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1 Jan—Mar, 2012
Dear Readers,
Welcome to the March
Edition of our Quarterly e-
Newsletter
It is with a sense of great
pride that we celebrate this
year our eleventh anniversary.
MUFAP has addressed various
import an t i s sue s and
strengthened the reform process to create a level
playing field for member institutions over the
course of past 11 years. MUFAP has developed
guidelines in the area of advertising and
communications for Asset Management,
Investment Advisory Services & mutual funds in
Pakistan to promote fair competition among
investment firms. MUFAP has also adopted the
CFA Institute Asset Manager Code of Professional
Conduct. This Code sets forth minimum ethical
and professional standards for providing asset
management (including investment advisory)
services to clients. MUFAP has developed a model
for TFC pricing and BATS.
During the last decade, the growth of the Pakistan
capital market and, the mutual fund industry in
particular, has been tremendous. The net assets of
the mutual fund industry increased substantially
from PKR 21 billion as at end-June 2001 to PKR
334 billion as at end-March 2012. The
membership is also extended to include twenty-
six corporate members representing our industry.
All these achievements would not have been
possible without the dedication and work of the
current and all the previous MUFAP Boards. To
mark our 11 years, Business Recorder is
publishing a supplement covering various
messages, interviews, articles and many interesting
highlights of Mutual Fund Industry as well as
MUFAP.
MUFAP has continued its efforts to expedite the
registration process of distributors following the
amendment to Clause 38 (K) of the NBFC & NE
Regulations, 2008 requiring distributors to
register with MUFAP as Registered Service
Providers and abide by the code of conduct set by
MUFAP. So far 26 corporate entities and 15
individuals have been registered with MUFAP as
Registered Service Providers and their details
have been posted on our website.
Editor ia l
The Team:
Editor
Ms Shafaq Khurram
Researcher
Mr. Siraj Ali, Mr. Zulfiqar Azam
For any feedback or comments
In this issue:
Jan—Mar, 2012 Volume 6
M U F A P Q u a r t e r l y
N e w s l e t t e r
In keeping with our commitment to better serve
our members, we have recently compiled all fund
management related SECP circulars and
notifications in one convenient place on our
website for ease of reference for our members.
Looking towards the content of this newsletter,
we have highlighted the key activities of the
MUFAP Board of Directors, its committees and
the events took place during the quarter.
Rounding off this bulletin, we have an article on
‗Compliance and Internal Audit – Two Sides of
River‘ which reviews the importance of separate
compliance and internal audit functions within the
entity.
I hope you enjoy reading this issue and find it
interesting and insightful. I would like to take the
opportunity to thank all the participants who have
contributed to the success of this Newsletter.
Also, I would appreciate it, if you could take some
time to give your valuable feedback to enable me
to understand your needs and incorporate them in
our future issues.
Shafaq
M U F A P A c t i v i t i e s
· Meeting of the Board of Directors
· Meetings of the Committees
· Meeting with Federal Board of
Revenue (FBR)
· Meeting with Chairman, SECP and
his team
E v e n t s
· Public Awareness Seminar on
Mutual Funds and Pension Funds at
FPCCI
· IFC Workshop on Corporate
Governance
· Public Awareness Seminar in
association with CDC at OICCI
· Training workshop on ‗Written
Communication Skills‘
S E C P U p d a t e s
· Launch of Code of Corporate
Governance, 2012
· SECP and leading fund managers
agree on reforms to promote the
capital market
· SECP approves regulations for
exchange traded funds for KSE
· SECP issues the Debt Securities
Trustee Regulations, 2012
· Broker-to-Broker functionality at
bonds automated trading system
approved
M a r k e t D e v e l o p m e n t
· Equity Market
· Money Market
· Debt Market
· Mutual Funds Market
A r t i c l e s
· Compliance and Internal Audit—
Two Sides of River
(By Mr. Syed Sohail Ahmed)
S t a t i s t i c s
· Net Assets
· Sales, Redemptions and Net Sales
· Mutual Funds Returns
2 Jan—Mar, 2012
The Board of Directors held five meetings during the quarter Jan- Mar 2012.
MUFAP ACTIVITIES – Over v iew
Meeting of the Board of Directors
S.No Names of Directors Dates
Meet-
ings
At-
tended
(Out
of 5)
10-Jan 7-Feb 21-
Feb
29-
Feb
22-
Mar
1 Mr. Imran Azim Yes Yes Yes Yes Yes 5
2 Mr. Mohammad
Shoaib
Yes No Yes No Yes 3
3 Mr. Adnan Siddiqui Yes Yes Yes Yes No 4
4 Mr. Amer Maqbool Yes No Yes No Yes 3
5 Mr. Babar Ali Lakhani Yes No No No Yes 2
6 Mr. Farid Ahmed
Khan
Yes No Yes Yes Yes 4
7 Mr. Mohammad Habib
ur Rahman
Yes No No Yes Yes 3
8 Mr. Mir Muhammad
Ali
Yes Yes Yes No Yes 4
9 Mr. Nihal Cassim Yes Yes Yes Yes No 4
10 Mr. Shahid Ghaffar Yes Yes Yes No Yes 4
11 Ms. Tara Uzra
Dawood
Yes No Yes No Yes 3
12 Mr. Wazir Ali Khoja No No No No No -
13 Mr. Yasir Qadri Yes Yes Yes No Yes 4
14 Mr. Shamshad Nabi Yes Yes Yes Yes Yes 5
Meetings of the Committees
MUFAP Committees held many fruitful discussions to make
important, well planned proposals on behalf of industry. The
following table presents the number of meetings held during the
quarter Jan-Mar‘12.
