tfm report sample

8/8/2019 TFM Report Sample

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Letter of Transmittal

April 12, 2010

Acknowledgement

First of all, we are thankful to our Lord and Sustainer ALLAH who bestowed on

us the powers of reading, writing, researching and presenting. Then, we are

grateful to our teacher Mr. Faisal Dhedhi who has provided many useful

suggestions and comments during the course of this project. Without his

assistance and proper guidance this project could not have been possible.

Also we wish to express a long felt gratitude to all those who were directly or

indirectly involved in the successful completion of this report.

In the end, whatever the difficulties we have faced, we have been able to over-

come them, just by the grace of ALLAH.


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MUTUAL FUND

Mutual fund is simply a financial intermediary that allows a group of investors topool their money together with a predetermined investment objective. The mutual

fund will have a fund manager who is responsible for investing the pooled money

into specific securities (usually stocks or bonds). When you invest in a mutual

fund, you are buying shares (or portions) of the mutual fund and become a

shareholder of the fund. Mutual funds are one of the best investments ever

created because they are very cost efficient and very easy to invest in (you don't

have to figure out which stocks or bonds to buy). These are divided in two

categories.

Open-End Fund

All mutual funds fall into one of two broad categories: open-end funds andclosed-end funds. Most mutual funds are open-end. The reason why thesefunds are called "open-end" is because there is no limit to the number of newshares that they can be issued. New and existing shareholders may add asmuch money to the fund as they want and the fund will simply issue new

shares to them. Open-end funds also redeem, or buy back, shares fromshareholders. You purchase shares in open-end mutual funds from themutual fund itself or one of its agents; they are not traded on exchanges.

Close-End Fund


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Closed-end funds behave more like stock than open-end funds; that is tosay, closed-end funds issue a fixed number of shares to the public in an initialpublic offering, after which time shares in the fund are bought and sold on astock exchange. Unlike open-end funds, closed-end funds are not obligatedto issue new shares or redeem outstanding shares. The price of a share in a

closed-end fund is determined entirely by market demand, so shares caneither trade below their net asset value ("at a discount") or above it ("at apremium"). You can purchase shares in a closed-end fund through a broker,

just as you would purchase a share of stock.

Advantages of Mutual Funds:

Mutual Funds substantially lower the investment risk of small investorsthrough diversification in which funds are spread out into various sectors,companies, securities as well as entirely different markets. It is always the

objectives of a fund manager to maximize a funds return for a given levelof risk; however the dangers of "over-diversification" are always prevalentwhich would inevitably lead to a reduced return on the portfolio.

Mutual Funds mobilize the saving of small investors and channel them intolucrative investment opportunities. As a result, mutual funds add liquidityto the market. Moreover, given that the funds are long term investmentvehicles, they reduce market volatility by offering support to scrip prices.

Mutual Funds are providing the small investor access to the whole marketwhich individually, would be difficult to achieve.

The investors save a great deal in transaction cost given that he hasaccess to a large number of securities by purchasing a single share ofmutual fund.

The investors can pick and choose a mutual fund to match his particularneeds.

MONEY MARKET:

Money market funds should be considered by investors seeking stability ofprincipal, total liquidity, and earnings that are as high, or higher, than thoseavailable through bank certificates of deposit. And unlike bank cash deposits,money market funds have no early withdrawal penalties.

Specifically, a money market fund is a mutual fund that invests its assets only inthe most liquid of money instruments. The portfolio seeks stability by investing in


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very short-term, interest-bearing instruments issued by the state and localgovernments, banks, and large corporations. The money invested is a loan tothese agencies, and the length of the loan might range from overnight to oneweek or, in some cases, as long as 90 days. These debt certificates are called"money market instruments"; because they can be converted into cash so

readily, they are considered the equivalent of cash.

There are several reason & advantages for choosing the money market fundwhich are as follows:

They are the safest for the novice investor,

They are the easiest, least complicated to follow and understand

Almost without exception, every mutual fund investment company offersmoney market funds.

