Pakistan: NAFA Financial Sector Income Quarterly Report - 31 March 2017

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2. NAFA FINANCIAL SECTOR INCOME FUND MISSION STATEMENT To rank in the top quartile in performance of NAFA FUNDS relative to the competition , and to consistently offer Superior risk-adjusted returns to investors. Quarterly Report Page 01
3. Contents NAFA FINANCIAL SECTOR INCOME FUND Page 02 FUND 'S INFORMATION 03 DIRECTORS' REPORT 05 CONDENSED INTERIM STATEMENT OF ASSETS AND LIABILITIES 09 CONDENSED INTERIM INCOME STATEMENT 10 CONDENSED INTERIM STATEMENT OF COMPREHENSIVE INCOME 11 CONDENSED INTERIM DISTRIBUTION STATEMENT 12 CONDENSED INTERIM STATEMENT OF MOVEMENT IN UNIT HOLDERS' FUND 13 CONDENSED INTERIM CASH FLOW STATEMENT 14 NOTES TO THE CONDENSED INTERIM FINANCIAL STATEMENTS 15 Quarterly Report
4. NAFA FINANCIAL SECTOR INCOME FUND Mr . Nausherwan Adil Dr. Amjad Waheed Mr. Aamir Sattar Mr. Abdul Hadi Palekar Mr. Foo Chiah Shiung (Kelvin Foo) Mr. Lui Mang Yin (Martin Lui) Mr. Kamal Amir Chinoy Mr. Shehryar Faruque Mr. Humayun Bashir Chairman Chief Executive Officer Director Director Director Director Director Director Director Chief Financial Officer Mr. Khalid Mehmood Mr. Foo Chiah Shiung (Kelvin Foo) Mr. Aamir Sattar Human Resource and Remuneration Committee Mr. Kamal Amir Chinoy Mr. Lui Mang Yin (Martin Lui) Mr. Abdul Hadi Palekar Chairman Member Member MCB Bank Limited Bank Al Habib Limited Habib Bank Limited Al Baraka Islamic Bank Limited The Bank of Punjab Limited Summit Bank Limited Sindh Bank Limited United Bank Limited JS Bank Limited Khushhali Bank Limited Samba Bank Limited Dubai Islamic Bank Pakistan Limited Zarai Taraqiati Bank Limited Bankislami Pakistan Limited Quarterly Report Page 03
5. NAFA FINANCIAL SECTOR INCOME FUND Auditors KPMG Taseer Hadi & Co. Chartered Accountants Sheikh Sultan Trust Building No.02 Beaumont Road, Karachi - 75530, Pakistan. Legal Advisor M/s Jooma Law Associates 205, E.I. Lines, Dr. Daudpota Road, Karachi. 7th Floor Clifton Diamond Building, Block No. 4, Scheme No. 5, Clifton Karachi. UAN: 111-111NFA (111-111-632), (Toll Free): 0800-20001, Fax: (021) 35825329 Website: www.nafafunds.com Lahore Office: 7-Noon Avenue, Canal Bank, Muslim Town, Lahore. UAN: 042-111-111-632 Fax: 92-42-35861095 Islamabad Office: Plot No. 395, 396 Industrial Area, I-9/3 Islamabad. UAN: 051-111-111-632 Phone: 051-2514987 Fax: 051-4859031 Peshawar Office: Opposite Gul Haji Plaza, 2nd Floor National Bank Building University Road Peshawar, UAN: 091-111 111 632 (nfa) Fax: 091-5703202 Multan Office: Page 04 Quarterly Report
6. NAFA FINANCIAL SECTOR INCOME FUND DIRECTORS ’ REPORT The Board of Directors of NBP Fullerton Asset Management Limited is pleased to present the unaudited financial statements of NAFA Financial Sector Income Fund (NFSIF) for the period ended March 31, 2017. Fund’s Performance The size of NAFA Financial Sector Income Fund has decreased from Rs. 1,255 million to Rs. 763 million during the period (i.e. a decline of 39%). During the period, the unit price of the Fund has increased from Rs. 10.4723 on June 30, 2016 to Rs. 11.1809 on March 31, 2017, thus showing a return of 9.0% as compared to its benchmark return of 6.0% for the same period. The performance of the Fund is net of management fee and other expenses. The Fund is unique as it invests a minimum 70% of its assets in financial sector (mainly banks) debt securities, instruments or deposits. Minimum entity / instrument rating of debt securities is ‘AA-’. This minimizes credit risk and at the same time enhances the liquidity of the Fund. Duration of the Fund cannot be more than one year. This minimizes interest rate or pricing risk. The Fund invests 25% of its assets in less than 90 days T-Bills or saving accounts with banks, which further enhances the liquidity profile of the Fund. The Fund has been assigned ‘A+ (f)’ fund stability rating by PACRA. During the period under review, State Bank of Pakistan (SBP) maintained the discount rate and policy rate at 6.25% and 5.75% respectively. The improved interbank liquidity conditions (due to net government retirement and increase in bank deposits) were well calibrated through the open market operations – keeping the weighted average overnight repo rate