you read this article, you might be turned onto a new way of doing things investment-wise. That way is land banking.

If you’re familiar with land banking investment and all they entail, you know what the hype is all about and what you have to gain from this wonderful and lucrative venture. If you’re still unfamiliar with land banking investment, boy, are you in for a learning experience?!

What is Land Banking Investment?

Land banking refers to purchasing land not for your own use, but with the intention of hanging on to it until it will make you a profit when sold — the profit being anything above and beyond what you paid for it when you bought it. Real estate and land is becoming a hot commodity and very popular as an investment, even more so than stocks and bonds. The fact that is a tangible asset only adds to its appeal for potential investors. Land banking investment is taking place all over the globe, with many firms established with the sole purpose of providing these types of investment opportunities.

Although any land (at a decent price) may be considered a great land banking investment, your better option is in buying undeveloped land that you know will increase in value due to its potential for growth. A perfect example of a good land banking investment is land that’s in an area where they may be a major highway built or a major growth in urban development. When the area surrounding the land becomes busier, the value of the land increases. Many investors purchase land where they know developers will be constructing homes in the near future. The value of the land changes because its status changes from vacant land to a potential location for development.

Is Now A Right Time For Land Banking?

Land has always been a great investment, regardless of what shape the economy has been in. The reason behind this theory is because real estate and land values always go up over time. Properties may tend to drop in value during hard times but they always come back up even higher than before the hard times. It may take awhile but they consistently increase in value.

Now is the perfect time to make land banking investment because real estate and the home market took a hard time financially the past few years due to the struggling economy. We’ve been hearing that things have got to look up because they can’t get much worse. Yet, we’ve also been hearing constantly on the news that the country, as a whole, can expect economy to get a little worse before things begin to look up again. The key here is “looking up again”. With economy at an almost all-time low, land values are way down, making it the-perfect time to invest in land. When the economy picks up, as it always does, the value of the land will also increase. Here comes your profit!

In this way, the success stories of companies featured in Smart Investor have gone several steps ahead of their competitors by exceeding customer expectations while ensuring operational excellence and delivering impressive shareholders’ value.

Takaful Malaysia for example, has set itself a lofty but achievable target of attaining more than 50% of the total market share in the insurance industry to regain its position as the market leader. The industry is worth RM12 billion in assets with Takaful Malaysia’s current share at RM4.3 billion.

The corporation is going full throttle in terms of undertaking several initiatives towards celebrating its 25 years of service excellence since early this year. It has set aside over RM10 million for re-branding and this includes above-the-line (ATL) and below-the-line (BTL) advertising to create a young, modern and energetic image.

It is certainly no newcomer to success, having been recognized as the country’s first Takaful operator with a strikingly interesting mudarabah profit sharing model. It is also a leader in terms of developing Takaful expertise in the workforce and it has the largest branch network in Malaysia.

Nonetheless, it realizes that it needs to overcome some of the toughest challenges such as developing a sustainable retail distribution channel, the shortage of experienced technical staff and staff retention, increased competition with new entry of Takaful operators and insufficient liquidity in Islamic investments such as bonds.

Competition clearly exists with eight Takaful players in the market and two Takaful licenses for issuance by Bank Negara Malaysia. As such, Takaful Malaysia must strive hard to maintain its market share. In addition, it is vital to have the right expertise to achieve good returns for customers and shareholders.

Like many other successful corporations, Takaful Malaysia is focusing on higher quality service for its customers and has made significant investments in IT and human capital to manage the customer experience. It also seeks to ensure service levels will improve and front liners will be trained to be more responsive and knowledgeable.

EON Bank is another corporation that is turning heads. Having dusted off its former image, the bank’s painstaking re-branding exercise is paying off well, with its customers responding positively to improvements in service quality and efficiency in terms of the speed of conducting financial transactions, to name a few.