Committee Meetings
Held
Audit, Accounts & Taxation 4
Rules Regulations & Product Development -
Mutual Funds
2
Ethics, Corporate Governance and Development
of Codes
-
Pricing Policy, Development and Promotion of
Debt Securities
1
Public Awareness, Public Relations & Education 3
Legal Affairs 1
Voluntary Pension Scheme 2
Publications 1
Audit, Accounts and Taxation Committee
Audit, Accounts and Taxation Committee and Voluntary Pen-
sion Funds Committee worked together to prepare the draft taxation proposals for the fiscal year 2012-13 relating to mutual funds, retirement schemes and debt securities. The following
key recommendations forwarded to the SECP for review and onward submission to FBR: i) Income Tax Proposals relating to Mutual Funds:
a. Section 62 – Tax credit on investment Investment amount should be enhanced to one million rupees
from five hundred thousand rupees and limit on tax credit of 15% of taxable income should be enhanced to 20% of taxable income.
b. Clause 47 (B) of Part IV of Second Schedule Like other taxes, withholding of Capital Gains Tax on re-
demption of investment held in mutual funds by approved pension funds, gratuity funds, provident funds, superannuation funds and other exempt entities including fund of funds
should also be exempt, as they are exempt from capital gains tax, as these are pass through vehicles.
ii) Income Tax Proposals relating to Retirement Schemes:
Tax free transferability of accumulated balance under pension funds and gratuity schemes to Voluntary Pension Funds (VPS) or income payment plan/ annuity plan should be allowed. This is
due to the reason that Gratuity and Employers‘ pension fund schemes are defined benefit schemes where the liability of the employer at any point in time cannot be exactly determined and
often there is upward revision. For this reason employers are now prefer to offer defined contribution scheme to employees. There is also a tendency among employees to switch from de-
fined benefit schemes to defined contribution schemes. This provision in tax law will enable employers/employees to transfer their balance without incurring additional tax liability, since no
withdrawals are being made. It is important to address this issue on an urgent basis in order to develop an efficient retirement system in Pakistan.
iii) Others: Withholding tax on mark up on debt securities/ instruments should be minimum tax instead of final tax (currently final tax is
in case of tax payers other than companies) so that persons in tax brackets higher than 10% are adequately taxed.
Pricing Policy & Development and Promotion of Debt
Securities Committee
Presently Un-Listed TFCs are traded privately between the
parties through direct negotiation mechanism. Such Un-Listed TFCs constitute major portion of corporate debt. Therefore SECP constituted a Joint Committee comprising representatives
from SECP, KSE, NCCPL, MUFAP, and FMA to facilitate a centralized platform for trading or reporting of trades carried out in Un-Listed TFCs. The Committee recommended NCCPL as the most suitable reporting platform for the Un-Listed TFCs
due to its centralized position and dealing with almost all Financial Institution involving in trading of Un-Listed TFCs. In this connection, NCCPL developed a Concept Paper for the
Reporting Mechanism for Unlisted TFCs and made a presentation on the Concept paper for the Reporting Mechanism for Un-Listed Debt Securities on January 17, 2012 at
the MUFAP Office.
Top
Top
3 Jan—Mar, 2012
MUFAP ACTIVITIES – Over v iew
Meeting with Federal Board of Revenue (FBR)
Benchmark Committee
The Benchmark Committee has been set up by the Board to suggest benchmarks for each category stated under SECP‘s Circular 7. After
much deliberation, the Committee concluded that a ‗one size fits all‘ approach would not work due to the wide variety of investment policies followed by funds even within a particular category.
Committee proposed to set up peer group indices for Income funds, Money Market Funds, Equity Funds, Islamic Income Funds and Islamic Equity Funds. Furthermore, Fund specific benchmarks can be
constructed based on the asset-allocations in the ―Investment Policy Statement‖ (IPS) approved by the regulator
A meeting with Chairman, FBR Mr. Mumtaz Haider Rizvi was
convened on the 20th April, 2012 to discuss FED, WWF and the
Tax Proposals for Finance Bill, 2012. MUFAP delegation led by Mr. Imran Azim, Chairman-MUFAP and Former Chairmen, Mr. Shahid Ghaffar and Mr. Habib-ur-Rehman. The discussion at the meeting
touched upon quite a few issues and recommendations that emerged from the session are as follows:
Transfer of balance from gratuity fund or pension fund to VPS or income payment plan should be tax free. AMCs, Banks and distribution companies should be given tax incentives in order to promote savings in mutual funds. Mutual funds and companies
providing services to mutual funds should fall outside the ambit of FED. WWF levy should not applicable on Mutual Funds and Voluntary Pension Funds.
A couple of meetings were held between Board of Directors of
MUFAP and SECP representatives in March. The meeting deliber-ated upon various pressing issues and resolved the following:
Shariah Advisors: MUFAP suggested that there should be one Shariah Advisor for all Islamic funds and therefore eligibility crite-ria should be developed for it by SECP. SECP agreed to set up its own Shariah Advisory Board by the year end to guide AMCs.
Offering Document: In response to the desire for standardized and more precise Offering document, SECP guided MUFAP to
make a precise template of offering document and forward it to SECP for approval.
Element of Income: MUFAP urged that there is a need to de-termine correct accounting treatment of Element of Income and Capital Gains included in the price of Units issued less those on
Units Redeemed and to harmonize its treatment across all AMCs.
SECP agreed and directed that a meeting of ICAP and MUFAP should be held to resolve the matter in the light of provisions of
international accounting standards. Code of ethics for AMCs and Distributors: MUFAP asked SECP to establish a joint committee to review and approve a
Code of Conduct for distributors and a Code of Ethics for AMCs. SECP concurred with the idea of setting up a joint committee comprising members from both SECP and MUFAP.
