ATLAS ASSET MANAGEMENT LIMITED- COMMITTED TOWARDS PROMOTING INVESTOR EDUCATION

ALI H. SHIRAZI
Executive Director,
Atlas Asset Management Limited

Apr 02 - 08, 2007

The growth of the mutual fund industry in Pakistan is dependant on promoting investor education. In developed countries and increasingly some developing countries, like India and Thailand, mutual funds are considered as ideal saving products for individuals. In Pakistan, due to a lack of investor awareness, mutual funds remain esoteric investment vehicles. Lack of awareness about mutual funds, may in part explain the extremely low savings rate in Pakistan.

Paul Schott Stevens, President of the Investment Company Institute (USA), signifies the positive impact mutual funds have had worldwide:

"No question - mutual funds have become a powerful force in the world of finance, a force that has transformed markets and changed lives of hundred of millions of people. Mutual funds have powered middle-class growth and energized the economy. They have democratized investing. And they have enhanced the ability of our capital markets to perform their core functions - bringing together those who are prepared to invest capital with those who are able to utilize it to create wealth and progress."

Let us consider, therefore, what makes mutual funds such a 'powerful force in the world of finance'.

DIVERSIFICATION:

A clear advantage of a mutual fund investment lies in the diversification it offers. A mutual fund investment is not in one security, but in a number of securities, which form a mutual fund's portfolio. For an average middle class investor it is not always possible to achieve the diversification available through investing in mutual funds. Such investors do not possess the expertise and resources required to manage a diversified portfolio. It is possible that a few investments in a mutual fund portfolio may not perform, but such investments are usually compensated by the superior performance of other investments in the portfolio.

LIQUIDITY:

Mutual Funds offer an investor with liquidity so that at any stage when they need cash they can have it without any difficulties.

PRODUCT RANGE:

Mutual funds offer a variety of products and an investor can find one that suits his/her investment objectives. Equity Funds invest in the Stock Market. Debt Funds invest in fixed income instruments with an average duration of over one year. Money Market Funds invest in short term fixed income instruments with duration of less than one year. Equity funds aim to provide long term growth in the value of investment but in the short run, they may show volatility in their net asset values. Income Funds aim to provide regular return with little risk to capital while Money Market Funds provide low return with no risk to capital.

THE INVESTMENT MANTRA

Outlined below are some of the golden rules investors must take into account when making a mutual fund investment:

INVESTMENT OBJECTIVES: "An investor without investment objectives is like a traveler without a destination." (Ralph Seger)

DIVERSIFICATION: "Mutual funds have historically offered safety and diversification. And they spare you with responsibility of picking individual stocks." (Ron Chernow)

RISK: "He that is over cautious will accomplish but very little." (Friedrich von Schiller)

INFLATION: "People realize that it isn't enough simply to save. We all know that if you're not keeping with inflation you're falling behind. The past may have been characterized by money in the mattress, but our future depends on savings being invested broadly in the market." (Martin L. Flanagan)

RETIREMENT FUND INVESTMENT: "Today many employers fear they'll be held liable for any bad outcome in the default investment where they put their workers retirement contributions. So they select the option that has the least immediate risk - a money market fund, for example. What that means, however is a far greater long term risk for workers - the risk of low returns and a diminished nest egg." (Paul Schott Stevens)

MARKET TIMING: "Wise investors realize that when it comes to meeting long term goals, time in the market beats market timing. Only about a third of the possibly monthly market timing combinations beat the buy and holds strategy." (Martin L. Flanagan)

We at Atlas Asset Management Limited (AAML) are committed towards promoting savings, capital growth and regular income on investments and financial independence for our esteemed investors.

AAML, an Atlas Group Company was incorporated in 2002 and has entered into a technical collaboration with ING Institutional & Government Advisory services B.V. ING Investment Management is a global asset manager having broad experience and expertise in providing advisory services in developing and emerging markets in the areas of Banking, Insurance, Pension and Asset Management. ING has representation on AAML's board of Directors and also plays an integral role in helping AAML, inter alia, with product development, enhancement of investment processes and staff training.

AAML strives to be a market leader in providing quality fund management services with customer satisfaction as its premier goal.

The Pakistan Credit Rating Agency (PACRA) has assigned an asset manager rating of "AM3+" to the company, which reflects "the company's strong capacity to master the risks inherent in asset management and the asset manager meets high investment management industry standards and benchmarks."

AAML currently manages four funds, three of which are open-end, Atlas Income Fund (AIF), Atlas Stock Market Fund (ASMF), Atlas Islamic Fund (AISF) and the fourth is the closed-end fund, Atlas Fund of Funds (ATFF). AIF, ASMF and ATFF have been assigned a "5-Star" fund rating by PACRA. The ratings reflect "a superior performance" in their respective categories.

