As a result of its consistent strategy to divert fund from low yielding and poor performing stocks to high yielding and better performing stocks, coupled with professional management
, the National Investment Trust (NIT) has paid highest ever dividend to its unit holders for the financial year 2003-04.
The reasons to cheer are many but the highest ever dividend of Rs2.55 per unit shows NIT's strong commitment to its unit holders for providing superior returns. The dividend will involve a huge total payout of over Rs4 billion among its unit-holders.
Hence, the NIT re-established itself as the market leader and secured an enhanced interest and confidence of its investors. The activity generated by the NIT has, to a large extent, strengthened the stock market, so the trust is now well positioned for privatization and can fetch much better price owing to its restructuring and surging performance.
The NIT has started to build a growing portfolio of investments in Term Finance Certificates (TFC). TFC investments provide the Fund with the core benefits of diversification and being highly liquid investment instrument.
The needed impetus has been provided by bringing about a shift in priorities, perception to have higher efficiencies, greater productivity and reduced costs or consumption.
Change in certain policies and portfolio has played a vital role in attaining greater productivity by NIT securing interest of the investors and getting landmark achievements.
The NIT has outperformed its benchmark of KSE-100 by a healthy margin of 5.44 per cent during the year where its NAV increased by 60.6 against 55.2 per cent increase in KSE-100 index.
This all became possible due to professional commitment of NIT management, which paved the way to provide superior returns to its unit-holders for the last three consecutive years.
The board of directors of the Investment Trust has approved the dividend after reviewing the financial results of the Trust for the year 2003-2004. Total return on the NIT units for the year 2003-04 comes to about 60.6 per cent that comprises 12.4 per cent of dividend yield and 48.2 per cent of appreciation in NAV per unit.
As a result of its concerted marketing efforts NIT recorded a lifetime high sale of its units at Rs11.757 billion for the year 2003-2004 that resulted into a positive sale of Rs2.1 billion as compared to a negative sales of Rs901 million during the last year that depicts the increasingly growing confidence of its investors.
A record amount of NIT units worth Rs9.657 billion were redeemed during the year but the system and procedures that had been strengthened at the NIT during the last few years, enabled it to meet all such redemptions to the utmost satisfaction of its investors that went a long way in further enhancing the confidence of its unit-holders and investors.
The net income of the fund increased significantly by 42 percent to the record high amount of Rs4.233 billion against Rs2.981 billion earned during the last financial year of 2002-03.
The NIT has also managed to increase its stock market operation to a great extent during the previous three years. The NIT traded record high shares of worth Rs12.296 billion during the year under review. The enhanced activity also provided needed support to stock market.
As a result of its increased trading activities and active participation in the stock market, capital gains realized during this period amounted to Rs1.939 billion that are ever highest during the last eight years and are remarkably higher by 99.5 per cent compared to Rs972 million of last year.
The ongoing strategy of the Fund to gradually restructure its portfolio by switching from low dividend paying stocks to those with attractive yields has also helped achieve a growth of 5 percent in its dividend income that appreciated to Rs2.485 billion for the year 2003-04 as against Rs2.368 billion for the previous year. This dividend income of Rs2.485 billion is again highest ever dividend inflow recorded by the Trust in any year during its entire life of 42 years.
All this improvement in the performance of the Fund translated into a growth of 34.5 per cent in earning per unit of the Trust that also rose to an all time record high earning of Rs2.61 per unit for the year under review from Rs. 1.94 per unit for the previous year.
Thus the Fund maintained its consistently followed philosophy of matching current year return to current year performance by paying dividend entirely from the profits earned during the year, without recourse to reserves.
The net assets of the fund have also increased to the record high level of Rs53.597 billion showing a robust growth of 69.5 percent over the amount of Rs31.629 billion on June 30, 2003.
In a bid to make the NIT unit more competitive and to address the long outstanding demand of investors, the Board of Directors have also decided to reduce the total load on NIT units from the existing 4.5 to 3.5 per cent with effect from August 2004.
The board of directors has decided to change the pricing system of the NIT units from previous day pricing to forward day pricing system with effect from August 2004 to make it more realistic, technically sound and in line with international practices.
The NIT the premier fund of the country having a large investment from the general public, small investors as well as institutions, was in a bad shape during the past couple of years. However, the superior performance during the recent past has alleviated their problems to a large extent, and the investors in general have benefited.
The gains realized by such investors and the handsome dividend inflows to such investors have also given a support to the stock market. A few years ago, when the market had fallen sharply, NIT recognized that there were fabulous bargains available in the market at the then prevailing levels.
Capitalizing on the availability of sharply discounted blue chips, NIT started a portfolio restructuring exercise in 2001-2002, which was aimed at aligning the investment objectives of the portfolio with those of its unit holders. The core objectives in order of priority were defined as 'income generation', 'capital preservation', and 'growth'.
