ASIGNMENT NO: 1

Name: Enrollment: Class: Course: Topic:

Mohammad Abdullah 2010-E-37 MBA (6th quarter) Managerial Accounting.

What is an investment Company? In what forms can it exist or can operate? Briefly explain its functions? Provide brief profile of any two investment companies operating in Pakistan and what functions are they performing. Submitted To: Submission Date: Mrs. Noureen Iqbal Khan 10-10-2012

INSTITUTE OF MANAGEMENT SCIENCES UNIVERSITY OF BALUSHISTAN QUATTA

The Investment Company Function & Mechanism. The Investment Company:

10/10/2012

Firm that invests the pooled funds of retail investors for a fee. By aggregating the funds of a large number of small investors into a specific investments (in line with the objectives of the investors), an investment company gives individual investors access to a wider range of securities than the investors themselves would have been able to access. Also, individual investors should be able to save on trading costs since the investment company is able to gain economies of scale in operations. There are two types of investment companies In United States securities law, there are at least three types of investment companies:

Open-End Management Investment Companies (mutual funds) Closed-End Management Investment Companies (closed-end funds) UITs (unit investment trusts)

A fourth and lesser-known type of investment company under the Investment Company Act of 1940 is a Face-Amount Certificate Company. Also popular are private investment funds which are simply private companies that make investments in stocks or bonds, but are limited to fewer than 100 investors, are private and are not regulated by the SEC. These funds are often composed of very wealthy investors Functions of Investment Company: Purchase of securities on margin; joint trading accounts; short sales of securities; exceptions. It shall be unlawful for any registered investment company, in contravention of such rules and regulations or orders as the Commission may prescribe as necessary or appropriate in the public interest or for the protection of investors to purchase any security on margin, except such short-term credits as are necessary for the clearance of transactions; to participate on a joint or a joint and several basis in any trading account in securities, except in connection with an underwriting in which such registered company is a participant; or to effect a short sale of any security, except in connection with an underwriting in which such registered company is a participant. Distribution by Investment Company of securities of which it is issuer. It shall be unlawful for any registered open-end company (other than a company complying with the provisions of section 10(d) [15 USCS 80a-10(d)]) to act as a distributor of securities of which it is the issuer, except through an underwriter, in the contravention of such rules and regulations as the Commission may prescribe as necessary or appropriate in the public interest or for the protection of investors. Limitations on commitments as underwriter. It shall be unlawful for any registered diversified company to make any commitment as underwriter, if immediately thereafter the amount of its outstanding underwriting commitments, plus the value of its investments in securities of issuers (other than investment companies) of which it owns more than 10 per centum of the outstanding voting securities, exceeds 25 per centum of the value of its total assets. Exceptions to limitation on ownership by Investment Company of securities of insurance company. Notwithstanding the provisions of this section any registered investment company
Prepared By Mohammad Abdullah Shah Bukhari Institute Of Management Sciences University Of Balochistan Quetta

The Investment Company Function & Mechanism.

10/10/2012

and any company or companies controlled by such registered company may purchase or otherwise acquire from another investment company or any company or companies controlled by such registered company more than 10 per centum of the total outstanding voting stock of any insurance company owned by any such company or companies, or may acquire the securities of any insurance company if the Commission by order determines that such acquisition is in the public interest because the financial condition of such insurance company will be improved as a result of such acquisition or any plan contemplated as a result thereof. This section shall not be deemed to prohibit the promotion of a new insurance company or the acquisition of the securities of any newly created insurance company by a registered investment company, alone or with other persons. Nothing contained in this section shall in any way affect or derogate from the powers of any insurance commissioner or similar official or agency of the United States or any State, or to affect the right under State law of any insurance company to acquire securities of any other insurance company or insurance companies Investment company No: 1 National investment unit trust limited NI(U)TL): NITL was incorporated as an unquoted public limited company in 1962. The principal activity of the company is to manage NI (U) T, an open end mutual fund. The fund is the largest open-end mutual fund in Pakistan, with investments in approximately 600 of the 706 listed Pakistani Companies. NIT's portfolio has over 90 percent correlation with the Karachi Stock Exchange all Share Index and is as such the nearest proxy to an Index fund in Pakistan. NIT is valued at approximately Rs. 26 billion. The fund has a 93% weighting in equities and 7% weighting in fixed income securities. NIT's objective is to provide its Unit-holders with a balance between their regular income needs and long-term capital appreciation. NITL has approximately 62,000 unit holders and over 19 branches and 2 booths across Pakistan. NI(U)T's unique attraction is that it provides investors with a one window entry to Pakistan's equity markets which at times can be illiquid and volatile. Pakistan, like most developing markets, has only a handful of stocks with the market capitalization and liquidity which makes them feasible additions to an international investment portfolio. However, these stocks are not representative of the economy as a whole and ignore the usual engine of growth for developing economies- the middle to small sized companies which can grow at multiples of, rather than percentage points over, last year's performance. Identifying these companies is hard enough, but even if one could identify them, trading in their shares is likely to be so illiquid as to make adding them to your portfolio a considerable challenge. In this environment, NI(U)T offers an unparalleled avenue for investing in corporate Pakistan: Compounding this lack of ready access is the fact that there are only a handful of offshore funds dedicated to investing in Pakistan. Additionally, given their size they also do not provide the investor with a wide enough exposure to the currently un-fancied, but potentially most lucrative, medium sized and smaller companies. The fund has also significant strategic holdings in some of Pakistan's best-managed companies and in major privatization transactions e.g. Pakistan State Oil, Sui Northern, Sui Southern, Karachi Electric Supply Corporation, Pakistan Tele Communication Limited etc. These companies comprise the backbone of Pakistan's economy.

