LAKSON MONEY MARKET FUND Annual Report 2017
LAKSON MONEY MARKET FUND
LAKSON MONEY MARKET FUND
CONTENTS Vision & Mission Statement
1
Fund's Information
2
Report of the Directors of the Management Company
4
Report of the Directors of the Management Company (In Urdu)
9
Report of the Fund Manager
16
Trustee Report to the Unit Holders
20
Statement of Compliance with the Code of Corporate Governance
21
Review Report to the Unit Holders on Statement of Compliance with the Best Practices of Code of Corporate Governance
24
Independent Auditor's Report to the Unit Holders
25
Statement of Assets and Liabilities
27
Income Statement
28
Statement of Comprehensive Income
29
Distribution Statement
30
Statement of Movement in Unit Holders' Fund
31
Cash Flow Statement
32
Notes to and forming part of the Financial Statements
33
Performance Table
62
LAKSON MONEY MARKET FUND
Vision To be a top quartile provider of investment solutions to both individuals and institutions. Through the success of our clients and employees we seek to build sustainable and long-term shareholder value, and to be an employer of choice in the asset management industry.
Mission To deliver superior performance as measured by market share parameters, high-quality service and a portfolio of innovative yet tailored products across a range of investment disciplines and distribution channels. To provide a fulfilling, stimulating and supportive environment for our employees that fosters their personal growth and facilitates our productivity as a team.
1
LAKSON MONEY MARKET FUND
Funds Information Management Company
Lakson Investments Limited Head Office Lakson Square, Building No.2, Sarwar Shaheed Road, Karachi-74200, Pakistan. Phone: (9221) 3569.8000 Fax: (9221) 3568.1653 Web site: www.li.com.pk E-mail:
[email protected] Lakson Investments Limited (Regulated by the DFSA as a Representative Office) Level 15, Gate Building DIFC, P.O. Box 507054 Dubai, U.A.E. Phone: +971.4 401.9284 Fax: +971.4 401.9578
Board of Directors of the Management Company
Chief Financial Officer & Company Secretary of the Management Company Audit Committee
Human Resource and Remuneration Committee
Mr. Iqbal Ali Lakhani - Chairman Mr. Babar Ali Lakhani - Chief Executive Officer Mr. A. Aziz H. Ebrahim Mr. Mahomed J. Jaffer Mr. Amin Mohammed Lakhani Mr. Jacques John Visser Mr. Daniel Scott Smaller Mr. Zahid Zakiuddin
Ms. Maimoona Raffat Mr. Zahid Zakiuddin - Chairman Mr. A. Aziz H. Ebrahim Mr. Iqbal Ali Lakhani Mr. Iqbal Ali Lakhani - Chairman Mr. Babar Ali Lakhani Mr. Daniel Scott Smaller
Trustee
Central Depository Company of Pakistan Limited CDC House, 99-B, Block-B, S.M.C.H.S., Main Shahra-e-Faisal, Karachi, Pakistan.
Auditors
BDO Ebrahim & Co. Chartered Accountants 2nd Floor, Block C, Lakson Square, Building No. 1, Sarwar Shaheed Road, Karachi - 74200.
2
LAKSON MONEY MARKET FUND Bankers to the Fund
Allied Bank Limited Askari Bank Limited Bank Alfalah Limited Faysal Bank Limited Habib Bank Limited Habib Metropolitan Bank Limited National Bank of Pakistan Sindh Bank Limited United Bank Limited
Legal Adviser
Fazleghani Advocates F-72/I, Block 8, KDA-5, Kehkashan, Clifton, Karachi, Pakistan.
Registrar
Lakson Investments Limited Lakson Square Building No.2, Sarwar Shaheed Road, Karachi-74200, Pakistan
Distributors
Adam Securities Amir Noorani BMA Financial Services Limited Elixir Securities (Pvt.) Limited Ismail Iqbal Securities Metro Securities Pvt. Limited Pearl Securities Pvt. Limited Rabia Fida Topline Securities (Pvt.) Limited Vector Capital (Pvt.) Limited
Rating by PACRA
AA(f) : Fund Stability Rating AM2+ : Asset Manager Rating
3
LAKSON MONEY MARKET FUND
REPORT OF THE DIRECTORS OF THE MANAGEMENT COMPANY FOR THE YEAR ENDED JUNE 30, 2017 The Board of Directors of Lakson Investments Limited, the Management Company of the Lakson Money Market Fund ("LMMF") is pleased to submit its report together with Audited Financial Statements for the year ended June 30, 2017. Fund Objective The objective of the fund is to provide stable and competitive returns with low volatility that are in line with the money markets and consistent with capital preservation. Accordingly, the fund consists of a liquid portfolio of low risk, short-term investments. Fund Profile LMMF is an open end money market fund which invests in Government Securities, Certificate of Investments, Clean Placements, Term Deposit Receipts and other short term instruments. The weighted average maturity of the portfolio is kept below 3 months. LMMF invests in only those securities that have been assigned at least an "AA" rating by a rating agency in Pakistan and are of less than 6 months maturity. An in-depth credit analysis is conducted before taking any exposure to any counter party to mitigate the credit risk. Short maturity of the portfolio protects the Unit Holders against interest rate movements while enhancing the liquidity of the Fund. LMMF is allowed to borrow up to 15% of Net Assets to meet redemptions, however, LMMF did not utilize this facility during the period under review. Fund Performance The LMMF yielded 6.80% in FY17 compared to 5.60% in FY16. The Benchmark of the LMMF (70% average 3M T-Bills yield + 30% average 3M TDR rate of minimum AA rated banks) yielded 5.28% in FY17. The LMMF outperformed the Benchmark by 152bp. Asset allocation was concentrated in cash which provided a good spread over the prevailing T bill yields without compromising liquidity and credit quality. A final dividend distribution of PKR 6.7764/unit was made in line with the Fund's policy of paying out more than 90% of the year's income to unit holders. The funds under management of LMMF dropped by 11.72% in FY17 to PKR 4.68 bn from PKR 5.30 bn at the start of the year. The LMMF will maintain significant exposure in T-Bills and cash to maintain high liquidity in accordance with its investment objective. The LMMF may switch between different maturities depending upon the liquidity conditions of the market and interest rate outlook. Also in order to generate competitive returns for unit holders the Fund will continue to explore placement options with high quality banks and DFIs at every available opportunity. Earnings Per Unit (EPU) EPU is not being disclosed as we feel determination of weighted average units for calculating EPU is not practicable for open end funds Income Distribution The Chief Executive Officer under the authority from Board of Directors of the Management Company during the year declared the interim payout of PKR 6.7764 per unit (6.7764% face value of PKR 100/) amounting to PKR 79.410 million distribution in cash for the year ended June 30, 2017. Fund and Asset Manager Rating The Pakistan Credit Rating Agency Limited ('PACRA') has upgraded the asset manager rating of the Management Company to AM2+ from AM2. The PACRA has maintained the Fund Stability Rating of LMMF at "AA(f)". Corporate Governance The Fund is listed on the Pakistan Stock Exchange Limited; therefore, the Management Company is required to comply with the requirements of the Code of Corporate Governance for listed companies. 1. The financial statements prepared by the Management Company present fairly the state of affairs of the Fund, the results of its operations, cash flows and movement in unit holders' fund.
4
LAKSON MONEY MARKET FUND 2. Proper books of accounts of the Fund have been maintained. 3. Appropriate accounting policies have been consistently applied in the preparation of financial statements and accounting estimates are based on reasonable and prudent judgment. 4. Relevant International Financial Reporting Standards, as applicable in Pakistan, provisions of NonBanking Finance Companies (Establishment and Regulation) Rules, 2003, Non-Banking Finance Companies and Notified Entities Regulations, 2008 ('NBFC Regulations), directives issued by the Securities & Exchange Commission of Pakistan and requirements of the constitutive documents of the Fund have been followed in the preparation of financial statements and any departure there from has been adequately disclosed. 5. The system of internal control is sound in design and has been effectively implemented and monitored. 6. There are no significant doubts upon the Fund's ability to continue as a going concern. 7. There has been no material departure from the best practices of Corporate Governance, as detailed in the listing regulations. 8. Key financial data as required by the Code of Corporate Governance has been summarized in this Annual Report. 9. Outstanding statutory payments on account of taxes, duties, levies and charges have been fully disclosed in the Financial Statements. 10. The statement as to the value of investments of provident fund is not applicable in the case of the Fund as such expenses are borne by the Management Company. 11. Meetings of the Board of Directors of the Management Company are held at least once in every quarter. During the year under review four meetings were held. Attendance of the Directors in these meetings is as follows:
Meetings S.No.
Name
Designation
Total
Attended Leave Granted
1
Mr. Iqbal Ali Lakhani
Chairman
4
3
1
2
Mr. Babar Ali Lakhani
Chief Executive
4
4
-
3
Mr. A. Aziz H. Ebrahim
Director
4
4
-
4
Mr. Mahomed J. Jaffer
Director
4
4
-
5
Mr. Amin Mohammed Lakhani
Director
4
2
2
6
Mr. Daniel Scott Smaller
Director
4
4
-
7
Mr. Zahid Zakiuddin
Director
4
4
-
8
Mr. Jacques John Visser
Director
4
3
1
12. Meetings of the Audit Committee of the Management Company are held at least once in every quarter. During the year under review four meetings were held. Attendance of the Directors in these meetings is as follows:
5
LAKSON MONEY MARKET FUND S.No.
Name
Designation
Total
Meetings Attended Leave Granted
1
Mr. Zahid Zakiuddin
Chairman
4
4
2
Mr. A. Aziz H. Ebrahim
Member
4
4
-
3
Mr. Iqbal Ali Lakhani
Member
4
3
1
-
13. During the year, one meeting of the Human Resource and Remuneration Committee comprising of Mr. Iqbal Ali Lakhani - Chairman, Mr. Babar Ali Lakhani - Member and Mr. Daniel Scott Smaller - Member was held, all the three members of the Committee attended the meeting. 14. The pattern of unit holding is given in note No. 22.1 of the Financial Statements. 15. During the year under review trades in the Units of the Fund were carried out by the Directors, the Chief Executive Officer, the Executives and including their spouses and minor children are as under: S.No.
Name
Designation
Investment
Redemption
(Number of Units)
1
Babar Ali Lakhani
Chief Executive Officer
14,484.9038
-
2
Iqbal Ali Lakhani
Chairman
14,109.1881
-
3
Amin Mohammed Lakhani
Director
2,793,641.8006
Executive Director & COO Spouse of Executive Spouse of Chairman
29,030.8312
28,869.7513
(3,077,533.2842) (9,954.1908)
4
Kashif Mustafa
5
Tazeen Fatima
6
Ronak Iqbal Lakhani
7
Imran Raza Kazmi
Executive
3,994.7708
-
8
Sameera Ali
Executive
0.2339
-
-
161.0799
(92,442.6936)
External Auditor The existing auditors M/s. BDO Ebrahim & Co., Chartered Accountants being eligible have given their consent for reappointment as auditors for the year ending June 30, 2018. The Board of Directors, on the recommendations of the Audit Committee, has reappointed M/s. BDO Ebrahim & Co., Chartered Accountants for the year ending June 30, 2018. Economy review CPI inflation clocked in at 4.16% in FY17, compared to 2.86% in the same period last year. The CPI inflation however remained well under the policy rate, keeping real interest rates positive and allowed the central bank to maintain its policy rate at 5.75% throughout the period under review. The low interest rate environment supported private sector credit expansion which recorded 18% YoY growth. On the trade front, imports surged to USD 53.03 bn in FY17 up 18.67% YoY as compared to USD 44.69 bn in FY16 on account of higher import of machinery (up 37.27% YoY) and petroleum products (up 30.25% YoY). On the other hand, exports failed to mark any recovery, falling 1.63% YoY in FY17 to USD 20.45 bn. Due to expanding trade deficit, up 36.3% in FY17 to USD 32.6 bn, and slowdown in remittances (down 3.08% YoY to USD 19.3 bn in FY17) particularly from Gulf countries, U.K. and USA, the current account deficit has deteriorated to USD 12.1 bn in FY17 from USD 4.9 bn in the same period last year. Due to a widening current account and external debt servicing (USD 4.8 bn for 11MFY17), FX reserves depleted to USD 21.37 bn in FY17, falling by some 8.1% YoY. PKR's stability against the USD however, remained intact during the period, despite USD gaining further strength against major emerging market currencies.