Public awareness: MUFAP emphasized upon the need for creat-ing awareness amongst the masses about mutual funds. SECP
Meeting with Chairman, SECP and his team:
agreed to develop a detailed investor education plan for differ-
ent segments with a view to attract investors to the mutual funds.
KYC requirement: In relation to a standardized and investor friendly KYC form for all mutual funds, SECP directed MUFAP to make a simple KYC form and approved the idea of establish-ing a centralized KYC registration agency.
Pension reforms: MUFAP urged that savings should be made mandatory or tax incentives should be provided in order to
promote retirement savings. Furthermore, anomalies between VPS and OSS must be removed with respect to investment policies, valuation, pre-retirement withdrawals, taxation limits
while transfer of accumulated sum from OSS to VPS should be
tax free. SECP requested MUFAP to submit comments on re-vised draft of to VPS Rules, 2005.
Bond market: On debt market development side, SECP planned to put in place a mechanism for Electronic reporting of
trades of non-listed TFCs.
Top Top
Top
4 Jan—Mar, 2012
Events
MUFAP in collaboration with the Federation of Pakistan Chambers of
Commerce and Industry (FPCCI) and Central Depository Company
of Pakistan (CDC) organized a seminar on ‗Mutual Funds and
Voluntary Pension Funds – An Efficient Way to Save‘ which held on
the February 3, 2012 at FPCCI Auditorium. The FPCCI invited its
members and executive committee members, businessmen
and industrialists to participate in the seminar. The program started
with a welcome address delivered by Chairman MUFAP, Mr. Imran
Azim who urged people to plan for their post-retirement lives to
avoid financial problems in old age. Dr. Amjad Waheed, CEO NAFA
Funds, highlighted a number of reasons to invest in mutual funds than
keeping savings in conventional bank accounts. He also emphasized
that the regulatory body and the trustee should put in place checks
and balances to ensure and protect the interests of investors. Mr.
Mohammad Habib ur Rahman, CEO Atlas Asset Management Limited,
explained Voluntary Pension Schemes and urged to set up a pension
system where retirement schemes should be made mandatory for all
individuals falling in the tax net.
Public Awareness Seminar on Mutual Funds and Pension
Funds at FPCCI Public Awareness Seminar in association with the CDC
at OICCI
MUFAP hosted an interactive workshop on
Corporate Governance Scorecard in consultation with International Finance
Corporation (IFC), a
member of the World Bank Group, on March 5,
2012. This workshop was designed to provide a platform to build capacity of MUFAP members and
staff to improve techniques for assessing Corporate Governance practices of investee companies. The workshop was conducted by Mr. Mohsin Ali Chaudhry who explained the corporate
governance scorecard methodology for rating corporate governance practices of Investee Company and discussed various diagnostic tools to assess corporate governance of a company. The workshop was
concluded with a dynamic participatory session included case studies, group discussion and open questioning.
In order to facilitate
understanding of options for personal tax benefits and retirement funds
investment avenues, MUFAP in collaboration with the Overseas Investor Chamber of
Commerce and Industry (OICCI) and Central Depository Company of Pakistan (CDC) organized a seminar on the subject of ―Mutual Funds and
Voluntary Pension Schemes―, on April 4, 2012 at the OICCI
office. This customized event for OICCI members was attended by a
large number of senior executives of OICCI member companies and MUFAP members. Mr Sarim Shaikh, Chairman & CEO, Shell Pakistan, and Member OICCI Managing Committee chaired the
meeting and welcomed the participants. The seminar started with a presentation by Dr. Amjad Waheed explaining ―How Mutual Funds can help you save efficiently‖. Mr.
Muhammad Shoaib presnted on the topic ―Voluntary Pension Schemes‖ and Mr. Hanif Jhakura, CEO of Central Depository Center (CDC) made a presentation on ―Role of the Trustee and Regulatory Bodies‖.
IFC Workshop on Corporate Governance
Training Workshop on ‘Written Communication Skills’
MUFAP
encourages all
employees to
take advantage
of educational
opportunities
for career development and expects employees to participate in
some sort of occupational education and training on a regular
basis. Recently, MUFAP sponsored the workshop on ‗Written
Communication Skills‘ for its personnel. It was organized by
Center for Executive Education, IBA and was facilitated by
Salman Nazar. This two day workshop aimed to provide
participants with the opportunity to understand the importance
of verbal and non-verbal communication. It also included
practical exercises in relation to basic concepts associated with
business letters, memos and reports.
Top
Top
Top
Top
5 Jan—Mar, 2012
SECP Update
The Federal Minister for Finance launched the Code of Corporate
Governance, 2012 in order to improve the governance framework of Public Sector Companies (PSCs). The measures to improve the governance include undertaking board composition reforms by
including a certain number of independent non-executive directors on the boards of companies, ensuring continuity in the tenure of board members, separating the roles of chairman and chief executive, forming specialized board committees, undertaking training and
capacity building of the board members, strengthening the internal control mechanism, augmenting the disclosure and transparency requirements, and undertaking periodic performance evaluation of the
board members, etc.
Launch of Code of Corporate Governance, 2012 SECP issues the Debt Securities Trustee Regulations,
2012
A broker-to-broker (BTB) functionality has now been introduced at the Bonds Automated trading System (BATS). It
will enable brokers to settle their inter-exchange trades directly with the National Clearing Company, resulting in more efficiency and transparency in the trading and settlement
process. A separate risk management system has also been provided for BTB-related trades. Under this risk management module all margin requirements will need to be fulfilled by the
broker initiating the trade instead of broker through whom the trade has been executed. This will result in better capital management by brokers and enhance their trading capacity.
