• Dividend Payments
  A fund may earn income in the form of dividends and interest on the securities in its portfolio. The fund may pay its shareholders nearly all of the income (minus expenses) it has earned in the form of dividends.
  
  
• Capital Gains Distributions
  The price of the securities a fund owns may increase. When a fund sells a security that has increased in price, the fund has a capital gain. At the end of the year, most funds distribute these capital gains (minus any capital losses) to investors.
  
  
• Increased NAV
  If the market value of a fund's portfolio increases after deduction of expenses and liabilities, then the value (NAV) of the fund and its shares increases. The higher NAV reflects the higher value of your investment.
  
  
• Additionally
  Funds may issue bonus or right share that further add value to the investor
  

• Closed End Mutual Fund
  A type of Investment Company that does not continuously offer its shares for sale but instead sells a fixed number of shares at one time (in the initial public offering) which then typically trade on a secondary market, such as Karachi Stock Exchange. The price of shares is determined by the market however is most sensitive to funds NAV performance.
  
  First Capital Mutual Fund is a closed-End Equity Fund and is listed on Karachi and Lahore Stock Exchange (Symbol ‘CPMFI’).
  
  
  
• Open-End Fund
  A type of Investment Company that continuously offers its units for sale and purchase. The investments or redemption of units can be made directly from the Asset Management Company or their authorized representative. The price of units is determined by the NAV per unit and is announced regularly with a specific validity period.
  
  

3. Basic Types of Mutual Funds According to Investment Objective

• Equity Funds invest in shares of common stocks.
• Index Funds an extension of Equity Funds invest with an objective to replicate the performance of the market index
• Fixed-Income Funds invest in government or corporate securities, which offer fixed rates of return.
• Balanced Funds invest in a combination of both stocks and bonds.
• Money Market Funds for high stability of principal, liquidity and income.
• Specialty/Sector Funds to diversify holdings within an industry.
  

4. Major Benefits of Mutual Funds

• Professional Investment Management
• Diversification
• Low Cost
• Convenience & Flexibility
• Liquidity
• Dividend Income and Capital Gains on Price / NAV Appreciation
  

5. Important Factors to Consider for Investing in Mutual Funds

Thinking about your long-term investment strategies and tolerance for risk can help you decide what type of fund is best suited for you.

But you should also consider the effect that fees and taxes will have on your returns over time.


Degrees of Risk
All funds carry some level of risk. You may lose some or all of the money you invest — your principal — because the securities held by a fund go up and down in value. Dividend or interest payments may also fluctuate as market conditions change.


Fees and Expenses
As with any business, running a mutual fund involves costs — including shareholder transaction costs, investment advisory fees, and marketing and distribution expenses. Funds pass along these costs to investors by imposing fees and expenses.


Shareholder Fees

• Sales Charge (Load) on Purchase
• Purchase Fee
• Deferred Sales Charge (Load) – on redemption of share / units
• Redemption Fee
• Exchange Fee – on transfer within a Funds Family
• Account fee
  

Annual Fund Operating Expenses

Management Fees — fees that are paid out of fund assets to the fund's investment adviser for investment portfolio management


Distribution [and/or Service] Fees paid by the fund out of fund assets to cover the costs of marketing and selling fund shares and sometimes to cover the costs of providing shareholder services. "Distribution fees" include fees to compensate brokers and others who sell fund shares and to pay for advertising, the printing and mailing of prospectuses to new investors, and the printing and mailing of sales literature.

Total Annual Fund Operating Expenses ("Expense Ratio") — the line of the fee table that represents the total of all of a fund's annual fund operating expenses, expressed as a percentage of the fund's average net assets.




6. Sources of Information about a Mutual Fund


Prospectus
The prospectus is the fund's selling document and contains valuable information, such as the fund's investment objectives or goals, principal strategies for achieving those goals, principal risks of investing in the fund, fees and expenses, and past performance. The prospectus also identifies the fund's managers and advisers and describes how to purchase and redeem fund shares.