Dear Investors
The Securities and Exchange Commission of Pakistan (SECP) issued Circular no. 26/2008 dated 5th November 2008 directing all AMCs to revalue downward all debt securities (including TFCs / Sukuks) held by collective investment schemes by 5 to 30% with immediate effect. As SECP has mentioned in its circular, this step has been taken due to absence of liquidity and price discovery in the debt market. Further, this directive is applicable till 12th January 2009 or such other date as the SECP may specify.
Al Meezan Investments has been calculating prices of its funds as per the pricing mechanism specified in NBFC Regulations. However, this abrupt change in the pricing mechanism by SECP has led to revaluation of the sukuk portfolio held by Meezan Islamic Income Fund (MIIF) and resulted in downward revision of its Offer and Redemption prices.
Despite the disruptive impact of the Circular from SECP, we have not suspended dealing of Meezan Islamic Income Fund (MIIF) even for a single day, though there has been a delay in announcement of prices to incorporate the implications of the Circular. Hence investors can continue to purchase or redeem units of MIIF without any restrictions. Furthermore, the management and Board of Directors of MIIF are committed not to suspend dealing in units of MIIF.
We would like to highlight that MIIF is not facing any liquidity problems and hence it does not need to make any distress selling of its sukuk portfolio. A sizable portion of fund portfolio is invested in cash, cash equivalents and term deposits with Islamic banks. The rest of the investment portfolio (around 43% of net assets) comprises of good quality Islamic income instruments (sukuk). This compares very favorably with other Islamic Income Funds where sukuk portfolio is around 70% to 85% of net assets. Due to better liquidity of MIIF compared to other Islamic income funds, MIIF is better placed to meet redemption requests.
We would like to advise that you should not panic due to this abrupt downward revision in prices of units and should not take any decision in haste. It is very important to act as a rational investor at this stage and consult our investment and sales team before making any decision regarding your investment in MIIF. Going forward, we anticipate that as the liquidity situation eases out, the price discovery will improve and this could lead to improvement in unit prices. Further, it is possible that SECP may, in consultation with stakeholders, could revise the formula for discount in valuations in a positive manner.
It would be pertinent to add that that the yield on MIIF which was estimated to be about 13.5% for the month of November is likely to increase to 14.5% based on the revision in NAV of the Fund. From the perspective of an investor who would like to increase his investment in the Fund, this offers a very attractive tax free yield on investment.
We at Al Meezan Investments assure you of our sincere commitment to the unit holders. For more details and any query please contact us at 0800 – HALAL (42525) or UAN 111-633-926.