6
LAKSON MONEY MARKET FUND During 9MFY17, fiscal deficit swelled to 3.9% of GDP on account of less than expected tax revenues along with higher development & security related expenditures against the annual target of 3.8% of GDP forcing the government to revise the budget deficit target to 4.1% of GDP. Cumulatively in 10MFY17, tax collection increased by only 8% to PKR 2,518.7 bn as compared to PKR 2,332.1 bn in SPLY. Fixed income markets review Headline interest rates remained unchanged at 5.75%/6.25% across FY17 as inflation remained benign at 4.2% YoY even as growth activity accelerated, with LSM up 5.5% YoY (11MFY17) and credit to private sector rising by 18% YoY. However, burgeoning risks on the external front appear to now be weighing on monetary policy; in Nov'16, 4 out of 10 MPC members voted for a 25bps cut but in the May'17 MPS, all committee members unanimously voted to keep interest rates unchanged. In its last communication in Jul'17, the SBP has pointed towards strong likelihood of continued growth momentum, contained inflation (FY18F: 4.5%-5.5%) and challenges on the external front (FY17 Current Account deficit rose to USD 12.1 bn or about 4% of GDP), while again keeping interest rates unchanged. MPC Committee Voting Pattern MPS Date
25bps cut
No change
Total
Jul'16
2
8
10
Sep'16
2
8
10
Nov'16
4
6
10
Jan'17
3
6
9
Mar'17
2
6
8
May'17
-
10
10
The government was a heavy borrower from the SBP in FY17 while not tapping commercial banks for financing. This allowed banks space and incentive to lend to the private sector, which was further supported by rising demand and soft interest rates. This growth is broad-based with trade financing and working capital lending also rising up to join the already-visible uptick in long-term fixed investment loans. This is in line with the SBP's outlook that overall growth momentum in the economy will likely be maintained. That said, with Pakistan entering an election year, it is possible that GoP borrowing requirements lift especially if populist decision making takes over. M2 growth clocked in at 13.7% YoY for FY17, at the same pace of growth witnessed in FY16. After the marked shift into PIBs a few years ago, GoP preference is again tilting towards shorter-term T Bills. From a 36% share in Jun'16, PIBs constituted less than 29% of GoP's total domestic debt by Apr'17. This differential has been almost entirely filled up by T Bills which are cheaper for the GoP; in FY17, the 12M T Bill yield averaged 5.96% vs. average yield for 3YR PIB of 6.36% (10YR bond was more than 8%). In FY17, the government raised PKR 9.1 tn through the T-Bills and PKR 894 bn through PIBs. In 4Q, as government focus continued to shift from PIBs to T-Bills with money raised through PIBs decelerated to PKR 115 bn during the quarter compared to PKR 646 bn raised in 1Q. This follows change in thinking in GoP's debt strategy following the IMF program. Date
T-Bills
PIB
6M
3M
12M
3YR
5YR
10 YR
30-Sep-16
5.86%
5.90%
5.91%
6.19%
6.69%
7.80%
30-Dec-16
5.96%
5.98%
5.95%
6.19%
6.69%
7.80%
31-Mar-17
5.97%
5.99%
5.99%
6.40%
6.89%
7.94%
30-Jun-17
5.99%
6.01%
6.04%
6.40%
6.90%
7.94%
7
LAKSON MONEY MARKET FUND Future Outlook Progress on CPEC-related projects and rebound in agriculture is expected to take GDP growth to 5.7% in FY18, from 5.3% in FY17. Widening of twin deficits remains a key concern, where we believe that the long-pending devaluation of the PKR can stimulate falling exports. Likewise, timely disbursements related to the government's exports incentive package could help to generate some much needed foreign exchange. On the import front, curtailments of unnecessary items as well as stable oil prices are a key to keep the trade deficit in check. On the flip side, a devaluation would also raise the specter of imported inflation especially with regards to oil consumption and debt repayments. Higher CPI numbers could see real interest rates decline to under 2% and prompt a round or two of monetary tightening from the SBP. This may cloud the GDP growth target of 5%+ as private sector and consumer borrowing decline in the face of higher rates. On the fiscal front, active and honest revenue mobilization will be crucial to meet the government's fiscal deficit target of 4.1% of GDP for FY18. Acknowledgment The Board is thankful to its valued investors, the Securities & Exchange Commission of Pakistan, the State Bank of Pakistan, the Trustee of the Fund - Central Depository Company of Pakistan Limited and the management of the Pakistan Stock Exchange Limited for their continued cooperation and support. The Directors of the Management Company also acknowledge the efforts put in by the team of the Management Company for the growth and the prudent management of the Fund.
For and on behalf of the Board
Director
Chief Executive Officer
Dated: August 25, 2017 Karachi
8
LAKSON MONEY MARKET FUND
9
LAKSON MONEY MARKET FUND
10
LAKSON MONEY MARKET FUND
11
LAKSON MONEY MARKET FUND
12
LAKSON MONEY MARKET FUND
13
LAKSON MONEY MARKET FUND
14
LAKSON MONEY MARKET FUND
15
LAKSON MONEY MARKET FUND
REPORT OF THE FUND MANAGER FOR THE YEAR ENDED JUNE 30, 2017 Fund Facts Open-End Money Market Fund 4,679 100.162 Previous Day CDC Pakistan Limited BDO Ebrahim & Co. 10% of Gross Earnings subject Management Fee to a minimum of 0.50% and maximum of 1.00% of the average annual net assets Front End Load None Back End Load None Launch Date November 13, 2009 70% average 3 months PKRV Benchmark rates + 30% average 3 months deposit rate of three AA rated banks. Dealing Days Mon - Fri Cut-Off Time 04:00 PM Fund Rating 'AA' by PACRA Asset Manager Rating AM2+
Asset Allocation
Fund Type Category Net Assets (PKR Mil.) NAV (30.06.2017) Pricing Mechanism Trustee Auditor
Morningstar
LMMF
Benchmark
FY17 - YTD June-17 2 Months 3 Months 6 Months 12 Months CY17 - YTD Simple Annualized
6.80% 9.94% 7.41% 6.84% 8.18% 6.80% 8.18% LMMF
5.28% 5.29% 5.33% 5.41% 5.39% 5.28% 5.39% Benchmark
FY17 - YTD June-17 2 Months 3 Months 6 Months 12 Months CY17 - YTD 3 Years 5 Years Since Inception
6.80% 9.51% 7.19% 6.67% 8.02% 6.80% 8.02% 7.74% 8.74% 11.87%
5.28% 5.16% 5.22% 5.30% 5.31% 5.28% 5.31% 7.16% 8.56% 11.62%
Cash 100%
Credit Split AA 10%
AAA 90%
Investment Committee Babar Ali Lakhani Kashif Mustafa Mustafa O. Pasha, CFA Syed Saifullah Kazmi Sana Abdullah, CFA Hassan Bin Nasir Junaid Arshad, ACCA Tayyaba Azeem
Chairman
Fund Objective
The objective of the fund is to provide stable and competitive returns with low volatility that are in line with the money markets and consistent with capital preservation. Accordingly, the fund consists of a liquid portfolio of low risk, short-term investments.
Investment Strategy The LMMF focused on maintaining a low risk and liquid portfolio in accordance with its investment objective. Exposure in T-Bills, placements and cash was managed according to a relative yield analysis and interest rate outlook. The LMMF maintained an average exposure of 51% in risk free T-Bills in order to maintain credit quality and liquidity in line with the low risk profile of the Fund. The Fund also maintained 5.0% average exposure to short term placements with banks & DFIs. This exposure was taken as the returns available on these placements were favorable when compared to T-Bills. Cash levels generally remained on the higher side (41% average) as banks offered attractive rates on daily product accounts. As of June 30, 2017 the WAM of the LMMF portfolio stood at 1 day with cash
16
LAKSON MONEY MARKET FUND exposure at 100%. Average portfolio WAM was kept on the lower side at 29 days over FY17 as the interest rate cycle bottomed out in May 2016. The LMMF maintained all its exposure in instruments having a minimum rating of 'AA'.
Fund Profile LMMF is an open end money market fund which invests in Government Securities, Certificate of Investments, Clean Placements, Term Deposit Receipts and other short term instruments. The weighted average maturity of the portfolio is kept below 3 months. LMMF invests in only those securities that have been assigned at least an "AA" rating by a rating agency in Pakistan and are of less than 6 months maturity. An in-depth credit analysis is conducted before taking any exposure to any counter party to mitigate the credit risk. Short maturity of the portfolio protects the Unit Holders against interest rate movements while enhancing the liquidity of the Fund. LMMF is allowed to borrow up to 15% of Net Assets to meet redemptions, however, LMMF did not utilize this facility during the period under review.
Fund Performance
The LMMF yielded 6.80% in FY17 compared to 5.60% in FY16. The Benchmark of the LMMF (70% average 3M T-Bills yield + 30% average 3M TDR rate of minimum AA rated banks) yielded 5.28% in FY17. The LMMF outperformed the Benchmark by 152bp. A final dividend distribution of PKR 6.7764/unit was made in line with the Fund's policy of paying out more than 90% of the year's income to unit holders. The funds under management of LMMF dropped by 11.72% in FY17 to PKR 4.68 bn from PKR 5.30 bn at the start of the year. The decrease in the fund size came about as investors opted to realize their investment gains at the end of the fiscal year. Performance Table Net Assets - Beginning (PKR Mil.) Net Assets - Ending (PKR Mil.)
FY17
FY16
5,297
4,209
108
LMMF vs. Benchmark
4,680
5,297
107
Highest Offer Price (PKR)
106.3721
105.6989
Lowest Offer Price (PKR)
100.0001
100.0257
106
Highest Redemption Price (PKR)
106.3721
105.6989
105
Lowest Redemption Price (PKR)
100.0001
100.0257
104
Beginning NAV - Ex-Div. (PKR)
100.1430
100.2599
103
6.7764
5.7016
102
Interim Distributions (PKR) Final Distribution (PKR) Ending NAV - Ex-Div. (PKR)
100.0001
100.0095
Return
6.80%
5.60%
Net Income (PKR Mil.)
79.00
66
1
15
WAM (Days)
Distributions
101 100 Jun-16
Sep-16 LMMF
Dec-16
Mar-17
Jun-17
Benchmark
FY17 FY16 PKR per Unit
1st Interim Distribution
6.7764
5.7016
NAV before Distribution
106.7765
105.7111
NAV after Distribution
100.0001
100.0095
Distribution Date
20-Jun-17
21-Jun-16
Future Outlook
Progress on CPEC-related projects and rebound in agriculture sector growth is expected to take GDP growth to 5.7% in FY18, from 5.3% in FY17. Interest rate appear to have bottomed, and could see some uptick in line with the expected increase in CPI inflation. Widening of twin deficit remains key concern, where we believe that the long-pending devaluation of the local currency can add stimulus to the falling exports. Likewise, timely disbursements related to exports incentive package announced by the government can also bode well for the falling exports. On the import front, curtailment of unnecessary items as well as stable (read low) oil prices are a key to keep the trade deficit in check. On the fiscal front, active and honest revenue mobilization will be crucial to meet the government's fiscal deficit target of 4.1% of GDP for FY18. The LMMF will continue to maintain significant exposure in T-Bills and cash to maintain high liquidity in accordance with its investment objective. The LMMF may switch between different maturities
17
LAKSON MONEY MARKET FUND depending upon the liquidity conditions of the market and interest rate outlook. Also in order to generate competitive returns for unit holders the Fund will continue to explore placement options with high quality banks and DFIs at every available opportunity.
Fixed Income Markets Review Headline interest rates remained unchanged at 5.75%/6.25% across FY17 as inflation remained benign at 4.2%YoY even as growth activities accelerated, with LSM up 5.5%YoY (11MFY17) and credit to private sector rising by 18%YoY. However, burgeoning risks on the external front appear to now be weighing on monetary policy; in Nov'16, 4 out of 10 MPC members voted for a 25bps cut but in the May'17 MPS, all committee members unanimously voted to keep interest rates unchanged. In its last communication in Jul'17, the SBP has pointed towards strong likelihood of continued growth momentum, contained inflation (FY18F: 4.5%-5.5%) and challenges on the external front (FY17 Current Account deficit rose to US$12.1bn or about 4% of GDP), while again keeping interest rates unchanged. MPC Committee Voting Pattern MPS Date
25bps cut
No change
Total
Jul'16
2
8
10
Sep'16
2
8
10
Nov'16
4
6
10
Jan'17
3
6
9
Mar'17
2
6
8
May'17
-
10
10
The government was a heavy borrower from the SBP in FY17 while not tapping commercial banks for financing. The consequent space to focus on the private sector, alongside rising demand and soft interest rates, enabled private sector credit to lift by a healthy 18%YoY in FY17. This growth is broadbased with trade financing and working capital lending also rising up to join the already-visible uptick in long-term fixed investment loans. This is in line with the SBP's outlook that overall growth momentum in the economy will likely be maintained. That said, with Pakistan entering an election year, it is possible that GoP borrowing requirements lift especially if populist decision making takes over. M2 growth clocked in at 13.7%YoY for FY17, at the same pace of growth witnessed in FY16. After the marked shift into PIBs a few years ago, GoP preference is again tilting towards shorter-term T Bills. From a 36% share in Jun'16, PIBs constituted less than 29% of GoP's total domestic debt by Apr'17. This differential has been almost entirely filled up by T Bills which are cheaper for the GoP; in FY17, the 12m T Bill yield averaged 5.96% vs. average yield for 3Yr PIB of 6.36% (10Yr bond was more than 8%). In FY17, the government raised PKR 9.1 trillion through the T-Bills and PKR 894bn through PIBs. In 4Q, as government focus continued to shift from PIBs to T-Bills with money raised through PIBs decelerated to PKR 115 bn during the quarter compared to PKR 646bn raised in 1Q. This follows change in thinking in GoP's debt strategy following the IMF program. Date
T-Bills
PIB
6M
3M
12M
3YR
5YR
10 YR
30-Sep-16
5.86%
5.90%
5.91%
6.19%
6.69%
7.80%
30-Dec-16
5.96%
5.98%
5.95%
6.19%
6.69%
7.80%
31-Mar-17
5.97%
5.99%
5.99%
6.40%
6.89%
7.94%
30-Jun-17
5.99%
6.01%
6.04%
6.40%
6.90%
7.94%
18
LAKSON MONEY MARKET FUND Circumstances Materially Affecting Interests of Unit Holders During the period under review, the Fund Stability Rating of 'AA' was maintained for the LMMF by PACRA, which denotes a fund consistently outperforming its peers with strong capacity to respond to future opportunities or stress situations. PACRA upgraded the Asset manager Rating of Lakson Investments to 'AM2+' during FY17. Any change in interest rates would affect the market values of tradable instruments present in the LMMF's portfolio. Any change in counterparty credit ratings can materially affect the interests of unit holders. Such changes could impact the NAV and credit split of the LMMF. As of June 30th, 2017 the LMMF has maintained provisions against Sindh Workers' Welfare Fund's liability to the tune of PKR 5.37 million. If the same were not made the NAV per unit of the LMMF would be higher by PKR 0.1150. If the LMMF would not have made the SWWF provisions during FY17, the year to date annualized return of the LMMF for FY17 would be higher by 0.11%. For details investors are advised to read the Note 11.1 of the latest Financial Statements of the LMMF.
Other Disclosures Lakson Investments Limited or any of its delegates did not receive any soft commission from its broker(s) or dealer(s). There was no unit split undertaken during the year. As of June 30, 2017 the LMMF does not employ leverage.
Breakdown of Unit Holding by Size Units Range
No. of Clients
1 - 100 101 - 500 501 - 1,000 1,001 - 5,000 5,001 - 10,000 10,001 - 50,000 50,001 - 100,000 100,001 - 500,000 500,001 - 1,000,000 1,000,001 - 5,000,000 5,000,001 - above
19
Units Held
13 8 1 12 5 15 6 9 3 13 1
535 1,895 547 34,835 34,210 399,425 495,869 1,928,215 2,197,586 34,187,269 7,440,764
86
46,721,150
LAKSON MONEY MARKET FUND
20
LAKSON MONEY MARKET FUND
STATEMENT OF COMPLIANCE WITH THE CODE OF CORPORATE GOVERNANCE FOR THE YEAR ENDED JUNE 30, 2017 This statement is being presented to comply with the Code of Corporate Governance ('the Code') contained in Regulation No 5.19.24 of listing regulations of Pakistan Stock Exchange Limited where Lakson Money Market Fund ('the Fund') is listed. The purpose of the Code is to establish a framework of good governance, whereby a listed entity is managed in compliance with the best practices of corporate governance. Lakson Investments Limited ('Management Company'), an un-listed public company, which manages the affairs of the Fund, has applied principles contained in the Code in the following manner. 1. The Management Company encourages representation of independent non-executive directors onits Board of Directors. At present the Board includes: Category
Names
Independent Directors
1. 2. 3. 4.
