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Mutual funds in Pakistan


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Mutual funds in Pakistan

  1. 1. MUTUAL FUNDS 1
  3. 3. MUTUAL FUNDS INTRODUCTIONSpecialization is the order of the day, be it with regard to a scheme‟s investmentobjective or its targeted investment universe. Given the plethora of options on handand the hard-sell adopted by mutual funds vying for a piece of your savings, findingthe right scheme can sometimes seem a bit daunting. Mind you, it‟s not just aboutgoing with the fund that gives you the highest returns. It‟s also about managing risk–finding funds that suit your risk appetite and investment needs.So, how can you, the retail investor, create wealth for yourself by investing throughmutual funds? To answer that, we need to get down to brass tacks–what exactly is amutual fund?Very simply, a mutual fund is an investment vehicle that pools in the monies ofseveral investors, and collectively invests this amount in either the equity market orthe debt market, or both, depending upon the fund‟s objective. This means you canaccess either the equity or the debt market, or both, without investing directly inequity or debt. 3
  4. 4. MUTUAL FUNDS CONCEPT OF A MUTUAL FUNDA Mutual Fund is a trust that pools the savings of a number of investors who share acommon financial goal. The money thus collected is then invested in capital marketinstruments such as shares, debentures and other securities. The income earnedthrough these investments and the capital appreciations realized are shared by itsunit holders in proportion to the number of units owned by them. Thus a Mutual Fundis the most suitable investment for the common man as it offers an opportunity toinvest in a diversified, professionally managed basket of securities at a relatively lowcost. The flow chart below describes broadly the working of a mutual fund:-Savings form an important part of theeconomy of any nation. With savingsinvested in various options availableto the people, the money acts as thedriver for growth of the country. Indianfinancial scene too presents multipleavenues to the investors. Thoughcertainly not the best or deepest ofmarkets in the world, it has ignited thegrowth rate in mutual fund industry toprovide reasonable options for anordinary man to invest his savings.Investment goals vary from person to person. While somebody wants security,others might give more weightage to returns alone. Somebody else might want toplan for his child‟s education while somebody might be saving for the proverbial rainyday or even life after retirement. With objectives defying any range, it is obvious thatthe products required will vary as well.INVESTORS EARN FROM A MUTUAL FUND INTHREE WAYS: 1. Income is earned from dividends declared by mutual fund schemes from time to time. 2. If the fund sells securities that have increased in price, the fund has a capital gain. This is reflected in the price of each unit. When investors sell these units at prices higher than their purchase price, they stand to make a gain. 3. If fund holdings increase in price but are not sold by the fund manager, the funds unit price increases. You can then sell your mutual fund units for a profit. This is tantamount to a valuation gain. 4
  5. 5. MUTUAL FUNDS ADVANTAGES OF MUTUAL FUNDS 1. PROFESSIONAL MANAGEMENTMutual Funds provide the services of experienced and skilled professionals, backedby a dedicated investment research team that analyses the performance andprospects of companies and selects suitable investments to achieve the objectives ofthe scheme. This risk of default by any company that one has chosen to invest in,can be minimized by investing in mutual funds as the fund managers analyze thecompanies‟ financials more minutely than an individual can do as they have theexpertise to do so. They can manage the maturity of their portfolio by investing ininstruments of varied maturity profiles. 2. DIVERSIFICATIONMutual Funds invest in a number of companies across a broad cross-section ofindustries and sectors. This diversification reduces the risk because seldom do allstocks decline at the same time and in the same proportion. You achieve thisdiversification through a Mutual Fund with far less money than you can do on yourown. 3. CONVENIENT ADMINISTRATIONInvesting in a Mutual Fund reduces paperwork and helps you avoid many problemssuch as bad deliveries, delayed payments and follow up with brokers andcompanies. Mutual Funds save your time and make investing easy and convenient. 