Prepared By Mohammad Abdullah Shah Bukhari Institute Of Management Sciences University Of Balochistan Quetta

The Investment Company Function & Mechanism.

10/10/2012

In 1998, NITL embarked on a major restructuring program, which included induction of senior professional management and modern asset management techniques. The other major step taken by the company includes its proactive role in corporate governance. Each investment decision is made within guidelines provided by NITL's investment committee. The objective of the team - management approach is to safeguard the fund from over reliance on any individual and to ensure transparency and rigorous evaluation of investment decisions. 'NIT mainly invests in listed equities. It suffered from low unit price in the past due to persistent bearish sentiments prevailing in equities market. However, during these years efforts were made for internal restructuring. NIT nominees played an active and effective role on the boards of directors of those companies wherever the Fund had made substantial investment," said Mehdi. The return from investment in stock market comprise of two components 1) capital gain/loss resulting from appreciation/drop in stock price and 2) dividend paid by companies to their shareholders. NIT projects a 19 per cent return to investors investing in the stock market either directly or by investing in NIT Units for the long-term (more than 5 years). Mission Statement: Our Core Values We are active and resourceful in developing proactive investment strategies for our shareholders. We are generous with our skills, tapping our collective initiative and creativity to provide financial solutions. We are committed to understanding our shareholders' needs to generate the potential for the most profitable returns. We believe honest communications and respect go far in creating long-term, trusting relationships. We are confident in our abilities, proud of what we do. It's the kind of certainty born of experience, training and knowledge; the kind that allows us to take calculated risks and reap the many results. Shareholders of National Investment Trust Limited. The GOP presently owns 8.33% of NITL's shares directly and 50% shares indirectly through government controlled entities. 8.33% shares is owned by each PICIC and MCB while 25% of NITL shares are held by three industrialists in equal proportions. The following is a list of NITL's shareholders. 1. National Bank of Pakistan. 2. Habib Bank Limited 3. United Bank Limited 4. Muslim Commercial Bank 5. Pakistan Industrial Credit & Investment Corporation 6. Industrial Development Bank of Pakistan 7. Investment Corporation of Pakistan 8. Pakistan Insurance Corporation 9. Government of Pakistan 10. Seat held by late Mr.Ahmed Dawood is vacant 11. Mr. Abdul Hamid Adamjee 12. Mian Tajammal Husain The National Investment (Unit) Trust is Pakistan's largest and oldest Mutual Fund, having approximately 52,000 unit holders. NIT's distribution network comprises of 19 NIT branches, various Authorized bank branches all over Pakistan and Arab Emirates Investment Bank (AEIB) in Dubai(UAE). The Trust constituted under the Trust Deed dated 12th November 1962, executed between National Investment Trust Ltd (NITL) as Management Company and National Banks of Pakistan as Trustee.
Prepared By Mohammad Abdullah Shah Bukhari Institute Of Management Sciences University Of Balochistan Quetta

The Investment Company Function & Mechanism.

10/10/2012

Fact Sheet
Fund Size Listing Custodian & Trustee Type Asset Allocation Front-End Load Back-End Load Management Fee Minimum Subscription Rs.101 Billion (As of 30th June 2007) Karachi Stock Exchange National Bank of Pakistan Open-End Mutual Fund Primarily Stock Market 2.5% 1% 1% Rs.5,000

Investment Objective Income generation, Capital Preservation and Growth

Investment company No: 2

PKIC - Inception & major milestones

Pakistan Kuwait Investment Company (Private) Limited (PKIC) is Pakistans leading Development Financial Institution (DFI) engaged in investment and development banking activities in Pakistan. PKIC was established as a joint venture between the Governments of Pakistan and Kuwait in 1979 and the company initiated operations with a paid -up capital of Rs. 62.50 million. Over the years paid-up capital and reserves have increased manifold and currently the total equity stands at a healthy Rs. 8.9 billion, reflect ing upon the companys impressive performance since inception. Pak Kuwait Investment Company was the first Development Financial Institution (DFI) of its kind in Pakistan with an objective to induce infrastructural development, a purpose it has lived up-to successfully. PKIC as a development financial institution has played a pivotal role in promoting industrial activity, by way of equity and debt investment in key areas of the economy. PKIC continues to serve as a medium for catalyzing infrastructure development and enhancing real economic activity, helping the nation in achieving a steep yet sustainable growth trajectory. Pak Kuwait is a progressive and evolving organization providing attractive returns on investment to its shareholders. Pak Kuwaits im pressive history of dividend payouts, which amounted to Rs. 10 billion since the time of its inception, is a testimony to its investor-friendliness. The companys strength lies in its strong business relationships within Pakistan and the Gulf region

References:
http://www.pkic.com/about-us/index.php?tab_id=17 http://www.ishainvestments.com/index.htm http://www.sec.gov/index.htm file:///F:/Research/National%20Investment%20Trust%20Limited.htm#
Prepared By Mohammad Abdullah Shah Bukhari Institute Of Management Sciences University Of Balochistan Quetta