Its re-engineering process has resulted in tangible successes. For example, in total, the bank has introduced more than 150 process changes across 60 activity groups to do away with and simplify back office activities by eliminating non-value added processes and duplication of work. Requirements of processing work have also been simplified reducing documentation and process time.

Another feather in its cap is being able to reinvent itself from what it was perceived as; a higher purchase (HP) bank for local cars, with a clever re-branding exercise that has put them in the limelight among customers and investors alike.

It is now benefitting from positive analysts’ recommendations and in the area of consumer banking and consumer banking related expertise, its senior staff are being approached to give comments and views.

EON Bank’s journey towards change first took shape in early 2008 with the bank beginning its Branch Improvement Project (BIP) that involved process changes explained earlier. Such improvements in efficiency of information flow and clarification of scope of duties between branches and HQ-units/centers, allowed the transformation process to take shape within each branch that underwent the process.

A lesser known success story that has made headlines today is Dnest Aviation Services which serves the leading executive jet and helicopter manufacturers in the world. The company also boasts the unique reputation of operating and maintaining

An elite group of Malaysians have grown so affluent that they can afford the luxury of globetrotting on their own private jet.

Recognizing the need to accommodate this growing market, Dnest went into the business of providing a private parking and maintenance area for such aircraft.

In addition, the owners need a ground lounge before they take off to some exotic destination.

Dnest clearly took advantage of this niche market segment and today, it serves some of the most high profile business executives and famous personalities that have their private jets placed at its hangars. Most of these customers are successful businessmen and by having their own aircraft, they have control over the departure and arrival to any place they wish to fly to and this increases productivity while giving them better standing when negotiating business deals anywhere in the world.

Dnest has been innovative in terms of providing support services to these businesspersons by taking care of their needs, from customs and immigrations, food and refreshments to their landing and hotel arrangements in their destination country. The company also arranges ground transport and other services for its high profile clientele.

At periods when their planes are not airborne, it is placed at Dnest’s hangar where it is taken care of by experts in aircraft services and technology. Customers also have an option to purchase a new aircraft as well.

Dnest, EON Bank, Takaful Malaysia and the minds behind the Cradle Investment Programme are striking examples of companies that set out to break the mould and create winning solutions.

The Cradle Investment Programme (CIP) was set up in June 2003 to address the needs of Malaysian technology entrepreneurs, especially in seeking “pre-seed” funding. Two years prior to this, a team of budding entrepreneurs

in Malaysia under the Technopreneurs Association of Malaysia (TeAM) were led by an inspired man named Nazrin Hassan.

Nazrin and this group realized that without support and financial assistance many promising technopreneurs would not be able to commercialise their ideas. After two years of intensive lobbying, the Development Funding idea was presented to Tun Dr Mahathir at the Budget Dialogue 2004 in May 2003. As a result, the Ministry of Finance allocated RM100 million for the Cradle Investment Programme (CIP), to implement pre-seed funding to technopreneurs under the national stimulus package in May 2003.

Cradle Fund Sdn Bhd (Cradle) took over the management of CIP beginning 17 July 2007. In less than seven years, the company has funded a staggering 372 ideas under the CIP programme. A total of RM30million has been disbursed to fund these ideas.

While corporations may comprise hardworking, dedicated individuals, it is the ability to think out of the box and create innovative solutions where there are gaps in the market that truly sets apart successful companies from the rest, as they blaze a new trail.

It does not matter what job function you are in — we simply cannot avoid selling. Unless, of course, you are the only person on earth and nobody else is around you.

In the business context, right and effective selling skills are of utmost importance. If you run a business and you are unable to convince people to buy your goods to the point of meeting a handsome profit margin, your business will fold in no time. It is as simple as that.

In small companies, generally, most staff are aware of their sales role. But in larger ones, the tendency is to leave the job to the sales department. Big mistake! My take is that everyone who interacts with customers or prospects should and must sell. This is especially so during tough times; everyone needs to come together and sell.