SECP has approved the Debt Securities Trustee Regulations,
2012, which will provide guidance to the trustees in discharging their responsibilities under the Trust Deeds. The regulations empower the trustees to (i) regularly monitor payment of
profit/markup/interest to the debt security holders and redemption of the securities; (ii) regularly monitor maintenance of the security, if any, backing the debt instrument; (iii) ensure that compliance with the provisions of the Trust Deeds,
particularly their covenants, are adhered to; and (iv) monitor that the debt security holders‘ complaints are resolved by the issuers.
Broker-to-broker functionality at bonds automated
trading system approved
SECP approves regulations for exchange traded funds for KSE
SECP has approved regulations governing exchange traded funds (ETFs) for the Karachi Stock Exchange (KSE). The trading in ETFs at the stock
exchanges will provide investors with alternative investment avenues while allowing diversified portfolio of securities that track a benchmark index and improve liquidity in the market.
SECP and leading fund managers agree on reforms to pro-
mote the capital market
SECP and leading fund managers, from commercial banks and mutual
funds, agreed on a number of reforms and measures to promote local capital markets during an interactive session, chaired by Mr. Imtiaz Haider, Commissioner SECP. Many suggestions were given by the
participants including the development of code of conduct for traders and investment advisors, etc. It was also suggested to revive the Institute of Capital Market in order to promote certification to help promote qualified professionals in the capital markets.
Top
Top
Top
Top
Top
6 Jan—Mar, 2012
Equi ty Market
The KSE-100 index closed the first nine
months of fiscal year 2012 at 13,761.76
points, marking a 16.53% increase
compared to the corresponding period
last year. The year-to-date change in the
index stood at 10.13%, or 1,265.73 points.
The index struggled to sustain the
recovery in the market as the opening
month of the calendar year or 3QFY12
saw the index inch up by 527.23 points, or
4.65%, to 11,874.89. Approval of long-awaited SECP‘s CGT proposal by the
Finance Minister served to offset concerns
over rising political uncertainty over the
memo-gate scandal and NRO cases.
The KSE-100 Index continued its previous month upward trend in February as it registered a monthly gain of 1,002.99 points, or 8.45% to
close at 12,877.88, marking the best monthly gain in the third quarter of FY12. Stock market staged a strong rally amid continued foreign
investment inflows, increase in international oil prices, the unchanged policy rate of 12% and positive corporate earnings announcement by
banks, fertilizer and cement companies.
In March, despite uncertain political
situation in the wake of contempt of
court case against Prime Minister,
delay in issuance of SRO relevant
section in IT ordinance and senate
elections, the market continued to
gain strength on buying momentum
across the board and crossed the
13,000-point barrier. It posted a gain
of 883.88 points, or 6.86% to settle at
13,761.76. The market managed to
end the 3QFY12 on a strong note owing to strong corporate results along with healthy payouts, upward trend in domestic cement sales at
improved price margins, restoration of gas supply to fertilizer sector and approval of the demutualization Bill for stock exchange. The steady build-up in average trading volume and net foreign inflow, combined with strengthened investor confidence, conveys an optimistic
view of the stock market.
Q2-FY12
(Oct’11-Dec’11)
Q3-FY12
(Jan’12-Mar’12)
(%) change
KSE-100 Index 11,347.66 13,761.76 21.27%
KSE-30 Index 10,179.03 12,114.13 19.01%
Market Capitalization (PKR bn) 2,945.79 3,528.14 19.77%
Net Foreign inflow (US $ mn) (111.31) 16.13 -
Avg. daily volume (mn shares) 59.72 196.40 228.87%
Q1-FY12 Q2-FY12 Q3-FY11 ALL TIME
HIGH
KSE-100
(Highest Close) 12,576.48 (Jul 05, 11)
12,092.32 (Oct 10, 11)
13,761.76 (Mar 30, 12)
15,676.34 (Apr 18, 08)
KSE-30
(Highest Close) 11,917.40 (Jul 22, 11)
11,634.34 (Oct 10, 11)
12,186.13 (Mar 5, 12)
18,996.33 (Apr 17, 08)
Apr'11 May'11 Jun'11 Jul'11 Aug'11 Sep'11 Oct'11 Nov'11 Dec'11 Jan'12 Feb'12 Mar'12
Market Capitalization (PKR bn) 3,207.79 3,217.53 3,288.66 3,220.91 2,934.92 3,103.91 3098.58 2996.55 2945.78 3083.281 3338.356 3528.144
Avg. daily volume (mn shares) 75.52 71.39 75.14 57.71 49.14 71.74 91.83 45.04 41.55 74.52 184.89 335.59
KSE - 100 Index 12,057.54 12,123.15 12,496.03 12,190.37 11,070.58 11,761.97 11,868.8 11,532.8 11,347.6 11,874.8 12,877.8 13,761.7
0
50
100
150
200
250
300
350
400
0.00
2,000.00
4,000.00
6,000.00
8,000.00
10,000.00
12,000.00
14,000.00
16,000.00
KSE
10
0 in
de
x (L
HS)
Avg
. Dai
ly v
olu
me
(mn
sh
are
s) (
RH
S)
KSE 100 index
Source: KSE
Source: KSE
Top
7 Jan—Mar, 2012
Money Market
Liquidity conditions in the money market remained tight during the quarter Jan-Mar‘12 on account of significant contraction in NFA and
lower government borrowings from SBP. Therefore, SBP mainly relied on open market operations (OMOs) to meet the demand for
money. The higher requirement for liquidity forced SBP to inject Rs. 3,424 billion, which is significantly substantial than normal injections
and poses inflationary risks. However, it mopped up Rs. 54 billion in the latest OMO conducted in March.