Mr. Daniel Scott Smaller Mr. Mahomed J. Jaffer Mr. Zahid Zakiuddin Mr. Jacques John Visser
Executive Director
1.
Mr. Babar Ali Lakhani
Non-Executive Directors
1. 2. 3.
Mr. Iqbal Ali Lakhani - Chairman Mr. A. Aziz H. Ebrahim Mr. Amin Mohammed Lakhani
The Independent Directors meet the criteria of independence under clause 5.19.1(b) of the Code. 2. The Directors of the Management Company have confirmed that none of them is serving as a director on more than seven listed companies, including the Management Company. 3. All the resident Directors of the Management Company are registered as taxpayers and none of them has defaulted in payment of any loan to a banking company, a DFI or an NBFI or, being a broker of a stock exchange, has been declared as a defaulter by that stock exchange. 4. During the period no casual vacancy occurred on the Board of the Management Company. 5. The Management Company has prepared a "Code of Conduct" and has ensured that appropriate steps have been taken to disseminate it throughout the Management Company along with its supporting policies and procedures. 6. The Board has developed a vision / mission statement, overall corporate strategy and significant policies for the Fund. A complete record of particulars of significant policies along with the dates on which they were approved or amended has been maintained. 7. All the powers of the Board have been duly exercised and decisions on material transactions, including appointment and determination of remuneration and terms and conditions of employment of the Chief Executive Officer ('CEO') have been taken by the Board.
21
LAKSON MONEY MARKET FUND 8. The meetings of the Board were presided over by the Chairman and, in his absence, by a director elected by the Board for this purpose and the Board met at least once in every quarter. Written notices of the Board meetings, along with agenda and working papers, were circulated at least seven days before the meetings. The minutes of the meetings were appropriately recorded and circulated. 9. The Directors are conversant of the relevant laws applicable to the Management Company, its policies and provisions of memorandum and articles of association and are aware of their duties and responsibilities. The directors of the Company having 14 years of education and 15 years of experience on the board of a listed company are exempted from the requirement of director's training program. All the board members except one director qualify for exemption under this provision of the CCG or having completed all parts of the program offered by the Pakistan Institute of Corporate Governance and duly certified. 10. The new appointment of Chief Financial Officer and Company Secretary was made during the year and is duly approved by the Board of Directors including her terms of employment. The Company has designated one of its employees as 'Coordinator/Head of Internal Audit' to act as coordinator between the firm providing internal audit services and the Audit Committee. 11. The Directors' Report of the Fund for this year has been prepared in compliance with the requirements of the Code and fully describes the salient matters required to be disclosed. 12. The financial statements of the Fund were duly endorsed by Chief Executive Officer and Chief Financial Officer before approval of the Board. 13. The Directors, Chief Executive Officer and Executives do not hold any interest in the units of the Fund other than those disclosed in the Annual Report. 14. The Management Company has complied with all the corporate and financial reporting requirements of the Code with respect to the Fund. 15. The Board has formed an Audit Committee. It comprises of three members, all of whom are NonExecutive Directors of the Management Company and the Chairman of the Committee is an Independent Director. 16. The meetings of the Audit Committee were held at least once every quarter and prior to approval of interim and final results of the Fund. The terms of reference of the Committee have been formed and advised to the Committee for compliance. 17. The Board of the Management Company has formed a Human Resource and Remuneration Committee. It comprises of three members, of whom two are Non-Executive Directors and the Chairman of the Committee is a Non-Executive Director. 18. The Board has outsourced the internal audit function to M/s. Grant Thornton Anjum Rahman, Chartered Accountants who are considered suitably qualified and experienced for the purpose and are conversant with the policies and procedures of the Fund. 19. The statutory auditors of the Fund have confirmed that they have been given a satisfactory rating under the quality control review program of the Institute of Chartered Accountants of Pakistan ('ICAP'), that they or any of the partners of the firm, their spouses and minor children do not hold units of the Fund and that the firm and all its partners are in compliance with International Federation of Accountants (IFAC) guidelines on code of ethics as adopted by the ICAP. 20. The statutory auditors or the persons associated with them have not been appointed to provide other services except in accordance with the listing regulations and the auditors have confirmed that they have observed IFAC guidelines in this regard.
22
LAKSON MONEY MARKET FUND 21. The 'Closed Period', prior to the announcement of interim / final results, and business decisions, which may materially affect the market price of Fund's securities, was determined and intimated to directors, employees and stock exchange. 22. Material / price sensitive information has been disseminated among all market participants at once through stock exchange. 23. The company has complied with the requirements relating to maintenance of register of persons having access to inside information by designated senior management officer in a timely manner and maintained proper record including basis for inclusion or exclusion of names of persons from the said list. 24. We confirm that all other applicable material principles enshrined in the Code have been complied with.
For and on behalf of the Board
Director
Chief Executive Officer
Dated: August 25, 2017
23
LAKSON MONEY MARKET FUND
24
LAKSON MONEY MARKET FUND
25
LAKSON MONEY MARKET FUND
26
LAKSON MONEY MARKET FUND
Statement of Assets and Liabilities As at June 30, 2017 Note
ASSETS Bank balances Investments Markup receivable Advance tax Prepayments TOTAL ASSETS
2017
2016
(Rupees)
5 6 7
4,741,467,462 20,911,070 1,975,760 121,238 4,764,475,530
4,043,545,037 1,331,819,772 16,210,101 132,990 5,391,707,900
8 9
38,546,346 406,028
38,280,127 369,496
10
3,710,398 2,752,544 39,377,266 84,792,582 4,679,682,948
3,012,786 53,266,730 94,929,139 5,296,778,761
4,679,682,948
5,296,778,761
LIABILITIES Payable to the Management Company Remuneration payable to the Trustee Annual fee payable to Securities and Exchange Commission of Pakistan Dividend payable Accrued expenses and other liabilities TOTAL LIABILITIES NET ASSETS
11
UNIT HOLDERS' FUND (as per statement of movement in unit holders' fund) CONTINGENCIES AND COMMITMENTS
12 (Number of units)
Number of units in issue
13
46,721,150
52,892,199
(Rupees) Net assets value per unit
100.1620
100.1430
The annexed notes from 1 to 24 form an integral part of these financial statements.
For Lakson Investments Limited (Management Company) Chief Executive Officer
Chief Financial Officer
27
Director
LAKSON MONEY MARKET FUND
Income Statement For the year ended June 30, 2017 2017
Note
(Rupees)
2016
INCOME Mark-up income Loss on sale of investments - net Unrealised appreciation in the fair value of investments classified as' held for trading' - net Reversal of Workers' Welfare Fund
14
307,540,415 (609,313)
272,896,411 (594,771)
6.1 & 6.2 11.1
53,035,329 359,966,431
173,553 272,475,193
30,694,011
33,381,828
3,990,221
5,421,209
5,040,251
5,341,092 4,289,576
3,710,399 311,699 338,517 65,000 76,131 244,745 3,750,911 48,221,885 311,744,546
3,012,786 302,650 300,780 64,000 45,400 293,584 52,452,905 220,022,288
(230,703,994) (1,620,811) 79,419,741
(153,794,570) 66,227,718
EXPENSES Remuneration to the Management Company 8.1 Sindh Sales Tax on remuneration to Management Company 8.2 Federal Excise Duty on remuneration to Management Company 8.3 Remuneration to the Trustee 9 Annual fee to the Securities and Exchange Commission of Pakistan 10 Auditors' remuneration 15 Fees and subscription Legal and professional charges Printing charges Brokerage, custody, settlement and bank charges Sindh Workers' Welfare Fund for prior years 11.1 Net income from operating activities Element of (loss) and capital (losses) included in the prices of units issued less those in units redeemed - net Sindh Workers' Welfare Fund for current year Net income for the year before taxation
11.1
Taxation
17
Net income for the year after taxation
-
-
79,419,741
66,227,718
The annexed notes from 1 to 24 form an integral part of these financial statements.
For Lakson Investments Limited (Management Company) Chief Executive Officer
Chief Financial Officer
28
Director
LAKSON MONEY MARKET FUND
Statement of Comprehensive Income For the year ended June 30, 2017 2017 Net income for the year after taxation
(Rupees)
79,419,741
Other comprehensive income
2016 66,227,718
-
Total comprehensive income for the year
-
79,419,741
66,227,718
The annexed notes from 1 to 24 form an integral part of these financial statements.
For Lakson Investments Limited (Management Company) Chief Executive Officer
Chief Financial Officer
29
Director
LAKSON MONEY MARKET FUND
Distribution Statement For the year ended June 30, 2017 Note Undistributed income at beginning of the year - realised Undistributed income at beginning of the year - unrealised Undistributed income at beginning of the year Total comprehensive income for the year Less: Interim distribution Cash distribution
16
Undistributed income at end of the year - realised Undistributed income at end of the year - unrealised Undistributed income at end of the year
2017
(Rupees)
2016
7,385,325
8,407,774
173,553 7,558,878
1,126,168 9,533,942
79,419,741
66,227,718
(79,410,222) 9,519 7,568,397
(68,202,782) (1,975,064) 7,558,878
7,568,397
7,385,325
7,568,397
173,553 7,558,878
The annexed notes from 1 to 24 form an integral part of these financial statements.
For Lakson Investments Limited (Management Company) Chief Executive Officer
Chief Financial Officer
30
Director
LAKSON MONEY MARKET FUND
Statement of Movement In Unit Holders' Fund For the year ended June 30, 2017 2017
Note Net assets at the beginning of the year Amount received on issue of 108,914,994 units (2016: 95,101,386 units) Amount paid on redemption of 115,086,043 units (2016: 84,204,009 units)
(Rupees)
2016
5,296,778,761
4,209,016,154
11,102,977,761
9,602,033,447
(11,950,787,087) (847,809,326)
(8,666,090,346) 935,943,101
230,703,994
153,794,570
(609,313) 80,029,054 79,419,741
173,553 (594,771) 66,648,936 66,227,718
(79,410,222) 9,519 4,679,682,948
(68,202,782) (1,975,064) 5,296,778,761
Net assets value per unit at the beginning of the year
100.1430
100.2271
Net assets value per unit at the end of the year
100.1620
100.1430
Element of loss and capital losses included in prices of units issued less those in units redeemed - net Unrealised appreciation in the fair value of investments classified as' held for trading' - net Loss on sale of investments - net Other income Less: Interim distribution
16
Cash distribution Net income / (loss) for the year less distribution Net assets as at the end of the year
The annexed notes from 1 to 24 form an integral part of these financial statements.
For Lakson Investments Limited (Management Company) Chief Executive Officer
Chief Financial Officer
31
Director
LAKSON MONEY MARKET FUND
Cash Flow Statement For the year ended June 30, 2017 2017 CASH FLOWS FROM OPERATING ACTIVITIES Net income for the year before taxation
(Rupees)
79,419,741
Adjustments for: Unrealised appreciation in the fair value of investments classified as held for trading - net Element of loss and capital losses included in prices of units issued less those in units redeemed - net
66,227,718
-
Decrease / (increase) in assets Investments Markup receivable Advance tax Prepayments Increase / (decrease) in liabilities Payable to the Management Company Remuneration payable to the Trustee Dividend payable Annual fee payable to Securities and Exchange Commission of Pakistan Accrued expenses and other liabilities Net cash generated from operating activities CASH FLOWS FROM FINANCING ACTIVITIES Receipts from issuance of units Payment against redemption of units Cash dividend paid Net cash (used in) /generated from financing activities Net increase in cash and cash equivalents Cash and cash equivalents at the beginning of the year Cash and cash equivalents at the end of the year
2016
(173,553)
230,703,994 310,123,735
153,794,570 219,848,735
1,331,819,772 (4,700,969) (1,975,760) 11,752 1,325,154,795
1,437,390,701 1,425,380 (3,755) 1,438,812,326
266,219 36,532 2,752,544
4,624,843 45,925 -
697,612 (13,889,464) (10,136,557) 1,625,141,973
(1,820,855) (175,160) 2,674,753 1,661,335,814
11,102,977,761 (11,950,787,087) (79,410,222)
9,602,033,447 (8,666,090,346) (68,202,782)
(927,219,548) 697,922,425
867,740,319 2,529,076,133
4,043,545,037 4,741,467,462
1,514,468,904 4,043,545,037
The annexed notes from 1 to 24 form an integral part of these financial statements.
For Lakson Investments Limited (Management Company) Chief Executive Officer
Chief Financial Officer
32
Director
LAKSON MONEY MARKET FUND
Notes to and forming part of the Financial Statements For the year ended June 30, 2017 1.
LEGAL STATUS AND NATURE OF BUSINESS Lakson Money Market Fund (the "Fund") was established under the Trust Deed executed on September 2, 2009 between the Lakson Investments Limited as its Management Company and the Central Depository Company of Pakistan Limited (CDC) as its Trustee. The Fund has been registered as a Notified Entity on September 18, 2009 by the Securities and Exchange Commission of Pakistan (SECP) in accordance with the Non-Banking Finance Companies and Notified Entities Regulations, 2008 (NBFC Regulations). The Management Company of the Fund has been licensed by SECP to undertake Asset Management and Investment Advisory Services as a Non-Banking Finance Company under the Non-Banking Finance Companies (Establishment and Regulation) Rules, 2003 (NBFC Rules). The registered office of the Management Company is located at 14 - Ali Block, New Garden Town, Lahore. The Fund is an open end mutual fund and is listed on Pakistan Stock Exchange Limited. Units are offered for public subscription on a continuous basis. The units are transferable and can be redeemed by surrendering them to the Fund. The Fund is categorised as "Money Market Scheme" as per the Circular 07 of 2009 issued by Securities and Exchange Commission of Pakistan (SECP) and the Fund primarily invests in Government securities, certificates of investment, certificates of deposits, term deposit receipts, commercial papers, reverse repo, etc. subject to the guidelines issued by SECP from time to time. Title to the assets of the Fund is held in the name of Central Depository Company of Pakistan Limited as Trustee of the Fund. The Pakistan Credit Rating Agency Limited (PACRA) has maintained AA(f) (Fund Stability Rating) to the Fund and pursuant to the updated Asset Manager Rating Methodology and Rating Scale, the Pakistan Credit Rating Agency Limited (PACRA) has upgraded asset manager rating of the Company to the new scale i.e. AM2+ (stable outlook), on May 15, 2017 (2016: AM2 as on June 08, 2016).