I was in a hotel for training. I left the computer running and Internet on while I went out for dinner. When I came back, the Internet got disconnected and I couldn’t access my e-mails. So I called the lobby and was soon directed to the hotel’s tech support guy. After getting in touch with me, he coached me on what to do to get the configuration right. When I posed a question on the slow Internet speed, he told me a ‘remarkable’ story. Here goes the story.

`Well, our management is on a cost-cutting spree … they are mainly a group of penny-pinching dudes who don’t understand the importance of upgrading. That’s why the Internet is slow.’

Wow, what a fantastic selling pitch! Instead of painting a positive picture of the hotel’s management, what the tech guy did was sell an idea that I wasn’t going to get fast Internet speed for a long time in his hotel. Hence, is it not wise to keep an eye on what non-sales staff are selling to your customers? In a hotel environment, it is vital to keep frontline staff and those who come face-to-face with guests (bell boys, chamber maids, receptionists, etc) exposed to fine selling skills (greeting guests, direction, hotel’s specialty, etc).

There are a few things to consider when training your non-sales people to sell. Make sure they understand that everyone sells. It does not matter if they are the delivery boy or vice-president of operations. Focus on these three areas if you are serious in giving them proper training:

Firstly, introduce them to your company, products and services — In classic sales, we call this the elevator pitch. It is basically a short presentation on what makes you special. In Sales Ninja, we call this Positioning. Everyone in your company needs to have a standardized introduction so that every staff will speak the same language when interacting with someone outside your company or industry (this is especially so if you belong to a small company).

Imagine everyone knowing Nokia but not many knowing Nanotech Solutions, for example. And just because you have been around for the last 10 years doesn’t mean everybody knows you. For a start, train your staff to promote your business.

Next, train them to look for opportunities to sell. Selling is helping. So when they hear there is a gap, problem or situation that the associates are having, they need to jump in and sell. While the more advanced sellers are able to create needs or opportunities, a fundamental need for novice sellers (such as your non-sales staff) is switching on their radar to detect a sales opening.

It is paramount that non-sales staff must understand that business survival is crucial to provide a consistent income stream to all employees. Non-sales people in an advertising industry can definitely leave their ears open to new product launches in the market, or the execution of new marketing strategies among big firms. Likewise, non-sales people in the property development sector can introduce new project launches to their relatives or friends.

Thirdly, train non-sales people to tackle objections. In non? sales terminology, this means to correct feedback, wrong perceptions or concerns from potential customers.

Say you are the administration executive for an automobile company that sells China brand cars.

One day you are having tea with some friends and one joker decides to crack jokes on China-made cars. While it is merely a joke, it may hurt the reputation of your company in the long haul. Regardless of the fact that you are merely an administration executive, you need to quickly step in and ‘correct the facts’ before it tarnishes the image of your employer.

To more sales … with less effort!

Conferred, bestowed, whatever: all are poor word choices. Equally, the idea that the Nobel Prize Committee possesses infinite wisdom. How else would one rationalise its rash decision? It heightens, if nothing else, the Committee’s decision-making process and style.

Having made a total mockery of the Nobel Peace Prize, the Committee may as well have given the prize to George W Bush who, for eight years, had led some of the paltriest, most ghastly neo­conservative, right wing warmongers. Bush, Dick Cheney, Condoleezza Rice, Paul Wolfowitz, Richard Perle, John Bolton, William Kristol and company were all empire-builders.

So great democracies were the Bush and British Tony Blair regimes that they saw no moral problems in secretly conducting ‘rendition’ — torture — of suspected Islamic terrorists through their allies in Egypt and Pakistan.

Iraq and Afghanistan from the Bush regime. Yet, it’s a war that he has more or less supported when he was senator. He also has inherited the ‘spy games’ war against terrorists wherever they are thought to be operating whilst also stating that rendition by US intelligence agencies is over. But the fact that he has continued to wage wars in Iraq and Afghanistan, and especially in the wake of even more damning evidence that the US will be thrashed in these countries the way they were thrashed in Vietnam, ought to question the extent to which Obama is, in fact, a man of peace.

