Group Members

 Umm e Farwa
 Sibgha Afzal
 Maryam Shehzadi

13-3 www.company.com
 Agenda

o History of Mutual Funds

o Introduction of Mutual
Funds
o Types
o Working of NIT
o Calculation of NAV
o Types of Loads
o Units Available in NIT

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 History

1962:
. National Investment Trust Limited (NIT) established
National Investment (Unit) Trust as first open-end mutual
fund in Pakistan on November 12, 1962.
1966:
Investment Corporation of Pakistan (ICP) established
to broaden investment base and develop capital markets in
the country. From 1966 onwards, ICP floated twenty-six
closed-end mutual funds.
1971:
Investment Companies and Investment Advisers Rules
were notified. Private sector was allowed to float closed-end
funds under these Rules.

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 History

1983:
First closed-end fund (Golden Arrow Selected Stock
Fund) in the private sector was launched on May 1, 1983.
1995:
Asset Management Companies Rules were notified
allowing launching of open-end funds by the private sector.
First closed-end Shariah Compliant Fund (Al Meezan Mutual
Fund) was launched on July 13, 1995.
1996:
First meeting of investment advisors/ asset
management companies held for the establishment of a
Mutual Funds Association of Pakistan (MUFAP).

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 History

1997:
Unit Trust of Pakistan, first private sector open-end
fund launched by JS Investments Limited (formerly ABAMCO
Limited) on October 27, 1997.
1999:
SECP was established under the Securities and
Exchange Commission of Pakistan Act 1997 and became
functional as a body corporate on January 1, 1999. SECP
replaced the Corporate Law Authority.
2001:
MUFAP officially registered and recognized as
representative body of asset management companies in the
country.

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 History

2001:
MUFAP officially registered and recognized as
representative body of asset management companies in the
country.
2004:
MUFAP secures membership of International Investment
Funds Association (IIFA).
2010:
MUFAP and Karachi Stock Exchange worked together to
launch Bond Automated Trading System (BATS) for trading of
Corporate Debt Securities.
2012:
Mutual Funds Industry shows a growth of 52% during
the financial year 2012.

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 Introduction

A mutual fund is an investment vehicle made up of a pool of

money collected from many investors for the purpose of
investing in securities such as stocks, bonds, money market
instruments and other assets. Mutual funds are operated by
professional money managers, who allocate the fund's
investments and attempt to produce capital gains and/or
income for the fund's investors. A mutual fund's portfolio is
structured and maintained to match the investment
objectives stated in its prospectus.

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 Features of Mutual Fund

• Professional investment management

• Diversification
• Low cost
• Convenience and flexibility
• Life cycle planning
• Affordability
• Investors information
• Benefit in taxation

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 Types of Mutual Funds

There are mainly two types of mutual funds.

Open-End Funds
Close- End Funds
Open End-Funds
The Open End Mutual Funds continuously issue new units on
demand and simultaneously redeem these units on demand.
Therefore, the numbers of units outstanding at any particular
point in time vary. An Open-end Fund does not have a fixed
pool of money. The Fund Manager is committed to
continuously issue Units to new investors at the Offer Price
and buy-back Units from ‘old’ investors at the Repurchase
Price, also known as Redemption Price. The units do not
trade on a stock market.

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 Open-End Funds

• Open-ended fund units are issued and can be purchased

or redeemed as needed at the fund's current net asset
value (NAV) per share adjusted for offer/redemption
price whereas mostly closed-end funds are listed on the
stock exchanges and are freely traded as shares of any
other company. Net Asset Value (NAV) of the units of an
Open End Mutual Fund is published on the respective
website of the fund manager and also in the newspapers.
• The Fund is set up as a Trust, with an independent
Trustee, who has custody of the assets of the Trust. Each
share of the Fund is called a Unit and its Fund Manager is
known as the Asset Management Company (AMC). The
Fund, itself, is called a Unit Trust.

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 Open-End Funds

Offer Price:
• This is the price at which the Fund sells its Units to the
investors. It is usually published in the newspapers as
well as posted on the AMC’s website every day.
Repurchase Price:
• This is the price at which the Fund buys-back its Units
from the Unit-holders.
• Mutual fund companies have professional management,
with a portfolio manager to monitor investment holdings
in a fund and who decides what equities to buy, hold or
sell. Units of an Open End Mutual Fund are sold to the
public at Net Asset Value (NAV) price adjusted for load.
How well the fund usually makes the difference between
a rising and a declining NAV.

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 Close-End Funds

• A closed-end fund (CEF) is a publicly traded investment

company. It collects money from investors through an
initial public offering (IPO) and uses this money to invest
in securities. The shares of a CEF are traded on a stock
exchange like that of any other company.
• Closed-end funds issue a specific number of share.
• The shares are not redeemable.
• But are readily transferable and traded.
• The price of a closed-end fund share fluctuates.
• Closed-end funds are not required to redeem their
shares.