close to the policy rate. However, long-term sovereign yields witnessed an average increase of around 60 basis points, indicating investors’ demand for higher term premium. CPI on year-on-year basis was recorded at 4.01% in 9MFY17 as compared to 2.64% in corresponding period last year. Overall trading activity in corporate debt securities was recorded at Rs. 7.8 billion. The trades were primarily concentrated in Banking sector TFCs. The Fund has earned total income of Rs 59.624 million during the period. After deducting expenses of Rs.11.27 million, the net income is Rs.48.354 million. The below chart presents the asset allocation and the weighted average credit rating of each of the sub-asset classes of NFSIF. Quarterly Report Page 05
7. NAFA FINANCIAL SECTOR INCOME FUND Acknowledgement The Board takes this opportunity to thank its valued unit-holders for their confidence and trust in the Management Company , and providing the opportunity to serve them. It also offers its sincere gratitude to the Securities & Exchange Commission of Pakistan and State Bank of Pakistan for their patronage and guidance. The Board also wishes to place on record its appreciation for the hard work, dedication and commitment shown by the staff and the Trustee. On behalf of the Board of NBP Fullerton Asset Management Limited Chief Executive Director Date: April 28, 2017 Place: Karachi. Page 06 Quarterly Report
8. NAFA FINANCIAL SECTOR INCOME FUND Quarterly Report Page 07
9. NAFA FINANCIAL SECTOR INCOME FUND Page 08 Quarterly Report
10. NAFA FINANCIAL SECTOR INCOME FUND CONDENSED INTERIM STATEMENT OF ASSETS AND LIABILITIES (UN-AUDITED) AS AT MARCH 31, 2017 Note March 31 , 2017 Unaudited June 30, 2016 Audited (Rupees in '000) ASSETS 4 Bank balances Investments Profit receivable Preliminary expenses and floatation costs Security deposit Receivable against issue of units Prepayments and other receivables Total assets 397,724 384,328 10,739 100 2,417 528 795,836 336,091 510,716 6,424 69 100 463,064 345 1,316,809 17,447 127 542 6,813 7,805 32,734 17,125 137 822 18,328 25,698 62,110 763,102 1,254,699 763,102 1,254,699 LIABILITIES Payable to the Management Company Payable to Central Depository Company of Pakistan Limited - Trustee Payable to the Securities and Exchange Commission of Pakistan Payable against redemption of units Accrued expenses and other liabilities Total liabilities NET ASSETS Unit holders’ fund (as per statement attached) 5 CONTINGENCIES AND COMMITMENTS (Number of units) Number of units in issue 119,810,599 68,250,660 (Rupees) Net asset value per unit 11.1809 10.4723 The annexed notes 1 to 11 form an integral part of this condensed interim financial information. For NBP Fullerton Asset Management Limited (Management Company) Chief Executive Quarterly Report Director Page 09
11. NAFA FINANCIAL SECTOR INCOME FUND CONDENSED INTERIM INCOME STATEMENT (UN-AUDITED) FOR THE NINE MONTH PERIOD AND QUARTER ENDED MARCH 31, 2017 Nine month ended March 31, Note 2017 Quarter ended March 31, 2016 March 31, 2017 March 31, 2016 ----------------------(Rupees in '000)---------------------- INCOME 22,641 31,564 17,976 2,478 28,358 5,473 40,846 - 7,616 6,984 17,976 (156) 8,729 15 11,717 - (1,556) 70,625 (2,438) 74,717 161 32,737 (874) 19,431 5,132 667 722 1,195 155 542 117 112 41 536 233 46 713 70 10,926 1,775 1,748 360 1,373 192 660 7 448 30 478 208 165 1,423 185 193 328 42 145 74 90 14 143 83 23 713 1 1,897 309 303 244 409 58 182 5 144 10 137 69 55 Total expenses 10,281 18,370 3,457 3,822 Net income from operating activities 60,344 56,347 29,280 15,609 Element of (loss) and capital (losses) included in prices of units issued less those in units redeemed - net (11,001) (15,384) (2,944) (10,083) Capital gain / (loss) on sale of investments - net Income from term finance certificates Income from government securities Profit on bank deposits and Term Deposit Receipts Reversal of provision for Workers' Welfare Fund Net unrealised (diminution) / appreciation in the value of investments classified as financial assets at fair value through profit or loss' Total income EXPENSES Remuneration of the Management Company Sindh sales tax on remuneration of the Management Company Federal excise duties on remuneration of the Management Company Allocation