Pak Oman Advantage Fund (POAF)

Introduction

Is a closed end fund, established through a Trust Deed between Pak Oman Asset Management Limited, the Management Company and Central Depository Company of Pakistan Limited.

POAF has been developed with the objective of investing in high quality debt instruments of commercial banks. POAF will have a limited life of 8 years, after which the fund will be wound down and investors will be paid back

Fund Investment Objective

To provide low risk adjusted returns to the investor by minimizing credit and price risks in a fixed income portfolio.

Authorized Investments:

• Listed, Rated TFCs issued by commercial banks to meet Tier-II Capital requirements where the instrument rating is minimum "A" (Single A).
  
  
• Listed, Rated TFCs issued by Corporate entities other than banks where the instrument rating is a minimum "A" (Single A).
  
  
• Treasury Bills, Pakistan Investment Bond, and any other Government Securities.
  Money Market Securities, Commercial Paper where the Issuing entity is rated at least "A" (Single A).
  
  
• Long, medium and short term deposits in Banks with a minimum rating
  of "A" (Single A).
  
  
• Repurchase transactions (REPO's) and reverse REPO's against eligible securities which would exclude any security not mentioned in "Authorized Investments".
  
  
• Continuous Funding System (CFS) or similar transaction by whatever name called.
  
  
• Spread transactions (Ready against Future deals).
  
  
• Provided that except for REPO transactions, the principal maturity of all above investments (as may be applicable) shall not be longer than a period of eight years from the date of completion of Initial Issue.

Type of Fund

Pak Oman Advantage Fund (POAF) is a Closed End Fund with the objective to invest in high quality debt instruments of commercial banks.

upto 75% of fund will be invested in listed and rated Tier II TFC issues of commercial banks. As only free floating instruments will be accepted, both credit risk as well as price risk will be minimized.

The remaining will be invested in listed and rated TFCs (non bank) rated A or higher, placements with banks and other financial institutions which have a minimum entity rating of "A", money market instruments including repurchase transactions where the underlying securities are of acceptable risk (Government or high credit rated corporate bonds), spread transactions and Continuous Funding System.

Name of the Members of Investment Committee:

Ms. Hina Ghazanfar, CEO
Mr. Ahmed Nabeel – Chief Investment Advisor
Mr. Najam Ul Hassan – Chief Financial Officer
Mr. Imran Rahim Khan – Fund Manager Fixed Income

Underlying Risk & Mitigates

ALike any other investment in mutual funds, this investment will also be exposed to certain risks which have been outlined below:

Credit Risk:
This comprises of Default risk, Credit Spread Risk and Downgrade Risk. As the bulk of investment by POAF would be in TFCs issued by commercial banks, these risks are reduced to a great extent.

Commercial banks are regulated by the State Bank of Pakistan and the State Bank only permits listed Tier-II Issues for banks that meet certain minimum rating requirements; moreover, such Issues are limited to 50% of Tier-I capital base.

In recent times, banking sector profitability has been on the rise with concurrent build-up in Tier-I. Higher Tier-II allows banking companies to build up new assets against relatively low cost capital, thereby further enhancing profitability ratios.

Price Risk:
Fixed income instruments carry price risk and can lose significant value in a rising interest rate scenario. As the fund life is 8 years, which can encompass more than one business cycle and changing interest rate environments, the fund will mitigate price risk by holding floating rate instruments only.

This will not apply to short term instruments which have a total life of less than 12 months, such as Treasury Bills or Commercial Paper.

Settlement Risk:
In a reverse repurchase transaction where the fund has taken an exposure against a security, default by the counterparty can result in ownership of the underlying security.

This can have an adverse impact if the market value of the security falls. To mitigate this risk, the fund will ensure that counterparties are creditworthy and carry low settlement risk.

Moreover, pricing of underlying securities will also be market based. The underlying securities will have to be authorized investments meeting the same rigorous screening procedure as direct investments (except for the fact that remaining life of the repo security may exceed remaining fund life).

Government Regulation Risk:
Relevant Government policies/ regulations may change which may have an adverse impact on the performance of the fund.

Offering Documents

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Auditors:

     A.F Fergusons & Co.

Trustee & Custodial of Fund

Central Depository Company of Paksitan Limited-CDCP

Disclaimer

The certificate Prices of the Fund and income generated from them may go up or down. Due to any extraordinary, unforeseeable circumstances, POAMCL may declare suspension of redemptions, invoke a queue system or announce winding-up.

The certificate of the Trust are not bank deposits and are neither issued by, insured by nor obligations of, nor otherwise supported by the SECP, any Government agency, the Trustee (except to the extent specifically stated in this document and the Trust Deed) or any of the shareholders of the POAMCL or any of the Core Investors or any other bank or financial institution.