During February, SBP adopted a cautious approach by keeping the discount rate unchanged at 12 percent considering the resurgence in
inflationary pressures and emerging risks to macroeconomic stability. Despite moderate aggregate demand, pressure on liquidity is likely to
continue due to uncertain foreign inflows and substantial government borrowings to finance the fiscal deficit.
Movement in KIBOR
Tenor Q1-FY12 Q2-FY12 Q3-FY12
KIBOR 3-month 13.20%-13.63% 11.77%-13.17% 11.75%-11.91%
KIBOR 6-month 13.25%-13.81% 11.82%-13.20% 11.80%-11.97%
KIBOR 12-month 13.60%-14.26% 12.21%-13.53% 12.14%-12.33%
Treasury Bills
A total of 6 T-bill auctions were held by SBP during the quarter in which a total amount of Rs. 595.31 billion was raised.
T-Bill Auctions (Amount in PKR billion; rates in %)
3-Month
Cut-off Rates
6-Month
Cut-off Rates
12-Month
Cut-off Rates
Amount
Accepted
12-Jan-12 11.78% 11.83% 11.89% 107.26
26-Jan-12 11.60% 11.63% 11.73% 120.31
09-Feb-12 11.74% 11.81% 11.89% 158.13
23-Feb-12 11.74% 11.81% R 13.35
08-Mar-12 11.83% 11.90% 11.94% 125.20
22-Mar-12 11.87% 11.94% 11.94% 71.06
Pakistan Investment Bonds
Activities remained skewed towards 3, 5 and 10 year tenor bonds in the PIB auctions held during the quarter.
PIB Auctions (Yields in % and Face Value in PKR billion)
Auction Date 3-Year 5-Year 7-Year 10-Year 15-Year 20-Year 30-Year Total
16-Feb-12 Cut-off rate
Offered
Accepted
12.45
17.63
11.91
12.81
10.03
6.35
-
-
-
12.91
11.71
6.63
-
-
-
-
-
-
-
-
-
-
39.37
24.89
15-Mar-12 Cut-off rate
Offered
Accepted
12.59
7.90
5.30
12.94
15.43
12.30
-
-
-
13.20
9.74
7.49
-
-
-
-
R
-
-
-
-
-
33.07
25.09
GoP Ijarah Sukuk
The Government accepted a total of Rs. 38.12 billion against received bids of Rs. 55.72 billion in the latest Ijara Sukuk auction held on Feb
23, 2012.
Source: SBP
Source: SBP
Source: SBP
Top
8 Jan—Mar, 2012
Debt Market
The table below summarizes the TOP 15 TFCs/Sukus on the basis of Face value during the Q3-FY12:
TFCs / Sukuks Face Value
(PKR million) Trade Value (PKR million)
No. of Trans-actions
Trade Price Range
NIB Bank Ltd. (05-03-08) 827.44 814.48 15 97.74 – 99.75
Pak Arab Fertilizers Ltd. (28-02-08) 579.39 577.31 6 99.50 - 100.2
Pakistan Mobile Communication Ltd. (28-10-08) 445.50 431.22 14 96.61 - 98.17
United Bank Ltd. (14-02-08) 326.52 326.83 9 99.72 - 100.9
Allied Bank Ltd. (28-08-2009) 169.84 169.05 7 99.19 - 100.0
Bank Alfalah Ltd.(02-12-09) 164.62 171.48 10 103.9 -104.5
Engro Fertilizer Ltd. (18-03-08) 120.50 112.44 3 92.00 - 94.00
Soneri Bank Limited (05/05/2005) 119.71 119.08 4 99.36 - 100.5
Standard Charterd Bank (01/02/2006) 104.50 106.68 1 102.1 - 102.1
Bank Al-Habib Ltd. (30-06-11) 74.49 79.08 5 106.05 - 106.5
Engro Fertilizer Ltd. (30-11-07) 69.89 67.98 2 97.00 - 97.95
Askari Bank Ltd. (23-12-11) 65.00 65.86 4 101.00 -101.75
Orix Leasing Pakistan Ltd. (30/06/2011) 50.00 50.25 1 100.5 - 100.5
Pak Hy Oils Ltd (31/12/2008) 34.62 9.66 2 27.9 - 27.9
Bank AlFalah Ltd. (23/11/2004) 33.25 33.60 1 101.05 - 101.05
Source: MUFAP
Top
9 Jan—Mar, 2012
Mutual Funds Market The total net assets expanded by 16.01% quarter over quarter. This growth applies to open-end funds, closed-end funds and pension funds.
The open-end funds went up by 15.77% to Rs. 309.116 billion, pension funds went up by 15.14% to Rs. 2.107 billion and closed end increased by 19.33% to Rs. 23.303 billion.
Funds launched during the quarter Q3-FY2012
Funds matured during the quarter Q3-FY2012
Primus Investment Management Limited joined the MUFAP Family
MUFAP Board approved the membership request of Primus Investment Management Limited (a wholly owned subsidiary of Pak Brunei Investment Company Limited). We welcome the participation of representatives of Primus Investment.
Appointment of MUFAP Board Member to the Faculty of Austria University
MUFAP is deeply honored by the appointment of Ms. Tara Uzra Dawood to conduct a course on Islamic Finance in Austria. She has been appointed to the Faculty at Danube University Krems (Austria) as recommended by IIFA and EBAMA. She will be conducting a one day course on Islamic Finance.
