Offering Document of Pakistan Income Fund (PIF)

PIF Offering Document Page 1 of 44

CLAUSE NO.

Offering Document of

Pakistan Income Fund (PIF)

Table of Contents

SUBJECT MATTER

1.

INTRODUCTION

2.

DEFINITIONS

3.

REGULATORY APPROVAL AND CONSENT

3.1 Approval of the Securities and Exchange Commission of Pakistan

3.2 Filing of the Offering Document

4.

CONSTITUTION, OBJECTIVES, POLICIES AND RESTRICTIONS

4.1 Constitution

4.2 Objectives

4.3 Trust Deed

4.4 Duration

4.5 Units

4.6 Open end Fund

4.7 Issues and Redemption of Units and Extraordinary Circumstances

4.8 First Offer

4.9 Transaction in Units

4.10 Investment Policy

4.11 Investment Restrictions and Exposure Limits

4.12 Exception to Investment Restrictions

4.13 Transactions with Connected Persons

4.14 Borrowing Policy

4.15 Risk Disclosure And Disclaim er

4.16 Offering Docum ent

4.17 Information given in this Document, Responsibility of M anagement Company

5.

ORGANIZATION AND MANAGEMENT

5.1 M anagement Company

5.2 About the Shareholders

5.3 The Board of Directors of the M anagement Company

5.4 Particulars of the Directors

5.5 Company Secretary

5.6 Duties and Responsibilities of the M anagement Company

5.7 Trustee

5.8 Core Investors

5.9 Registrar

5.10 Custodian

5.11 Distributors and Investment Facilitators

5.12 Auditors 5.13 Legal Advisors

5.14 Bankers

5.15 Bank Accounts

6.

PRINCIPAL FEATURES

6.2 Characteristics of Units

6.3 Distribution Policy

7.

PURCHASES AND REDEMPTION OF UNITS

8.

OFFER AND REDEMPTION PRICES

9.

EXPENSES OF PIF

9.2 The Remuneration of the M anagement Company and the Trustee

9.3 The payment to Legal Advisors

9.4 Expenses of the M anagement Company and the Trustee

10.

TAXATION

PAGE NO.

3 3 3 4

10

17 20 21 22 22

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CLAUSE NO.

SUBJECT MATTER

10.1 Taxation on the income of the Fund

10.2 Taxation on Unit Holders and liability to Zakat

10.3 Disclaim er

11.

FEES AND CHARGES

11.1 Management Fee

11.2 Trustee Fee

11.3 Sales and Processing Charges (Front-end Load)

11.4 Redemption Processing Charge (Back -end Load)

12.

PROCEDURE FOR PURCHASE OF UNITS

12.1 Who Can Apply

12.2 Application Procedure

12.3 Payment

12.4 Joint Application

12.5 Allotment (Issue of Units)

13.

PROCEDURE FOR REDEMPTION OF UNITS

13.1 Application Procedure

13.2 Payment of Redemption Proceeds

13.3 Joint Holders

13.4 Partial Redemption

13.5 Verification of Redemption Application Form

13.6 Redemption Requests in Excess of 10% of Units in Issue

14.

TRANSFER OF UNITS

14.1 Application Procedure

14.3 Partial Transfer

14.4 Verification of Transfer Application Form

14.5 Closure of Register

15.

SERVICE TO UNIT HOLDERS

15.1 Availability of Forms

15.2 Register of Unit Holders

15.5 Information in the Register

15.6 Financial Reporting

15.7 Income Distribution

16.

FINANCIAL INFORMATION

16.1 Auditors Certificate on Core Investors' Investment in the Units of PIF

16.2 Auditors Certificate on Net Asset Value of Units in PIF

16.3 Formation Cost

17.

TERMINATION OF PIF

17.1 By the Management Company

17.2 By the Securities and Exchange Com mission of Pakistan

17.3 W inding up

18.

DEFINITIONS

19.

AUTHORIZED BRANCHES OF THE DISTRIBUTION COMPANIES

20.

FORMS

PAGE NO.

23

24

26

27

28

31 32 32 38 38

PIF Offering Document Page 3 of 44

Offering Document of

Pakistan Income Fund (PIF) Managed by Arif Habib Investment Management Limited,

An Asset Management Company Registered under the Asset Management Companies Rules, 1995

Date of Publication of Offering Document 28th February 2002

1. INTRODUCTION The Pakistan Income Fund (PIF) has been established through a Trust Deed under the Trust Act 1882 entered into betw een A rif H abib Investm ent M anagem ent Lim ited (A H IM L), as the M anagem ent Com pany and Central Depository Com pany of Pakistan Lim ited as the Trustee and is authorised under the Asset Management Company Rules, 1995.

