• What is an Asset Management Company (AMC)?
• What is a mutual fund?
• What is the SECP?
• What is a trustee?
• What types of funds are available in Pakistan?
  What is an open-end fund?
  What is a closed-end fund?
• What categories of funds are available in Pakistan?
• Are mutual funds insured?
• What are the factors that influence the performance of Mutual Funds?
• What are loads?
• Are there any additional charges?
• What kind of risk is involved with mutual funds?
• As a new investor how do I select a particular scheme?
• What is a Unit?
• What is NAV?
• Why should I invest in mutual funds?
• Are there any Tax benefits?
• How is it Different to a Bank?
• Investor Services function of a mutual fund and reports available to an investor?
• Can investors buy units jointly?
• How secure is my investment with Lakson Investments?
• Where can I get an application form?
• How do investors take entry into the fund for the first time?
• How do I purchase additional units of Lakson Investments?
• How do I know the status or position of my units?
• How do investors take their money out of the fund?
• How do investors change their account details or transfer between funds?
• Can I invest in any currency?
• What is the mode of payment?
• Can the dividends be reinvested?
• Will Zakat be deducted at source?
• How and When is my profit/ return realized?

Top What is an Asset Management Company (AMC)?

An Asset Management Company (“AMC”) is a specialized financial institution that provides asset management services to both institutions and individuals.  In Pakistan, AMCs are licensed and regulated by the Securities and Exchange Commission of Pakistan (SECP) under the Non-Banking Finance Companies Rules, 2003 and Notified Entities Regulations, 2007.

TopWhat is a mutual fund?

A mutual fund is an investment vehicle comprising a pool of funds collected from many investors for the purpose of investing in securities such as stocks, bonds, money market instruments, securtiies, treasury notes and other capital markets instruments.  In Pakistan, Mutual funds are legally established in the form of a Trust, under the Trusts Act of 1882 (preferred & new system) or a company formed under The Companies Ordinance 1984 (old system).  All assets of the mutual fund are held by an independent trustee and the AMC only serves as a portfolio manager for the mutual fund.

TopWhat is the SECP?

The Securities and Exchange Commission of Pakistan (SECP) was established under Securities and Exchange Commission of Pakistan Act, 1997, with a mandate to regulate the corporate sector, capital markets, insurance companies and other non-banking finance companies.  The SECP has oversight of various external service providers to the corporate and financial sectors, including chartered accountants, credit rating agencies, corporate secretaries, brokers, surveyors and other related entities.

The predecessor to the SECP was the Corporate Law Authority (CLA).

TopWhat is a trustee?

The SECP has strict criteria regarding the appointment of the Trustee, bearing the best interests of the Unit Holders in mind.  For funds to be launched by Lakson Investments (LI), Central Depository Company of Pakistan Limited (CDC) is the proposed trustee.  CDC was incorporated in 1993 to manage and operate the Central Depository System (CDS).  The aim of CDC is to operate as a central securities depository on behalf of the financial services industry and to contribute to the country's ability to support an effective capital market system which will attract institutional and retail level investors from Pakistan and abroad.

TopWhat types of funds are available in Pakistan?
What is an open-end fund?
What is a closed-end fund?

Open-end Funds: Continually issue new units and redeem outstanding units on investor request.  The unit holders buy units of the fund and may redeem them at the published Net Asset Value (NAV).  Typically, these funds have a perpetual lifespan.  The asset management company launches the fund and continues to remain the counter party in the sales and purchase transactions with the unit holder, as in if the investor wishes to buy or sell units of the fund they contact the AMC which then submits the information to the Trustee.

Closed-end Funds: Fixed number of share certificates issued by the fund, the units trade in the stock markets.  Market price of the unit certificates is determined by their demand and supply and they are not necessarily traded at the NAV.  Though many of these funds have a perpetual lifespan, others have a limited lifespan.  The asset management company launches the fund and no longer remains the counter party in the sales and purchase transactions with the unit holder, so when an investor wishes to buy or sell units of the fund they have to find a buyer or seller on the stock exchange.

TopWhat categories of funds are available in Pakistan?

Money-Market Funds: These funds can invest only in government backed treasury bills (sovereign backed paper) and short-term bank deposits.   The Lakson Money Market Fund invests only in treasuries and short-term bank deposits with highly rates banks only.