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 Closed-End Fund

• The Closed-End Fund is a Mutual Fund that has a fixed

pool of money which is collected from the investors when
the Fund is set up and subscription are received through
Initial Public Offering (IPO).
• The Fund Manager invests the money in accordance with
the declared Investment Policy of the Fund and
distributes the returns achieved to the investors, from
time to time, in the shape of Cash Dividends or Bonus
share.

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 Close- End Funds

• The NAV of a CEF fluctuates with the changes to the

market price of the securities in which the CEF has
invested.
• The price at which the share of the CEF trades is called
the market price.

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 Close-End Funds

• For example, if the NAV of a CEF is 10 and its market price

is 12, the CEF is trading at a premium of 20%. If the NAV is
10 and its market price is 8, the CEF is trading at a
discount of 20%.
• The premium/discount may be computed using the
following formula:
• Premium or Discount = Market Price – NAV
NAV

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 NAV

• The net asset value (NAV) represents the net value of an

entity, and is calculated as the total value of the entity’s
assets minus the total value of its liabilities. Most
commonly used in the context of a mutual fund or
an exchange-traded fund (ETF), the NAV represents the
per share/unit price of the fund on a specific date or time.

NAV = (Assets - Liabilities) / Total number of outstanding

shares

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 Definition of Loads

• A load is a sales charge commission charged to an

investor when buying or redeeming shares in a mutual
fund. Sales charge commissions can be structured in a
number of ways. They are determined by the mutual fund
company and charged by mutual fund intermediaries in
mutual fund transactions. Common types of sales charges
include front-end load and back-end load.

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 Types of Loads

• Front-End Load
• Back-End Load
Front-End Load
• A front-end load is a commission or sales charge applied
at the time of the initial purchase for an investment,
usually with mutual funds and insurance policy
purchases. It is deducted from the investment amount
and, as a result, lowers the size of the investment. Front-
end loads are paid to investment intermediaries, such as
financial planners, brokers and investment advisors, as
sales commissions as such, these sales charges are not
part of a mutual fund's operating expenses.

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 Back-End Load

• A back-end load is a fee (sales charge or load) that

investors pay when selling mutual fund shares, and the
fee amounts to a percentage of the value of the share
being sold. A back-end load can be a flat fee or can
gradually decrease over time, usually within five to 10
years. In the latter case, the fee percentage is highest in
the first year and decreases yearly until the
specified holding period ends, at which time it drops to
zero.

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 Working of Mutual Funds

• Investment = Rs.1,00,000
• Offer Price = Rs.10
• No. of units = 10,000
• Sale Price = Rs.15

• Gross Income = 10,000*15=Rs.1,50,000

(here tax is payable)
Capital Gain = 1,50,000-1,00,000=Rs.50,000
• Tax on Capital Gain = Rs.50,000*12.5%=Rs.6250

• So…
• Net Capital Gain=50,000-6250=Rs.43750

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 In Case of Dividend

• If
• Rate of Dividend= Rs.5 per unit

• Then
• Gross Dividend=Rs.10,000*5=Rs.50,000

• With Holding Tax=50,000*12.5%=Rs.6250

• So
• Net Dividend=Rs.43750

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 In Case of Re-Investment

• if
• Offer Price= Rs.15
• Re-purchase price= Rs.10
• No. of Units= 43750 = 4375 units

These units will be given to re-investors in case of re-

investment.

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 • How X-Dividend Rate is
calculated in Mutual Funds.

• Dividend Rate/ Opening Price of the Unit

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 Units Available in NIT

Equity Funds
Investment Unit Trust
State Enterprise Fund
Equity Market Opportunity Fund
Islamic Equity Fund
Income/ Money Market Funds
Government Bond Fund
Income Fund
Islamic Income Fund
Money Market Fund
Pension Funds
Pension Fund
Islamic Pension Fund

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 Equity Funds

An equity scheme or equity fund is a fund that invests in

Equities more commonly known as stocks. The objective of
an equity fund is long-term growth through capital
appreciation, although dividends and capital gain realized are
also sources of revenue.
Investment Unit Trust
National Investment Unit Trust (NIUT) is the Pakistan’s
largest and oldest Mutual Fund. As on October 31st,
2018, the portfolio of NIUT Fund carries an investment of
around Rs. 66.737 Billion invested in over 389 listed
companies. The Fund belongs to around 48,607 unit holders.
NI(U)T has been governed under the Trust Deed dated 12th
November 1962, executed between National Investment
Trust Ltd (NITL) as Management Company and National
Bank of Pakistan as Trustee.

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 Equity Funds

State Enterprise Fund

National Investment Trust Limited has launched NIT – State

Enterprise Fund on Jan 13, 2009. NIT – SEF was constituted
under the trust deed executed between National Investment
Trust Limited as Management Company and Central Depository
Company (CDC) of Pakistan as Trustee.

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 State Enterprise Fund

The total size of the Fund is Rs. 2.399 billion as at October

31st, 2018, Invested in the following eight eligible
stocks backed by government guarantee.