Money market funds represent an indispensable investment tool for thebeginning investor.

They are the most basic and conservative of all the mutual fundsavailable.

To understand why money market mutual funds are recommended as an idealinvestment, let reemphasize just seven of the advantages they offer:

Safety of principal, through diversification and stability of the short-termportfolio investments.

Total and immediate liquidity, by telephone or letter.

Better yields than offered by banks, 1% to 3% higher.

Low minimum investment, some as low as $100.

Professional management, proven expertise.

Generally, no purchase or redemption fees, no-load funds.

STOCK MARKET:

In Stock Market, the stocks are listed and traded on stock exchanges which areentities of a corporation or mutual organization specialized in the business of

bringing buyers and sellers of the organizations to a listing of stocks andsecurities together.

The biggest Stock exchange of Pakistan located in Karachi is the Karachi StockExchange (KSE). Due to the liquidity offered by the Karachi Stock Exchange, it isstated as the Best Performing Stock Market of the World for the year 2002.


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Introduction to Our Fund

Fund Name: ABC Fund

Fund Type: Open Ended

Fund Size PKR 200 mn

Category: Balanced Fund

Launch Date: Jan 2010

Benchmark Fund: KSE 100 Index

Benchmark Fund Return: --

Our Expected Return: 19.46%


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Our Objective

The objective of our fund is to attain maximum rate of return by investing in a

combination of money market instruments and stock market. Whilst yielding

competitive rate of return we would also ensure to maintain a liquid profile and

prudently met redemption requests.

Our Mission Statement

Our Funds mission statement states that:


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Its not whether you win or lose its how you play the

game so all it requires is due diligence and wisdom.

Honesty, integrity and professionalism will be our guiding light.

Benchmark

KSE 100 INDEX


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Our Allocation

Our funds portfolio consists of investment in both money market instruments andstock market. Investment of capital in both markets is described as under:

TotalCapital

200,000,000.00

Money Market 80,000,000.00Stock Market 120,000,000.00


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ABC FUND

Money

Market

40%

Stock

Market

60%

Money Market Stock Market

MONEY MARKET:

Money Market Amount Invested % of Investment

T-Bills 70,000,000.00 35.00%Cash 10,000,000.00 5.00%

Total 80,000,000.00 40.00%


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MONEY MARKET ALLOCATION

T-Bills

87%

Cash

13%

T-Bills Cash

MONEY MARKET (DSS FUND)


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STOCK MARKET:


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STOCK MARKET ALLOCATION

E & P

33%

OMC

17%

FERTILIZE

R

37%

POWER

13%

E & P OMC FERTILIZER POWER

Stock Market Amount Invested % of Investment

E & P 40,000,000.00 20.00%

OMC 20,000,000.00 10.00%

FERTILIZER 45,000,000.00 22.50%

POWER 15,000,000.00 7.50%

Total 120,000,000.00 60.00%


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IN V E S T M E N T IN C O M P

P P L

8 .33

P O L

25 . 00

P S O

16 . 67

E N G R

25.00

FFC

12 .50

HUBC

12 . 50

P P L

P O L

P S O

ENGR

F FC

HUBC


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STOCK MARKET (DSS FUND)


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Conclusion

DSS Fund by utilizing a combination of money market and stock market

instruments in the ratio of 40:60 respectively expects to yield a rate of return of

about 19.46% which is a competitive market rate.

Our main focus remained in making our fund less risky and more liquid by using

the financial methods of diversifying our portfolio. The sectors and companies

that we choose to invest in are blue chip stocks giving us a good capital gain or

dividend gain and in some case both. The sectors chosen for investment are way

too different and are in no way co-related to each other giving us security that if

there is a downfall in a particular sector (way it is because of economic

disturbance or any other reason) it would not affect our earnings from other

sector.

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