Everybody understands why someone like Aung San Suu Kyi, the Burmese opposition leader jailed by the Burmese military junta, was awarded the Nobel Peace Prize in 1991. That was two years into her detention by the anti­democratic regime. Suu Kyi is still being held in detention today for her struggle for democracy and human rights, all of which are routinely abused by the junta.

Obama is no more Aung San Suu Kyi than he is Mother Teresa. The Committee says it had awarded the prize to Obama for his ‘extraordinary’ efforts in international diplomacy and hastening nuclear disarmament. Extraordinary? Really? What has Obama done in his nine months in office as US president that the Committee felt compelled to crow about his peace achievements?

Remember the old 197o song War – What is it Good For? by Edwin Starr? It was an anti-Vietnam War hit that rallied strong anti-war protestors in America (and around the world) in numbers that made every successive US administration — from Nixon to Johnson to Ford — shudder in its jocks. War: What is it good for? Absolutely nothing.

Obama should have been given a prize for his oratory skills. If there were a prize for the best rhetoric, he’d win that too. Hands down. But what efforts has he made since becoming president of the most powerful country on earth to bring an end to the wars in the Middle East and northwest Asia? What has he done to bring a political settlement closer to reality in the war between Palestine and Israel?

And what of his standoff against Iran and its regime’s secretive nuclear armaments development policy? It’s not exactly a policy credo that would win him the confidence of the Iranian regime and their president, Mohammad Ahmadinejad. And why did he order his UN ambassador in the Security Council mid-October to use its veto to condemn Israel’s war atrocities against Palestinians.

Irving Kristol, the founder of US neo­conservatism, labeled the Republican Party rightwing movement as having being ‘mugged by reality’. I wonder how long before we start seeing the same traits of Obama. But here’s Obama, now, who says he wants peace with Iran and drops George W Bush’s plans to erect an anti-missile defense shield system in Poland, on Russia’s doorstep.

He remains a man of peace but still wages war in Iraq and Afghanistan. Better still, he wants to boost US troop numbers by as many as 40,00o. And he’ll compel NATO states and America’s allies, such as Australia, to also increase their troops and weapons, not find ways to peace through political solutions but to inflate the wars.

For this, Obama gets the Nobel Committee’s peace gong? How can Obama be a man of peace and justice and democracy on the one hand and wage war and death and destruction and misery on the other? What’s more, Obama was nominated just seven days into his presidency.

Yes, go figure. And go figure why the Nobel Peace Prize Committee, for all its infinite wisdom, even accepted, let alone entertained, the nomination of a man a week after he was sworn into office and was still picking over his cabinet and other appointments?

Tan Sri Mustapha Kamal Abu

and even a one-minute display of fireworks celebrated three official launches — the Menara Mustapha Kamal office tower, the Emkay gallery, and the Building Passion with Mustapha Kamal book — to mark Emkay’s 26-year journey as a property developer.

The towering 21-storey Menara Mustapha Kamal, said MK, is a monument of Emkay’s achievements. Also, it houses the entire group under the same roof for the first time.

Since its inception 26 years ago, Emkay has built properties amounting to more than RM8 billion in value, the bulk of which were affordable homes, according to MK, dubbed ‘The King of Affordable Homes’, in his welcoming speech.

The Bumiputera property magnate shared the ‘secret’ of his success, the driving force that kept him going when challenges came his way.

`The fear of failure,’ MK revealed to the 530 guests present.

`I could not afford to fail. My family depended on me. The livelihood of my staff, and their families, depended on the company. And most importantly, my greatest fear was that people would point to my failure and say that Malays could never succeed,’ he shared.

Former Prime Minister Tun Dr Mahathir Mohamad, who officiated the event that night, hailed MK as a `shining example’ of successful Malay entrepreneurship, and commended him on his attitude of tahu malu (knowing how to be ashamed).

