Asset Allocation Funds

These funds have highly fluid investment portfolios that target the best of any asset class. They are a step ahead of Balanced funds, meaning that they can invest upto 100% of their net assets in any particular asset class or in any combination of asset classes. In a rising market, these funds generally take advantage of short term spread transactions, realizing their profits in small and rapid steps. In declining markets, they move swiftly towards safer asset classes. The element of risk in a asset allocation fund is generally higher than that of a balanced fund, but the returns are relatively higher as well.

Accessibility & Affordability

Most banks, financial institutions and other companies sell mutual funds and facilitate clients on behalf of the management company. Additionally, the initial amount is very small and this makes investing extremely easy and affordable.

Account Statement

means statement of transactions in Units in the folio of the Holder.

Balanced Fund

The objective of these funds is to provide a balanced mixture of safety, income and capital appreciation. The strategy of balanced funds is to invest in a combination of fixed income and equities. These funds maintain the debt and equity at certain ratios which are adjusted periodically based on market conditions.

Benefits of Investing in Open-end Mutual Funds

Open-end mutual funds offer investors many benefits that would be difficult for average investors to achieve individually.

Back-end Load

means Sales Load deducted from the Net Asset Value in determining the Redemption Price.

Business Day

means a day on which Banks are open for business in Pakistan.

Constitutive Document

means the Trust Deed that is the principal document governing the formation, management or operation of the Trust.

Contingent Load

means Sales Load deducted from the Net Asset Value in determining the Redemption Price.

Certificate

means the definitive certificate acknowledging the number of Units registered in the name of the Holder issued at the request of the Holder.

Custodian

means a bank, the Central Depository Company or any other Depository that for the time being may be appointed by the Trustee with the approval of the Management Company to hold and protect the Deposited Property or any part thereof as custodian on behalf of the Trustee.

Core Investors

means the initial investors, who shall be required to subscribe to and to hold number of Units of an amount to be in compliance with Rule 67-2 (f) for the minimum two years from the date of payment in full of such Units.

Core Units

means such Units of the Trust that are issued to Core Investors with the condition that these are not redeemable for a period of two years from the date of issue. However, such Units are transferred with this condition and shall rank pari passu with all other Units save for this restriction. Any transfer of these Core Units, during the first two years of their issue, shall be affected only on the receipt by the Transfer Agent of a written acceptance of this condition by the transferee.

Diversification

A risk management technique that mixes a wide variety of investments within a portfolio. It is designed to minimize the impact of any one security on overall portfolio performance.

Deposited Property

means the aggregate proceeds of the sale of all Units at Offer Price after deducting therefrom or providing thereout any applicable Sales Load and Duties and Charges and Transaction costs and any other expenses chargeable to the Fund; and includes the Investment and all income, profit and other benefits arising therefrom and all cash, bank balances and other assets movable or immovable and property of every description for the time being held or deemed to be held upon trust by the Trustee for the benefit of the Holders pursuant to this Deed but does not include any back-end or contingent charges payable to the Management Company or any amount standing to the credit of the Distribution Account.

Distributor/ Distribution Company

means a company, firm or a Bank appointed by the Management Company and after intimation to the Trustee for performing the Distribution Function and shall also include the Management Company and the Trustee, subject to approval by the Management Company, if they perform the Distribution Function.

Distribution Function

mean with regard to:

Equity

These funds invest mainly in equity of companies and undertake the risk of price movement at the stock exchange. Such funds are clearly expected to out-perform other types of funds in a rising market. When the market declines, equity funds tend to under-perform, when compared with other types of funds. Their strength is the expected capital appreciation and windfall income through capital gains. However, such funds are prone to losses when the market is declining.

Fixed-Income

These funds primarily invest in assets that pay a fixed-Rupee amount e.g., bank deposits, treasury bills, term finance certificates and government bonds. They are generally not affected by volatility at the stock exchanges. The element of risk is low and so is the return.

Front-end Load or Preliminary Charges

means the Sales Load that is included in the Offer Price of Units.

Goal

Mutual Funds have a variety of goals:

• Some seek to generate income on a regular basis, while aiming to preserve the original investment/ principal.

• Some seek to provide investors long-term capital appreciation, current income and at the same time attempt to preserve the original investment.

• Some seek to make the investment grow over a period of time. The current income (dividend yield) may be low.