of operational expenses from the Management Company Remuneration of the Trustee Sindh sales tax on remuneration of the Trustee Annual fee - Securities and Exchange Commission of Pakistan Securities transaction cost Settlement and bank charges Annual listing fee Auditors' remuneration Fund's Rating fee Legal and Professional Charges Provision for Sindh workers' welfare fund - previous years Amortisation of preliminary expenses and floatation costs Provision for Sindh workers' welfare fund Net income for the period before taxation Taxation Net income for the period after taxation 6 7 (989) - (989) - 48,354 40,963 25,347 5,526 48,354 - - 40,963 25,347 5,526 The annexed notes 1 to 11 form an integral part of this condensed interim financial information. For NBP Fullerton Asset Management Limited (Management Company) Chief Executive Page 10 Director Quarterly Report
12. NAFA FINANCIAL SECTOR INCOME FUND CONDENSED INTERIM STATEMENT OF COMPREHENSIVE INCOME (UN-AUDITED) FOR THE NINE MONTH PERIOD AND QUARTER ENDED MARCH 31, 2017 Nine month ended March 31, 2017 Quarter ended March 31, 2016 March 31, 2017 March 31, 2016 ----------------------(Rupees in '000)---------------------48,354 Net income for the period after taxation Other comprehensive income for the period Total comprehensive income for the period 48,354 40,963 40,963 5,526 25,347 - - 5,526 25,347 The annexed notes 1 to 11 form an integral part of this condensed interim financial information. For NBP Fullerton Asset Management Limited (Management Company) Chief Executive Quarterly Report Director Page 11
13. NAFA FINANCIAL SECTOR INCOME FUND CONDENSED INTERIM DISTRIBUTION STATEMENT (UN-AUDITED) FOR THE NINE MONTH PERIOD AND QUARTER ENDED MARCH 31, 2017 Nine month ended March 31, 2017 Quarter ended March 31, 2016 March 31, 2017 March 31, 2016 ----------------------(Rupees in '000)---------------------Undistributed income brought forward 99,670 99,141 122,677 134,578 Net income for the period 48,354 40,963 25,347 5,526 Undistributed income carried forward 148,024 140,104 148,024 140,104 - Realised gain - Unrealised (loss) / gain 149,580 (1,556) 142,542 (2,438) 147,863 161 142,542 (2,438) Undistributed income carried forward 148,024 140,104 148,024 140,104 Undistributed income comprising of : The annexed notes 1 to 11 form an integral part of this condensed interim financial information. For NBP Fullerton Asset Management Limited (Management Company) Chief Executive Page 12 Director Quarterly Report
14. NAFA FINANCIAL SECTOR INCOME FUND CONDENSED INTERIM STATEMENT OF MOVEMENT IN UNIT HOLDERS ' FUND (UN-AUDITED) FOR THE NINE MONTH PERIOD AND QUARTER ENDED MARCH 31, 2017 Nine month ended March 31, 2017 Quarter ended March 31, 2016 March 31, 2017 March 31, 2016 ----------------------(Rupees in '000)---------------------Net assets at the beginning of the period Issue of 39,447,300 units (March 31 2016 : 156,595,941 units) Redemption of 91,007,239 units (March 31 2016 : 152,333,596 units) 1,254,699 776,933 793,085 1,105,109 421,780 1,649,763 67,260 52,549 (972,732) (550,952) (1,620,524) 29,239 (125,534) (58,274) (310,748) (258,199) 11,001 15,384 2,944 10,083 Net element of (income) / loss and capital (gains) / losses included in prices of units issued less those in units redeemed - amount representing (income) / loss that form part of unit holders' fund - transferred to Income statement - amount representing (income) / loss that form part of unit holders' fund - transferred to distribution statement Net unrealised appreciation on re-measurement of investments classified as 'financial assets at fair value through profit or loss' Capital loss on sale of investments Other operating income Net income for the period Element of income / (loss) and capital gains / (losses) included in prices of units issued less those in units redeemed Net assets as at the end of the period (1,556) (2,438) - 2,478 49,910 48,354 40,923 40,963 763,102 862,519 - - (874) 161 (156) 25,186 25,347 6,556 5,526 - 763,102 862,519 The annexed notes 1 to 11 form an integral part of this condensed interim financial information. For NBP Fullerton Asset Management Limited (Management Company) Chief Executive Quarterly Report Director Page 13
