NSEL 30 index fund
("the Fund") is is a passively managed index mutual fund designed for long-term investors seeking capital appreciation by investing in Lithuania.
The Fund's investment objective is to replicate the total return of the NSEL 30 Index, before fees and expenses, by investing substantially all of its assets in the stocks that are represented in the Index.
The NSEL 30 Index is composed of 30 common stocks of Lithuanian companies that have the highest free-float based market capitalization and are traded on the Lithuanian National Stock Exchange. Each stock in the NSEL 30 Index is weighted by its total free-float based market capitalization relative to the total free-float based market capitalization of all securities in the Index.
The Fund invests in substantially all 30 stocks in the NSEL 30 Index in proportion to their weighting in the Index. The Fund's investment portfolio is rebalanced quarterly to reflect the changes in the composition of the NSEL 30 Index. The Fund buys and sells securities only to rebalance its portfolio and in response to daily shareholder purchases and redemptions. This way the Fund's portfolio is relatively inactive; it means the brokerage commissions and transaction costs are lower.
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II. THE FUND'S CAPITAL
The Fund can issue unlimited number of shares for public distribution.
The Fund's capital is equal to net asset value and fluctuates depending on the issue (sale) and redemption of shares and on the changes of investment portfolio's value. The initial net asset value of the Fund is equal to one million litas.
Determining Net Asset Value
The Fund's net asset value per share is determined by dividing the value of the securities held by the Fund, plus any cash or other assets, minus all liabilities, by the total number of the Fund shares outstanding.
The Fund values its stock portfolio based on its current market value. The market price of the stocks included in the Fund's portfolio is the last traded price in the central market.
The Fund's net asset value per share is determined each business day and announced on the Fund's website at www.nsel30indexfund.com an hour after official results of Lithuanian Stock Exchange trading session are announced (usually 5:00 p.m., Lithuanian time).
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III. INVESTMENT RISK AND ITS MANAGEMENT
All investments have risks to some degree. When selling shares, investors should be aware that they may get more or less for their shares than they originally paid for them. As with any mutual fund, there is no assurance that the Fund will achieve its goal. The Fund's investments are subject to changes in their value from a number of factors described below.
RISKS
Market Risk. Stocks fluctuate in price, and their short-term volatility at times may be great. Since the Fund invests in common stocks, the value of the Fund's portfolio will be affected by changes in the stock market. The Fund's net asset value per share will fluctuate as the value of the Fund's portfolio of securities change.
The Fund attempts to reduce its exposure to market risk by diversifying its investments, that is, by spreading its assets across a wide selection of securities, industries and sectors. It's important to remember that diversification won't protect you against overall market fluctuation; index funds that track the market will go up and down with the market they represent. However, an investment in a fund that holds 30 stocks will likely be less volatile than equity portfolio composed of a smaller number of securities.
Investing for a long term in Lithuania greatly reduces market risk. Over the past few years, economic growth, low inflation, a stable currency, low stock valuations and good investment ratios* have made Lithuania the premier investment location in the region. Continued recovery of Lithuanian economy should mean higher stock prices. Consequently, the long-term investors who chose an index fund in Lithuania can reasonable expect to match growing stock market performance.
Currency Risk. The Fund does not invest in foreign securities so Lithuanian investors will not be affected by currency risk. Foreign investors however may be affected by currency risk because the value of investment portfolio may change relative to other currencies.
Liquidity Risk. Some stocks in the Fund's investment portfolio may become illiquid because they do not have an active trading market. However, the liquidity risk is kept down to minimum because the Fund's investment portfolio is composed of "free-float" shares, that is, the shares actually traded in the market.
After shareholder offers shares for redemption, the Fund settles accounts with shareholder no later than within seven business days.
* For example, one of the investment ratios, share price to net profits (P/E) was significantly lower in Lithuania compared to other stock exchanges in 2001. It shows that the Lithuanian stock market is clearly undervalued in view of the positive economic outlook and strong projected earnings growth.
