Pakistan: NAFA Income Fund Report - May 2017

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1. NAFA Income Fund (NIF) MONTHLY REPORT (MUFAP's Recommended Format) Unit Price (31/05/2017): Rs. 10.3201 May 2017 Performance % Performance Period May 2017 FYTD Trailing 12 months 2017 June 16 - May 17 FY 2016 FY 2015 FY 2014 FY 2013 FY 2012 Since Launch March 28, 2008* NAFA Income Fund 5.0% 6.5% 6.5% 6.9% 13.7% 2.3% 6.9% (6.9%) 4.1% Benchmark 6.2% 6.1% 6.1% 6.5% 9.0% 9.8% 9.9% 12.4% 10.2% * Annualized Return Based on Morning Star Methodology All other returns are Annualized Simple Return The performance reported is net of management fee & all other expenses and based on dividend reinvestment gross of with-holding tax where applicable. Investment Objective General Information Launch Date: Fund Size: Type: Dealing Days: Ramazan Dealing Time: Settlement: Pricing Mechanism: Load:** Management Fee: Total Expense Ratio: Risk Profile: Fund Stability Rating Listing: Custodian & Trustee: Auditors: Benchmark: Fund Manager: Minimum Subscription: Asset Manager Rating: March 28, 2008 Rs. 1,093 million Open-end – Income Fund Daily – Monday to Friday (Mon - Thr) 8:30 A.M to 2:30 P.M (Friday) 8:30 A.M to 12:30 P.M 2-3 business days Forward Pricing Front End Load (Individual): 1% (Nil on investment above Rs. 26 million) Front End Load (Other): 1% (Nil on investment above Rs. 16 million) Back End Load: NIL 10% of Net Income (Min 0.5% p.a., Max 1.0% p.a.) 1.74% p.a.(including 0.50% government levies) Low "A (f)" by PACRA Pakistan Stock Exchange MCB Financial Services Limited Deloitte Yousuf Adil Chartered Accountants 6-Month KIBOR Muhammad Ali Bhabha, CFA, FRM Growth Unit: Rs. 10,000/Income Unit: Rs. 100,000/AM1 by PACRA (Very High Quality) ** effective from January 02, 2017 Asset Allocation (% of Total Assets) 31-May-17 TFCs / Sukuks T-Bills MTS Placement with Banks Bank Deposits Others including receivables Total Leverage 28-Apr-17 10.3% 2.7% 13.3% 7.9% 64.7% 1.1% 100.0% Nil 12.7% 3.3% 3.7% 9.8% 69.1% 1.4% 100.0% Nil Top TFC (as at May 31, 2017) Name of TFC / Sukuk % of Total Assets Jahangir Siddiqui and Company Ltd. 24-Jun-16 24-Jun-21 Askari Commercial Bank Limited 30-SEP-14 30-SEP-24 Jahangir Siddiqui and Company Ltd. 08-APR-14 08-APR-19 Faysal Bank Limited III 27-DEC-10 27-DEC-17 Bank Alfalah Limited IV - FT 02-DEC-09 02-DEC-17 Total 3.7% 3.4% 1.4% 1.1% 0.7% 10.3% Sindh Workers' Welfare Fund (SWWF) The scheme has maintained provisions against Sindh Workers' Welfare Fund's liability to the tune of Rs. 2,254,198/-. If the same were not made the NAV per unit/last one year return of scheme would be higher by Rs. 0.0213/0.22%. For details investors are advised to read note 5 of the Financial Statements of the Scheme for the period ended March 31, 2017. Name of the Members of Investment Committee Dr. Amjad Waheed, CFA Sajjad Anwar, CFA Muhammad Ali Bhabha, CFA, FRM Hassan Raza, CFA To earn a competitive rate of return while preserving capital to the extent possible by investing in liquid assets. Fund Manager Commentary The Fund posted an annualized return of 5.0% during May 2017 versus the Benchmark return of 6.2%. The annualized return during FYTD is 6.5% against the Benchmark return of 6.1%, hence an outperformance of 0.4% p.a. This outperformance is net of management fee and all other expenses. As the allocation of the Fund shows, exposure in TFCs and Sukuks stands at 10.3% of net assets. All TFCs in the Fund are floating rate instruments linked to KIBOR. The weighted average Yield-to-Maturity of the Fund is around 6.5% p.a. while its weighted average time to maturity is 0.4 year. This yield does not include potential recovery in fully provided TFCs (Face Value of around Rs. 309 million), which is potential upside for the Fund. Thus, the Fund is expected to perform well over the medium to long term horizon. However, since TFCs prices may go up or down, therefore, only investors with medium term investment horizon are advised to invest in this Fund. We will rebalance the allocation of the Fund proactively based on the capital market outlook. Details of Non-Compliant Investments Particulars Type of Investment Value of Investments before Provision Provision held % of Net Assets % of Gross Assets Agritech Limited II TFC - - - AgriTech Limited V TFC 22,180,000 22,180,000 - - - SUKUK 19,687,500 19,687,500 - - - New Allied Electronics (Sukuk II) SUKUK 49,054,371 49,054,371 - - - Saudi Pak Leasing TFC 41,321,115 41,321,115 - - - World Call Telecom Limited TFC 26,881,190 26,881,190 - - - 308,999,976 308,999,976 - - - Eden Housing (Sukuk II) Total 149,875,800 149,875,800 Value of Investments after Provision Credit Quality of the Portfolio as of May 31, 2017 (% of Total Assets) Govt. Securities (AAA rated) AAA AA+ AAA+ MTS (Unrated) Others including receivables Total 2.7% 0.1% 15.4% 59.5% 7.9% 13.3% 1.1% 100.0% Notes: 1) The calculation of performance does not include cost of front end load. 2) Taxes apply. Further, tax credit also available as per section 62 of the Income Tax Ordinance, 2001. Disclaimer: This publication is for informational purposes only and nothing herein should be construed as a solicitation, recommendation or an offer to buy or sell any fund. All investments in mutual funds are subject to market risks. Past performance is not necessarily indicative of future results. Please read the Offering Document to understand investment policies and the risks involved. The scheme holds certain non-compliant investments. Before making any investment decision, investors should review the latest monthly Fund Manager Report and Financial Statements. The reported returns may include provisioning and reversal of provisioning against some debt securities.