Fixed Income Funds: These funds primarily invest in securities that offer a fixed-return such as bank deposits, treasury bills (T-bills), term-finance certificates (TFCs) and other money market instruments.  In comparison to equity funds, the element of risk is low and so is the return.  These funds carry a minimum level of risk and provide competitive returns based on an underlying fixed-income portfolio.

Equity Funds: These funds invest in the domestic equity markets.  Traditionally Equity Funds have produced returns greater than Fixed Income and Money Market funds, however they have a much greater risk attached to them and can experience negative returns.  They are generally highly correlated with the stock index and the LEF is benchmarked with the KSE 100.

The Lakson Equity Fund (LEF) has a very competent research team who work with a fund manager within the parameters set by the Investment Committee to actively manage the equity fund.  The fund invests only in highly rated companies which offer an upside opportunity for the fund. 

Balanced Funds: These funds carry a mix of equity and fixed income securities in their portfolio.  The element of risk is moderate and the tends to be better than fixed- income funds because of the equity component in their portfolio.  There is usually a minimum allocation for asset classes covered by the fund.

Asset Allocation Funds: These funds invest in a mix of equity and fixed income securities. Unlike balanced funds, these funds are aimed at taking advantage of shifts in macro-economic trends by investing in asset classes that are projected to gain the most.  There is no minimum allocation for asset classes.

Fund of Funds: These funds invest in other mutual funds.

Islamic Funds: These funds invest in Shariah Compliant instruments and securities

Islamic Fund of Funds: These funds invest in other Islamic mutual funds.

TopAre mutual funds insured?

Mutual funds by virtue of their portfolio investments (listed and trade-able securities and instruments) are market driven, and are not insured in Pakistan. However, globally some mutual funds are in fact insured (80% or 70% of portfolio value), currently these funds are not offered in Pakistan

However, several AMC’s now offer capital protected funds.  Lakson Managed Accounts (“LMA”)s can build a protected portfolio for investors with a  minimum investment of PKR 5 mn.

TopWhat are the factors that influence the performance of Mutual Funds?

The performance of a mutual fund is directly influenced by its portfolio investments. For example, the performance of an equity fund is the result of its investments in stocks, and hence is influenced by the performance of the stock market and in particular the stocks in the portfolio.

Interest rates and the credit quality influence the performance of Income Funds. As interest rates fall, prices of underlying securities rise and vice versa thus affecting the value of the portfolio. 

TopWhat are loads?

A mutual fund often charges an entry and/or exit fee. These are also referred to as sales loads. The proceeds of such charges/ load helps the AMC market the fund and cover distributions costs.

• Front-end load is a charge when investors purchase units.
• Back-end load is a charge when investors redeem/sell their units.
• No-load funds are sold with no sales loads. Lakson Money Market Fund (LMMF) is an  example of a no load fund.
• Contingent Differed Sales Charge / Load is a charge when you redeem units.  Investors bear this load when exiting the fund. Generally a Contingent Differed Sales Charge / Load is structured in a diminishing format, the longer an investor stays invested in the fund the lower the load charged at exit. Lakson Funds do not have any Contingent Loads.  Lakson Investments strongly believes in transparency and clearly states all charges in its offering documents.

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TopAre there any additional charges?

Aside from direct expenses & fees (as detailed in offering document), no other indirect expenses/ fees shall be incurred by the investor.
However, the AMC and investors may enter into a separate agreement for additional services which may incur additional fees/charges. e.g. ATM functionality , sms transactions et . all.

TopWhat kind of risk is involved with mutual funds?

Investments in Mutual Funds are subject to market risks.  The value of the units may go up or down based on the investment portfolio of the fund and market conditions.  A fund that aims to achieve a high level of growth will be more volatile than one whose objective is to preserve the original capital.  Complete details regarding the risk associated with the investment in the fund are provided in the offering document.

TopAs a new investor how do I select a particular scheme?

Choice of any scheme would depend to a large extent on the investor preferences.

An important aspect while selecting a particular scheme is the duration of the investment.  Depending on your time horizon you can select a particular scheme.  Besides all this, factors including management quality, sponsor background, objective of the fund, independent rating, and returns given by the funds on different schemes should be taken into account while selecting a particular scheme.

TopWhat is a Unit?

“Unit” means one undivided share in the Trust.  Each Unit Holder has a beneficial interest in the Scheme proportionate to the Units by such Unit Holder.

TopWhat is NAV?