4. RETURN POTENTIALOver a medium to long-term, Mutual Funds have the potential to provide a higherreturn as they invest in a diversified basket of selected securities. Apart fromliquidity, these funds have also provided very good post-tax returns on year to yearbasis. Even historically, we find that some of the debt funds have generated superiorreturns at relatively low level of risks. On an average debt funds have posted returnsover 10 percent over one-year horizon. The best performing funds have givenreturns of around 14 percent in the last one-year period. In nutshell we can say thatthese funds have delivered more than what one expects of debt avenues such aspost office schemes or bank fixed deposits. Though they are charged with a dividenddistribution tax on dividend payout at 12.5 percent (plus a surcharge of 10 percent),the net income received is still tax free in the hands of investor and is generally muchmore than all other avenues, on a post tax basis. 5. LOW COSTSMutual Funds are a relatively less expensive way to invest compared to directlyinvesting in the capital markets because the benefits of scale in brokerage, custodialand other fees translate into lower costs for investors. 5
  6. 6. MUTUAL FUNDS 6. LIQUIDITYIn open-end schemes, the investor gets the money back promptly at net asset valuerelated prices from the Mutual Fund. In closed-end schemes, the units can be soldon a stock exchange at the prevailing market price or the investor can avail of thefacility of direct repurchase at NAV related prices by the Mutual Fund. Since there isno penalty on pre-mature withdrawal, as in the cases of fixed deposits, debt fundsprovide enough liquidity. Moreover, mutual funds are better placed to absorb thefluctuations in the prices of the securities as a result of interest rate variation and onecan benefits from any such price movement. 7. TRANSPARENCYInvestors get regular information on the value of your investment in addition todisclosure on the specific investments made by your scheme, the proportioninvested in each class of assets and the fund managers investment strategy andoutlook. 8. FLEXIBILITYThrough features such as regular investment plans, regular withdrawal plans anddividend reinvestment plans; you can systematically invest or withdraw fundsaccording to your needs and convenience. 9. AFFORDABILITYA single person cannot invest in multiple high-priced stocks for the sole reason thathis pockets are not likely to be deep enough. This limits him from diversifying hisportfolio as well as benefiting from multiple investments. Here again, investingthrough MF route enables an investor to invest in many good stocks and reapbenefits even through a small investment. Investors individually may lack sufficientfunds to invest in high-grade stocks. A mutual fund because of its large corpusallows even a small investor to take the benefit of its investment strategy. 10. CHOICE OF SCHEMESMutual Funds offer a family of schemes to suit your varying needs over a lifetime. 11. WELL REGULATEDAll Mutual Funds are registered with SEBI and they function within the provisions ofstrict regulations designed to protect the interests of investors. The operations ofMutual Funds are regularly monitored by SEBI. 12. TAX BENEFITSLast but not the least, mutual funds offer significant tax advantages. Dividendsdistributed by them are tax-free in the hands of the investor. They also give you theadvantages of capital gains taxation. If you hold units beyond one year, you get thebenefits of indexation. Simply put, indexation benefits increase your purchase costby a certain portion, depending upon the yearly cost-inflation index (which iscalculated to account for rising inflation), thereby reducing the gap between youractual purchase cost and selling price. This reduces your tax liability. What‟s more,tax-saving schemes and pension schemes give you the added advantage of benefitsunder Section 88. You can avail of a 20 per cent tax exemption on an investment ofup to Rs 10,000 in the scheme in a year 6