2.
BASIS OF PREPARATION
2.1
Statement of compliance These financial statements have been prepared in accordance with approved accounting standards as applicable in Pakistan. Approved accounting standards comprise of such International Financial Reporting Standards (IFRS) issued by the International Accounting Standards Board as are notified under the repealed Companies Ordinance, 1984, provisions of and directives issued under the repealed Companies Ordinance, 1984, Non Banking Finance Companies (Establishment and Regulation) Rules, 2003 and Non-Banking Finance Companies and Notified Entities Regulations, 2008. In case, the requirements differ, the provisions and directive of repealed Companies Ordinance, 1984, the requirements of Trust deed, Non-Banking Finance Companies (Establishment and Regulation) Rules, 2003, and Non-Banking Finance Companies and Notified Entities Regulations, 2008 shall prevail. During the year, the Companies Act, 2017 was promulgated and enacted on May 30, 2017. However, SECP has notified through Circular No. 17 dated July 20, 2017 that companies whose financial year closes on or before June 30, 2017 shall prepare their financial statements in accordance with the provisions of the repealed Companies Ordinance, 1984 (the Ordinance), hence these financial statements have been prepared in accordance with the Ordinance.
33
LAKSON MONEY MARKET FUND 2.2
Basis of measurement These financial statements have been prepared under the historical cost convention, except investments that are stated at fair values. These financial statements have been prepared following accrual basis of accounting except for cash flow information
2.3
Functional and presentation currency These financial statements are presented in Pak Rupees, which is the Fund's functional and presentation currency.
2.4
Use of estimates and judgments The preparation of financial statements in conformity with approved accounting standards, as applicable in Pakistan, requires management to make judgments, estimates and assumptions that affect the application of policies and the reported amounts of assets, liabilities, income and expenses. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making the judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates. The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods. Judgments made by management in the application of approved accounting standards, as applicable in Pakistan, that have significant effect on the financial statements and estimates with a significant risk of material judgment in the next year are as follows: Classification and valuation of investments For details please refer notes 4.1 and 21 to these financial statements. Impairment of investment A financial asset is assessed at each reporting date to determine whether there is any objective evidence that it is impaired. This objective evidence of impairment of fixed income securities is determined in accordance with provisioning criteria for non performing exposures as per the requirements of Circular No. 33 of 2012 dated October 24, 2012. Element of income / (loss) and capital gains / (losses) included in the prices of units issued less those in units redeemed - net For details please refer note 4.8 to these financial statements. Provision for taxation For details please refer notes 4.6 and 17 to these financial statements. Workers' Welfare Fund For details please refer note 11.1 to these financial statements. Other assets
34
LAKSON MONEY MARKET FUND Judgment is involved in assessing the realisability of other assets balances. 3
NEW STANDARDS, INTERPRETATIONS AND AMENDMENTS TO PUBLISHED APPROVED ACCOUNTING STANDARDS
3.1
Amendments that are effective in current year but not relevant to the Fund. The Fund has adopted the amendments to the following approved accounting standards as applicable in Pakistan which became effective during the year from the dates mentioned below against the respective standard: Effective date (annual periods beginning on or after) IFRS 10
Consolidated Financial Statements - Amendments regarding application of the consolidation exception
January 01, 2016
IFRS 11
Joint Arrangements - Amendments regarding the accounting for acquisitions of an interest in a joint operation
January 01, 2016
Disclosure of Interests in Other Entities Amendments regarding the application of the consolidation exception
January 01, 2016
IAS 1
Presentation of Financial Statements - Amendments resulting from the disclosure initiative
January 01, 2016
IAS 16
Property, Plant and Equipment - Amendments regarding the clarification of acceptable methods of depreciation and amortisation and amendments bringing bearer plants into the scope of IAS 16
IFRS 12
IAS 27
IAS 28
IAS 38
IAS 41
January 01, 2016
Separate Financial Statements (as amended in 2011) - Amendments reinstating the equity method as an accounting option for investments in in subsidiaries, joint ventures and associates in an entity's separate financial statements
January 01, 2016
Investments in Associates and Joint Ventures Amendments regarding the application of the consolidation exception
January 01, 2016
Intangible Assets - Amendments regarding the clarification of acceptable methods of depreciation and amortisation
January 01, 2016
Agriculture - Amendments bringing bearer plants into the scope of IAS 16
January 01, 2016
Other than the amendments to standards mentioned above, there are certain annual improvements made to IFRS that became effective during the year: Annual Improvements to IFRSs (2012 2014) Cycle:
35
LAKSON MONEY MARKET FUND IFRS 5 IFRS 7 IAS 19 IAS 34 3.2
Non-current Assets Held for Sale and Discontinued Operations Financial Instruments: Disclosures Employee Benefits Interim Financial Reporting
Amendments not yet effective The following amendments to the approved accounting standards as applicable in Pakistan would be effective from the dates mentioned below against the respective standards: Effective date (annual periods beginning on or after) IFRS 2
Share-based Payment - Amendments to clarify the classification and measurement of share-based payment transactions
January 01, 2018
IFRS 4
Insurance Contracts - Amendments regarding the interaction of IFRS 4 and IFRS 9
January 01, 2018
IFRS 10
Consolidated Financial Statements - Amendments regarding the sale or contribution of assets between an investor and its associate or joint venture
Deferred indefinitely
IAS 7
Statement of Cash Flows - Amendments resulting from the disclosure initiative
January 01, 2017
IAS 12
Income Taxes - Amendments regarding the recognition of deferred tax assets for unrealised losses
January 01, 2017
Investments in Associates and Joint Ventures Amendments regarding the sale or contribution of assets between an investor and its associate or joint venture
Deferred indefinitely
Investment Property - Amendments to clarify transfers or property to, or from, investment property
January 01, 2018
IAS 28
IAS 40
The Annual Improvements to IFRSs that are effective for annual periods beginning on or after January 01, 2017 are as follows: Annual Improvements to IFRSs (2014 2016) Cycle: IFRS 12 Disclosure of Interests in Other Entities IAS 28 Investments in Associates and Joint Ventures 3.3
January 01, 2017 January 01, 2018
Standards or interpretations not yet effective The following new standards and interpretations have been issued by the International Accounting Standards Board (IASB), which have not been adopted locally by the Securities and Exchange Commission of Pakistan: IFRS 1 IFRS 9 IFRS 14 IFRS 15 IFRS 16 IFRS 17
First Time Adoption of International Financial Reporting Standards Financial Instruments Regulatory Deferral Accounts Revenue from Contracts with Customers Leases Insurance Contract
36
LAKSON MONEY MARKET FUND The effects of IFRS 9 - Financial Instruments are still being assessed, as this new standard may have a significant effect on the Companys future financial statements. The Fund expects that the adoption of the other amendments and interpretations of the standards will not have any material impact and therefore will not affect the Fund's financial statements in the period of initial application. 4.
SIGNIFICANT ACCOUNTING POLICIES The principal accounting policies have been consistently applied to all the periods presented in the preparation of these financial statements and are set out below:
4.1
Investments
4.1.1
All investments are initially recognised at cost, being the fair value of the consideration given including the transaction cost associated with the investment, except in case of held for trading investments, in which case the transaction costs are charged off to the income statement.
4.1.2
The Fund classifies its investments in the following categories: a) Financial assets at fair value through profit or loss This category has two sub-categories, namely; financial instruments classified as held for trading, and those designated at fair value through profit or loss upon initial recognition: i) Investments which are acquired principally for the purposes of generating profit from short term fluctuation in price or are part of the portfolio in which there is recent actual pattern of short term profit taking are classified as held for trading. ii) Investments designated at fair value through profit or loss upon initial recognition include those group of financial assets which are managed and their performance evaluated on a fair value basis, in accordance with the documented investment strategy. After initial recognition, above investments are remeasured at fair value determined with reference to the period-end quoted rates. Gains or losses on re-measurement and sale of these investments are recognised in income statement. b) Available for sale Investments which do not fall under the above categories and which may be sold in response to the need for liquidity or changes in market rates are classified as availablefor-sale. After initial recognition, investments classified as available-for-sale are remeasured at fair value, determined with reference to the year-end quoted rates. Gains or losses on remeasurement of these investments are recognised directly in the unit holders' funds through other comprehensive income until the investment is sold, collected or otherwise disposed-off, or until the investment is determined to be impaired, at which time the cumulative gain or loss previously reported in unit holders' funds is included in income.
4.1.3
Basis of valuation of investments Fair value of the investments in Government securities comprising Market Treasury Bills and Pakistan Investment Bond are determined by reference to the quotations obtained from the PKRV rates notified by the Mutual Fund Association of Pakistan (MUFAP) as at the year end.
37
LAKSON MONEY MARKET FUND All regular way of purchases and sales of investments are recognised on the trade date i.e. the date the Fund commits to purchase / sell the investments. Income accrued on Market Treasury Bills are included in the carrying value of investments. 4.2
Securities under resale / repurchase agreements Transactions of purchase under resale (reverse-repo) of authorized investments are entered into at contracted rates for specified periods of time. Securities purchased with a corresponding commitment to resell at a specified future date (reverse-repos) are not recognised in the statement of assets and liabilities. Amounts paid under these agreements are included in receivable in respect of reverse repurchase transactions. The difference between purchase and resale price is treated as income from reverse repurchase transactions and accrued over the life of the reverse-repo agreement. Transactions of sale under repurchase (repo) of authorized investments are entered into at contracted rates for specified periods of time. Securities sold with a simultaneous commitment to repurchase at specified future date (repos) continue to be recognised in the statement of assets and liabilities and are measured in accordance with accounting policies for investment securities. The counterparty liabilities for amounts received under these transactions are recorded as liabilities. The difference between sale and repurchase price is treated as borrowing charges and accrued over the life of the repo agreement.
4.3
Unit holders' fund Unit holders' fund representing the units issued by the Fund, is carried at the redemption amount representing the investors' right to a residual interest in the Fund's assets.
4.4
Issue and redemption of units Units are allocated at the offer price prevalent on the day on which applications for the purchase of units are received (however units are issued on realisation of cheques). The offer price represents the net assets value of units at end of the day plus the allowable sales load (if any). Units are redeemed at the redemption price prevalent on the day on which the applications for the redemption of units are received. The redemption price represents the net assets value at end of the day.
4.5
Net asset value per unit The net assets value per unit disclosed in the statement of assets and liabilities is calculated by dividing the net assets of the Fund by the number of units in issue at the year end.
4.6
Taxation The Fund is exempt from taxation on income under clause 99 of Part I to the Second Schedule of the Income Tax Ordinance, 2001, subject to the condition that not less than 90 percent of its income excluding realised and unrealised capital gain for the year is distributed amongst the unit holders.
4.7
Revenue recognition - Gains / (losses) arising on sale of investments are included in the income on the date at which the transaction takes place. - Unrealised gains / (losses) arising on revaluation of investments classified as held for trading are included in the income statement in the period in which they arise. - Interest income on Government securities, reverse repurchase arrangements, certificates of investment, certificates of deposits, term deposit receipts, commercial paper, placements and bank deposits are recognised in the income statement at rate of return implicit in the instrument on time proportionate basis.
38
LAKSON MONEY MARKET FUND 4.8
Element of income / (loss) and capital gains / (losses) included in prices of units issued less those in units redeemed - net To prevent the dilution of per unit income and distribution of income already paid out on redemption, as dividend, an equalisation account called "element of income / (loss) and capital gains / (losses) included in prices of units issued less those in units redeemed" is created. The "element of income / (loss) and capital gains / (losses) included in prices of units issued less those in units redeemed" account is credited / debited with the amount representing net income and capital gains accounted for in the last announced net assets value and included in the sale proceeds of units. Upon redemption of units, the element of income / (loss) and capital gains / (losses) included in prices of units issued less those in units redeemed account is debited with the amount representing net income and capital gains accounted for in the last announced net assets value and included in the redemption price. The net "element of income / (loss) and capital gains / (losses) included in prices of units issued less those in units redeemed" during an accounting year is recognised in the income statement.
4.9
Financial instruments Financial assets and financial liabilities are recognised at the time when the Fund becomes a party to the contractual provisions of the instrument. Financial assets are derecognised when the Fund looses control of the contractual rights that comprises that financial assets. Financial liabilities are derecognised when they are extinguished, that is, when the obligation specified in the contract is discharged, cancelled or expired. Any gain or loss on derecognition of the financial assets and financial liabilities is taken to income currently. Subsequent to initial recognition, all financial assets and financial liabilities are measured at fair value. The particular recognition method adopted for measurement of financial liabilities and investments subsequent to initial recognition is disclosed in the individual policy statement associated with each item.
4.10
Offsetting of financial assets and financial liabilities Financial assets and financial liabilities are offset and the net amount reported in the statement of assets and liabilities when there is a legally enforceable right to set off the recognised amount and the Fund intends either to settle on a net basis, or to realize the asset and settle the liability simultaneously.
4.11
Impairment A financial asset is assessed at each balance sheet date to determine whether there is any objective evidence that it is impaired. A financial assets is considered to be impaired if objective evidence indicates that one or more events have had a negative effect on the estimated future cash flows of the asset. Provision for diminution in the value of debt securities is made as per the requirements of Circular No. 33 of 2012 dated October 24, 2012 (which is essentially the same as contained in Circular No. 1 of 2009 previously issued by the SECP) and based on management's assessment made in line with its provisioning policy approved by the Board of Directors of the Management Company pursuant to the requirements of the SECP's above referred circular. In case of impairment of other available-for-sale investments, the cumulative loss that has been recognised directly in statement of comprehensive income is taken to the income statement.
39
LAKSON MONEY MARKET FUND Other individually significant financial assets are tested for impairment on an individual basis. The remaining financial assets are assessed collectively in groups that share similar credit risk characteristics. All impairment losses are recognised in income statement. 4.12
Derecognition Financial assets are derecognised when the rights to receive cash flows from the financial assets have expired, have been realised or have been transferred and the Fund has transferred substantially all risks and rewards of ownership. A financial liability is derecognised when the obligation under the liability is discharged or cancelled or expired.
4.13
Provisions A provision is recognised in the balance sheet when the Fund has a present legal or constructive obligation as result of past event and it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation.
4.14
Cash and cash equivalents Cash and cash equivalents comprise of bank balances including term deposits with banks (that are readily convertible to known amount of cash) are subject to an insignificant risk of significant changes of values and have maturities of less than three months from the date of acquisition.