`I am proud of Mustapha Kamal’s attitude. He took full advantage of the opportunities opened to him (as a Bumiputera), but unlike others, he never abused them. He was not interested in the “get rich quick” route. He knew how to be malu (ashamed),’ said Dr Mahathir.

MK’s 26-year journey with Emkay is documented in the book Building Passion with Mustapha Kamal as well as the Emkay Gallery located at the lobby floor of Menara Mustapha Kamal.

The book, wrote author Cheah Chor Sooi in the preface, was originally meant as a biography, ‘but being an individual who despises the act of self-praise, it was decided that this book would only focus on MK’s business philosophy and management methods‘.

“The book is based on my experience, not on theory. With what we have gone through and experienced, I sincerely believe that we can humbly share some thoughts on how we have managed to keep the Emkay Group agile all this while and sustain it to what it is today. If what I say is in line with the management gurus, Alhamdulilah (Praise God), if not, so what?” MK said candidly.

The 3,063 square feet Emkay Gallery, meanwhile, features five sections: The Journey, The Mission, The Passion, The Love, and The Legacy. The gallery, which cost RM1.5 million to set up, is open to the public from Nov 1. Entrance is free.

Menara Mustapha Kamal is a 21-storey office tower with a total built-up space of 201,508 sq ft. The Emkay Group occupies six floors while the remaining available space will be rented out. The tower, purchased at RM85 million, is one of the four towers of the PJ Trade Centre, Damansara Perdana. It was developed by Tujuan Gemilang Sdn Bhd, a company helmed by MK’s heir apparent Ahmad Khalif Mustapha Kamal.

Emkay has come a long way since its first major breakthrough project: Bandar Baru Sungai Buloh. As it continues to grow, MK will make sure Emkay will always be driven by his vision of ‘Building a Better Tomorrow Today‘.

In the face of a crisis, important documents are retrieved with a simple search of digital storage; instructions are immediately sent via email to offices in all four corners of the world; and there is ongoing dialogue between corporations and consumers via networking sites.

The challenge is for companies to best utilize technology and yet be business-resilient if it backfires. As great as technology can be, it only takes a blackout to wipe the slate clean.

As we become more dependent on technology, it’s even more important that we look at the risks and vulnerabilities we face because they change every day. Technology is great but there are limitations and complexities and potentially different risks that must be addressed. Whilst the internet and developments in teleconference technology may enable cost savings, it is important that staff are well train to fully utilize these advances.

A crisis occurs when there are risks to the stability of survival, whether it is people, businesses and/or governments. But, he adds, it is not solely the responsible of an organisation’s leader to steer a company towards recovery.

As a leader, you must be prepared, and know what to do and how to get your business back to normal operations. But it’s not just the leader’s responsibility to ensure that everything is okay. Everybody should know his or her role during a crisis. You win or lose as a team, not because of one person.

As a speaker at the International Crisis Management Conference and Workshop 2009, to be held from Nov 4-5 in Kuala Lumpur, Corcoran will be sharing his experiences in helping organisations over the past 20 years, and giving his recommendations on how to improve based on lessons learned from the past.

With many companies opening multiple offices across the world, a well-planned integrated business continuity solution that focuses on the people in a business will far outweigh a focus on technology.

Some manager emphasizes the need to always address an organization’s most important asset — its people. Unfortunately, from my observations over the past 20 years, most disaster recovery plans do not adequately address the people aspects during a crisis or recovery. Most of the focus has been on technology, but without people to run, manage and use the information that technology creates, it’s all for nothing.

He advises multinational organizations to devise a company-wide business resiliency plan that addresses a framework of six crucial business layers:

• Strategy/vision
• Organization/people
• Processes
• Applications and data
• Technology
• Facilities

These six business layers are critical to an integrated, efficient and effective business resiliency plan. A well-thought-out plan would help because everybody in the company would understand the importance of the plan, how it supports the strategy, and which processes are most important. A business should strive for consistent processes so that one country could support another country during a crisis.