15. NAFA FINANCIAL SECTOR INCOME FUND CONDENSED INTERIM CASH FLOW STATEMENT (UN-AUDITED) FOR THE NINE MONTH PERIOD AND QUARTER ENDED MARCH 31, 2017 Nine month ended March 31, 2017 Quarter ended March 31, 2016 March 31, 2017 March 31, 2016 ----------------------(Rupees in '000)---------------------CASH FLOW FROM OPERATING ACTIVITIES Net income for the period before taxation Adjustments : Net unrealised appreciation on re-measurement of investments classified as 'financial assets at fair value through profit or loss' Element of loss and capital losses included in prices of units issued less those in units redeemed - net Amortisation of preliminary expenses and floatation costs Decrease / (increase) in assets Investments Advances, deposits, prepayments and other receivables Profit receivable (Decrease) / increase in liabilities Payable to the Management Company Payable to Central Depository Company of Pakistan Limited - Trustee Payable to the Securities and Exchange Commission of Pakistan Accrued expenses and other liabilities Net cash generated from operating activities 5,526 25,347 40,963 48,354 1,556 2,438 (161) 874 11,001 70 60,981 15,384 165 58,950 2,944 1 28,131 10,083 55 16,538 124,832 (184) (4,315) 120,333 5,880 764 (4,941) 1,703 90,000 (233) (7,414) 82,353 44,989 10 (9,657) 35,342 322 (10) (280) (17,893) (17,861) (331) (6) (812) (5,272) (6,421) 212 (45) 145 (15,280) (14,968) (46) 19 182 1,462 1,617 163,453 54,232 95,516 53,497 882,427 (984,247) (101,820) 1,649,763 (2,788,789) (53,508) (1,192,534) 64,843 (118,721) (53,878) 52,549 (312,374) (259,825) CASH FLOW FROM FINANCING ACTIVITIES Receipts from issue of units Payment on redemption of units Distribution paid Net cash (used in) financing activities 61,633 (1,138,302) 41,638 (206,328) Cash and cash equivalents at the beginning of the period 336,091 1,546,969 356,086 614,995 Cash and cash equivalents as at the end of the period 397,724 408,667 397,724 408,667 Net increase in cash and cash equivalents during the period The annexed notes 1 to 11 form an integral part of this condensed interim financial information. For NBP Fullerton Asset Management Limited (Management Company) Chief Executive Page 14 Director Quarterly Report
16. NAFA FINANCIAL SECTOR INCOME FUND NOTES TO AND FORMING PART OF THE CONDENSED INTERIM FINANCIAL INFORMATION (UNAUDITED) FOR THE NINE MONTH PERIOD AND QUARTER ENDED MARCH 31, 2017 1 LEGAL STATUS AND NATURE OF BUSINESS NAFA Financial Sector Income Fund (the Fund) was established under a Trust Deed executed between NBP Fullerton Asset Management Limited as the Management Company and the Central Depository Company of Pakistan Limited (CDC) as the Trustee. The Trust Deed was executed on July 28, 2011 and was approved by the Securities and Exchange Commission of Pakistan (SECP) on August 16, 2011 under the Non-Banking Finance Companies (Establishment and Regulation) Rules, 2003 (NBFC Rules). The Management Company of the Fund has been licensed to act as an Asset Management Company under the NBFC Rules through a certificate of registration issued by the SECP. The principal office of the Management Company is situated at 7th Floor Clifton Diamond Building, Block No.4, Scheme No.5, Clifton, Karachi. The Management Company is a member of the Mutual Funds Association of Pakistan (MUFAP). The Fund is an open-end mutual fund and is listed on the Paksitan Stock Exchange (Now merged into Pakistan Stock Exchange Limited). Units of the Fund are offered for public subscription on a continuous basis. These units are transferable and can be redeemed by surrendering to the Fund. The Fund is categorized as an Open-End "Income Scheme" as per the criteria laid down by the SECP for categorization of Collective Investment Schemes (CISs). The core objective of the Fund is to provide income enhancement and preservation of capital by investing in prime quality Financial Sector term finance certificates (TFCs) / sukuks, bank deposits and short-term money market instruments. The Pakistan Credit Rating Agency (PACRA) has assigned Management Quality Rating of 'AM1' w.e.f April 21, 2017 to the Management Company and Fund stability rating of 'A+(f)' to the Fund. Title to the assets of the Fund is held in the name of CDC as Trustee of the Fund. 2 BASIS OF PREPARATION 2.1 Statement of compliance These condensed interim