Calculation:

The value of a unit of the mutual fund, known as the net asset value per share (NAV), is calculated daily based on the net value of assets divided by the number of units issued and currently outstanding.  Buying and selling into funds is done on the basis of NAV-related prices.  NAV is calculated as follows:

NAV = (Total Assets – Total Liabilities) / Totol Number of Outstanding Units

Offer Price = NAV + load
Redemption Price= NAV – load

The Lakson Income Fund and Lakson Money Market Fund are no load funds.

TopWhy should I invest in mutual funds?

Mutual funds are an easy, convenient and affordable way of gaining access to capital markets.  Each investor has a stake in the assets and earnings of the fund in proportion to the amount of their investments.  The benefits of mutual funds include:

Professional Management: The AMC appoints a team of investment professionals, assisted by qualified research analysts, to manage the portfolio of the fund in conformity with the Investment Objective of the fund.

Diversification: Mutual Fund portfolios usually consist of multiple investment positions/vehicles across sectors and companies, and are thus better able to mitigate risk by virtue of the their diverse portfolio.  In short, a mutual fund does not put “all its eggs in one basket” instead it invests in many securities, some of which may rise while other may fall.  This reduces the risk an investor faces while investing in one or two securities.

Liquidity: Liquidity is the ability to readily access your money in an investment.  Open ended mutual funds provide a unique opportunity to investors in liquidating their investment at a redemption price determined through the NAV methodology.  In Pakistan, the investor can get his/her money back within six business days of the redemption date.  Lakson Funds generally strive to provide redemption proceeds within 3 business days.

Reduction of transaction costs: A direct investor bears all the costs of investing such as brokerage costs, and custody of security costs. When going through a fund, you have the benefit of economies of scale; the fund pay lesser costs because of larger volumes, a benefit passed on to its investor.  Costs including but not restricted to Technology Infrastructure, Investor Services, Research, et al are borne by the management company, in this case Lakson Investments Limited.

Convenience: Investors can choose for automatic reinvestment or periodic distribution of the earnings of their units in the fund. Further, the investors don’t need to open CDC Accounts or to transfer their units through a brokerage. Mutual funds also offers a wide variety of services including account statements at any time on the investors request, , dedicated investor support and designated Investment Centers for  added convenience. Investors can also switch from one fund to another at any time.

Time: Generally an investor does not have the time to actively manage portfolios.  We are Lakson Funds have a team of dedicated professionals who are relentlessly researching and analyzing stocks, visiting companies to meet management, determining business cycle ups and downs, studying macroeconomic trends, forecasting interest rate fluctuations and interpreting fiscal as well as monetary policy measures to see how they affect the movement of securities.

TopAre there any Tax benefits?

TopHow is it Different to a Bank?

A bank too manages a pool of money, but the money it receives from investors (depositors) is treated as a loan from the depositors on which the bank pays a fixed rate of return. The bank in turn lends the money to various businesses and earns a higher rate of return. The bank makes money by earning the difference between the rate at which it borrows (from the depositors)..

In the event there is a loss in the lending business, the bank will still pay the depositor the agreed rate. However, in the event the bank runs into major losses (such as major defaults by its borrowers) and has to close down, the depositors are not likely to get their full principal but will get whatever can be recovered by the liquidators.  

Lakson Funds will always use multiple banks and will only work with highly reputable and financially strong banks.  In addition Lakson Funds are able to negotiate better deposit rates for shorter time periods with many different banks and pass on over 80% of the profit to an investor whereas in a bank they keep the profit.

TopInvestor Services function of a mutual fund and reports available to an investor?

Lakson Investments is committed to providing high quality service to its investors, while maintaining the highest professional and ethical standards. Reports will be generated and analyzed on the nature of calls.  Further, some funds may also offer a wide variety of services including monthly, quarterly and on-demand account statements, etc.  Lakson Funds offer all of these.

Account Statement: A record of all transactions and the account balances for a specified time-frame.

Fund Manager Report: FMR gives the monthly review of the fund and highlights important facts and figures while giving a market analysis as related to the performance of the fund.

Annual Account (audited) & Half yearly/Quarterly account: Comprehensive financial report covering virtually all aspects of the financial activity of the fund, along with financial notes providing details.  The auditor of: LMMF is KPMG Taseer Hadi & Company, LIF is KPMG Taseer Hadi & Company and the LEF is BDO Ebrahim & Co.

Various sms/email reports: Investors can receive various reports via sms/email.

