1. Q: What is an investment fund?
Answer: An investment fund is an investment company which attracts funds of investors and invests these funds to securities according to established goals. Investors who acquire shares of an investment fund at the same time acquire a corresponding proportion of mutual securities portfolio.
2. Q: What is the NSEL 30 Index Fund?
A: NSEL 30 Index Fund is the first investment fund in Lithuania. It was registered on August 31, 2000 as an investment variable capital company under laws of the Republic of Lithuania.
The NSEL 30 Index Fund composes its investment portfolio following the NSEL 30 Index. The NSEL 30 Index is a cap-weighted index composed of shares of the 30 largest free-float capitalization companies that are listed on the Vilnius Stock Exchange. NSEL 30 Index reflects about 97% of all the free float capitalization of companies in Vilnius Stock Exchange.
3. Q: Why an index fund?
A: An index fund which buys all the stocks in a market index offers lower fees and lower risk with diversification. As it provides the average return of the stock market, it will outperform at least half of the investors in the market. Because of its greater efficiency of less trading, lower costs, automatic dividend reinvestment, it tends to outperform more than half the professional investors. After 5 years, an index fund outperforms 75% professional managers. After 10 years, it outperforms 90% professional managers. These results are supported by theory and by academic studies.
For an emerging market such as Lithuania, an index fund offers even more. Many individual stocks tend to be illiquid while the fund is not. If you have to sell an individual stock to get cash, you can incur substantial trading costs due to the bid-ask spread and your stock might not trade that day. The index fund provides liquidity. You can sell one or all the shares of your investment and quickly get your money. We discourage market timing by having a 1% or 2% charge, but there is no charge if you had your investments for 2 years. (The 2% maximum charge for less than one year is usually less than the combined commission and spread if you had to sell your own stocks.) The fund automatically reinvests your dividends on stocks. If you had separately owned these stocks, you
would have idle cash until you decided what to buy. With an index fund, your money is always working for you.
As Lithuania is an emerging market, it is likely to be more volatile. All the more reasons to have an index fund as your core investment is providing liquidity, diversification, and safety.
4. Q: How to invest in the NSEL 30 Index Fund?
A: Investor should submit an Order to buy the Fund shares to any branch of SEB Vilniaus bankas. If investor presents this Order before 1:00 p.m. Lithuanian time, he/she acquires shares for the price which will be set on the same business day before 5:00 p.m. Lithuanian time. If investor presents the Order after 1:00 p.m. Lithuanian time, he/she acquires shares for the price which will be set on the next business day before 5:00 p.m. Lithuanian time.
5. Q: What are the costs?
A: When buying the fund shares, investor pays distribution commissions (2% of his/her investment). When redeeming shares, investor incurs redemption expenses that are from 0% to 2% of the value of redeemed shares.
The fund pays the following expenses:
1. management fee to the management company (1% of the fund’s average net assets).
2. custodian fee (0.23% of the fund’s average net assets and 10 litas for every money and securities transaction).
3. brokerage fee (0.25% from the value of every transaction).
4. the general expenses for printing annual reports, prospectuses, audit, marketing, legal expenses are allowed up to 0.5% limit of the average net assets.
6. Q: Are there any other investment funds that invest in only Lithuanian stocks?
A: No. There are funds that include some Lithuanian stocks such as Baltic fund or Central and Eastern European fund, but these of course have the additional political and currency risks of other countries.
7. Q: What are the risks?
A: 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. Investments in a stock market are subject to changes in value from two major 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 investment portfolio will be affected by changes in the stock market.
Specific company risk. Any stock from the Fund’s investment portfolio may lose its value because of difficulties in that particular company. However, all stocks don’t rise and fall in value at the same time. When returns of one company fall, those for another may be rising. Experienced investors have learned to minimize a specific company risk by diversifying their investments among a variety of holdings. An investment in a fund that holds many stocks from different industries and sectors will be less volatile than equity portfolio composed of a smaller number of securities.
Investing for longer term greatly reduces both market risk and specific company risk. Growing economy means higher stock prices; thus, long term investors who chose an index fund in Lithuania can reasonably expect to match a growing economy.
8. Q: Is there insurance?
A: Investment funds are precisely regulated by Lithuanian laws and Securities Commission. NSEL 30 Index Fund’s assets are safely stored in the Custodian—SEB Vilniaus bankas - separately from the management company’s assets. NSEL 30 Index Fund is an investment variable capital company — a separate legal unit with its management bodies (shareholders meeting and supervisory board). Only shareholders meeting can make changes in management, custodian, distribution, redemption and other fees as well as to change management company, custodian, audit firm, etc.
The fund expenses and their maximum limits are strictly defined, it is not possible to exceed them or make any expenses that are not directly related with the fund’s activities. It is not possible that all stocks in the fund’s investment portfolio will completely lose their value at the same time. As long as the Lithuania will exist there will be successful companies listed in the stock market in which the NSEL 30 Index Fund will invest.
9. Q: When should I buy?
A: It is almost always a good time to invest in the future. It is very hard to predict short term movements of the stock market which can change rapidly on any unexpected good or bad news. Over time the stock market will reflect the earnings and dividends of the underlying companies, the economy and future expectations. Stocks therefore will go up over time as the economy, earnings and dividends grow. This is a good time for Lithuania as it has the highest GDP growth in the EU and a rapidly improving economy. One should not hesitate in such favorable circumstances. Since it is always possible to buy and have the market go down, you should have an investment plan where you will make additional investments to take advantage of any temporary lower stock market and average your cost base or to continue to add to your investment when you can.
10. Q: How do I know if I am wining or losing with my investment?
A: You can go to the index fund website at www.indexfund.lt at any time and see the current value of the fund shares and the performance for the month and year to date. The value of your shares will be shown on your bank statement for your account.
11. Q: How do I get my money back?
A: Investor can request the Fund to redeem their shares from them at any time. Redeemed shares will be paid at the latest in 7 business days after investor presents an order to redeem shares to the distributor.
12. Q: How to sell shares of NSEL 30 Index Fund?
A: The Fund shares can be sold through all SEB Vilniaus bankas’ branch offices during their working hours.
13. Q: How do I get more information?
A: Information about the NSEL 30 Index Fund is provided in the fund’s prospectus. If you have any questions about investing with the NSEL 30 Index Fund or if you would like to get a prospectus, visit the fund’s website at www.indexfund.lt or call a personal banker at SEB Vilniaus bankas or a broker at the fund’s management company Investicijų portfelių valdymas at +370-5-2747016, 2747017.