  7. 7. MUTUAL FUNDS DISADVANTAGES OF MUTUAL FUNDSMutual funds are good investment vehicles to navigate the complex andunpredictable world of investments. However, even mutual funds have someinherent drawbacks. Understand these before you commit your money to a mutualfund. 1. NO ASSURED RETURNS AND NO PROTECTION OF CAPITALIf you are planning to go with a mutual fund, this must be your mantra: mutual fundsdo not offer assured returns and carry risk. For instance, unlike bank deposits, yourinvestment in a mutual fund can fall in value. In addition, mutual funds are notinsured or guaranteed by any government body (unlike a bank deposit, where up toRs 1 lakh per bank is insured by the Deposit and Credit Insurance Corporation, asubsidiary of the Reserve Bank of India). There are strict norms for any fund thatassures returns and it is now compulsory for funds to establish that they haveresources to back such assurances. This is because most closed-end funds thatassured returns in the early-nineties failed to stick to their assurances made at thetime of launch, resulting in losses to investors. A scheme cannot make anyguarantee of return, without stating the name of the guarantor, and disclosing the networth of the guarantor. The past performance of the assured return schemes shouldalso be given. 2. RESTRICTIVE GAINSDiversification helps, if risk minimization is your objective. However, the lack ofinvestment focus also means you gain less than if you had invested directly in asingle security.Assume, Reliance appreciated 50 per cent. A direct investment in the stock wouldappreciate by 50 per cent. But your investment in the mutual fund, which hadinvested 10 per cent of its corpus in Reliance, will see only a 5 per cent appreciation. 3. TAXESDuring a typical year, most actively managed mutual funds sell anywhere from 20 to70 percent of the securities in their portfolios. If your fund makes a profit on its sales,you will pay taxes on the income you receive, even if you reinvest the money youmade. 4. MANAGEMENT RISKWhen you invest in a mutual fund, you depend on the funds manager to make theright decisions regarding the funds portfolio. If the manager does not perform as wellas you had hoped, you might not make as much money on your investment as youexpected. Of course, if you invest in Index Funds, you forego management risk,because these funds do not employ managers. 7
  8. 8. MUTUAL FUNDS FREQUENTLY USED TERMS NET ASSET VALUE (NAV)Net Asset Value is the market value of the assets of the scheme minus itsliabilities. The per unit NAV is the net asset value of the scheme divided by thenumber of units outstanding on the Valuation Date. EXAMPLE SALE PRICEIs the price you pay when you invest in a scheme. Also called Offer Price. It mayinclude a sales load. REPURCHASE PRICEIs the price at which a close-ended scheme repurchases its units and it mayinclude a back-end load. This is also called Bid Price. REDEMPTION PRICEIs the price at which open-ended schemes repurchase their units and close-ended schemes redeem their units on maturity. Such prices are NAV related. SALES LOADIs a charge collected by a scheme when it sells the units. Also called, „Front-end‟load. Schemes that do not charge a load are called „No Load‟ schemes. REPURCHASE OR ‘BACK-END’LOADIs a charge collected by a scheme when it buys back the units from the unitholders. 8
  9. 9. MUTUAL FUNDS TYPES OF MUTUAL FUND SCHEMESA wide variety of Mutual Fund Schemes exist to cater to the needs such as financialposition, risk tolerance and return expectations etc. The table below gives anoverview into the existing types of schemes in the Industry.BY STRUCTURE a) OPEN-ENDED SCHEMESOpen-ended or open mutual funds are much more common than closed-ended fundsand meet the true definition of a mutual fund – a financial intermediary that allows agroup of investors to pool their money together to meet an investment objective– tomake money! An individual or team of professional money managers manage thepooled assets and choose investments, which create the fund‟s portfolio. They areestablished by a fund sponsor, usually a mutual fund company, and valued by thefund company or an outside agent. This means that the fund‟s portfolio is valued at"fair market" value, which is the closing market value for listed public securities. Anopen-ended fund can be freely sold and repurchased by investors. Buying and Selling: Open funds sell and redeem shares at any time directly to shareholders. To make an investment, you purchase a number of shares through a representative, or if you have an account with the investment firm, you can buy online, or send a check. The price you pay per share will be based on the fund‟s net asset value as determined by the mutual fund company. Open funds have no time duration, and 9