AIF, an income fund, was offered for public subscription on a continuous basis from March 22, 2004. The principal activities of the Fund are to make investment primarily in reverse repurchase transactions of listed equity securities, fixed rate corporate debt instruments, Government securities and other money market instruments. This Fund is designed for investors looking for a diversified exposure in a less risky asset class. AIF is one of the best performing funds in its category and posted a return of 11.53% in FY06.

ASMF, an equity fund, was offered for public subscription on a continuous basis from November 23, 2004. ASMF aims at achieving a good rate of current income consistent with the prospects of appreciation in the value of amount invested. The Fund is designed for risk conscious investors seeking equity exposure and a strong focus on its investment growth. ASMF has outperformed most of its peers in its asset class and the return for the FY06 stood at 32.52%.

ATFF, the third fund of the company and the first of its kind in Pakistan, is a closed-end fund. It was launched in December, 2004 with a paid up capital of Rs. 500 million. ATFF is listed and traded at the Karachi Stock Exchange. ATFF has a unique investment strategy, in that it passes on the benefits of price discounts to its investors. The objective of the Fund is to take advantage of the discount at which closed-end funds are traded on the stock exchange and post a higher return to the shareholders. ATFF announced a cash dividend of 15% for FY06.

AISF, a Shariah Compliant equity fund, was launched for public subscription from January 15, 2007. The main objective of AISF is to provide an outlet to investors who want Riba-free returns, enabling them to invest in a professionally managed, diversified investment portfolio of Shariah Compliant securities and instruments, both within and outside Pakistan with a vision of optimizing returns balanced with risk.

AAML is committed to offering its investors the best possible returns on a diverse range of products to meet not only the customer's current requirements but also exceed their future expectations. AAML is actively promoting investor education through its various publications such as its monthly newsletter Spotlight which has a page dedicated to investor education, its bilingual annual brochure which contains extensive details on mutual funds in both English and Urdu for easy understanding of its investors. AAML also dedicated its annual calendar 2007, to the topic of Investor Education taking the investors through some of the important points of investments. AAML has also organized brief info sessions for selected class of professionals to inform them about investments through mutual funds. AAML feels that awareness about mutual funds can only be created through educating the investors to enable them to make an informed choice about managing their investments.

AAML's sales team is available to guide the individuals to allocate their investments between various funds in AAML's fund family in accordance to their requirements. An individual can make their own portfolio by investing in multiple funds to create a risk/ return profile that suits his/her requirements.

PORTFOLIO CONSTRUCTION:

The following 5 portfolio recommendations are meant to serve as possible guidelines and do not take into account the financial situation, time horizon, existing portfolio and risk profile of an individual investor.

CONSERVATIVE: The objective of the portfolio is to take on low risk and thereby achieve low but steady returns for an investment horizon of 3 years or less and is suitable for conservative investors who want a stable, low-risk portfolio which require minimal action and monitoring. Specific examples include retirees and housewives. The portfolio is also suitable for investors who require the invested money within 3 years and are saving up for it.

MODERATELY CONSERVATIVE: To take on moderately low risk and achieve higher returns than a full fixed income portfolio over an investment horizon of 3 to 5 years. This portfolio is suitable for investors who want reasonably good returns and are able to bear some risk for these returns. It gives current income to the investors with long term capital growth. Examples include investors with college bound children and investors accumulating assets for retirement.

BALANCED: To take on medium risk and achieve moderate returns over an investment horizon of 5 years. This portfolio is suitable for investors who want reasonably good returns and are able to bear some risk for these returns. Specific examples include middle aged persons with no immediate cash commitments and those at least 5 years away from retirement. The portfolio is also suitable for investors who have medium to long term financial goals like saving for their children's education or to build/upgrade a house.

MODERATELY AGGRESSIVE: To take on moderately higher risk and achieve higher returns than a balanced portfolio over an investment horizon of 5 years or more. A moderately aggressive portfolio is suitable for investors wanting good returns but willing to withstand some short-term fluctuations in their portfolio to achieve this. Specific examples include singles, young couples and middle aged couples who are saving for retirement.

AGGRESSIVE: The objective of this portfolio is to take on higher risk and achieve higher returns over an investment horizon of 10 years or more. It is suitable for aggressive investors who are able to handle risk and who understand the fluctuations that come with being invested in stock markets. Also suitable for investors who have a long-term horizon and who can bear temporary market setbacks. Specific examples include singles with no near term commitments and newly married or young couples saving for long term needs such as children's higher education or retirement.

PORTFOLIO/ ALLOCATION

ATLAS STOCK MARKET FUND

ATLAS INCOME FUND

MONEY MARKET FUND

TIME HORIZON

Conservative

20%

50%

30%

3 years or less

Moderately Conservative

35%

65%

-

3 - 5 years

Balanced

50%

50%

-

5 years

Moderately Aggressive

65%

35%

-

5 years or more

Aggressive

80%

20%

-

Over 10 years

Mohammad Habib-Ur-Rehman
Vice-Chairman/Chief Executive