financial information have been prepared in accordance with the approved accounting standards as applicable in Pakistan for interim financial reporting. The approved accounting standards comprise of such International Financial Reporting Standards (IFRSs) issued by the International Accounting Standards Board as are notified under the Companies Ordinance, 1984, the requirements of the Trust Deed, the Non-Banking Finance Companies (Establishment and Regulations) Rules, 2003 (the NBFC Rules), the Non-Banking Finance and Notified Entities Regulations, 2008 (the NBFC Regulations) and the directives issued by the Securities and Exchange Commission of Pakistan (SECP). Wherever the requirements of the Trust Deed, the NBFC Rules, the NBFC Regulations or the directives issued by the SECP differ with the requirements of the IFRSs, the requirements of the Trust Deed, the NBFC Rules, the NBFC Regulations or the directives issued by the SECP prevail. The disclosures made in this condensed interim financial information have, however, been limited based on the requirements of the International Accounting Standard 34: 'Interim Financial Reporting'. This condensed interim financial information does not include all the information and disclosures required in a full set of financial statements and should be read in conjunction with the published annual audited financial statements of the Fund for the year ended June 30, 2016. In compliance with Schedule V of the Non-Banking Finance Companies and Notified Entities Regulations, 2008, the directors of the Management Company hereby declare that this condensed interim financial information gives a true and fair view of the state of the Fund’s affairs as at March 31, 2017. 3 ACCOUNTING POLICIES The accounting policies adopted for the preparation of the condensed interim financial information are the same as those applied in the preparation of the annual audited financial statements for the year ended June 30, 2016. Quarterly Report Page 15
17. NAFA FINANCIAL SECTOR INCOME FUND 31 March 30 June 2017 2016 Unaudited Audited (Rupees in '000) Note 4 INVESTMENTS At fair value through profit or loss Term finance certificates - listed Term finance certificates - unlisted 4.1 4.2 Loans and receivables Term Deposit Receipts - Long Term 70,132 314,196 105,630 255,086 384,328 150,000 510,716 4.1 Term finance certificates - listed All term finance certificates have a face value of Rs. 5,000 each unless stated otherwise Number of certificates / bonds Name of the investee company Term finance certificates - listed Faysal Bank Limited - III As at July 01, 2016 Purchases during the period 27,900 Sales/ matured during the period - - As at March 31, 2017 Market value/ Carrying value as at Investment as a percentage of Market value of total investments March 31, 2017 Rupees in ‘000 Net assets 27,900 70,132 9.19 18.25 27,900 70,132 9.19 18.25 -------------%------------- 70,825 Carrying Value as at March 31, 2017 Net unrealised diminution on re-measurement of investments classified as 'financial assets at fair value through profit or loss' (693) 4.2 Term finance certificates - unlisted All term finance certificates have a face value of Rs. 5,000 each unless stated otherwise Number of certificates / bonds Name of the investee company Term finance certificates - unlisted Bank Alfalah Limited - IV Askari Bank Limited - IV JS Bank Limited Jahangir Siddiqui and Company Ltd. Standard Chartered Bank As at July 01, 2016 34,300 44 4,000 3,300 Purchases during the period 23,400 - Carrying Value as at March 31, 2017 Net unrealised diminution on re-measurement of investments classified as 'financial assets at fair value through profit or loss' 4.3 5 Sales/ matured during the period - As at March 31, 2017 Market value/ Carrying value as at March 31, 2017 Rupees in ‘000 34,300 44 23,400 4,000 3,300 114,889 44,571 117,708 20,520 16,508 65,044 314,196 Investment as a percentage of Net assets Market value of total investments -------------%------------15.06 5.84 15.42 2.69 2.16 29.89 11.60 30.63 5.34 4.30 315,059 (863) The term finance certificates held by the Fund are generally secured against hypothecation of stocks and receivables and mortgage of fixed assets of the issuer. CONTINGENCIES AND COMMITMENTS There were no contingencies and commitments outstanding as at March 31, 2017 and as at June 30, 2016. 