A business continuity plan is no simple feat, and companies that have yet to do so may feel overwhelmed with even trying to figure out the scope of their plan. As a result, many companies resort to an attitude of ‘we’ll sort it out if and when it happens

If and when it happens, it could be too late. Technology is a double-edged sword that could harm as much as it helps. When a blackout or catastrophe strikes, a well-thought-out business resiliency plan will ensure that an organization is not left to grapple in the dark.

A possible excitement is that the company has secured a new HDD customer in Samsung where Notion VTec has been qualified by the former to produce 2.5-inch HDD components. According to OSK Research, this is one key additional factor that will propel Notion VTec to a higher growth platform in FY10 and FYil. Without this qualification, the company would only at best grow organically in tandem with the industry’s growth rate, it says. The qualification by Samsung actually allows Notion VTec to mass? produce 2.5-inch HDD components for the FY1Of first time since before this project, 90% of its HDD components were only for the 3.5-inch HDD segment.

Depending on worldwide market demand, Notion VTec could be making 500,000 pieces a month for Samsung. However, OSK Research believes that should the company execute this project smoothly, there is a possibility that the volume could go up to one million pieces per month by mid-2010. Hence, this new production could be a significant earnings kicker going forward for the company.

OSK Research is enthusiastic about the company’s prospects, noting that Notion Vtec is now on track for its eighth straight year of growth with management having shown its capability in managing volatile raw material prices and exchange rates over the years to deliver solid earnings growth and earnings margin for the company. With the recovery in the world economy, shipments of HDD and digital cameras are expected to resume steady growth going forward after an interruption in 2009, and together with the Samsung qualification kicker, the research house expects Notion Vtec to post even stronger earnings growth in FY10.

By applying a fair 9.0x FY10 price earnings (PE) multiple to the company’s projected earnings, OSK Research values Notion Vtec at a fair value of RM0.585. However, it notes that the valuation is a peak cycle valuation of the PER trading band for the stock and hence the valuation does hinge on the optimism level in the equity market. The stock price has risen rapidly in the last few weeks and hence investors could probably wait for a pullback to accumulate at lower levels if they like the growth story of the company.

However, with its strong revenue and earnings growth, the company graduated to a main board listing at the height of the US financial crisis last year, which was probably not good timing as the company shares were sold down together with the equity market bloodbath worldwide then to as low as RM0.16 in March this year.

However, this was probably not a true indicator of the company’s strong fundamentals then and when sentiment came back; the share price rebounded quickly and is now trading past RM0.50 It continued to post strong earnings even during this time and is now forecast by OSK Research to reach a record-breaking revenue and earnings of RM214.5 million and RM45.5 million respectively in 2010.

From its humble beginnings, Notion Vtec is now one of the best-earning local players in the Malaysian market for the manufacture of HDDs and digital cameras. It derives the bulk of its revenue (or around 80%) from the hard disk drives (HDD) and digital camera industries (see Table 1). Its key customers are multinational companies (IVINCs) such as Western Digital, Hitachi and Nikon (see Table 2) and the key products that it makes are camera cam barrels, digital camera body lens ring, HDD anti-disk, HDD disk clamps, HDD spacer rings, etc. The company is also involved in supplying other industries such as the automotive, consumer electronics and air-conditioning sectors.

It is also now one of the biggest high precision engineering specialists in the country with two manufacturing plants in Kiang, Selangor, which it has expanded a few times since its initial public offer (IPO) in 2005. Its main factory is situated on nine acres of land with a 350,000 square foot (sq ft) built-up area with another 80,000 sq ft on three acres. The company now has 1,300 employees with 80% of its factory workers being foreigners. The factories have 960 computer numerically-controlled machines (CNC) at their sites while having achieved many accolades such as ISO 9001: 2000, IS0140001: 2004 and ISO/TS16949 certifications.