  10. 10. MUTUAL FUNDS can be purchased or redeemed at any time, but not on the stock market. An open fund issues and redeems shares on demand, whenever investors put money into the fund or take it out. Since this happens routinely every day, total assets of the fund grow and shrink as money flows in and out daily. The more investors buy a fund, the more shares there will be. Theres no limit to the number of shares the fund can issue. Nor is the value of each individual share affected by the number outstanding, because net asset value is determined solely by the change in prices of the stocks or bonds the fund owns, not the size of the fund itself. Some open-ended funds charge an entry load (i.e., a sales charge), usually a percentage of the net asset value, which is deducted from the amount invested. Advantages: Open funds are much more flexible and provide instant liquidity as funds sell shares daily. You will generally get a redemption (sell) request processed promptly, and receive your proceeds by check in 3-4 days. A majority of open mutual funds also allow transferring among various funds of the same “family” without charging any fees. Open funds range in risk depending on their investment strategies and objectives, but still provide flexibility and the benefit of diversified investments, allowing your assets to be allocated among many different types of holdings. Diversifying your investment is key because your assets are not impacted by the fluctuation price of only one stock. If a stock in the fund drops in value, it may not impact your total investment as another holding in the fund may be up. But, if you have all of your assets in that one stock, and it takes a dive, you‟re likely to feel a more considerable loss. Risks: Risk depends on the quality and the kind of portfolio you invest in. One unique risk to open funds is that they may be subject to inflows at one time or sudden redemptions, which leads to a spurt or a fall in the portfolio value, thus affecting your returns. Also, some funds invest in certain sectors or industries in which the value of the in the portfolio can fluctuate due to various market forces, thus affecting the returns of the fund. b) CLOSE-ENDED SCHEMESClose-ended or closed mutual funds are really financial securities that are traded onthe stock market. Similar to a company, a closed-ended fund issues a fixed numberof shares in an initial public offering, which trade on an exchange. Share prices aredetermined not by the total net asset value (NAV), but by investor demand. Asponsor, either a mutual fund company or investment dealer, will raise funds througha process commonly known as underwriting to create a fund with specific investmentobjectives. The fund retains an investment manager to manage the fund assets inthe manner specified. Buying and Selling: Unlike standard mutual funds, you cannot simply mail a check and buy closed fund shares at the calculated net asset value price. 10
  11. 11. MUTUAL FUNDS Shares are purchased in the open market similar to stocks. Information regarding prices and net asset values are listed on stock exchanges, however, liquidity is very poor. The time to buy closed funds is immediately after they are issued. Often the share price drops below the net asset value, thus selling at a discount. A minimum investment of as much as $5000 may apply, and unlike the more common open funds discussed below, there is typically a five-year commitment. Advantages: The prospect of buying closed funds at a discount makes them appealing to experienced investors. The discount is the difference between the market price of the closed-end fund and its total net asset value. As the stocks in the fund increase in value, the discount usually decreases and becomes a premium instead. Savvy investors search for closed-end funds with solid returns that are trading at large discounts and then bet that the gap between the discount and the underlying asset value will close. So one advantage to closed-end funds is that you can still enjoy the benefits of professional investment management and a diversified portfolio of high quality stocks, with the ability to buy at a discount. Risks: Investing in closed-end funds is more appropriate for seasoned investors. Depending on their investment objective and underlying portfolio, closed-ended funds can be fairly volatile, and their value can fluctuate drastically. Shares can trade at a hefty discount and deprive you from realizing the true value of your shares. Since there is no liquidity, investors must buy a fund with a strong portfolio, when