4th Ladies Fund Women’s Award Ceremony 2012
LADIESFUND® Women's Award is a recognition award which is designed to acknowledge and celebrate the top female role models particularly entrepreneurs in the country. The 4th LADIESFUND Women‘s Award ceremony was held on
March 15, 2012 at Mohatta Palace Museum which was attended by a large number of women. Renowned writer Fatima Surraiya Bajia, Member National Assembly Khush Bakht Shujaat and wife of the US ambassador to Pakistan Dr Marilyn Wyatt graced the ceremony with their presence. Ms. Tara Uzra Dawood, President of Dawood Global Foundation,
delivered the welcome address and announced three scholarships for female students in partnership with Iqra University as well as virtual mentorships with the Cherie Blair Foundation for Women and the Google Foundation. Among others, the ceremony honored the world‘s youngest certified Microsoft professional late Arfa Karim and the Oscar-winning
documentarian Sharmeen Obaid-Chinoy. Review of compliance with the mandatory disclosure requirements of monthly FMR
MUFAP has been closely monitoring the mandatory disclosure requirements on the monthly FMR. MUFAP has made itself available to its member institutions for any clarifications required to comply with the standardized format of the FMR. There have been a couple of issues faced by the member institutions, for which we have held a few meetings to justify and clarify the concerns. As per our previous practice the
names of only the compliant AMCs are mentioned below: 1. Alfalah GHP Investment Management Limited
2. Arif Habib Investments Limited 3. Askari Investments Management Limited 4. Atlas Asset Management Limited
5. BMA Asset Management Company Limited 6. Faysal Asset Management Limited 7. Habib Asset Management Limited
8. HBL Asset Management Limited 9. JS Investments Limited 10. PICIC Asset Management Company Limited
Fund Name Category Inception Date
AKD Cash Fund Money Market March 30, 2012
Askari Equity Fund Equity March 30, 2012
NAFA Money Market Fund Money Market February 24, 2012
UBL Principal Protected Fund I Fund of Funds February 3, 2012
Fund Name Maturity Date Type Category
KASB Capital Protected Gold Fund March 19, 2012 Open End Capital Protected
Source: MUFAP
Source: MUFAP
Top
10 Jan—Mar, 2012
Ar t ic les COMPLIANCE AND INTERNAL AUDIT – TWO SIDES OF RIVER
In recent years, business complexities and advancements have increased the importance of effective compliance and internal audit functions within the entity. These monitoring functions serve as an eye for the board of directors and the senior management to keep check on the
business and support functions. However, the overlapping of responsibilities is a major concern for both functions to perform their work effectively. According to generally accepted practices followed by reputable institutions all over the world, compliance function and internal audit
function should be independent from each other. Compliance is a management function and head of compliance generally reports to the senior management (in most cases, chief executive officer) of the entity while the head of internal audit reports to the audit committee of the board of directors. This means that these functions behave like two sides of river i.e. monitoring entity‘s processes according to their
terms of reference without interfering in each others work. Every entity should have written terms of reference for both functions. The clear distinction between the responsibilities of both functions will help them in carrying out their responsibilities effectively.
In asset management industry, generally the supervision of compliance function is assigned to the head of internal audit as a cost effective option. This may raise autonomy issue on the part of head of internal audit due to dual reporting to the senior management and the board
of directors. In addition to this, compliance function is expected to advise senior management on compliance of laws, rules, regulations and
internal policies and procedures, assists senior management in educating staff on compliance issues and establishing written guidelines for staff on the appropriate implementation of statutory laws, rules, regulations and internal policies and procedures. These generic responsibilities of compliance function will compromise the independence of the head of internal audit that is assigned to monitor
compliance function of the entity in addition to internal audit. Recent changes in statutory laws, rules and regulations have increased the compliance pressures on internal audit departments. This has impacted the ability of internal audit departments to carry out thorough audits and to evaluate internal controls of the entity effectively.
Separate independent compliance function will not only reduce this pressure from internal audit department but also add value for senior management in day-to-day compliance monitoring of the statutory laws, rules, regulations and entity‘s policies and procedures.
In order to have sound vigilance and monitoring system within the entity, both functions should have a formal status with appropriate authority and independence. This will promote ethical culture within the entity and generate confidence of stakeholders including investors. The clear distinction between their responsibilities is the critical task for the management so that both functions work effectively. Below-
mentioned illustration provides a general idea about the distinct responsibilities of both functions.
Regulatory guidelines, best practices and ethical requirements acknowledge the importance of separate compliance and internal audit functions with pre-defined terms of reference. It is the responsibility of those charged with governance and the senior management to evaluate the importance of separate compliance and internal audit functions.
This article is inspired from the guidelines of Basel Committee on Banking Supervision and reflects the individual views of the writer. Syed Sohail Ahmed is a risk and compliance enthusiast working at Arif Habib Investments Limited. You can contact him at his personal email address
[email protected] for sharing your views.