4.15
Cash and bank balances Cash and bank balances are carried at nominal value, except the foreign currency account balances which are translated into rupees at the rates of exchange approximating those prevailing at the balance sheet date.
4.16
Dividend (including bonus units) Dividend (including bonus units) declared are recorded in the period in which they are approved.
4.17
Transactions with related parties / connected persons Transactions with related parties / connected persons are based at arm's length at normal commercial rates on the same terms and conditions as applicable to third party transactions. Remuneration to the Management Company and the Trustee is determined in accordance with the provision of NBFC Rules, NBFC Regulations and the Trust Deed respectively.
4.18
Other assets Other assets are stated at cost less impairment losses, if any.
5
BANK BALANCES Cash at bank in : Local currency In profit and loss sharing accounts In current accounts
5.1
Note
5.1
2017
(Rupees)
4,741,452,166 15,296 4,741,467,462
2016
4,043,527,630 17,407 4,043,545,037
These represents profit and loss account maintained with banks carrying mark-up rates ranging from 3.75% to 7.40% (June 30, 2016: 4.00% to 7.40%) per annum.
40
LAKSON MONEY MARKET FUND 6
At fair value through profit or loss held for trading Government securities Market Treasury Bills 6.1
2017
Note
INVESTMENTS
6.1
(Rupees)
-
2016
1,331,819,772 1,331,819,772
Market Treasury Bills -----------------Number of treasury bills-----------------
Government Securities
Note
Number of holdings at beginning of the year
Acquired during the year
Disposed/ matured during the year
Balance as at June 30, 2017
Number of holdings at the end of the year
Carrying Value
Unrealized appreciation
Market value
Market value Market value as percentage as percentage of net assets of total of the Fund investment
----------------------(Rupees)----------------------
3 Months Market Treasury Bills (face value of Rs. 100,000 each)
6.1.1
3,500
217,917
221,417
-
-
-
-
-
-
6 Months Market Treasury Bills (face value of Rs. 100,000 each)
6.1.2
9,940
77,977
87,917
-
-
-
-
-
-
6,300
-
-
-
-
-
-
12 Months Market Treasury Bills (face value of Rs. 100,000 each)
-
6,300
June 30, 2017 June 30, 2016
1,331,646,219
1,331,819,772
173,553
25.14
100.00
6.1.1
This represents 3 months Government Treasury bill carrying effective mark-up rate of nil (June 30, 2016: 5.92%). The face value of Treasury Bills held as at June 30, 2017 is Nil (June 30, 2016: Rs. 350 million).
6.1.2
This represents 6 months Government Treasury bills carrying an effective mark-up rate of nil (June 30, 2016: 5.92 to 6.22%). The face value of Treasury Bills held as at June 30, 2017 is Nil (June 30, 2016: Rs. 994 million).
7
Note
MARKUP RECEIVABLE Considered good Markup / profit receivable on: Profit and loss sharing accounts Profit receivable on clean placement
8.
41
(Rupees)
2016
20,741,755 169,315 20,911,070
16,210,101 16,210,101
8.1
2,500,253
2,244,796
8.2
5,068,183
5,057,421
8.3
30,977,910 38,546,346
30,977,910 38,280,127
PAYABLE TO THE MANAGEMENT COMPANY Remuneration payable to the Management Company Sales tax payable on remuneration to the Management Company Federal excise duty payable on remuneration to the Management Company
2017
LAKSON MONEY MARKET FUND 8.1
The Management Company is entitled to remuneration for services rendered to the Fund under the provisions of the Non-Banking Finance Companies and Notified Entities Regulations, 2008, of an amount not exceeding one percent per annum of the average daily net assets of the Fund. Currently the Management Company is charging its remuneration at the rate of 10% of the gross earnings of the Fund, calculated on a daily basis. The fee is subject to a minimum of 0.5% and maximum of 1.00% of the average annual net assets of the Fund. The effective rate of charging of its remuneration for service rendered for the year ended June 30, 2017 is 0.62%.
8.2
The Sindh Provincial Government has levied Sindh Sales Tax at the rate of 13% (June 30, 2016: 14%) on Management Company's remuneration. Above liability includes Rs. 4,743,150 (June 30, 2016: Rs. 4,743,150) accrued on Federal Excise Duty (FED) on the management remuneration as more fully explained in note 8.3 below. Had the provision relating to FED not been made, Net Asset Value per unit of the Fund as at June 30, 2017 would have been higher by Re. 0.1015 (June 30, 2016: Re. 0.0897) per unit.
8.3
The amount is being held for payment to asset management company for onward payment to Federal Board of Revenue on the basis of a stay order of the Honorable High Court of Sindh dated September 04, 2013. The stay order was granted as a result of a petition filed by asset management companies from the platform of MUFAP against the amendment in Finance Act, 2013 which levied FED on the fees received by asset management companies from funds under management. As the asset management services rendered by the Management Company of the Fund is already subject to provincial sales tax on services levied by the Sindh Revenue Board, which is being charged to the Fund, the Management Company is of the view that further levy of FED is not justified. The Sindh High Court in its decision dated July 16, 2016 maintained the previous order passed against other constitutional petition whereby levy of FED has been declared to be Ultra Vires to the Constitution. On September 23, 2016, the Federal Government has filed an appeal against the said SHC order in the Honorable Supreme Court of Pakistan (SCP) and thus the previous balance of FED has not been reversed. Therefore, as a matter of prudence and abundant caution, without prejudice to the above, the Management Company has made a provision with effect from June 13, 2013, aggregating to Rs. 30.978 million (June 30, 2016: Rs. 30.978 million). Had the provision on FED not been made, Net Asset Value per unit of the Fund as at June 30, 2017 would have been higher by Re. 0.66 (June 30, 2016: Re. 0.59). Further, the Federal Government vide Finance Act 2016 has excluded asset management companies and other non-banking finance companies from levy of FED on their services. Accordingly, no provision for FED is made from July 01, 2016 onwards.
9.
REMUNERATION PAYABLE TO THE TRUSTEE The Trustee is entitled to a monthly remuneration for services rendered to the Fund under the provision of Trust Deed. Net assets ranging from Rs. 1 million to Rs. 1 billion 0.15% per annum of the daily average net assets of the Fund. Net assets ranging between Rs. 1 billion to Rs. 10 billion Rs. 1.5 million plus 0.075% per annum of the daily average net assets of the Fund exceeding Rs. 1 billion. Exceeding Rs 10 billion Rs. 8.25 million plus 0.06% per annum of the daily average net assets of the Fund exceeding Rs. 10 billion.
42
LAKSON MONEY MARKET FUND 10.
ANNUAL FEE PAYABLE TO THE SECURITIES AND EXCHANGE COMMISSION OF PAKISTAN This represents annual fee payable to Securities and Exchange Commission of Pakistan (SECP) in accordance with Regulation 62 of the Non-Banking Finance Companies and Notified Entities Regulations, 2008. Currently, the Fund is required to pay annual fee to SECP at the rate of 0.075% of the average daily net assets of the Fund.
11.
ACCRUED EXPENSES AND OTHER LIABILITIES Auditors' remuneration Workers' Welfare Fund Sindh Workers' Welfare Fund Brokerage payable Withholding tax Others
11.1
Note
11.1 11.1
2017
(Rupees)
204,400 5,371,722 100,669 33,604,975 95,500 39,377,266
2016
201,400 53,035,330 30,000 53,266,730
Workers' Welfare Fund The Finance Act, 2008 had introduced an amendment to the Workers' Welfare Fund Ordinance, 1971 (WWF Ordinance) as a result of which it was construed that all Collective Investment Schemes (CISs) / mutual funds whose income exceeded Rs. 0.5 million in a tax year were brought within the scope of the WWF Ordinance, thus rendering them liable to pay contribution to WWF at the rate of two percent of their accounting or taxable income, whichever was higher. In light of this, the Mutual Funds Association of Pakistan (MUFAP) filed a constitutional petition in the Honourable Sindh High Court challenging the applicability of WWF on CISs which is pending adjudication. Similar cases were disposed of by the Peshawar and the Lahore High Courts in which these amendments were declared unlawful and unconstitutional. However, these decisions were challenged in the Supreme Court of Pakistan. Subsequently, the Finance Act, 2015 introduced an amendment under which CISs / mutual funds have been excluded from the definition of industrial establishment subject to WWF under the WWF Ordinance. Consequently, mutual funds are not subject to this levy after the introduction of this amendment which is applicable from Tax Year 2016. Accordingly, no further provision in respect of WWF was made with effect from July 1, 2015. On November 10, 2016 the Supreme Court of Pakistan had passed a judgment declaring the amendments made in the Finance Acts 2006 and 2008 pertaining to WWF as illegal citing that WWF was not in the nature of tax and could, therefore, not have been introduced through money bills. Accordingly, the aforesaid amendments have been struck down by the Supreme Court of Pakistan. The Federal Board of Revenue has filed a petition in the Supreme Court of Pakistan against the said judgment, which is pending hearing. While the petitions filed by the CISs on the matter are still pending before the Sindh High Court, the Mutual Funds Association of Pakistan (MUFAP) (collectively on behalf of the asset management companies and their CISs) has taken legal and tax opinions on the impact of the Supreme Court of Pakistan judgement on the CISs petition before the Sindh High Court. Both legal and tax advisors consulted were of the view that the judgment has removed the very basis on which the demands were raised against the CISs. Therefore, there was no longer any liability against the CISs under the WWF Ordinance and that all cases pending in the Sindh High Court or lower appellate forums will now be disposed of in light of the earlier judgement of the Supreme Court of Pakistan.
43
LAKSON MONEY MARKET FUND Furthermore, as a consequence of the 18th amendment to the Constitution of Pakistan, in May 2015 the Sindh Workers Welfare Fund Act, 2014 (SWWF Act) had been passed by the Government of Sindh as a result of which every industrial establishment located in the Province of Sindh, the total income of which in any accounting year is not less than Rs 0.50 million, is required to pay Sindh Workers Welfare Fund (SWWF) in respect of that year a sum equal to two percent of such income. The matter was taken up by the MUFAP with the Sindh Revenue Board (SRB) collectively on behalf of various asset management companies (including the Management Company of the Fund) whereby it was contested that mutual funds should be excluded from the ambit of the SWWF Act as these were not industrial establishments but were pass through investment vehicles and did not employ workers. The SRB held that mutual funds were included in the definition of financial institutions as per the Financial Institution (Recovery of Finances) Ordinance, 2001 and were, hence, required to register and pay SWWF under the SWWF Act. Thereafter, MUFAP has taken up the matter with the Sindh Finance Ministry to have CISs / mutual funds excluded from the applicability of SWWF. In view of the above developments regarding the applicability of WWF and SWWF on CISs / mutual funds, MUFAP has recommended the following to all its members on January 12, 2017: - based on legal opinion, the entire provision against WWF held by the CISs till June 30, 2015, to be reversed on January 12, 2017; and - the provision in respect of SWWF should be made on a prudent basis with effect from the date of enactment of the SWWF Act, 2014 (i.e. starting from May 21, 2015) on January 12, 2017. However, the management considered it prudent to provide for SWWF from the time it becomes applicable under law (i.e. w.e.f. July 01, 2014). Accordingly, the provision for SWWF is being made on a daily basis going forward. The above decisions were communicated to the SECP and the Pakistan Stock Exchange Limited on January 12, 2017 and the SECP vide its letter dated February 1, 2017 has advised MUFAP that the adjustments relating to the above should be prospective and supported by adequate disclosures in the financial statements of the CISs/ mutual funds. Accordingly, the Fund has recorded these adjustments in its books on January 12, 2017. Provision for SWWF as of June 30, 2017 amounted to Rs 5.372 million. Had the recognition in previous years not been made, the net assets value per unit of the Fund would be higher by Re. .011 / .011% (June 30, 2016: Re. 1.00 / 1.00%). 12.
CONTINGENCIES AND COMMITMENTS There were no contingencies and commitments as at June 30, 2017 except as disclosed in note 17. (2016: Nil)
13.
2017 2016 (Number of Units)
NUMBER OF UNITS IN ISSUE Units in issue at beginning of the year Units issued during the year Units redeemed during the year Units in issue at the end of the year
52,892,199 108,914,994 (115,086,043) 46,721,150
Face value of the unit is Rs. 100 each.
44
41,994,822 95,101,386 (84,204,009) 52,892,199
LAKSON MONEY MARKET FUND 14.
MARK-UP INCOME
2017 2016 (Number of Units)
Mark-up / return on financial assets comprises of: Letters of placements Certificates of investments Profit and loss sharing account Term deposits receipts with banks Market Treasury Bills 15.
AUDITORS' REMUNERATION
242,055 15,637,041 120,114,958 4,120,548 167,425,813 307,540,415
649,205 10,208,219 62,076,620 40,833,861 159,128,506 272,896,411
165,000 81,000
160,750 79,500
27,000 16,199 22,500 311,699
26,500 15,900 20,000 302,650
Annual audit fee Fee for review of half yearly financial statements Fee for review of statement of compliance with the best practices of Code of Corporate Governance Other services Out of pocket expenses 16.
INTERIM DISTRIBUTIONS DURING THE YEAR ---------------- For the year ended June 30, 2017 ---------------Distribution No. of Bonus per unit Units Issued
Bonus Cash ---------(Rupees) ---------
Date of distributions June 20, 2017
6.7764 6.7764
-
-
79,410,222 79,410,222
---------------- For the year ended June 30, 2016 ---------------Distribution No. of Bonus per unit Units Issued
Bonus Cash ---------(Rupees) ---------
Date of distributions June 21, 2016
5.7016 5.7016
-
-
68,202,782 68,202,782
17.
TAXATION
17.1
The Fund's income is exempt from income tax as per clause (99) of part I of the Second Schedule of the Income Tax Ordinance, 2001 subject to the condition that not less than 90% of the accounting income for the year as reduced by capital gains whether realised or unrealised is distributed amongst the unit holders. Furthermore, as per regulation 63 of the Non-Banking Finance Companies and Notified Entities Regulations, 2008, the Fund is required to distribute 90% of the net accounting income other than capital gains to the unit holders. Since the management has distributed the income earned by the Fund during the year to the unit holders in the manner explained above and therefore no provision for taxation has been made in these financial statements.