1. Oil & Gas Development Company Limited.

2. Pakistan Petroleum Products.
3. Kot Addu Power Company Limited.
4. Pakistan Telecommunication Company Limited.
5. National Bank of Pakistan.
6. Pakistan State Oil Company Limited.
7. Sui Northern Gas Pipeline Limited.
8. Sui Southern Gas Company Limited

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 Equity Market Opportunity Fund

NIT started making investments from this Fund on 25th

July 2008. NIT – EMOF was constituted under the Trust
Deed executed between National Investment Trust Limited
(NITL) being the management company and Central
Depository Company (CDC) of Pakistan being Trustee.

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 Islamic Equity Fund

NIT-IEF (Islamic Equity Fund) is an open-end Islamic

Equity Fund which invests in Shariah Compliant Listed
Equities. Ideally to cater the requirement of those
investors, who wish to invest in Shariah Compliant
Equities and want to earn Halal, Riba-free returns, as
on October 31st, 2018 the portfolio of NIT-IEF carries
an investment of Rs. 3.935 billion, invested in over 41
companies. The fund belong to around 3,822 unit
holders

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 Income/Money Market Fund

• Government Bond Fund

• NITL, in its efforts to provide a wide range of services to
cater the needs of different classes of investors, has
launched NIT Government Bond Fund. It is an open end
Income Fund investing primarily in the short term as well
as long term Government Securities with maximum
weighted average time to maturity not exceeding 7.5
years.
NIT GBF is a low risk income fund with major investment
(70% or above) in Government Securities while at least
25% shall be invested in cash and near cash instruments
which includes cash in bank account (excluding TDRs)
and treasury bills not exceeding 90 days maturity. As on
October 31st, 2018, NIT GBF had funds under
management of around Rs. 3.77 billion and had
approximately 1,182 unit holders.
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 Income Fund

• NITL, in its efforts to provide a wide range of services to

cater to the needs of different classes of investors, has
launched " NIT Income Fund" in the Fixed Income
Category. It is also an open end Income Fund. As on
October 31st, 2018 NIT IF had funds under
management of around Rs. 4.83 billion and had
approximately 1,354 unit holders.

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 Islamic Income Fund

• NIT Islamic Income Fund (NIT-IIF) is an open-end Islamic

Income Fund which invests in Shariah Compliant
instruments. Ideally to cater the requirement of those
investors, who wish to earn Riba free Halal returns. The
objective of the Fund is to generate a stable Shariah
compliant income stream, while seeking maximum
possible preservation of capital, over the medium to long-
term period, by investing in a diversified portfolio of
Shariah Compliant fixed income and money market
instruments.

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 Money Market Fund

• In an effort to expand its current suite of products, NIT

has launched the NIT Money Market Fund (NIT-MMF)
(formerly NIT-GTF). It is an open end Money Market
Fund, investing primarily in short-term Government
securities, Bank Placements and any other Money Market
Instrument with maximum weighted average time to
maturity not exceeding 90 days.

• NIT-MMF (formerly NIT-GTF) is a low risk money market

fund. As on 31st October 2018, NIT-MMF had Funds
under management of around Rs. 1.41 Billion.

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 Pension Funds

• Pension Fund
• NIT Pension Fund is established in Pakistan as a
Voluntary Pension Fund through a Trust Deed, dated May
14, 2015, entered in between National Investment Trust
Limited in its capacity as the Pension Fund Manager and
Central Depository Company of Pakistan Limited in its
capacity as the Trustee and authorized under the
Voluntary Pension System (VPS) Rules, 2005.
The Pension Fund shall initially consist of four (4) Sub-Funds to be
called
i. NIT-PF Equity Sub-Fund (the “Equity Sub-Fund”)
ii. NIT-PF Debt Sub-Fund (the “Debt Sub-Fund”)
iii. NIT-PF Money Market Sub-Fund (the “Money Market Sub-
Fund”) and
iv. NIT-PF Commodities Sub-Fund (the “Commodities Sub-Fund”)

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 Islamic Pension Fund

• NIT Islamic Pension Fund is established in Pakistan as a

Voluntary Pension Fund through a Trust Deed, dated May
14, 2015 on the basis of Wakalah tul Istismar(Investmetn
Agency Agreement), entered in between National
Investment Trust Limited in its capacity as the Pension
Fund Manager and Central Depository Company of
Pakistan Limited in its capacity as the Trustee and
authorized under the Voluntary Pension System (VPS)
Rules, 2005.
The Pension Fund shall initially consist of three (3) Sub-Funds to
be called
• i. NIT-IPF Equity Sub-Fund (the “Equity Sub-Fund”)
ii. NIT-IPF Debt Sub-Fund (the “Debt Sub-Fund”)
iii. NIT-IPF Money Market Sub-Fund (the “Money Market
Sub-Fund”)

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 Mutual Fund Companies in Pakistan

• National Investment
• National Asset Trust Management Company
• Arif Habib Investment
• NBP Capital Limited
• AKD Capital Limited

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