6 PROVISION FOR SINDH WORKERS' WELFARE FUND The Finance Act, 2008 introduced amendments to the Workers' Welfare Fund (WWF) Ordinance, 1971 whereby the definition of industrial establishment was extended. The amendments were challenged at various levels and conflicting judgments were rendered by the Lahore High Court, Sindh High Court and Peshawar High Court. The Honourable Supreme Court of Pakistan vide its judgment dated November 10, 2016, has upheld the view of Lahore High Court and decided that WWF is not a tax and hence the amendments introduced through Finance Act, 2008 are ultra-vires to the Constitution. The Federal Board of Revenue has filed Civil Review Petitions in respect of above judgment with the prayer that the judgment dated November 10, 2016 passed in the Civil Appeal may kindly be reviewed in the interest of justice. Page 16 Quarterly Report
18. NAFA FINANCIAL SECTOR INCOME FUND Furthermore , the Sindh Revenue Board (SRB) had written to few mutual funds in January 2016 to register and pay Sindh Workers Welfare Fund (SWWF) for the accounting year closing on or after December 31, 2013. The MUFAP reviewed the issue and based on an opinion decided that SWWF is not applicable on mutual funds as they are not financial institutions as required by SWWF Act, 2014. The MUFAP wrote to SRB that mutual funds are not establishments and are pass through vehicles hence, they do not have any worker and no SWWF is payable by them. The SRB responded back that as mutual funds are included in definition of financial institutions in the Financial Institutions (Recovery of Finance) Ordinance, 2001, therefore SWWF is applicable on mutual funds. The MUFAP has taken up this matter before the Sindh Finance Ministry to exclude mutual funds from SWWF. In view of the above developments regarding the applicability of Federal and Sindh WWF on Mutual Funds, the MUFAP has recommended the following to all its members on January 12, 2017: based on legal opinion, the entire provision against the Federal WWF held by the CISs till June 30, 2015, to be reversed on January 12 , 2017; and the provision in respect of Sindh WWF should be made on a prudent basis on January 12, 2017 with effect from the date of enactment of the Sindh WWF Act, 2014 (i.e. starting from May 21, 2015). Accordingly, the provision for SWWF is being made on a daily basis going forward. The above decisions were communicated to the SECP and the Pakistan Stock Exchange Limited on January 12, 2017 and the SECP vide its letter dated February 1, 2017 has advised MUFAP that the adjustments relating to the above should be prospective and supported by adequate disclosures in the financial statements of the CISs/ mutual funds. Accordingly, the Fund has recorded these adjustments in its books on January 12, 2017. The Scheme has maintained provisions against Sindh Workers' Welfare Fund's liability to the tune of Rs.1.702 million. If the same were not made the NAV per unit of scheme would be higher by Rs.0.0249. 7 TAXATION The income of the Fund is exempt from income tax under clause 99 of Part I of the Second Schedule to the Income Tax Ordinance, 2001 subject to the condition that not less than ninety percent of its accounting income for the period, as reduced by capital gains, whether realised or unrealised, is distributed to the unit holders. The management intends to distribute atleast 90% of the Fund's net accounting income earned by the year end to the unit holders. Accordingly, no provision for taxation has been made in this condensed interim financial information. The Fund is also exempt from the provision of section 113 (minimum tax) under clause 11A of Part IV of the Second Schedule to the Income Tax Ordinance, 2001. 8 TOTAL EXPENSE RATIO Total expense ratio (all the expenses incurred during the period divided by average net asset value for the period) is 1.56% p.a including 0.43% representing government levies on Collective Investment Schemes such as Sales tax, Worker's Welfare Fund and Securities and Exchange Commission of Pakistan fee for the period. 