MUTUAL FUNDS

An Avenue for Savings and Investments

Contents
Introduction/Benefit Structure of Mutual Funds Types of Mutual Funds Status of Mutual Fund Industry in Pakistan Status of Mutual Fund Industry Globally

Introduction/Benefit

Introduction to Mutual Fund

What is a Mutual Fund?
Mutual fund is a pool of money belonging to a group of investors, who entrust it to a Fund Manager for making prudent investments on their behalf, strictly in accordance with the Investment Guidelines as laid down in the Constitutive Documents of the Fund.

Key Advantages of Investing in Mutual Funds

Professional Investment Management Diversification Convenience and Flexibility Liquidity and Easy Withdrawal Regulatory Protection Protection through Trustee Taxation Benefits

Advantages of Money Market Funds (MMFs) Versus Bank Deposits & NSS
Money Market Funds (MMFs) are like a current account of a bank withdraw any time without penalty MMFs returns are much higher than bank deposits. Average bank deposit rate is 6% p.a., average return on MMFs is 10.5% p.a.. The return of about 10% p.a. is even better than Term-Deposits Unlike NSS, there are no penalties on withdrawals, and much better service Tax credits of up to Rs. 100,000 on open end mutual funds and unlimited on pension funds, if investment horizon is longer than one year versus 10% tax on bank deposits and some NSS Schemes

Tax Benefits

Mutual Funds required to withhold CGT as per below:

10% for less than 6 months holding 8% for 6 to 12 months holding Zero for more than 12 months holding Capital Gains separate block of income with full & final tax liability.

Corporate Entities:
Tax savings of 25%-35% as compared to bank deposits

Individuals:
Tax savings of 0-10% as compared to bank deposits Tax Rebates upto Rs.100,000/- on open end funds and unlimited on Pension Funds

Structure of Mutual Funds

Structure of Mutual Funds

MONEY MARKET FUNDS INCOME FUNDS

MANAGEMENT FEE

ISLAMIC FUNDS

ASSET MANAGEMENT COMPANY

FUND MANAGEMENT

BALANCE FUNDS

ASSET ALLOCATION FUNDS

STOCK FUNDS

1. Funds are separate legal entities owned by the investors 2. The AMC simply manages the funds on behalf of investors and charge a fee for that 3. Management fee ranges from 1% p.a. to 3% p.a. of assets under management
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Operations of Funds by Management Company & Trustee

REGULATOR - SECP MANAGEMENT COMPANY
Manages all investments in Funds

TRUSTEE/ CUSTODIAN
All Assets are in the custody of the Trustee

INVESTORS, INSTITUTIONAL / RETAIL

SALES REDEMPTIONS

FUNDS / SCHEMES

INVESTMENTS RETURNS

Bank Deposits T-Bills TFCs Equities

Types of Mutual Funds

Types of Mutual Funds

Conventional/Shariah Open-end

Compliant Funds

/ Closed-end
of Mutual Funds

Sub-categories

Money Market Funds Income Funds Asset Allocation Funds Balanced Funds Equity Funds Sector Specific Funds

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Basic Characteristics of Mutual Funds

Investment Avenues Fund Category Volatility/ Risk Investment Time Banks T-Bills

TFCs/ Sukuks No

Equities

Money Market

Very Low

Short or Long

Yes

Yes

No

Income

Moderate

Medium

Yes

Yes

Yes

No

Balanced / Asset Moderate Allocation

Medium-Long

Yes

Yes

Yes

Yes

Equity

High

Long

Yes

Yes

No

Yes
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How to choose a Mutual Fund?

Rating/Quality of Sponsors Rating of Asset Management Company (AMC) Rating of Fund Highly Qualified & Experienced Management Team Successful Performance Track Record Ethical Reputation of the Management

Disciplined Investment Methodology

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Risk Disclaimer
All investments in mutual funds are subject to market risks The NAV based prices of units and any dividend/returns thereon are dependant on forces affecting the financial markets. These may go up and down on market conditions

Past performance is not necessarily indicative of future results

Please read offering document of the fund to understand the investment policies and the risk involved
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How to Start Investing?