units are trading at a good discount, and the stock market is in position to rise.BY INVESTMENT OBJECTIVE:A scheme can also be classified as growth scheme, income scheme, or balanced schemeconsidering its investment objective. Such schemes may be open-ended or close-endedschemes as described earlier. Such schemes may be classified mainly as follows:GROWTH / EQUITY ORIENTED SCHEMESThe aim of growth funds is to provide capital appreciation over the medium to long-term. Such schemes normally invest a major part of their corpus in equities. Suchfunds have comparatively high risks. These schemes provide different options to theinvestors like dividend option, capital appreciation, etc. and the investors maychoose an option depending on their preferences. The investors must indicate theoption in the application form. The mutual funds also allow the investors to changethe options at a later date. Growth schemes are good for investors having a long-term outlook seeking appreciation over a period of time. 11
  12. 12. MUTUAL FUNDSEQUITY FUNDSAs explained earlier, such funds invest only in stocks, the riskiest of asset classes.With share prices fluctuating daily, such funds show volatile performance, evenlosses. However, these funds can yield great capital appreciation as, historically,equities have outperformed all asset classes. At present, there are four types ofequity funds available in the market. In the increasing order of risk, these are:INDEX FUNDSThese funds track a key stock market index, like the KSE 100 index (Karachi StockExchange) or NYSE (New York stock exchange). Hence, their portfolio mirrors theindex they track, both in terms of composition and the individual stock weightages.For instance, an index fund that tracks the KSE will invest only in the KSE 100 indexstocks. The idea is to replicate the performance of the benchmarked index to nearaccuracy.SECTOR FUNDSThe riskiest among equity funds, sector funds invest only in stocks of a specificindustry, say IT or FMCG. A sector fund‟s NAV will zoom if the sector performs well;however, if the sector languishes, the scheme‟s NAV too will stay depressed.Barring a few defensive, evergreen sectors like FMCG and OIL&GAS most otherindustries alternate between periods of strong growth and bouts of slowdowns. Theway to make money from sector funds is to catch these cycles–get in when thesector is poised for an upswing and exit before it slips back. Therefore, unless youunderstand a sector well enough to make such calls, and get them right, avoid sectorfunds.INCOME / DEBT ORIENTED SCHEMEThe aim of income funds is to provide regular and steady income to investors. Suchschemes generally invest in fixed income securities such as bonds, corporatedebentures, Government securities and money market instruments. Such funds areless risky compared to equity schemes. These funds are not affected because offluctuations in equity markets. However, opportunities of capital appreciation are alsolimited in such funds. The NAVs of such funds are affected because of change ininterest rates in the country. If the interest rates fall, NAVs of such funds are likely toincrease in the short run and vice versa. However, long term investors may notbother about these fluctuations.Such funds attempt to generate a steady income while preserving investors‟ capital.Therefore, they invest exclusively in fixed-income instruments securities like bonds,debentures, Government of India securities, and money market instruments such ascertificates of deposit (CD), commercial paper (CP) and call money. There arebasically three types of debt funds. 12
  13. 13. MUTUAL FUNDSSPECIALIZED FUNDSSpecialized funds resemble sector funds in most respects. The major difference isthe type of securities that make up the funds portfolio. For example, the portfoliomay consist of common stocks only, foreign securities only, bonds only, new stockissues only, over - the - counter securities only, and so on.ISLAMIC FUNDSIn case of Islamic Funds, the investment made in different instruments is to be in linewith the Islamic Shairah Rules. The Fund is generally to be governed by an IslamicShariah Board. And then there is a purification process that needs to be followed, assome of the money lying in reserve may gain interest, which is not desirable in caseof Islamic investments.BALANCED FUNDThe aim of balanced funds is to provide both growth and regular income as suchschemes invest both in equities and fixed income securities in the proportionindicated