Compliance Function
Board of Directors
Chief Executive Officer
Compliance ReportsInternal Audit Reports
· Validates Management’s implementation of Internal Controls, Risk Management and Governance Structure to ensure that
- appropriate policies and procedures are in place for every function;
- transactions are carried out efficiently and effectively in accordance with internal policies & procedures, regulatory guidelines and best practices; and
- entity’s operations and processes are functioning efficiently and effectively
· Monitors compliance with statutory laws, rules and regulations
· Monitors compliance of entity’s policies and procedures
· Monitors compliance with senior management’s directives
· Makes follow-up of the observations made by Internal Auditors, External Auditors and Regulators in their reports
· Advise senior management on compliance of laws, rules and regulations
· Educating staff on compliance issues and acting as a contact point within the entity for compliance related queries from staff
· Assist senior management in establishing written guidance for staff on the appropriate implementation of laws, rules and regulations through internal policies and procedures
Audit Committee
Internal Audit Function
Independent
Review of
Compliance
Function’s
Activities
Syed Sohail Ahmed — Arif Habib Investments Limited
Top
11 Jan—Mar, 2012
Stat i s t ic s Net Assets - Open End Schemes (PKR in million)
Net Assets - Pension Funds (PKR in million)
Net Assets - Closed End Funds (PKR in million)
Industry-wide - Net Assets (PKR in million)
Schemes FY06 FY07 FY08 FY09 FY10 FY11 FY12Q1 FY12Q2 FY12Q3
Asset Allocation 4,291 2,582 4,985 2,508 2,389 3,066 2,983 3,881 4,455
Balanced 6,574 7,459 12,353 7,100 5,182 3,525 3,249 2,962 3,204
Capital Protected - 2,617 5,019 6,194 7,147 3,368 1,969 2,271 2,320
Equity 71,191 113,147 104,162 61,542 39,374 52,458 48,236 44,597 51,896
Income 28,602 112,327 140,381 78,461 62,092 47,504 49,725 62,964 78,905
Money Market - - 114 3,282 32,046 77,304 79,197 104,917 119,897
- - - - - - - - -
Islamic Asset Allocation 1,378 1,073 1,832 1,520 1,178 1,263 1,199 1,139 1,246
Islamic Balanced - 965 1,916 1,358 911 767 731 701 787
Islamic Capital Protected - - 579 582 637 - 408 408 436
Islamic Equity 4,064 5,108 7,425 4,501 4,601 5,320 6,913 6,605 8,045
Islamic Income - 3,162 9,103 7,855 7,289 20,793 22,218 28,825 28,948
Islamic Money Market - - - 624 5,224 7,170 6,892 7,728 8,977
Total 116,100 248,440 287,870 175,528 168,071 222,537 223,722 266,999 309,116
Schemes FY06 FY07 FY08 FY09 FY10 FY11 FY12Q1 FY12Q2 FY12Q3
Pension - - 305 349 572 655 655 751 847
Islamic Pension - - 466 530 729 902 952 1,079 1,260
Total - - 770 878 1,301 1,558 1,607 1,830 2,107
Schemes FY06 FY07 FY08 FY09 FY10 FY11 FY12Q1 FY12Q2 FY12Q3
Asset Allocation 629 646 592 283 345 435 454 382 436
Balanced 618 2,135 1,971 1,243 1,144 1,317 1,311 1,257 1,408
Capital Protected - 108 1,397 1,297 1,404 - - - -
Equity 38,860 44,609 38,145 22,171 24,036 17,810 17,552 15,478 18,843
Income - 1,027 1,115 1,084 1,111 1,125 1,057 1,085 1,119
Money Market - - - - - - - - -
- - - - - - - - -
Islamic Asset Allocation - - - - - - - - -
Islamic Balanced 1,513 1,598 1,424 1,143 1,278 1,523 1,354 1,327 1,497
Islamic Capital Protected - - - - - - - - -
Islamic Equity 2,029 2,219 1,906 1,174 1,404 1,707 - - -
Islamic Income - - - - - - - - -
Islamic Money Market - - - - - - - - -
Total 43,649 52,341 46,549 28,394 30,723 23,917 21,728 19,529 23,303
Source: MUFAP
Source: MUFAP
Source: MUFAP
FY06 FY07 FY08 FY09 FY10 FY11 FY12Q1 FY12Q2 FY12Q3
Open End Funds 116,100.13 248,439.97 287,869.51 175,528.17 168,071.02 222,537.44 223,721.69 266,998.81 09,115.73
Closed End Funds 43,648.59 52,341.33 46,548.91 28,394.20 30,722.84 23,917.28 21,728.19 19,529.30 23,303.35
Pension - - 770.43 878.34 1,300.72 1,557.85 1,606.82 1,829.87 2,107.00
Total 159,748.72 300,781.30 335,188.85 204,800.72 200,094.58 248,012.58 247,056.69 288,357.98 334,526.08
Source: MUFAP
Top
12 Jan—Mar, 2012
Stat i s t ic s
Sales (PKR in million)
Redemptions (PKR in million)
Net Sales (PKR in million)
FY06 FY07 FY08 FY09 FY10 FY11 FY12Q1 FY12Q2 FY12Q3
Asset Allocation 8,562 2,943 6,538 849 461 871 201 1,226 505
Balanced 1,933 3,007 9,585 827 627 165 12 0 105
Capital Protected - 2,624 2,591 2,951 2,848 0 - 369 -
Equity 10,580 21,609 39,580 14,638 11,825 13,286 1,116 5,411 2,484
Income 41,149 178,192 385,817 128,626 113,145 45,670 11,527 30,062 45,556
Money Market - - 115 4,813 84,831 133,516 39,151 66,637 71,076