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Investors may buy shares through all Vilniaus bankas' branch offices or through distribution agents. All banks and financial brokerage companies may be Fund's shares distribution agents.
The minimum number of shares that can be initially acquired is five.
The Fund's share price is equal to Fund's net asset value per share and is determined once each business day an hour after official results of Lithuanian Stock Exchange trading session are announced (usually 5:00 p.m., Lithuanian time). The Fund's share price is announced on the Fund's website at www.nsel30indexfund.com.
The Fund's share sale (distribution) price is equal to Fund's share price at the time of sale increased by sales charge (2%).
Investors may set up a custodian account and purchase Fund shares by completing an account application ("Custodian Agreement") and a Share Subscription Agreement. The forms and instructions may be obtained from Vilniaus bankas or loaded from the Fund's website at www.nsel30indexfund.com from Investor Package page. The signed forms must be sent by fax to Vilniaus bankas at +370 2 682374* and mailed to Vilniaus bankas, Gedimino pr. 12, LT-2600, Vilnius, Lithuania.
Investor must pay for the Fund shares in Lithuanian currency (litas). To pay in litas directly, investor has to pay to:
Vilniaus bankas, the bank code 260101377, account # 201110716.
Investor may transfer any other currency to the account named in Share Subscription Agreement in order to convert this currency to litas and pay for the Fund shares.
An investor must pay for the signed shares in 3 days after signing the above agreements.
* Since August 23, 2002, the fax number will be changed to +370-5-2682374.
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Investors can sell (redeem) shares at any time through Vilniaus bankas by completing an "order to redeem shares". The order must be sent by fax at +370 2 682374* and mailed to Vilniaus bankas, Gedimino pr. 12, LT-2600, Vilnius, Lithuania.
Shares will be sold at the share price at the time of redemption less any redemption charge (up to 2%). Redeemed shares will be paid in 7 business days after the order is received by Vilniaus bankas.
* Since August 23, 2002, the fax number will be changed to +370-5-2682374.
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DIVIDENDS
The Fund does not pay dividends to its shareholders. All dividends received by the Fund are reinvested.
The Fund is not required to pay out its gains and investment income.
TAXES
According to Lithuanian laws, individuals do not pay taxes for the increases in securities' value.
The Fund has to pay road tax (0.48% from January 25, 2002) on any realised gain. The Fund does not pay income tax on reinvested capital gains. Since there are no personnel employed by the Fund, the Social Insurance tax is not applicable to the Fund.
Some foreign investors may be subject to taxes based on the rules of their country.
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The following tables are intended to assist investors in understanding the expenses associated with investing in the Fund.
Shareholder Transaction Expenses
(as a % of net asset value per share at the time of sale/redemption)
Sales charge - 2%
Redemption charge:
For shares held for longer than 2 years - 0%
For shares held for from 1 to 2 years - 1%
For shares held for up to 1 years - 2%
Total: 2%-4%
Annual Fund Operating Expenses
(as a % of average annual net asset value of the Fund)
Management fee - 1%
Custodian and brokerage fees - 1% (estimate)
Administrative and other expenses - 2% (estimate)
Total: 4% (estimate)
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FOR MORE INFORMATION
Articles of Association, Annual and Semi-Annual Reports, and a full version of Prospectus containing more complete information about the Fund can be obtained:
By Telephone:
Call to:
The NSEL 30 Index Fund's Management Company at
+370-2-731649, 731659,
+370-5-2731649, 2731659 (since July 30, 2002).
The Fund shares distributor Vilniaus bankas at
+370-2-682371,
+370-5-2682371 (since August 23, 2002).
By Mail:
Write to:
NSEL 30 Index Fund
Ukmergės 41-513, LT-2034 Vilnius Lithuania
On the Internet:
You can send us a request by email at fund@indexfund.lt or read or download documents on the Fund's website at www.nsel30indexfund.com and www.indexfund.lt.
You are also very welcome to send us any comments or questions you may have.
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