If you have any doubt about the contents of this offering document, you should consult one or more from amongst your legal adviser, stockbroker, bank manager, or other financial adviser.

Investors must recognise that all investments involve varying levels of risk. The portfolio of PIF consists of market-based investm ents and is subject to market fluctuations and risks inherent in all such investments. Neither the value of the Units in PIF nor the level of dividends declared by the Fund are or can be assured. Investors are requested to read the Risk Disclosure statem ent contained in Section 4.15 herein below.

2. DEFINITIONS Unless the context requires otherwise all words, term s or expressions used in this Offering Docum ent shall have the m eaning assigned to them in Section 18 hereof.

3. REGULATORY APPROVAL AND CONSENT 3.1. Approval of the Securities and Exchange Commission of Pakistan

The Securities and Exchange Com m ission of Pakistan (SEC P) has authorised the offer of Units of PIF under Rule 10 of the Asset M anagem ent Com panies Rules, 1995 (Rules). The SEC P has approved this Offering Docum ent, under Rule 12 of the Rules. It m ust be clearly understood that in giving this approval, the SECP does not take any responsibility for the financial soundness of PIF nor for the accuracy of any statem ent m ade or any opinion expressed in this Offering Document. The provisions of the Trust Deed govern this Offering Docum ent. It sets forth inform ation about PIF that a prospective investor should know before investing in The Fund. Prospective investors should consult one or m ore from am ongst their legal adviser, stockbroker, bank m anager, or other financial adviser.

3.2. Filing of the Offering Document The M anagem ent Company has filed a copy of this Offering Docum ent signed by the Chief Executive along with the Docum ents (1) to (8) below with the SECP. Certified copies of these docum ents can be inspected at the registered office of the M anagem ent Com pany or the registered office and place of business of the Trustee or at any of the Authorised Branches of the Distribution Companies.

(1) Trust Deed (Deed) of PIF dated 23rd October 2001, between AHIM L, as the establisher of PIF and M anagement Company and CEN TRA L DEPOSITORY COM PANY O F PA KISTAN LIM ITED, as the Trustee;

(2) Registrar Agreem ent dated 11th September 2001 between AHIM L and Gangjees Registrar Services;

PIF Offering Document Page 4 of 44

(3) The following Distribution Agreem ents: Name of Distributor Arif Habib Securities Limited B an k A l-H ab ib Lim ited Standard Chartered Bank Taurus Securities Limited Union Bank Lim ited

Agreement Date 26th February 2002 10th November 2001 26th October 2001 5th November 2001 28th November 2001

(4) Letters dated 27th February 2002 from M essrs. A. F. Ferguson & Co., Chartered Accountants, Auditors of PIF, consenting to the issue of statem ents and reports appearing in Part 16 of this Offering D ocum ent;

(5 ) The S E C P's C ertificate of R egistration N o S C /M F-ED /130/2001, dated 17th A pril 2001, registering A H IM L as an A sset M anagem ent C om pan y together w ith S E C P's letter N o S C /M F-ED/798/2001 dated 7th Decem ber 2001 confirm ing that the conditions o f registration have been satisfied;

(6 ) The S E C P's letter N o S C /M F-D D (R )/339/2001, dated 13th July 2 001, ap pro vin g th e ap po intm en t of CENTRA L DEPOSITORY COM PANY O F PAKISTAN LIM ITED as the Trustee of PIF;

(7 ) The S E C P's letter N o. S C /M F-ED /125/2002, dated 28th February 2002, authorizin g P IF;

(8 ) The S E C P's letter N o. S C /M F-ED /125/2002, dated 28th February 2002, approvin g this O ffering D o cu m en t.

4. CONSTITUTION, OBJECTIVES, POLICIES AND RESTRICTIONS 4.1. Constitution

PIF has been constituted by a Deed entered into at Karachi on 23rd October 2001 between: (i) Arif Habib Investment Management Limited (AHIML), a c o m p a n y in c o rp o ra te d u n d e r th e

C o m p an ies O rd in an ce 1 9 8 4 , w ith its registered o ffice at 7 th Flo o r, A l-S eh at C en tre, R afiq u i S h ah eed R o ad , K arach i-7 5 3 5 0 , as th e estab lis h er o f P IF a n d M an a g e m e n t C o m p an y; an d (ii) Central Depository Company of Pakistan Limited (CDC), a co m p an y in co rpo rated u nd er th e Companies Ordinance 1984 and registered with the Securities & Exchange Com mission as a Central D epository Com pany, with its registered office at 8th Floor Karachi Stock Exchange Building, Stock Exchange Road, Karachi and place of business at 8th Floor Karachi Stock Exchange Building, Stock Exchange Road, Karachi, as the Trustee.