45
LAKSON MONEY MARKET FUND 17.2
A new section 4B has been introduced in the Income Tax Ordinance, 2001 vide the Finance Act, 2015, according to which super tax has been imposed for Tax Year 2015 on the income of individuals, association of persons and companies who are earning income of Rs. 500 million or above in Tax Year 2015. Super Tax shall be charged at the rate of 3% for person other than banking companies. During the year, the Management Company has received an order under the aforementioned section for recovery of super tax not paid with return of income in respect of the Fund for the Tax Year 2015. The Deputy Commissioner considered that the Fund was required to pay super tax as the income of the Fund was more than Rs. 500 million and raised a demand of Rs. 18.819 million in this respect. The Management Company has filed an appeal before Commissioner Appeals (Inland Revenue) against the order which has been decided in favor of the Company whereby super tax demand has been deleted. The department has filed an appeal against the decision at the Appellate Tribunal which is pending adjudication and no provision has been made for super tax in the financial statements for the year ended June 30, 2017.
18.
TRANSACTIONS AND BALANCES WITH RELATED PARTIES / CONNECTED PERSONS Related parties / connected persons include Lakson Investments Limited being the Management Company, Central Depository Company of Pakistan Limited (CDC) being the Trustee of the fund, SIZA Services (Private) Limited being the holding company of the Management Company, associated companies of the Management Company, key management personnel, other funds being managed by the Management Company, staff retirement benefits of related parties and other entities having holding more than 10% in the units of the Funds as at June 30, 2017. Remuneration to the Management Company and the Trustee is determined in accordance with the provisions of NBFC Regulations and the Trust Deed respectively. Other transactions are in normal course of business, at contracted rates and terms determined in accordance with the market rates. Transactions and balances with related parties other than those disclosed elsewhere are as follows:
18.1
Balance as at year end
Note
2017
(Rupees)
2016
Lakson Investments Limited Management Company Remuneration payable Sindh Sales Tax and Federal Excise Duty on remuneration to Management Company
8.1
2,500,253
2,244,796
8.2 & 8.3
36,046,093
36,035,331
406,028
369,496
Central Depository Company of Pakistan Limited - Trustee of the Fund Remuneration payable
9
46
47 41,448 22,571 9,349 59,581 23,314 20,572 66,908 32,901 10,211 20,801 4,866,094
7 146 58 -
21
12 11,096
22,781
77
225
24,609 45,333
153
5,526,823 3,799,996 607,873 373,733 1,290,412 14,487,130 487,333 4,326 3,597,335 61,325 -
653,936
200,675
68,098 1,413,936 459,637 1,999,487 1,643,944 11,993,217 4,328 3,003,933 224,942 1,358
2,466,346 2,738,637
Units issued during the year
2,291,317 10,106,945
Number of Units as at July 01, 2016
20,801 4,612,745
10,211
32,901
59,727 23,372 20,572 66,908
9,355
22,584 11,096
41,672
22,802
45,410
24,762
3,902,323 1,413,936 459,638 1,999,487 373,733 2,113,664 21,480,353 298,191 4,328 5,080,015 255,696 1,358
149,320
2,357,666 3,080,756
Units redeemed during the year
253,349
-
-
-
-
-
-
-
-
-
1,692,598 3,799,996 607,872 820,692 4,999,994 189,142 4,326 1,521,253 30,571 -
705,291
2,399,997 9,764,826
Number of holdings at the end of the year
-
-
-
14,621 5,808 -
701
1,202 1,111,187
22,532
2,103
7,711
15,322
6,819,538 141,595,793 46,029,428 200,234,627 164,629,484 1,201,036,730 433,419 300,822,862 22,526,367 135,994
20,096,207
229,459,378 1,012,139,838
As at July 01, 2016
2,080,358 486,609,858
1,021,195
3,290,519
6,031,811 2,360,274 2,057,459 6,691,724
935,009
2,263,612 -
4,196,043
2,278,424
4,589,422
2,491,400
561,779,136 380,000,000 60,817,479 38,000,000 130,380,968 1,500,000,000 49,014,285 432,565 369,134,225 6,190,660 -
65,708,475
246,716,985 280,154,478
Units issued during the year
2,080,603 490,667,390
1,021,316
3,290,907
6,051,782 2,368,089 2,057,702 6,692,513
935,829
2,265,511 1,159,076
4,222,414
2,280,850
4,601,122
2,509,031
404,122,607 143,225,008 46,855,177 202,624,725 38,209,726 214,431,152 2,264,950,896 31,255,204 459,242 527,711,632 26,162,815 -
15,697,000
250,454,923 315,616,863
Units redeemed during the year
25,375,943
-
-
-
-
-
-
-
-
-
169,534,001 380,615,199 60,885,675 82,202,152 500,809,399 18,944,841 433,301 152,371,743 3,062,053 -
70,643,393
240,388,500 978,064,502
Balance as at June 30, 2017 (Investment at current NAV
Year ended June 30, 2017 ------------------------ Number of Units ------------------------------------------------------- Rupees --------------------------------
* holding reduced to below 10 % due to divestment of Unit holder (s) / investment from other Unit holders
Holding company / associated companies / undertakings of the Management Company SIZA Services (Private) Limited (Holding Company of the Management Company) SIZA (Private) Limited Hasanali & Gulbanoo Lakhani Foundation Century Insurance Company Limited Sybrid (Private) Limited Premier Fashions (Private) Limited Colgate Palmolive (Pakistan) Limited Clover Pakistan Limited Lakson Power Limited SIZA Commodities (Private) Limited Baluchistan Polyproducts (Private) Limited Colgate Palmolive (Pakistan) Limited ECPFT SIZA Foods (Private) Limited Employees Contributory Provident Fund Trust Accuray Surgical Limited Employees Contributory Provident Fund Princeton Travels (Private) Limited Employees Contributory Provident Fund Trust Gam Corporation (Private) Limited Employees Contributory Provident Fund Lakson Business Solutions Limited Employees Contributory Provident Fund Trust Clover Pakistan Limited Employees Gratuity Fund Lakson Investments Limited Employees Contributory Provident Fund Trust Merit Packaging Limited Employees Contributory Provident Fund Trust Merit Packaging Limited Employees Gratuity Fund Alan (Private) Limited Century Insurance Company Limited Employees Gratuity Fund Hasanali Karabhai Foundation Employees Contributory Provident Fund Trust Tetley Clover Private Limited Employees Contributory Provident Fund Trust Clover Pakistan Limited Employees Contributory Provident Fund Trust 10 % Holding (Millat Tractor)
Lakson Investments Limited - Management Company Directors, Chief Executive and their spouse and minors Key management personnel, employees and connected persons of the Management Company
18.2 Unit Holders' Fund
LAKSON MONEY MARKET FUND
48 25,974
15,869 8,957 28,862 8,544 41,800 68,181 187,162 73,237
15,881 11,096 8,957 28,862 8,551 41,800 68,181 187,308 73,295
18,247 98,228
18,247 98,305
287,949
195,913
196,066
25,995
60,286 1,738,698
60,286 1,740,056
288,174
11,859,382 2,786,306 4,394 7,077,730 201,889
15,862,236 9,655 4,328 10,081,663 291,994
13,500
2,055,849 3,471,026 125,097 2,653,066 399,297 3,095,829
65,275
148,900
4,974,448 6,635,792
Units redeemed during the year
1,967,194 4,022,757 459,638 3,903,456 399,297 3,687,871
4,666,580 3,936,983
Units issued during the year
2,599,186 12,805,755
SIZA Services (Private) Limited (Holding Company of the Management Company) 156,753 SIZA (Private) Limited 862,205 Hasanali & Gulbanoo Lakhani Foundation 125,096 Century Insurance Company Limited 749,097 Sybrid (Private) Limited Premier Fashions (Private) Limited 1,051,902 Century Enterprises (Private) Limited Colgate Palmolive (Pakistan) Limited 7,990,363 Clover Pakistan Limited 2,776,651 Lakson Power Limited 4,394 SIZA Commodities (Private) Limited Baluchistan Polyproducts (Private) Limited 134,837 Century Insurance Co. Limited Employees Contributory Provident Fund Trust Colgate Palmolive (Pakistan) Limited ECPFT Siza Foods (Private) Limited Employees Contributory Provident Fund Trust Clover Pakistan Limited Employees Contributory Provident Fund Trust Accuray Surgical Limited Employees Contributory Provident Fund Princeton Travels (Private) Limited Employees Contributory Provident Fund Trust Gam Corporation (Private) Limited Employees Contributory Provident Fund Lakson Business Solutions Limited Employees Contributory Provident Fund Trust Clover Pakistan Limited Employees Gratuity Fund Tetley Clover (Private) Limited Employees Contributory Provident Fund Trust Hasanali Karabhai Foundation ECPF Trust Lakson Investments Limited ECPFT Siza Services Private Limited Employees Contributory Provident Fund Trust Sybrid (Private) Limited ECPFT Merit Packaging Limited Employees Contributory Provident Fund Trust Merit Packaging Limited Employees Gratuity Fund -
Holding company / associated companies / undertakings of the Management Company
Lakson Investments Limited - Management Company Directors, Chief Executive and their spouse and minors Key management personnel, employees and connected persons of the management company
Number of Units as at July 01, 2015
146 58
7
12 11,096
225
21
77
153
1,358
68,098 1,413,936 459,637 1,999,487 1,643,944 11,993,217 4,328 3,003,933 224,942
200,675
2,291,317 10,106,945
Number of units as at June 30, 2016
-
-
-
-
-
-
-
-
15,710,858 86,416,326 12,538,071 75,079,779 105,429,012 800,850,974 278,295,680 440,428 13,514,360
14,923,781
260,508,731 1,283,483,648
Balance as at July 01, 2015
4,181,670 6,820,877 18,738,368 7,332,405
896,072 2,887,344 855,450
1,588,729 1,110,036
28,828,998
2,600,508
1,825,459 9,834,427
19,614,434
6,031,021 174,075,522
1,600,000,000 1,000,000 432,875 1,021,591,018 78,850,000
203,508,849 410,861,023 46,006,120 400,000,000 41,000,000 373,823,584
6,598,883
467,716,896 670,943,533
Units issued during the year
4,184,935 6,826,202 18,738,368 7,332,405
896,772 2,889,598 855,450
1,588,729
28,828,998
2,600,508
1,826,884 9,834,427
19,614,434
3,035,729 174,075,523
1,244,129,049 291,389,476 463,355 705,225,779 21,329,901
216,697,527 362,167,161 13,216,645 279,298,794 41,616,657 319,872,762
1,355,479
512,178,791 676,905,727
Units redeemed during the year
14,621 5,808
701
1,202 1,111,187
22,532
2,103
7,711
15,322
135,994
6,819,538 141,595,793 46,029,428 200,234,627 164,629,484 1,201,036,730 433,419 300,822,862 22,526,367
20,096,207
229,459,378 1,012,139,838
Balance as at June 30, 2016 (Investment at current NAV
Year ended June 30, 2016 ------------------------ Number of Units ------------------------------------------------------- Rupees --------------------------------
LAKSON MONEY MARKET FUND
LAKSON MONEY MARKET FUND 18.3
Note
Transactions during the year
Lakson Investments Limited Management Company Remuneration to the Management Company 8.1 Sindh Sales Tax and Federal Excise Duty on remuneration to the Management Company 8.2 &8.3
19.
2017
(Rupees)
2016
30,694,011
33,381,828
3,990,221
10,762,301
Central Depository Company of Pakistan Limited - Trustee of the Fund Remuneration to the Trustee
5,040,251
4,289,576
Directors, Chief Executive & their Spouse and Minors Dividend paid
65,751,380
17,324,276
Key Management personnel, employees and connected persons of the Management company Dividend paid
1,475,659
770,786
FINANCIAL RISK MANAGEMENT Introduction and overview The Fund has exposure to following risks from its use of financial instruments: -
Credit Risk Liquidity Risk Market Risk Operational Risk
This disclosure presents information about the Funds exposure to each of the above risks, the Funds objectives, policies and processes for measuring and managing risk, and the Funds management of capital. Risk management framework The Funds objective in managing risk is the creation and protection of unit holders value. Risk is inherent in the Funds activities, but it is managed through monitoring and controlling activities which are primarily set up based on limits established by the Management Company, Fund's constitutive documents and the regulations and directives of the SECP. These limits reflect the business strategy and market environment of the Fund as well as the level of the risk that Fund is willing to accept. The Board of Directors of the Management Company supervises the overall risk management approach within the Fund. 19.1
Credit risk Credit risk is the risk that a counterparty to a financial instrument will fail to discharge an obligation or commitment that it has entered into with the Fund, resulting in a financial loss to the Fund. At the year-end it arises principally from bank balances and mark-up / return recoverable, etc.
49
LAKSON MONEY MARKET FUND Management of credit risk The Fund's policy is to enter into financial contracts in accordance with the investment guidelines approved by the Investment Committee, its Trust Deed and the requirements of NBFC rules and regulations and guidelines given by SECP from time to time. Credit risk is managed and controlled by the Management Company of the Fund in the following manner: - Where the investment committee makes an investment decision, the credit rating and credit worthiness of the issuer is taken into account along with the financial background so as to minimise the risk of default. - Analysing credit ratings and obtaining adequate collaterals wherever appropriate / relevant. - The risk of counterparty exposure due to failed trades causing a loss to the Fund is mitigated by a periodic review of the credit ratings and financial statements on a regular basis. - Cash is held only with reputable banks with minimum long term credit rating of AA. Exposure to credit risk In summary, compared to the maximum amount included in Statement of Assets and Liabilities, the maximum exposure to credit risk at year end was as follows:
Note Bank balances including profit receivables 5&7 Investments including profit receivables 6&8
June 30, 2017 Statement Maximum of Assets and exposure Liabilities ----------- (Rupees) -----------
June 30, 2016 Statement Maximum of Assets and exposure Liabilities ----------- (Rupees) -----------
4,762,209,217
4,762,209,217
4,059,755,138
4,059,755,138
4,762,209,217
4,762,209,217
1,331,819,772 5,391,574,910
4,059,755,138
Difference in the balances as per the Statement of Assets and Liabilities and maximum exposure in investments is due to the fact that investments of nil (2016: Rs. 1,331.820 million) relates to investments in Government Securities which are not considered to carry credit risk. Past due / impaired assets None of the financial assets of the Fund are past due or impaired as at year end. Credit ratings and Collaterals Credit risk arising from bank balances is mitigated through deposit held with banks which are rated AA or above. The Fund is required to follow the guidelines / restrictions imposed in its offering document and the SECP in respect of the minimum ratings prior to any investment.