in their offer documents. These are appropriate for investors looking formoderate growth. They generally invest 40-60% in equity and debt instruments.These funds are also affected because of fluctuations in share prices in the stockmarkets. However, NAVs of such funds are likely to be less volatile compared topure equity funds.As the name suggests, balanced funds have an exposure to both equity and debtinstruments. They invest in a pre-determined proportion in equity and debt–normally60:40 in favour of equity. On the risk ladder, they fall somewhere between equity anddebt funds, depending on the fund‟s debt-equity spilt–the higher the equity holding,the higher the risk. Therefore, they are a good option for investors who would likegreater returns than from pure debt, and are willing to take on a little more risk in theprocess.MONEY MARKET OR LIQUID FUNDThese funds are also income funds and their aim is to provide easy liquidity,preservation of capital and moderate income. These schemes invest exclusively insafer short-term instruments such as treasury bills, certificates of deposit,commercial paper and inter-bank call money, government securities, etc. Returns onthese schemes fluctuate much less compared to other funds. These funds areappropriate for corporate and individual investors as a means to park their surplusfunds for short periods.BOND FUNDSThese funds invest in government bonds and corporate bonds. These Bond Fundsoffer a steady source of income and in many times these incomes get the advantageof Tax Exemption. 13
  14. 14. MUTUAL FUNDS Approaches to Portfolio Management (Fund Management Style):Mutual funds can be broadly classified into two categories in terms of the fundmanagement style i.e. actively managed funds and passively managed funds(popularly referred to as index funds).ACTIVELY MANAGED FUNDSActively managed funds are the ones wherein the fund manager uses his skills andexpertise to select invest-worthy stocks from across sectors and market segments.The sole intention of actively managed funds is to identify various investmentopportunities in the market in order to clock superior returns, and in the processoutperform the designated benchmark index. in active fund management two basicfund management styles that are prevalent are:Growth Investment Style: wherein the primary objective of equity investment is toobtain capital appreciation. this investment style would make the funds manager pickand choose those shares for investment whose earnings are expected to increase atthe rates that exceed the normal market levels. they tend to reinvest their earningsand generally have high P/E ratios and low Dividend Yield ratio.Value Investment Style: wherein the funds manager looks to buy shares of thosecompanies which he believes are currently under valued in the market, but whoseworth he estimates will be recognized in the market valuation eventually.PASSIVELY MANAGED FUNDSOn the contrary, passively managed funds/index funds are aligned to a particularbenchmark index like KSE 100 index KSE 30 index. The endeavor of these funds isto mirror the performance of the designated benchmark index, by investing only inthe stocks of the index with the corresponding allocation or weightage. 14
  15. 15. MUTUAL FUNDS MUTUAL FUND AND PAKISTANMUFAP (MUTUAL FUND ASSOCIATION OFPAKISTAN)Mutual Funds Association of Pakistan (MUFAP) is the trade body for Pakistan‟s multibillion rupees asset management industry. The money our members manage is in awide variety of investment vehicles including stocks, bonds, money marketinstruments, government securities and bank deposits. Our role is to ensuretransparency, high ethical conduct and growth of the mutual fund industry. MUFAPwas formed in 1996 by Mr. Zaigham Mahmood Rizvi, ex-Chairman and foundermember, and was formally licensed in 2001 as a public limited company (byguarantee) under Section 42 of the Companies Ordinance, 1984 by Ministry ofCommerce (MOC) and is thus a quasi legal entity. After the establishment of MUFAPin 1996, private and foreign firms were allowed to float open-ended funds for thegeneral public. This time also saw the stock market‟s performance scale new heightsas a result of positive government policies and incentives, registering a growth ofmore than 15 times in the net assets of the mutual funds between 2000-2008. MutualFunds were initially overseen by the Corporate Law Authority (“CLA”) under itsSecurities Wing. The CLA, then a division of the Ministry of