How Mutual Funds Generate their Income

Income

Depending on the investment policy of the mutual funds, the main sources of income are:

Expenses

Income Tax on Mutual Funds/ Investors

The impact of taxation on investor, investing directly or through mutual funds is neutral. Mutual funds distributing ninety percent of income as dividend are exempt from payment of income tax. The unit/ shareholders are subject to tax on dividend distribution by mutual funds at the applicable tax rates.

Initial Period or Initial Offering Period

means a period determined by the Management Company not exceeding ninety days during which Units will be offered at the Initial Price in terms of the Offering Document.

Initial Price

means the price per Unit during the initial offering period determined by the Management Company.

Liquidity

A mutual fund allows you to request that your units be converted into cash at any time.

Mutual Funds

A mutual fund is a pool of money provided by various participants and then invested into equity and fixed income markets with the objective to provide safety of capital and returns to investors. The pool is managed by on behalf of the investors by a team of specialized individuals, commonly known as fund managers or investment advisors.

Net Asset Value (NAV)

means per Unit value of the Trust arrived at by dividing the Net Assets by the number of Units issued.

Offering Document

means the prospectus, advertisement or other document (approved by SECP), which contains the investment and distribution policy and all other information in respect of the Unit Trust, as, required by the Rules and is circulated to invite offers by the public to invest in the Unit Trust.

Professional Management

Mutual funds being large entities are managed by professional portfolio managers who have the right levels of qualifications and experience to handle and search for best securities for the fund. these funds may have crucial, real time information from the markets and are able to execute large trade volumes on timely and cost effective basis.

Par Value

means the face value of a Unit that shall be determined by the Management Company in consultation with the Trustee from time to time.

Regulatory authority/ body

Mutual funds are regulated by the Securities and Exchange Commission of Pakistan (SECP).

Risks of Investing in Mutual Funds

All investments in mutual funds and securities are subject to market risks. Their target return/ dividend range cannot be guaranteed. Their price is neither guaranteed nor administered/ managed. It is based on the NAV, which may go up or down depending, to some extent, upon the factors and forces affecting the stock market. Past performance is not necessarily indicative of future results. The risk may vary depending upon the investment strategy of funds and whether they are balanced, fixed-income or equity funds.

Register

means the Register of the Holders kept pursuant to the Rules and the Trust Deed.

Registrar Functions

means the functions with regard to:

Reporting or Base Currency

means the currency used in presenting the financial statements, which will be Pakistani Rupee.

Rules

means the Non-Banking Finance Companies (Establishment and Regulation) Rules 2003, as amended from time to time

SECP

means the Securities and Exchange Commission of Pakistan, established under section 3 of the Securities and Exchange Commission of Pakistan Act, 1997.

Stock Exchange

means Karachi Stock Exchange, Lahore Stock Exchange, Islamabad Stock Exchange or any other stock exchange registered under section 5 of the Securities and Exchange Ordinance.

Sales Agent

means an individual, firm, corporate or other entity appointed by the Management Company to identify solicit and assist investors in investing in the Scheme. The Management Company shall compensate the Investment Facilitators/ Sales Agents out of the Sales Load collected by it in the Offer Price.

Sales Load

means the sales charges or commission (excluding Duties and Charges) not exceeding five percent (5%) of the Net Asset Value, which may be included in the Offer Price of certain classes of Units or deducted from the Net Asset Value in order to determine the Redemption Price of certain classes of Units.

Subscription Day

means every Business Day provided that the Management Company may with the prior written consent of the Trustee and upon giving not less than seven days notice in at least one newspaper, either English or Urdu, declare any particular Business Day not to be a Subscription Day.

Types of Mutual Fund

There are two types of mutual funds which are as follows:

• Open-end
  These are mutual funds which continually create new units or redeem issued units on demand. They are also called unit trusts, because they are registered as trusts. The unit holders buy the units of the fund or may redeem them on a continuous basis at the prevailing NAV.

• Closed-end
  These are investment companies which issue shares like any other company. The shares are then traded on the stock exchanges. The shares are normally traded at below their NAV

Transparency

Since all investments in mutual funds are held in the custody of a Trustee, which is either a reputed bank or depository company, this ensures transparency in both the values of the transaction taking place as well as the amounts that are received and paid out, hence reducing the risk of misappropriation to a significant degree.

Transfer Agent

means a company including a Bank that the Management Company shall appoint for performing the Registrar Function.

Trust, Unit Trust or Scheme

means the Unit Trust constituted by the Trust Deed for continuous offers for sale of Units

Unit

means one undivided share in the Trust.

Unit Holder

means the investors for the time being entered in the Register as owner of a Unit, including investors jointly so registered pursuant to the provisions of the Trust Deed.