TopCan investors buy units jointly?

Yes.  However, this requires a joint account.

TopHow secure is my investment with Lakson Investments?

Mutual funds are regulated by the Securities and Exchange Commission of Pakistan which is a government regulatory authority.  There are several entities involved in the operations of a mutual fund, each with its own mandate and specialized function to safeguard investor interests as well as enforce and set rules to maximize investor interests.

Four separate and independent entities ensure transparency and compliance with applicable rules and regulations to safeguard the interest of investors.  These independent entities include:   

• The Securities & Exchange Commission of Pakistan (SECP)
• The Auditors
• The Trustee
• The Stock Exchange

TopWhere can I get an application form?

• Download Account Opening Form and Investment Form from our website www.laksoninvestments.com.pk/lialpha OR
• Collect from our Head office at Lakson Square Building # 2, Sarwar Shaheed Road, Karachi or at any transaction location.  A complete list of transaction locations is available on our website OR
• Collect from any transaction location.  A complete list of transaction locations is available on our website http://www.laksoninvestments.com.pk/lialpha/available-at/ OR
• Call us at + 92.21 111.534.111 and we will post it to you OR
• Email us at info@li.com and we willemail it to you..

If you need help filling it out the form or have any questions please reach us using any of the above.

TopHow do investors take entry into the fund for the first time?

By filling out the form and submitting it to us with the requisite supporting documents. Call us on + 92.21 111.534.111 or check our website http://www.laksoninvestments.com.pk/lialpha to find the drop off location nearest you.

TopHow do I purchase additional units of Lakson Investments?

By completing an investment form for purchase of units.

• Submit the forms with an ATL, or directly with the Management Company and the cheque (crossed “Account Payee Only”, pay order or demand draft in the name of “Trustee – Lakson Income Fund”).
• The authorized personnel of the ATL shall verify the particulars given in the application form and documents submitted therewith and shall give you an acknowledgement of the receipt of the application.
• Units shall be issued based on the offer price calculated and announced by the AMC on the Subscription Day on which the investor submits the complete and correct application form to the ATL within the subscription hours.
• Investors will be provided a confirmation statement within seven (7) business days after the offer price paid for units has been realized.

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TopHow do I know the status or position of my units?

There are several options to check the status of your investment:

• You can view your account statement online using a secure web browser.
• You can subscribe to a unit price update over SMS.
• You can call us and with your account information for verification and we can tell you over the phone. 
• You can call us and request us to mail out a statement to your registered address.

TopHow do investors take their money out of the fund?

Redemption payments will be made to the investor within a period of a maximum 6 working days, either through a cross-cheque or through a bank transfer (this option is only available if selected when you opened the account and details were provided to AMC via Account Opening form or Change request form)

The investors may also receive redemption proceeds via other forms/mode of payment subject to any separate transactional arrangement offered by the AMC and subscribed to by the investor.

TopHow do investors change their account details or transfer between funds?

The investors can change their account details or transfer between different types of funds through an application form available at all transaction locations of Lakson Investments.

TopCan I invest in any currency?

The currency of the fund is Pak Rupees and Investments can only be made in Pak Rupees.

TopWhat is the mode of payment?

Payment is acceptable in the form of cross-cheque, debit instructions, demand draft or pay order in favor of “CDC- Trustee Lakson [name of fund goes here] Fund”.

TopCan the dividends be reinvested?

Yes, dividends can be reinvested.

TopWill Zakat be deducted at source?

Zakat will be deducted at source unless a Zakat declaration form (CZ-50-Zakat exemption form) is submitted.

TopHow and When is my profit/ return realized?

Returns/ profit is realized via the following two(2) options:

Redemption: Investors can sell their units to realize a partial or full gain (. The NAV based pricing ensures that all returns are included in the price on a daily basis and realizing profits is simple. Redemption proceeds are considered a capital gain and not taxed.

Dividend: A payment declared or recommended by the Asset Management Company and paid to the fund’s unit-holders out of the fund current and/or retained earnings.  Dividends are disbursed in two forms, either bonus units or cash.

Bonus Dividend: In case of bonus units all the investors have to simply redeem the units to realize the gain.  Currently neither capital gains nor bonus units are taxed.

Cash Dividend: Cash dividend is paid directly to the unit holder depending on the option selected (i.e. reinvest my units, cross-cheque or bank transfer).  Currently cash dividends are taxed at 10%)