50
LAKSON MONEY MARKET FUND Details of the credit ratings (entitles' credit rating) of investments, (other than Government securities) and bank balances including term deposits receipts as at year end are as follows: Ratings
2017
2016
AAA AA+ AA Total
89.16 0.29 10.56 100.00
64.67 0.71 34.62 100.00
Above ratings are on the basis of available ratings assigned by PACRA and JCR-VIS on year end dates. The bank balances are unsecured. Concentration of credit risk Concentration of credit risk exists when changes in economic or industry factors affect groups of counterparties whose aggregate credit exposure is significant in relation to the Funds total credit exposure. Around 0% (2016: 24.07%) of the Fund's financial assets are in Government securities which are not exposed to the credit risk, while the remaining portfolio of financial assets is broadly diversified and transactions are entered into with diverse credit-worthy counterparties thereby mitigating any significant concentrations of credit risk. The Fund's concentration of credit risk of financial assets by industrial distribution are with Central bank and Commercial banks. Settlement risk The Funds activities may give rise to risk at the time of settlement of transactions. Settlement risk is the risk of loss due to the failure of an entity to honour its obligations to deliver cash, securities or other assets as contractually agreed on sale. For the vast majority of transactions the Fund mitigates this risk by conducting settlements through a broker to ensure that a trade is settled only when both parties have fulfilled their contractual settlement obligations. 19.2
Liquidity risk Liquidity risk is the risk that the Fund will encounter difficulty in meeting obligations arising from its financial liabilities that are settled by delivering cash or another financial asset, or that such obligations will have to be settled in a manner disadvantageous to the Fund. The Fund is exposed to cash redemptions of its units on a regular basis. Units are redeemable at the holders option based on the Funds net asset value per unit at the time of redemption calculated in accordance with the Funds constitutive document and guidelines laid down by Securities and Exchange Commission of Pakistan (SECP). Management of liquidity risk The Fund's policy is to manage this risk by investing majority of its assets in investments that are traded in an active market and can be readily disposed. The Fund invests primarily in Government securities, marketable debt securities and other financial instruments having remaining maturity less than 6 months, which under normal market conditions are readily convertible to cash. As a result, the Fund may be able to liquidate quickly its investments in these instruments at an amount close to their fair value to meet its liquidity requirement.
51
LAKSON MONEY MARKET FUND The Fund has the ability to borrow, with prior approval of trustee, for meeting redemption requests. The maximum amount available to the Fund from borrowings is limited to the extent of 15% of total assets at the time of borrowing with repayment with in 90 days of such borrowings. No such borrowings were made during the year. In order to manage the Fund's overall liquidity, the Fund also has the option to withhold daily redemption requests in excess of ten percent of the units in issue and such requests would be treated as redemption requests qualifying for being processed on the next business day. Such procedure would continue until the outstanding redemption requests come down to a level below ten percent of the units then in issue. However, during the year no such option was exercised or considered necessary. Maturity analysis for financial liabilities The table below analyses the Fund's liabilities into relevant maturity groupings based on the remaining period at the balance sheet date to the contractual maturity date. The amounts in the table are the contractual undiscounted cash flows. June 30, 2017 Less than 3 to 12 Total months 3 months ------------ (Rupees) ------------
Financial liabilities Non-derivative liabilities Payable to the Management Company Remuneration payable to the Trustee Accrued expenses and other liabilities Unit Holders' Fund *
38,546,346 406,028 400,569 39,352,943 4,679,682,948
-
38,546,346 406,028 400,569 39,352,943 4,679,682,948
June 30, 2016 Less than 3 to 12 Total months 3 months ------------ (Rupees) ------------
Financial liabilities Non-derivative liabilities Payable to the Management Company Remuneration payable to the Trustee Accrued expenses and other liabilities Unit Holders' Fund *
38,280,127 369,496 231,400 38,881,023 5,296,778,761
-
38,280,127 369,496 231,400 38,881,023 5,296,778,761
Above financial liabilities do not carry any mark-up. * Payable on demand 19.3
Market risk Market risk is the risk that changes in market prices, such as interest rates, equity prices, foreign exchange rates and credit spreads (not relating to changes in the obligors/issuers credit standing) will effect the Funds income or the fair value of its holdings of financial instruments. The objective of market risk management is to manage and control market risk exposures within acceptable parameters, while optimising the return on risk.
52
LAKSON MONEY MARKET FUND Management of market risks The Management Company manages market risk by monitoring exposure on marketable securities by following the internal risk management policies and investment guidelines approved by the Investment Committee and regulations laid down by the Securities and Exchange Commission of Pakistan. The maximum risk resulting from financial instruments equals their fair values. Market risk comprise of three types of risk: interest rate risk, currency risk and other price risk. 19.3.1
Interest rate risk
19.3.1.1
Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates. Currently the Funds interest rate exposure arises on investment in Government Securities, Term Deposits with banks, bank balances in profit and loss sharing accounts and placement with and certificate of investments of financial institutions. Currently all of the Fund's investment carry fixed interest rates. The Management Company monitors the interest rate environment on a regular basis and may change the mix of its portfolio to enhance the earning potential of the Fund subject to the above defined guidelines. Other risk management procedures are the same as those mentioned in the credit risk management.
19.3.1.2
Details of the interest rate profile of the Fund's interest bearing financial assets were as follows: Fixed rate instruments Financial assets Investments in Government Treasury Bills Bank balances
2017
Note
6.1 5.1
(Rupees)
4,741,452,166 4,741,452,166
2016
1,331,819,772 4,043,527,630 5,375,347,402
None of the financial liabilities carry any interest rate. In addition, none of the financial assets bear variable interest rate. Fair value sensitivity analysis for fixed rate instruments Interest bearing Government securities are held by the Fund at fair value through profit and loss account (held for trading) exposes the Fund to the fair value risk. In case of 100 basis points decrease / increase in yield rates of the above Government Securities during the year, the net assets of the Fund would have been lower / higher by nil (2016: Rs. 1.33 million) with consequential effect on net income for the year. Other balances are not carried at fair value through profit and loss. Therefore a change in interest rate during the year would not effect the income statement and unit holder's fund.
53
LAKSON MONEY MARKET FUND 19.3.1.3
A summary of the Funds interest rate gap position, categorised by the earlier of contractual re-pricing or maturity date is as follows: June 30, 2017 Financial assets Bank balances Investments Total assets
Mark-up/ profit rate (%)
Less than one month
One to three More than three Total month months & upto one year ----------------------------- (Rupees) -----------------------------
3.75 to 7.40 5.92 to 6.22
4,741,452,166 4,741,452,166
4.00 to 7.40 5.92 to 6.22
4,043,527,630 249,197,000 4,292,724,630
-
-
4,741,452,166 4,741,452,166
June 30, 2016 Financial assets Bank balances Investments Total assets
843,694,800 843,694,800
238,927,972 238,927,972
4,043,527,630 1,331,819,772 5,375,347,402
None of the Fund's financial liability is exposed to interest rate risk.
19.3.2
Currency risk Currency risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in foreign exchange rates. The Fund, at present, is not exposed to currency risk as all transactions are carried out in Pak Rupees.
19.3.3
Other price risk Other price risk is the risk that the fair value of financial instrument will fluctuate as a result of change in market prices (other than those arising from interest rate risk or currency risk), whether caused by factors specific to an individual investment, its issuer or factors affecting all instruments traded in the market. The Fund is expecting minimal price fluctuation on its investment in debt securities (i.e. Government securities) for change in factors other than those arising from interest rate or currency risk.
19.4
Operational risks Operational risk is the risk of direct or indirect loss arising from a wide variety of causes associated with the processes, technology and infrastructure supporting the Funds operations either internally within the Fund or externally at the Funds service providers, and from external factors other than credit, market and liquidity risks such as those arising from legal and regulatory requirements and generally accepted standards of investment management behaviour. Operational risks arise from all of the Funds activities. The Funds objective is to manage operational risk so as to balance limiting of financial losses and damage to its reputation with achieving its investment objective of generating returns for investors. The primary responsibility for the development and implementation of controls over operational risk rests with the Board of Directors. This responsibility encompasses the controls in the following areas: - requirements for appropriate segregation of duties between various functions, roles and responsibilities; - requirements for the reconciliation and monitoring of transactions; - compliance with regulatory and other legal requirements; - documentation of controls and procedures;
54
LAKSON MONEY MARKET FUND - requirements for the periodic assessment of operational risks faced, and the adequacy of controls and procedures to address the risks identified; - ethical and business standards; - risk mitigation, including insurance where this is effective. 19.5
Unit Holders' Fund risk management Management's objective when managing unit holders' funds is to safeguard the Fund's ability to continue as a going concern so that it can continue to provide optimum returns to its unit holders and to ensure reasonable safety of unit holders' funds. The Fund manages its investment portfolio and other assets by monitoring return on net assets and makes adjustments to it in the light of changes in markets' conditions. The capital structure depends on the issuance and redemption of units and with effect from July 1, 2012, the Fund is subject to maintain minimum fund size of Rs. 100 million at all times.
19.6
Financial instruments by category
Assets Bank balances Investments Markup receivable
------------------ As at June 30, 2017 -----------------Loans and Financial assets Available Total receivables at fair value for sale through profit or loss ------------------- (Rupees) -------------------
4,741,467,462
-
20,911,070 4,762,378,532
-
4,741,467,462 20,911,070 4,762,378,532
------------------ As at June 30, 2016 ------------------
Liabilities Payable to the Management Company Remuneration payable to the Trustee Accrued expenses and other liabilities
Assets Bank balances Investments Markup receivable
Liabilities at Financial Total fair value liabilities at through profit amortized or loss cost ------------------- (Rupees) -------------------
-
38,546,346 406,028 400,569 39,352,943
38,546,346 406,028 400,569 39,352,943
------------------ As at June 30, 2016 -----------------Loans and Financial assets Available Total receivables at fair value for sale through profit or loss ------------------- (Rupees) -------------------
4,043,545,037 - 1,331,819,772 16,210,101 4,059,755,138 1,331,819,772
55
-
4,043,545,037 1,331,819,772 16,210,101 5,391,574,910
LAKSON MONEY MARKET FUND ------------------ As at June 30, 2016 ------------------
Liabilities Payable to the Management Company Remuneration payable to the Trustee Accrued expenses and other liabilities 20
Liabilities at Financial Total fair value liabilities at through profit amortized or loss cost ------------------- (Rupees) -------------------
-
38,280,127 369,496 231,400 38,881,023
38,280,127 369,496 231,400 38,881,023
TOTAL EXPENSE RATIO (TER) As per the SECP circular vide direction no. 23 dated July 20, 2016 and as referred in Regulations 60(5) the Non-Banking Finance Companies and Notified Entities Regulations, 2008, Total Expense Ratio (TER) calculated inclusive of Sindh Sales Tax and SECP fee is 0.93% as of June 30, 2017 and this includes 0.2% representing Sindh Sales tax and SECP fee.
21
FAIR VALUE OF FINANCIAL INSTRUMENTS Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The Funds accounting policy on fair value measurements of the investments is discussed in note 4.1 to these financial statements. Underlying the definition of fair value is the presumption that the Asset Management Company is a going concern without any intention or requirement to curtail materially the scale of its operations or to undertake a transaction on adverse terms. The fair value of financial assets and liabilities traded in active markets i.e. listed equity shares are based on the quoted market prices at the close of trading on the period end date. The quoted market prices used for financial assets held by the company is current bid price. A financial instrument is regarded as quoted in an active market if quoted prices are readily and regularly available from an exchange, dealer, broker, industry group, pricing service, or regulatory agency, and those prices represent actual and regularly occurring market transactions on an arms length basis. IFRS 13, 'Fair Value Measurements' requires the Fund to classify fair value measurements using a fair value hierarchy that reflects the significance of the inputs used in making the measurements. The fair value hierarchy has the following levels: - Quoted prices (unadjusted) in active markets for identical assets or liabilities (level 1); - Inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly (that is, as prices) or indirectly (that is, derived from prices) (level 2); and - Inputs for the assets or liability that are not based on observable market data (that is, unobservable inputs) (level 3).
56
LAKSON MONEY MARKET FUND The following table shows the carrying amounts and fair values of financial assets and financial liabilities, including their levels in the fair value hierarchy. June 30, 2017 Carrying amount Fair value through profit and loss
6
Financial assets not measured at fair value Bank balances Markup receivable
21.1
Financial liabilities not measured at fair value Payable to the Management Company Payable to the Trustee Accrued expenses and other liabilities
21.1
Fair Value
Other financial liabilities
Total
Level 1
Level 2
Level 3
Total
------------------------------------------------ (Rupees) ------------------------------------------------
Note On-balance sheet financial instruments Financial assets measured at fair value Market treasury bills
Loans and receivables
-
-
-
4,741,467,462 20,911,070 4,762,378,532
-
-
-
-
38,546,346 406,028 400,569 39,352,943
-
-
-
-
4,741,467,462 20,911,070 4,762,378,532
-
-
-
-
-
38,546,346 406,028 400,569 39,352,943
-
-
-
-
-
-
-
-
June 30, 2016 Carrying amount Fair value through profit and loss
6
Financial assets not measured at fair value Bank balances Markup receivable
21.1
Financial liabilities not measured at fair value Payable to the Management Company Payable to the Trustee Accrued expenses and other liabilities
21.1
21.1
Fair Value
Other financial liabilities
Total
Level 1
Level 2
Level 3
Total
------------------------------------------------ (Rupees) ------------------------------------------------
Note On-balance sheet financial instruments Financial assets measured at fair value Market treasury bills
Loans and receivables
1,331,819,772 1,331,819,772 -
4,043,545,037 16,210,101 4,059,755,138 -
-
1,331,819,772 1,331,819,772
-
-
4,043,545,037 16,210,101 4,059,755,138
-
-
-
-
38,280,127 369,496 231,400 38,881,023
-
-
-
-
38,280,127 369,496 231,400 38,881,023
1,331,819,772 1,331,819,772
-
1,331,819,772 1,331,819,772
The Fund has not disclosed the fair values for these financial assets and financial liabilities, as these are either short term in nature or reprice periodically. Therefore, their carrying amounts are reasonable approximation of fair value. Valuation techniques For level 2 investments at fair value through profit or loss - held for trading investment in respect of Treasury Bills Fund uses rates derived from PKRV rates at reporting date per certificates multiplied by the number of certificates held . Transfers during the year During the year ended June 30, 2017, there were no transfers between level 1 and level 2 fair value measurements, and no transfers into and out of level 3 financial instruments.