Finance, was graduallytransformed and made independent as the Securities and Exchange Commission ofPakistan (“SECP”) as part of the Capital Market Development Program (CMDP)initiative of the Asian Development Bank undertaken for Pakistan. The CMDPenvisaged formation of four types of Self-Regulated Organizations (“SROs”) tofunction under the SECP: Stock Exchanges recognized as separate SROs; Mutual Funds Association of Pakistan (MUFAP); Leasing Association of Pakistan (LAP); and Modaraba Association of Pakistan (MAP).MUFAP‟s role is to establish the essential codes and standards within the industry toensure the trust and confidence of investors and build the industry as a whole. 15
  16. 16. MUTUAL FUNDSTAXATION ON MUTUAL FUNDSThe income of mutual funds is exempt from Income Tax, if not less than 90% of theincome of the year, as reduced by capital gains is distributed amongst the unitholders as dividend or bonus units.TAXATION ON UNIT HOLDERSHolders of mutual funds are subject to Income Tax on dividend income received froma mutual fund (excluding the amount of dividend paid out of capital gains on listedsecurities) as under:Public Company and Insurance Company 5%.If received by any other person,including a non-resident 10%Capital gain on disposition of units in a mutual fund is exempted from tax till suchtime that capital gain on sale of securities listed on the stock exchanges is exemptfrom such tax.TAX CREDITAs funds are listed at the stock exchanges, unit holders of the mutual funds, otherthan a company, are entitled to a tax credit under section 62 of the Income TaxOrdinance, 2001 on purchase of new units. The amount on which tax credit isallowed is the lower of (a) amount invested in purchase of new units, (b) fifteenpercent of the taxable income of the unit holder, or (c ) Rupees Five HundredThousand (PKR. 500,000), and is calculated by applying the average rate of tax ofthe unit holder for the tax year. If the units are disposed within twelve months, theamount of tax payable for the tax year in which the units are disposed is increasedby the amount of credit allowed.RULES GOVERN MUTUAL FUNDS IN PAKISTANThere are two rules govern mutual funds inPakistan, which are: 1) Investment Companies and Investment Advisors Rules, 1971. (Govern closed-end mutual funds) 2) 2. Asset Management Companies Rules, 1995. (Govern open-ended mutual funds) 16
  18. 18. MUTUAL FUNDS MUTUAL FUND COMPANIES IN PAKISTANSome of the mutual fund company‟s details are given below:NATIONAL INVESTMENT TRUST LIMITEDThe National Investment Trust Limited (NITL) is the first Asset ManagementCompany of Pakistan, formed in 1962, had Funds under management of Rs. 81.301billion, with approximately 59,619 unit holders as on June 30,2011. NITs distributionnetwork comprises of 22 branches, various Authorized bank branches all overPakistan and Arab Emirates Investment Bank (AEIB) in Dubai (UAE).PRODUCTS & INVESTMENT STRATEGYThe National Investment Unit Trust (NIUT) is the Pakistan‟s largest and oldestMutual Fund. As on June 30, 2011, NIUT had funds under management of aroundRs. 40.464 billion invested in over 440 listed companies and had approximately56,195 unit holders. NITLs distribution network comprises of 22 NIT branches,various Authorized bank branches all over Pakistan and Arab Emirates InvestmentBank (AEIB) in Dubai (UAE). The Trust constituted under the Trust Deed dated 12thNovember 1962, executed between National Investment Trust Ltd (NITL) asManagement Company and National Bank of Pakistan as Trustee.MEEZAN BALANCED FUNDMeezan Balanced Fund is the first Shariah compliant balanced fund in Pakistan.MBF is a closed-end balanced fund constituted under Non-Banking FinanceCompanies (Establishment Regulation) Rules, 2003. It was launched on December20, 2004 with the objective to provide stable income stream along with equity upside.The investment objective of MBF is to generate long term capital appreciation as wellas current income by creating a balanced portfolio that is invested both in highquality equity securities and MBF invests 40-60% of the funds in stocks whichprovides capital appreciation and returns higher than those of bonds and bankdeposits. The rest of the funds are invested in various Islamic income instruments.such as Sukuks (Islamic Bonds), Certificate of Islamic Investments, Musharika andMorabaha instruments, Shariah-compliant spread transactions, and other Islamicincome products, which provides the security of a constant income stream toinvestors. 18