9 TRANSACTIONS WITH CONNECTED PERSONS 9.1 Connected persons include NBP Fullerton Asset Management Limited being the Management Company, Central Depository Company of Pakistan Limited being the Trustee, National Bank of Pakistan (NBP), and Alexandra Fund Management Pte. Limited being the sponsors, NAFA Provident Fund Trust being the employee contribution plan of the Management Company, other collective investment schemes managed by the Management Company and directors and officers of the Management Company. 9.2 The transactions with connected persons are in the normal course of business, at contracted rates and terms determined in accordance with market rates. 9.3 Remuneration and front - end load payable to the Management Company and remuneration payable to the Trustee are determined in accordance with the provisions of the NBFC Regulations and the Trust Deed respectively. Quarterly Report Page 17
19. NAFA FINANCIAL SECTOR INCOME FUND (Unaudited) Nine month ended March 31, 2017 9.4 Details of the transactions with connected persons are as follows: March 31, 2017 National Bank of Pakistan - Sponsor Amount paid against redemption of units Distributions paid Bank Profit Central Depository Company of Pakistan Limited - Trustee Remuneration of the Trustee Sindh sales tax on remuneration of the Trustee CDS Charges COO / Company Secretary Redemption of Nil units (March 31 2016: 45,963 units) Employees of the Management Company 54,023 Units issued / transferred in during the period (March 31 2016 : 1,474,201 units) 184,470 Units redeemed / transferred out during the period (March 31 2016 : 1,450,026 units) 5,132 667 722 191 10,926 1,775 1,748 360 629 1,423 185 193 30 93 721,058 53,508 6 93 - 1,195 155 117 1,373 192 219 328 42 74 409 58 72 489 489 489 - 575 1,954 15,504 15,295 - 74 701 94,537 - - - 31 March 2017 Unaudited 9.5 Balances outstanding as at period end NBP Fullerton Asset Management Limited - Management Company Preliminary expenses and floatation costs paid by the Management Company on behalf of the Fund Other payable Management remuneration payable Sindh Sales Tax payable Federal Excise Duty payable Allocation of operational expenses payable to the Management Company Sales load and transfer load payable to the Managment Company Central Depository Company of Pakistan Limited - Trustee Remuneration payable Sales tax payable on remuneration of trustee Security deposit National Bank of Pakistan - Sponsor Profit receivable on bank balances Bank balance Employees of the Management Company Units held 73 units (June 30, 2016 : 130,521 units) Summit Bank Limited Bank balance Page 18 March 31, 2016 2015 2016 2015 ------------------------------ (Rupees in '000) ------------------------------- NBP Fullerton Asset Management Limited - Management Company Remuneration of Management Company Sindh Sales Tax on Management Company's remuneration Federal excise duty on Management Company's remuneration Allocation of operational expenses from the Management Company Front end load NAFA Income Opportunity Fund Sale of Treasury Bills Quarter ended March 31, 2016 1,897 309 303 244 79 6 30 June 2016 Audited (Rupees in '000) 169 492 141 14,947 722 976 17 152 514 84 14,947 575 836 112 15 100 137 100 1 9,226 28 762 1 1,367 1,979 1,398 Quarterly Report
20. NAFA FINANCIAL SECTOR INCOME FUND 31 March 2017 Unaudited 30 June 2016 Audited (Rupees in '000) Amount receivable / (payable) against issuance and redemption of units to: NAFA Government Securities Liquid Fund NAFA Islamic Active Allocation Plan III NAFA Islamic Stock Fund NAFA Riba Free Savings Fund NAFA Income Opportunity Fund NAFA Income Fund NAFA Asset Allocation Fund NAFA Islamic Energy Fund PAKISTAN ELECTRONIC MEDIA REGULATORY AUTHORITY Units held : 10,396,091 units 10 - (15,438) (174) (2,521) (154) 423,934 30,566 4,593 3,971 116,238 - DATE OF AUTHORISATION FOR ISSUE This condensed interim financial information was authorised for issue by the Board of Directors of the Management Company on April 28, 2017. 11 GENERAL 11.1 Figures have been rounded off to the nearest thousand rupees. 11.2 Corresponding figures have been rearranged and reclassified, wherever necessary, for the purpose of better presentation. No significant reclassifications have been made during the current period. For NBP Fullerton Asset Management Limited (Management Company) Chief Executive Quarterly Report Director Page 19