22
SUPPLEMENTARY NON FINANCIAL INFORMATION The information regarding unit holding pattern, top brokers, members of the Investment Committee, Fund manager, meetings of the Board of Directors of the management company and rating of the Fund and the management company are as follows:
57
LAKSON MONEY MARKET FUND 22.1
Unit holding pattern of the Fund
Category
No of Investors
Individuals Associated Companies and Directors Insurance Companies NBFCs Retirement Funds Others
Category
46 23 2 1 5 9 86
No of Investors
Individuals Associated Companies and Directors Insurance Companies NBFCs Retirement Funds Public Limited Companies
22.2
43 33 2 1 3 6 88
106,716,936 2,411,450,602 24,273,855 240,388,560 267,073,827 1,629,779,168 4,679,682,948 June 30, 2016 Investment amount (Rupees) 26,090,585 3,344,092,978 23,095,470 48,659,735 109,776,161 1,745,063,832 5,296,778,761
% of total net assets 2.28 51.53 0.52 5.14 5.71 34.83 100.00
% of total net assets 0.49 63.13 0.44 0.92 2.07 32.95 100.00
List of brokers by percentage of commission paid Name of broker
(Percentage %) 2017 2016
- Invest & Finance Securities Limited - Invest Capital Markets Limited - Vector Capital (Private) Limited - Magenta Capital (Private) Limited - Optimus Capital Management Limited - Next Capital - C&M Management (Private) Limited - Elixir Securities Pakistan (Private) Limited - JS Global Capital Limited - Global Securities Pakistan Limited 22.3
June 30, 2017 Investment amount (Rupees)
64.44 9.34 8.26 7.36 6.79 3.82 -
Particulars of the Investment Committee and Fund manager Following are the members of the investment committee of the Fund: -
Mr. Babar Ali Lakhani (Chairman Investment Committee) Mr. Kashif Mustafa Mr. Mustafa O. Pasha Ms. Sana Abdullah Mr. Syed Saifullah Kazmi Mr. Hassan Bin Nasir (Fund Manager) Ms. Tayyaba Azeem Mr. Junaid Arshad
58
4.94 21.74 36.17 5.23 16.17 2.24 5.70 4.78 1.66 0.77
LAKSON MONEY MARKET FUND Mr. Babar Ali Lakhani - Chief Executive Officer Mr. Lakhani has over 17 years of investment and portfolio management experience in domestic and international equity and fixed income markets. Mr. Lakhani most recently served as the Chief Investment Officer of Century Insurance Company Limited, a Public Limited Company listed on Pakistan Stock Exchange. He was an Investment Associate at High Street Advisors and a Research Analyst at Credit Suisse Equity Group (formerly Credit Suisse First Boston). Mr. Lakhani brings extensive investment experience, globally practiced portfolio management discipline, and a comprehensive understanding of the global asset management industry to Lakson Investments Limited. Mr. Lakhani received his BA in Finance from Bentley College, and his MBA from Brandeis University. Mr. Lakhani is a member of the Global Association of Risk Professionals (GARP), the Society of Financial Service Professionals and the Young Presidents' Organization (YPO). Mr. Lakhani is a member of the Alumni Trustee Committee of Brandeis University and is the schools representative in Pakistan. Mr. Kashif Mustafa- Executive Director & COO Mr. Mustafa has more than nine years of experience working in the financial markets of Pakistan with local and international brokerage houses, and leading Asset Management Companies. Mr. Mustafas experience includes; Financial Analysis, Equity Research, Investment Advisory and Business Development. Before Lakson Investments Limited, Mr. Mustafa worked for Askari Investments and Crosby Securities Pakistan Limited as Vice President and Head of Sales & Business Development respectively. He frequently appears on the media and has been featured on Express, Business Plus, CNBC, GEO, PTV, Aaj TV, Sindh TV & KTN. Mr. Mustafa did his graduation in Mathematics and Masters in Economics. Mr. Mustafa O. Pasha, CFA Head of Investment Mr. Pasha has over nine years of experience in the asset management and investment advisory industry. He did his Bachelors in Economics from McGill University (Montreal, Canada) in 2006 and obtained his CFA charter in 2012. At Lakson Investments Limited he is responsible for driving out performance of all fixed income portfolios against their respective benchmarks by formulating the investment outlook and implementing strategy through asset allocation. As a member of the Investment Committee he is a key member of the team that develops and executes the investment strategy for both fixed income and equity portfolios. He was previously associated with BMA where he initially served as a fixed income analyst and later became the in house economist for the entire BMA group. Between 2009 - 2012 he supervised fixed income / money market investments across all mutual funds and institutional / HNW accounts advised by BMA. Ms. Sana Abdullah, CFA Head of Research Ms. Sana Abdullah has over nine years of experience in the asset management and brokerage industry, focusing on equity research and advisory. She did her Masters in Business Administration from Iqra University in 2003, and obtained her CFA charter in 2015. At Lakson Investments Limited she is responsible for driving the equity research function, formulating the fundamental investment outlook and generating investment ideas to generate alpha. As a member of the Investment Committee, she is a key member of the investments team that develops and executes the investment strategy for Lakson Investments' mutual funds and discretionary portfolios.
59
LAKSON MONEY MARKET FUND Ms. Sana Abdullah was previously associated with Tundra Fonder, a Swedish asset manager having investments in frontier markets where she was heading the research function and was responsible for the Pakistan research desk. Before joining Tundra, she worked with broker/deals including Global Securities, IGI Finex Securities and Elixir Securities where she has also headed and supervised research teams. Mr. Syed Saifullah Kazmi Head of Equities Mr. Saifullah has over nine years of experience and currently holds positions of Head of Equities Investments in Lakson Investments Limited. He is a qualified Finance major from Kingston University. He has experience in Emerging and Frontier Financial Markets, with focus in Pakistan, Strong Fixed Income background, with investment strategy and trading experience in instruments including, Government Securities, Corporate Bonds, Banking Products and Islamic Sukkuks. He is also managing the following funds: 1. Lakson Equity Fund 2. Lakson Tactical Fund 3. Lakson Islamic Tactical Fund ( Formerly: Lakson Asset Allocation Emerging Market Fund) Mr. Hassan Bin Nasir VP - Fixed Income Mr. Bin Nasir has over eight years of experience and currently holds positions of Vice President Fixed Income in Lakson Investments Limited. He completed his Masters in Business Administration in Finance major from Bahria University, Pakistan. He has immense experience in managing portfolios across Collective Investment Schemes, Separate Managed Accounts with Strong Fixed Income background, investment strategy and trading experience in instruments including, Government Securities, Corporate Debt Securities, Banking Products and Shariah Compliant Corporate Debt Securities. He is also managing the following funds: 1. Lakson Income Fund 2. Lakson Asset Allocation Developed Market Fund Ms. Tayyaba Azeem Assistant Portfolio Manager Ms. Tayyaba Azeem is currently working as an assistant portfolio manager and risk manager at Lakson Investments. She has done her MBA in Finance from Brandeis University (U.S.A.) and graduated with distinction (summa cum laude) on a Fulbright Scholarship. She has also worked in the fields of marketing, research and non-profits. She has over nine years of work experience. Mr. Junaid Arshad Manager Compliance Mr. Junaid Arshad an ACCA member, having over 9 years of experience in the asset management industry and currently holds the position of Manager Compliance. He possess sound knowledge of financial management, tax regulations, financial procedures, and NBFC Rules and Regulations. He was actively involved in system development and implementation during his stay at different organizations. He was previously associated with JS Investments and Alfalah Investments as a finance professional.
60
LAKSON MONEY MARKET FUND 22.4
Directors meeting attendance Information in respect of attendance by Directors in the meeting is given below: 2017 Name of directors Mr. Iqbal Ali Lakhani Mr. Babar Ali Lakhani Mr. Amin Mohammed Lakhani Mr. A. Aziz H. Ebrahim Mr. Mahomed J. Jaffer Mr. Daniel Scott Smaller Mr. Zahid Zakiuddin Mr. Jacques Visser
22.5
Meeting Attended
August 26, 2016
October 21, 2016
February 28, 2017
April 25, 2017
3 4 2 4 4 4 4 3
X T X T T T T T 6
T T T T T T T T 8
T T T T T T T T 8
T T X T T T T X 6
Rating of the Fund and the Management Company PACRA Rating
Management Stability Rating Quality Rating
Lakson Investments Limited (Management Company) Lakson Money Market Fund 23.
AM2+ -
AA(f)
DATE OF AUTHORIZATION FOR ISSUE These financial statements were authorized for issue on August 25, 2017 by the Board of Directors of the Management Company.
24.
GENERAL Figures have been rounded off to the nearest rupee.
For Lakson Investments Limited (Management Company) Chief Executive Officer
Chief Financial Officer
61
Director
LAKSON MONEY MARKET FUND Performance Table
FY17
FY16
FY15
FY14
FY13
FY12
Net Assets - Beginning (PKR Mil.)
5,297
4,209
7,490
10,423
6,876
Net Assets - Ending (PKR Mil.)
4,680
5,297
4,209
7,490
10,423
6,876
Net Asset value per share
100.1620
100.1430
100.2271
100.1170
100.7055
100.8703
Selling Price for units
100.1620
100.1430
100.2271
100.1170
100.7055
100.8703
Repurchase Price for units
100.1620
100.1430
100.2271
100.1170
100.7055
100.8703
Highest Offer Price (PKR)
106.3721
105.6989
108.3718
101.1451
100.9823
101.1143
Lowest Offer Price (PKR)
100.0001
100.0257
100.1206
100.0039
100.0202
100.0264
Highest Redemption Price (PKR)
106.3721
105.6989
108.3718
101.1451
100.9823
101.1143
Lowest Redemption Price (PKR)
100.0001
100.0257
100.1206
100.0039
100.0202
100.0264
Beginning NAV - Ex-Div. (PKR)
100.1430
100.2599
108.5450
100.0029
100.0001
100.0001
6.7764
5.7016
8.4431
6.875
7.7256
9.8150
Interim Distributions (PKR) Final Distribution (PKR) Ending NAV - Ex-Div. (PKR) Return
-
-
-
4,155
0.6561
0.7026
0.8702
100.0001
100.0095
100.1019
100.0001
100.0029
100.0001
6.80%
5.60%
8.57%
7.90%
8.76%
11.19%
Net Income (PKR Mil.)
79
66
119
594
716
610
Total Distribution
79
68
118
659
702
592
Accumulated Capital Growth
7
7
9
8
73
59
WAM (Days)
1
15
58
34
9
33
Average Annual return of the Fund One Year
5.72%
5.60%
8.57%
7.92%
8.76%
11.19%
Two year
6.39%
7.32%
8.07%
8.69%
10.47%
12.09%
Three year
7.47%
7.70%
8.51%
10.17%
11.69%
12.35%
10.68%
10.55%
10.83%
11.07%
12.14%
12.35%
Since inception
62
LAKSON MONEY MARKET FUND Distributions
FY17
FY16
FY15
FY14
FY13
6.7764 106.7765 100.0001 20-Jun-17
5.7016 105.7111 100.0095 21-Jun-16
8.4431 108.5450 100.1019 22-Jun-15
0.5783 100.5903 100.0120 29-Jul-13
0.8030 100.8040 100.0010 30-Jul-12
0.9112 100.9115 100.0003 01-Aug-11
2nd Interim Distribution NAV before Distribution NAV after Distribution Distribution Date
0.5565 100.5658 100.0093 28-Aug-13
0.8731 101.0086 100.1355 31-Aug-12
0.9391 100.9758 100.0367 29-Aug-12
3rd Interim Distribution NAV before Distribution NAV after Distribution Distribution Date
0.5197 100.5235 100.0038 25-Sep-13
0.6993 100.7865 100.0872 26-Sep-12
0.9619 100.9968 100.0349 28-Sep-11
4th Interim Distribution NAV before Distribution NAV after Distribution Distribution Date
0.5414 100.5454 100.0040 23-Oct-13
0.6676 100.7865 100.1358 24-Oct-12
0.9043 101.1469 100.2426 28-Oct-11
5th Interim Distribution NAV before Distribution NAV after Distribution Distribution Date
0.6546 100.6586 100.0040 26-Nov-13
0.7960 100.9081 100.1121 28-Nov-12
0.9340 101.0794 100.1454 28-Nov-11
6th Interim Distribution NAV before Distribution NAV after Distribution Distribution Date
0.6039 100.6134 100.0095 25-Dec-13
0.6541 100.7060 100.0519 27-Dec-12
0.9352 100.9780 100.0428 30-Dec-11
7th Interim Distribution NAV before Distribution NAV after Distribution Distribution Date
0.7497 100.7535 100.0038 28-Jan-14
0.7428 100.7769 100.0341 29-Jan-13
0.9335 100.9851 100.0516 31-Jan-12
8th Interim Distribution NAV before Distribution NAV after Distribution Distribution Date
0.6397 100.6510 100.0113 25-Feb-14
0.6291 100.6292 100.0001 28-Feb-13
0.7503 100.7504 100.0001 27-Feb-12
9th Interim Distribution NAV before Distribution NAV after Distribution Distribution Date
0.6040 100.6079 100.0039 25-Mar-14
0.5453 100.5454 100.0001 27-Mar-13
0.8350 100.8351 100.0001 29-Mar-12
10th Interim Distribution NAV before Distribution NAV after Distribution Distribution Date
0.6549 100.6588 100.0039 23-Apr-14
0.6886 100.7227 100.0341 29-Apr-13
0.7990 100.7991 100.0001 27-Apr-12
11th Interim Distribution NAV before Distribution NAV after Distribution Distribution Date
0.7725 100.7764 100.0039 27-May-14
0.6267 100.6268 100.0001 29-May-13
0.9115 100.9116 100.0001 30-May-12
12th Interim Distribution Final Distribution NAV before Distribution NAV after Distribution Distribution Date
0.6561 100.6562 100.0001 24-Jun-14
0.7026 100.7055 100.0029 08-Jul-13
0.8702 100.8703 100.0001 05-Jul-12
1st Interim Distribution NAV before Distribution NAV after Distribution Distribution Date
FY12
Disclaimer Past performance is not Past performance is not necessarily indicative of future performance and unit prices and investment returns may go down, as well as up.
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Lakson Investments Limited Lakson Square, Building No. 2, Sarwar Shaheed Road, Karachi-74200, Pakistan T +92.21 3569.8000 F +92.21 3568.1653
Lakson Investments Limited
(Regulated by the DFSA as a Representative Office)
Level 15, Gate Building DIFC, P.O. Box 507054 Dubai, U.A.E. T +971.4 401.9284 F +971.4 401.9578
