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Mutual funds

What are mutual funds?

An investment vehicle which is comprised of a pool of funds collected from many investors for the purpose of investing in securities such as stocks, bonds, money market securities, and similar assets. Mutual funds are operated by money mangers, who invest the fund's capital and attempt to produce capital gains and income for the fund's investors. A mutual
fund's portfolio is structured and maintained to match the investment objectives stated in its prospectus.

In business encyclopedia

Mutual funds belong to a group of financial intermediaries known as investment companies, which are in the business of collecting funds from investors and pooling them for the purpose of building a portfolio of securities according to stated objectives. They are also known as open-end investment companies. Other members of the group are closed-end
investment companies (also known as closed-end funds) and unit investment trusts. In the United States, investment companies are regulated by the Securities and Exchange Commission under the Investment Company Act of 1940.

Mutual funds are generally organized as corporations or trusts, and, as such, they have a board of directors or trustees elected by the shareholders. Almost all aspects of their operations are externally managed. They engage a management company to manage the investment for a fee, generally based on a percentage of the fund's average net assets during
the year. The management company may be an affiliated organization or an independent contractor. They sell their shares to investors either directly or through other firms such as broker-dealers, financial planners, employees of insurance companies, and banks. Even the day-to-day administration of a fund is carried out by an outsider, which may be the
management company or an unaffiliated third party.

Read more: MGT604 - Management of Financial Institutions - Lecture Handout 22

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PAKISTAN ECONOMIC AID & DEBT

The Asian Development Bank will provide close to $ 6 billion development assistance to Pakistan during 2006-9. The World Bank unveiled a lending program of up to $6.5 billion for Pakistan under a new four-year, 2006-2009, aid strategy showing a significant increase in funding aimed largely at beefing up the country's infrastructure. Japan will provide $500
million annual economic aid to Pakistan.

The major causes of poverty in Pakistan

• Lack of employment opportunities, which in the rural setting is caused by the absence of rural-urban linkages.
• A slowdown in the pace of economic growth in the 1990s
• With the burgeoning debt obligations, a decline in the public sector development program.

Key challenges facing the Government of Pakistan

1. Restoring economic growth-constrained further by a drought-affected agriculture sector
2. Managing the large debt burden with international financial institutions.
3. Promoting domestic and foreign investors' confidence
4. Increasing exports to generate foreign exchange,
5. Maintaining a level of social development spending to stem the deteriorating social indicators.
6. Law and Order, or Terrorism

Future Prospects for Pakistan's Economy

Pakistan's long term prospects will depend upon the interplay of evolution in political and social developments, economic policies to be pursued, the quality of governance and institutions, and most important investment in the human capital. It has become quite obvious from both Pakistan's own history and the experience of the developing countries that sustained economic growth and poverty reduction cannot take place merely on the strength of economic policies. Political stability, social cohesion, supporting institutions, and good governance are equally important ingredients coupled with both external environments for achieving economic success.

Read more: MGT604 - Management of Financial Institutions - Lecture Handout 13