Notion VTec was founded in 1995 by William Choo Wing Hong, Lee Tian Yoke and Thoo Chow Fah, who are the current Managing Director, Executive Director and Executive Chairman respectively. Thoo is a relative of the Choo family by marriage. The Choo family collectively owns 36.2% of the e‘mpany while Thoo has a 7.6% stake. The fact that these long­time founders are still managing the company is probably a good indication of sustainability and continuation of the company’s good performance going forward, says an analyst.

If a company can continue to register record earnings even during the worst of the global recession in 2008 and is likely to continue the streak into the next two years, it would certainly be one company that is worth a look, right? Well, under-researched Notion VTec Limited, which is now listed on Bursa’s main board since August 2008 may likely be a good bet for investors, at least in OSK Research’s view. The research house says it is impressed by the fact that the management of the company has been able to grow Notion VTec’s revenue and earnings for six consecutive years (even through the worst of the world’s recession in 2008) to 2009 and this streak is likely to continue even higher to another record-breaking year next year.

According to OSK Research, despite volatility in aluminium prices and the RM/US$ exchange rate, the company’s net profit has leapt from RM13.3 million in FY05 to an expected RM36.7 million in FY09, representing a compounded annual growth rate (CAGR) of 29%. One amazing fact is that Notion Vtec has been able to consistently maintain a profit before tax (PBT) margin of 25% since FY04, which is abnormal in the high precision engineering industry; especially for a business that makes more than RM150 million in sales.

The good news now is that with the qualification to manufacture 2.5-inch hard disk drive (HDD) components for Samsung going forward, this could likely boost the company’s earnings further in FY10 and fast-track its growth over and above its organic growth rate, says the research house.

Seen as the closest alternative to the relatively secure fixed deposit (FD), CGFs are designed to safeguard the capital of investors with the promise of returns higher than FD rates.

However, given the challenging economic and stock market conditions, many of these funds have performed dismally in the last one year or so. At best, many dished out marginal returns while others matured at par value, meaning that investors have only got back their capital.

These investors would have fared better had they taken the safe route of placing their money in FDs, which would have yielded a return of at least 2.5% to 3% per annul.

To be sure, there are some CGFs that have bucked the bearish trend and delivered good returns, but these funds are in the minority, say industry players.

Adviser of Retail Fund, says a zero return on CGFs is not entirely unexpected. “Given the investment climate the last one year or so, many funds have performed disappointingly. It was during this period that the global crisis peaked, making it very challenging for many fund managers to deliver returns.”

Still, CGFs, at least in theory, are attractive, and more so to cautious investors. What could be better than an investment product that guarantees to return your cash plus the possible bonus of high returns?

With the recent collapse of global investment banks like Lehman Brothers in the US, the worry about the safety of capital has heightened. Investors were more concerned about the return of their capital than the return on capital.

Another product called the capital protected fund (CPF) is similar in almost all aspects. It promises to protect the capital invested at maturity, except in the case of CGF an additional guarantee is given by a bank, for which a fee is charged to the fund.

Both funds normally have an investment horizon of three to five years.

In the recent past, there has been a huge demand for such schemes going by the incredible growth in this sector. According to media reports, there are now more than 5o such schemes in the market. Assets under management of these funds are estimated to be worth close to RMio billion, representing about 13% of the total asset under management of all private unit trust funds in the country.

Still the question arises as to why many of these funds were unable to at least meet the benchmark FD rates. If these funds had done so, they would have become a more viable investment product for investors bent on staying away from the more aggressive and riskier products.

However, industry players are quick to point out that every investment comes with risks. The problem is this may not have been communicated to the investors at the time of purchase. Like many other unit trusts, most CGF funds are marketed to consumers by banking front-lines, ie, clerks. These personnel may often not be fully knowledgeable about the downside of schemes.

In order to provide the guaranteed feature, normally a large portion of the fund is invested in zero-coupon negotiable instruments of deposit, or ZNID, which are money market instruments. ZNIDs are issued at a discount and compounds at a fixed interest rate to their par value (of i00%) at maturity, thus ‘protecting’ the initial capital. The remaining will be invested in risky assets like stocks, options and currencies.