Determine your objectives of savings/investments which includes - Return needs - Time horizon - Liquidity needs - Risk Profiling of Investor Ask yourself whether you are an aggressive, moderate or a conservative investor Select the mutual fund manager you trust Select the fund which you want to invest Monitor your investments on periodic basis

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Status of Mutual Funds Industry in Pakistan

Mutual Fund Industry in Pakistan

GROWTH OF MUTUAL FUNDS IN PAKISTAN
350.0

305
300.0

299

250.0

237
191 159

Rs. in Billion

200.0

150.0

132

100.0

63
50.0

47
21

31

24

20

Dec-06 Dec-07 Dec-08 Dec-09 Dec-10 Dec-11

Open-end

Close-end
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Mutual Fund Industry in Pakistan

OPEN END FUNDS - CATEGORYWISE SIZE Rs. 299 Billion as on 31/12/2011
Asset Allocation 1%

CLOSE END FUNDS - CATEGORYWISE SIZE Rs.20 Billion as on 31/12/2011

Income 6%

Balanced 2%

Capital Protected 1%

Balanced 15%

Equity 28%

Money Market 37%

Income 31%

Equity 79%

Mutual Fund Industry in Pakistan

MUTUAL FUNDS VS BANK DEPOSITS - PAKISTAN
600 12%

10.3%
Percentage of Bank Deposits
500 9%

Pak Rs. in Billion

400

368
6.0%

318
4.7% 5.1%

300

261
5.1%

5.4%

6%

222

200

179

180
3%

100

0%

Dec-06

Dec-07

Dec-08

Dec-09

Dec-10

Dec-11

Status of Mutual Funds Industry Globally

Mutual Fund Industry in India

MUTUAL FUND INDUSTRY VS BANK DEPOSITS - INDIA
9,000 20%

18%
8,000

18%

7,953 6,876

18%

7,000
Indian Rupee in Tillion

13%
6,000

14%

5,490

11%

12%
12%

5,000

4,193
4,000

10%

3,339
3,000

8%

6%

2,000

4%

1,000

2%

0%

Dec-06

Dec-07

Dec-08

Dec-09

Dec-10

Dec-11

Percentage of Bank Deposits

14%

6,782

16%

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Mutual Fund Industry India vs Pakistan

MUTUAL FUND AS % OF BANK DEPOSIT - INDIA VS PAKISTAN
20%

18.0%
18% 16%

18.3%

14.2%
14% 12%

13.3% 11.4% 11.8%

10.3%
10%
8%

6% 4% 2% 0%

6.0%
4.7%

5.1%

5.1%

5.4%

Dec 06

Dec 07

Dec 08

Dec 09

Dec 10

Dec 11

India

Pakistan
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Worldwide Mutual Fund Assets

WORLDWIDE MUTUAL FUND ASSETS Trillios of U.S. dollars, end of quarter
30.0

25.0

22.38 20.34
20.0

22.95

23.12 21.44

23.70

24.70

25.62

25.93 23.13

18.92

18.16

15.0

10.0

5.0

Q4 Q1 2008

Q2

Q3 2009

Q4

Q1

Q2

Q3 2010

Q4

Q1

Q2 2011

Q3

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Worldwide Mutual Fund Assets

WORLDWIDE MUTUAL FUND ASSETS Billions of U.S. dollars, end of quarter
12,000.0

11,004
10,000.0

9,043
8,000.0

6,000.0

5,868

5,638
4,933

4,746 3,019

4,000.0

2,693

2,000.0

2011: Q2 2011: Q3 Equity

2011: Q2 2011: Q3 Bond

2011: Q2 2011: Q3 Money Market

2011: Q2 2011: Q3 Balanced/ Mixed

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Worldwide Mutual Fund Assets

PERCENT OF WORLDWISE MUTUAL FUND ASSETS BY TYPE OF FUND, 2011:Q3
Money Market 21%

Balanced/ Mixed 12%

Bond 24%

Other/ Unclassified 4%

Equity 39%
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Worldwide Mutual Fund Assets

PERCENT OF WORLDWIDE MUTUAL FUND ASSET BY REGION, 2011:Q3
Africa Asia/Pacific, 13% America, 55%

Europe, 32%

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Thank You