- - - - - - - -
Islamic Asset Allocation 1,598 594 2,049 458 387 154 27 21 51
Islamic Balanced - 1,310 2,507 255 526 123 23 6 10
Islamic Capital Protected - - 581 9 - - 396 - -
Islamic Equity 1,581 1,879 4,934 931 764 1,167 356 325 746
Islamic Income - 4,018 22,288 14,596 9,108 34,135 4,727 10,402 5,476
Islamic Money Market - - - 676 13,094 6,309 2,172 2,536 3,908
Total 65,402.05 216,176.14 476,584.78 169,628.39 237,617.84 235,396.38 59,707.31 116,994.93 129,916.40
FY06 FY07 FY08 FY09 FY10 FY11 FY12Q1 FY12Q2 FY12Q3
Asset Allocation 4,829 5,119 3,621 2,166 1,164 952 225 256 787
Balanced 4,318 3,831 5,841 2,934 3,605 1,918 318 159 324
Capital Protected - 57 164 806 233 3,540 633 110 6
Equity 15,138 16,577 37,407 13,103 15,799 15,281 1,617 4,850 3,200
Income 26,705 104,836 369,510 180,573 133,660 62,821 9,197 17,743 29,279
Money Market - - 3 1,683 57,790 101,027 40,005 45,027 57,067
- - - - - - - - -
Islamic Asset Allocation 154 900 1,604 634 795 366 32 34 66
Islamic Balanced - 452 1,522 505 1,213 440 55 23 26
Islamic Capital Protected - - - 10 26 1,532 - 0 1
Islamic Equity 1,312 1,954 2,469 1,615 1,984 2,038 401 172 780
Islamic Income - 927 17,547 16,187 10,000 12,865 3,545 4,099 5,574
Islamic Money Market - - - 54 8,812 5,301 2,629 1,873 2,833
Total 52,456.50 134,652.83 439,688.77 220,269.29 235,081.20 208,079.96 58,658.23 74,344.36 99,943.30
FY06 FY07 FY08 FY09 FY10 FY11 FY12Q1 FY12Q2 FY12Q3
Asset Allocation 3,733 (2,176) 2,917 (1,317) (703) (80) (24) 970 (283)
Balanced (2,386) (824) 3,744 (2,108) (2,978) (1,753) (306) (159) (219)
Capital Protected - 2,567 2,427 2,145 2,614 (3,540) (633) 259 (6)
Equity (4,558) 5,032 2,173 1,535 (3,973) (1,994) (502) 560 (716)
Income 14,445 73,356 16,307 (51,947) (20,516) (17,152) 2,330 12,320 16,277
Money Market - - 112 3,129 27,042 32,489 (854) 21,610 14,008
- - - - - - - - -
Islamic Asset Allocation 1,444 (306) 444 (175) (407) (213) (5) (13) (15)
Islamic Balanced - 858 985 (249) (687) (317) (33) (17) (16)
Islamic Capital Protected - - 581 (1) (26) (1,532) 396 (0) (1)
Islamic Equity 268 (75) 2,465 (684) (1,219) (870) (45) 153 (34)
Islamic Income - 3,091 4,741 (1,592) (892) 21,270 1,182 6,303 (97)
Islamic Money Market - - - 622 4,282 1,008 (457) 664 1,074
Total 12,945.55 81,523.31 36,896.01 (50,640.91) 2,536.65 27,316.44 1,049.08 42,650.67 29,973.11
Source: MUFAP
Source: MUFAP
Source: MUFAP Top
13 Jan—Mar, 2012
Stat i s t ic s
Open End Funds' Return
Pension Funds' Return
Closed End Funds' Return
FY06 FY07 FY08 FY09 FY10 FY11 FY12Q1 FY12Q2 FY12Q3
Asset Allocation 62.90% 18.79% -3.29% -22.33% 9.23% 17.79% -0.35% -2.67% 10.32%
Balanced 28.98% 27.16% 1.87% -25.01% 14.24% 16.20% 1.74% -4.05% 15.89%
Capital Protected 5.57% 5.26% 14.67% 8.96% 9.71% 2.21% 3.73% 2.62%
Equity 27.48% 44.11% -4.29% -39.31% 18.93% 24.50% -0.85% -7.14% 17.61%
Income 7.49% 9.07% 8.58% 7.68% 8.95% 8.20% 8.79% 7.55% 10.66%
Money Market 8.75% 10.33% 10.68% 11.80% 11.94% 11.19% 10.05%
Islamic Asset Allocation -4.54% 23.38% 5.49% -2.63% 6.93% 11.36% 1.87% -2.62% 11.08%
Islamic Balanced 14.86% -1.17% -15.11% 16.83% 27.17% 1.43% -1.71% 14.73%
Islamic Capital Protected -0.40% 0.76% 13.62% 14.12% 3.18% 0.10% 7.00%
Islamic Equity 30.68% 25.09% -0.70% -30.12% 29.34% 37.26% 2.71% -5.71% 22.16%
Islamic Income 9.81% 7.52% 8.06% 5.64% 10.41% 11.25% 10.85% 11.05%
Islamic Money Market 7.79% 10.10% 10.79% 11.60% 11.15% 10.68%
FY06 FY07 FY08 FY09 FY10 FY11 FY12Q1 FY12Q2 FY12Q3
Equity -4.40% -26.78% 20.32% 26.45% -0.45% -6.55% 18.40%
Debt 3.54% 12.67% 7.67% 10.69% 12.86% 9.58% 8.14%
Money Market 6.25% 10.00% 3.54% 10.94% 11.06% 8.95% 8.43%
Islamic Equity 0.13% -8.72% 23.13% 34.76% 2.75% -5.92% 19.53%
Islamic Debt 6.71% 9.91% 8.87% 9.65% 7.37% 7.33% 7.91%
Islamic Money Market 5.96% 9.17% 6.69% 9.03% 7.07% 9.24% 8.29%
FY06 FY07 FY08 FY09 FY10 FY11 FY12Q1 FY12Q2 FY12Q3
Asset Allocation 19.23% 17.32% 5.41% -45.64% 26.44% 42.46% 4.62% -1.61% 14.14%
Balanced 22.18% 14.95% 0.92% -29.19% 0.12% 13.45% 1.18% -2.39% 17.50%
Capital Protected 14.79% -4.25% -1.13% 8.16%
Equity 9.11% 29.22% 0.35% -37.80% 13.30% 17.29% -1.31% -9.60% 22.11%
Income 2.70% 12.15% 5.76% 12.46% 11.67% 12.43% 11.11% 13.27%
Money Market
Islamic Asset Allocation
Islamic Balanced 22.73% 24.94% 1.76% -10.86% 22.81% 25.35% 3.00% -2.00% 13.00%
Islamic Capital Protected
Islamic Equity 21.40% 9.38% -2.78% -31.63% 31.40% 37.37%
Islamic Income
Islamic Money Market
Source: MUFAP
Source: MUFAP
Source: MUFAP
* Annualized
** Average for the Industry Top