4.2 Objectives The Fund provides investors an opport unity to invest in a portfolio of m oney m arket investm ents such

as, spread transactions (i.e., transactions aim ed at earning a spread in the price of shares resulting from the tim ing difference betw een ready and future settlem ent. The buying, in the ready settlem ent m arket,

and the selling, in the future settlem ent m arket, shall be carried out sim ultaneously so as to avoid any risk em anating from the movem ent in prices of the underlying shares), Carry Over Transactions (CO T), investm ent grade debt securitie s; m oney m arket instrum ents and short m aturity reverse repurchase transactions.

PIF Offering Document Page 5 of 44

The Fund seeks to achieve the following benefits for the investors: Offer the benefit of returns available from investm ents in spread transactions, Carry Over

Transactions (COT), debt securities; money m arket instrum ents and short m aturity repurchase transactions. Such investm ents are norm ally an exclusive dom ain of large-scale (w holesale) investors The focus of investm ent policy is to protect capital by diversifying the investm ents and by m anaging m aturities in a m anner that reduce the risk of loss in market value of the investm ents as the result of any m ajor upward m ovem ent in lending rates. Provide the investors with liquidity and the facility to join or leave the Fund at their convenience.

The objective of the Fund is to provide investors a facility to invest through one sim ple transaction into spread transactions, Carry Over Transactions (COT), a range of debt instrum ents, short m aturity securities and reverse repurchase arrangem ents; with the view of seeking high yields while balancing out the risk into a mix of debt and reverse repurchase investm ents and at the sam e tim e offering the investors the liquidity and the facility to join or leave the Fund at their convenience.

4.3 Trust Deed The Deed is subject to and governed by the Securities and Exchange Ordinance 1969, Asset M anagem ent Com panies Rules, 1995 and all other applicable laws and regulations. The term s and conditions in the D eed and any supplem ental deed/s shall be binding on each Unit H o ld e r. The Trustee and the M anagem ent Com pany, acting together and with the approval of SEC P, shall be entitled by supplem ental deed/s to m odify, alter or add to the provisions of the Deed on any of the following grounds: 1) To such extent as m ay be required to ensure com pliance with any applicable laws and regulations or any am endm ent of such laws and regulations; 2) To enable the provisions of the Deed to be more conveniently and efficiently im plem ented; 3) To enable the Units to be listed on a stock or other exchange; or 4) Otherwise to the benefit of the Unit Holders;

Provided that in case of (2), (3) and (4) above, such alteration or addition shall not prejudice the interest of the Unit Holders; and that in any event, it shall not release the Trustee or the M anagem ent Com pany of their responsibilities.

4.4 Duration The duration of PIF is perpetual. However the SECP or the M anagem ent Com pany m ay, on the occurrence of certain events, wind it up as stated in Section 17 of this Offerin g Docum ent under the heading "Term ination of PIF".

4.5 Units PIF is divided into Units having a First Offer price of Rs.50 each. This price is applicable to such Units that are issued before any of the assets of PIF are invested other than deposits, whether o r not earning interest/m ark-up. Thereafter the U nits shall be issued on the basis of their N et A sset V alue (N A V ), which shall form the base for determ ining the Offer and Repurchase Prices. All Units and fractions thereof represent an undivided share in the Fund and rank pari passu as to their rights in the net assets, earnings, and the receipt of the dividends and distributions. Each Unit Holder has a beneficial interest in PIF proportionate to the Units held by such Unit Holder. However, for the convenience of investors, the M anagem ent Com pany m ay issue Units with different options as to the adm inistrative arrangem ents (while m aintaining the integrity of each Unit's pari passu rights). Consequently, the U nits issued w ith differing adm inistrative arrangem ents m ay have differing quantum of the Front-en d Lo ad added to the N A V for determ ining the O ffering Price thereof and differing levels of B ack-en d load deducted for determ ining the Repurchase Price.

4.5.1 CD UNITS

Type CD Units are meant for those making sizeable investment and remain invested for medium to long term and have the following characteristics:

Minimum Investment:

The Management Company may from time to time amend the minimum amount of initial investment that is required for opening an account with the Registrar. At the initial stage, the minimum

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