This is where the leveraging factor or multiplier effects, if any, kick in. For investors who are risk-averse, there seems to be a gap in investors’ expectations.

Despite the low risk nature of CGFs, some of its investors have high expectations of returns, which is unrealistic. It could be that the basic investment rule of low risk low returns’ and ‘high risk high returns‘ does not seem to have been understood well enough by the CGFs investors.

Don’t be surprised and panic when your investments in capital guaranteed funds (CGFs) give you zero returns. This is increasingly becoming the norm for this group of products.

Seen as the closest alternative to the relatively secure fixed deposit (FD), CGFs are designed to safeguard the capital of investors with the promise of returns higher than FD rates.

However, given the challenging economic and stock market conditions, many of these funds have performed dismally in the last one year or so. At best, many dished out marginal returns while others matured at par value, meaning that investors have only got back their capital.

These investors would have fared better had they taken the safe route of placing their money in FDs, which would have yielded a return of at least 2.5% to 3% per annul.

To be sure, there are some CGFs that have bucked the bearish trend and delivered good returns, but these funds are in the minority, say industry players.

Basic Building Blocks Of A Capital Protected Fund

Advisor of Retail Fund, says a zero return on CGFs is not entirely unexpected. “Given the investment climate the last one year or so, many funds have performed disappointingly. It was during this period that the global crisis peaked, making it very challenging for many fund managers to deliver returns.”

Still, CGFs, at least in theory, are attractive, and more so to cautious investors. What could be better than an investment product that guarantees to return your cash plus the possible bonus of high returns?

With the recent collapse of global investment banks like Lehman Brothers in the US, the worry about the safety of capital has heightened. Investors were more concerned about the return of their capital than the return on capital.

Another product called the capital protected fund (CPF) is similar in almost all aspects. It promises to protect the capital invested at maturity, except in the case of CGF an additional guarantee is given by a bank, for which a fee is charged to the fund.

Both funds normally have an investment horizon of three to five years.

In the recent past, there has been a huge demand for such schemes going by the incredible growth in this sector. According to media reports, there are now more than 5o such schemes in the market. Assets under management of these funds are estimated to be worth close to RMio billion, representing about 13% of the total asset under management of all private unit trust funds in the country.

Still the question arises as to why many of these funds were unable to at least meet the benchmark FD rates. If these funds had done so, they would have become a more viable investment product for investors bent on staying away from the more aggressive and riskier products.

However, industry players are quick to point out that every investment comes with risks. The problem is this may not have been communicated to the investors at the time of purchase. Like many other unit trusts, most CGF funds are marketed to consumers by banking frontlines, ie, clerks. These personnel may often not be fully knowledgeable about the downside of schemes.

In order to provide the guaranteed feature, normally a large portion of the fund is invested in zero-coupon negotiable instruments of deposit, or ZNID, which are money market instruments. ZNIDs are issued at a discount and compounds at a fixed interest rate to their par value (of i00%) at maturity, thus ‘protecting’ the initial capital. The remaining will be invested in risky assets like stocks, options and currencies.

This is where the leveraging factor or multiplier effects, if any, kick in. For investors who are risk-averse, there seems to be a gap in investors’ expectations.

Despite the low risk nature of CGFs, some of its investors have high expectations of returns, which is unrealistic. It could be that the basic investment rule of low risk low returns’ and ‘high risk high returns‘ does not seem to have been understood well enough by the CGFs investors.

Contrary to the way it is marketed now, some industry players think the products should be marketed passively rather than be sold at banking counters. There should also be better communication to the investors on the potential downside of zero returns. Investors should be asked ‘ are you ok with that zero return?’ This may not be related to potential customers currently.

In the end, though, a lot of disappointment will be avoided if investors themselves read the prospectus and the fine print before investing.